Profit margins continue to improve despite lower revenue, but order recovery is the next focus

Revenue in the first half of FY2026 was ¥4,710 million, down ¥88 million, or 1.9%, from ¥4,798 million in the same period of the previous year. Operating profit, meanwhile, rose ¥73 million, or 11.1%, to ¥728 million from ¥655 million. The simple calculation of the operating margin was 15.5%, approximately 1.8 percentage points higher than 13.7% in the same period of the previous year, indicating that profitability improved even as revenue contracted.

In the first quarter, revenue was ¥2,029 million and operating profit was ¥282 million, representing a 2.0% decline and a 20.7% increase, respectively, year on year. The first-quarter operating margin was approximately 13.9%, up from approximately 11.3% in the same period of the previous year, and the cumulative margin for the first half rose further to 15.5%. Based on the differences between the cumulative first-half figures, second-quarter standalone revenue is estimated at approximately ¥2,681 million and operating profit at approximately ¥446 million, indicating that the improvement in operating profit exceeded the decline in revenue even compared with the standalone second quarter of the previous year.

The company attributes the improvement in profit to measures to increase orders, improve productivity, and reduce selling, general and administrative expenses. However, it has not disclosed the profit contribution of each factor or whether the improvement in the operating margin was driven by pricing, project mix, personnel utilization, or SG&A expenses. Accordingly, the sustainability of the profit improvement must currently be assessed using segment profit and the cumulative operating margin through the third quarter.

At the next earnings announcement, the focus will be not only on whether revenue recovers from its year-on-year decline, but also on whether the first-half operating margin of 15.5% can be maintained through the cumulative third quarter. If only the margin is maintained while revenue remains sluggish, fixed-cost controls may be making a substantial contribution, and a recovery in orders and revenue will be necessary to meet the full-year forecast. Conversely, if a recovery in revenue and maintenance of the margin are confirmed at the same time, it will be easier to determine whether the first-half combination of lower revenue and higher profit reflects improved profitability rather than temporary cost factors.