Higher volume, but lower unit rates and higher costs are weighing on profit

FY2027 Q1, covering April to June 2026, generated revenue of ¥14,860 million, operating profit of ¥1,495 million, ordinary profit of ¥1,645 million and net profit attributable to owners of the parent of ¥1,385 million. In the prior-year period, revenue was ¥14,841 million, operating profit was ¥1,762 million, ordinary profit was ¥1,889 million and net profit was ¥1,336 million. Revenue increased by ¥18 million, while operating profit declined by ¥264 million. At the profit level, operating profit fell 15.0% and ordinary profit fell 12.9%, indicating that maintaining revenue scale was not enough to support profit.

In terms of volume, gas sales increased 15.7% year on year to 102,926 thousand m³. Demand for hot water and heating declined as temperatures remained high, while higher operating rates at commercial customers’ facilities drove overall sales volume higher. However, lower gas rates resulting from the fuel cost adjustment meant that the increase in sales volume did not translate directly into higher revenue, which rose only 0.1%. In addition, although LNG prices remained below the prior-year level, operating expenses increased by ¥283 million due to higher fuel and other costs associated with the increase in sales volume, according to the company.

The operating margin calculated simply from revenue and operating profit declined by approximately 1.8 percentage points, from approximately 11.9% in the prior-year period to approximately 10.1% in the current period. The company does not formally disclose quarterly operating margin as an indicator, nor does it break down the respective impacts of unit rates, fuel costs and other operating expenses on operating profit. Accordingly, it is difficult at this stage to determine whether the Q1 profit decline resulted from the timing of temporary rate adjustments or from a recurring cost burden associated with higher sales volume.

In H1, it will be necessary to confirm not only whether gas sales volume continues to increase, but also whether the earnings benefit from higher volume exceeds the increase in fuel and other costs. In particular, the breakdown of residential and commercial sales volume, the change in unit rates and the increase in fuel costs were not disclosed for Q1. At the next results announcement, disclosure of these items in millions of yen or thousand m³, together with whether the operating margin recovers to at least the Q1 calculated level of 10.1% and whether the year-on-year decline in operating profit narrows from 15.0%, will help assess the substance of any profit recovery.