Will higher revenue and operating profit flow through to ordinary profit and below?

Revenue in Q1 FY2027 was ¥4,786 million, up 10.2% year on year, while operating profit was ¥250 million, up 9.0%. However, ordinary profit was ¥229 million, down 1.9%, and quarterly net profit attributable to owners of the parent was ¥146 million, down 6.9%. The benefit of higher revenue was apparent through operating profit, but earnings moved in the opposite direction below operating income.

In the same quarter of the previous year, operating profit was ¥229 million and ordinary profit was ¥234 million. The relationship between the two therefore changed from ordinary profit exceeding operating profit by ¥5 million to operating profit exceeding ordinary profit by ¥21 million this year. The company cited higher interest expenses as the reason for the declines in ordinary profit and net profit, explaining that they rose 61.9% year on year, but it did not provide the absolute amount of interest expenses or a breakdown by factor. In H1 FY2027, the key issue will be the extent to which higher operating profit is offset by financial expenses.

In FY2026, the previous full fiscal year, revenue rose 2.5% year on year to ¥18,856 million, while operating profit fell 20.4% to ¥1,202 million, ordinary profit fell 29.6% to ¥1,074 million, and net profit fell 32.4% to ¥723 million. The decline in earnings became larger moving from revenue to operating profit and then to ordinary profit and net profit. It will therefore be necessary to determine whether the increase in interest expenses in Q1 is a temporary fluctuation in lower-line earnings or a continuing factor reflecting the financing environment.

Because no official quarterly profit plan for H1 FY2027 has been disclosed, a simple 50% of the full-year forecast provides reference levels of ¥640 million for ordinary profit and ¥440 million for net profit. Based on Q1 results, Q2 alone would need to generate ordinary profit of ¥411 million and net profit of ¥294 million. In the next results announcement, we will look for the cumulative amounts of ordinary profit and net profit, the amount of interest expenses, the adjustment from operating profit to ordinary profit, and whether the full-year forecast is maintained or revised.