FY2027-H1 will determine whether the sharp decline in Q1 profit was a planned seasonal factor

FY2027-Q1 revenue was ¥19,330 million, operating profit was ¥1,043 million, profit before tax was ¥495 million, and profit attributable to owners of the parent was ¥95 million. In the year-earlier period, revenue was ¥20,527 million and operating profit was ¥3,296 million, so the 68.4% decline in operating profit was substantially larger than the 5.8% decline in revenue. The operating margin also fell by approximately 10.7 percentage points, from approximately 16.1% a year earlier to approximately 5.4%.

By segment, revenue from the renewable energy generation and related business was ¥19,215 million, down 4.6% year on year, while revenue from the development and operations business was ¥961 million, down 48.7%. Reported EBITDA in the renewable energy generation and related business was ¥7,679 million and operating profit was ¥1,950 million, whereas EBITDA in the development and operations business was negative ¥12 million and operating profit was negative ¥100 million. The company cited scheduled maintenance shutdowns at biomass power plants, repair work at the Karumai Nishi Solar project, and lower business development fees as factors behind the Q1 declines in revenue and profit. The pattern was therefore not simply weaker demand; the timing of shutdowns and recognition of one-off revenue depressed the margin.

Meanwhile, cumulative first-half actual electricity sales across all power sources were 1,719,119,924kWh, up 15.8% year on year, although 2.1% below plan. In September alone, utility-scale solar electricity sales were 26,604,142kWh, down 23.2% year on year, while biomass sales were 283,410,968kWh, up 34.8%. The increase in generation was supported by newly commissioned and newly consolidated biomass operations. Lost generation from output curtailment in September was reported at 0.110% of the annual planned electricity sales volume, and the company explained that the impact on the full-year forecast was immaterial at this stage.

At the next results announcement, we will need to assess how much of the ¥76,370 million in revenue and ¥10,257 million in operating profit remaining after Q1 must be accumulated in the second half. In particular, it will be necessary to review generation after the concentration of scheduled maintenance has passed in H1, the operating margin of the renewable energy generation and related business, a return to profitability in the development and operations business, and the cumulative impact of output curtailment. If H1 operating profit exceeds ¥5,650 million and the shortfall in electricity sales against plan narrows, the view that Q1's decline was a temporary operational issue will strengthen. Conversely, if electricity sales remain below plan and profit progress stays below 50%, the achievability of the ¥95,700 million revenue and ¥11,300 million operating profit forecasts will be called into question.