Will cost pressure and lower operating profit despite higher revenue continue in FY2027-H1?

FY2027-Q1 consolidated revenue rose 6.1% year on year to ¥628,962 million, while operating profit fell 25.0% to ¥4,190 million, ordinary profit fell 12.3% to ¥5,074 million, and net income attributable to owners of the parent fell 10.6% to ¥3,381 million. The operating margin was only approximately 0.67% on a simple calculation, below the approximately 1.46% operating margin for FY2026 as a whole. The company attributes the decline in operating profit mainly to higher operating expenses resulting from rising procurement prices for pharmaceuticals and other products, as well as inflation-driven increases in outsourcing and other costs.

The FY2027 full-year forecast calls for revenue of ¥2,563,000 million, operating profit of ¥31,200 million, ordinary profit of ¥34,300 million and net income of ¥25,000 million. Revenue is expected to rise 3.1% from the previous year, while operating profit is expected to decline 14.2%. At the end of Q1, revenue progress was approximately 24.5%, close to the proportion of the fiscal year elapsed, but operating profit progress was only approximately 13.4%. In H1, it will be necessary to determine whether the cost increases that became apparent in Q1 are temporary or represent structural pressure that will continue into the second half.

Profit pressure is also evident in the core pharmaceutical wholesaling business. FY2027-Q1 revenue in this business rose 6.3% year on year to ¥607,825 million, while operating profit fell 11.0% to ¥3,528 million. In FY2026 as a whole, pharmaceutical wholesaling revenue rose 3.8% to ¥2,401,013 million, while operating profit fell 1.4% to ¥31,467 million, showing that higher revenue has continued not to translate into profit growth.

In the next earnings release, we will monitor whether the impact of higher procurement prices, logistics and outsourcing costs, and labor costs is disclosed quantitatively, and how much was offset through price negotiations and SG&A controls. No breakdown by factor or gross margin disclosure has been identified at this stage. Whether H1 FY2027 operating profit exceeds the year-earlier period, and whether progress against the full-year operating profit forecast of ¥31,200 million improves from the Q1 level of 13.4%, will be key to assessing the credibility of the full-year forecast.