1Q profit margin declined on costs and interest despite flat revenue

In 1Q of the fiscal year ending March 2027, revenue was ¥2,514 million, down 1.2% year on year, while operating profit was ¥355 million, down 12.1%, ordinary profit was ¥298 million, down 17.4%, and net profit was ¥251 million, down 22.9%. The declines in operating profit and below were larger than the decline in revenue, and the operating margin fell by approximately 1.7 percentage points, to approximately 14.2% from approximately 15.9% in the same period of the previous year. The company cited higher personnel and other costs, as well as an increase in interest paid due to higher interest rates, as factors behind the decline in profit, but did not disclose the impact by item.

For comparison, the operating margin was 11.3% in the fiscal year ended March 2026, improving 1.5 percentage points from 9.8% in the previous fiscal year. By contrast, the full-year forecast for the fiscal year ending March 2027 is revenue of ¥9,700 million and operating profit of ¥800 million, implying a simple operating margin of approximately 8.2%. The 1Q margin of approximately 14.2% is above the full-year forecast, but has deteriorated from the same period of the previous year. The first-half breakdown of expenses will therefore be needed to determine whether the full-year forecast incorporates conservative seasonality or reflects a substantive decline in profitability based on higher cost burdens.

For the first-half results, using half of the full-year forecast as a simple monitoring benchmark gives revenue of ¥4,850 million, operating profit of ¥400 million, ordinary profit of ¥300 million, and net profit of ¥200 million. However, the company has not disclosed a separate first-half earnings forecast, so these are mechanical benchmarks for checking progress, not company targets. In particular, 1Q operating profit alone reached 44.4% of the ¥800 million full-year forecast. Accordingly, whether the margin continues to deteriorate in 2Q will be more important than whether first-half operating profit reaches ¥400 million.

Depreciation and amortisation was ¥178,599 thousand in 1Q, compared with ¥700 million for the full previous fiscal year. The company has not disclosed how personnel expenses, energy costs, and interest paid, in addition to depreciation and amortisation, each changed from the same period of the previous year in millions of yen. In the first-half results, we will check not only changes in revenue, but also whether the operating margin remains in the 14% range and whether increases in interest paid and changes in interest-bearing debt and borrowing rates are disclosed.