Shikoku Electric Q2 FY2027: Revenue rises as costs cut profit

Shikoku Electric posted higher revenue but lower earnings in the first half of FY2027. Revenue rose 8.9% year on year to ¥419.1 billion, while operating profit fell 27.2% to ¥48.2 billion and interim net income attributable to owners of the parent declined 18.1% to ¥40.6 billion. The operating margin fell to 11.5% from about 17.2% a year earlier.

Higher expenses more than offset increased revenue, cutting operating profit by ¥18.1 billion. Higher purchased-power costs were a major factor, and growth in wholesale sales alone was not enough to restore earnings. The key to improving profitability is not only growing sales, but also controlling the cost of procuring electricity.

The mix of electricity sales shifted during the first half. Total electricity sales volume increased 4.5% year on year, but retail sales declined while wholesale sales growth lifted the overall total.

Electric Power Business revenue increased 8.3% year on year to ¥370.1 billion. Retail electricity sales volume fell amid a decline in contracted demand and the fading impact of unusually hot weather the previous summer. In contrast, sales through bilateral contracts and the wholesale power market increased, lifting wholesale revenue.

Revenue from Other Businesses rose 13.9% year on year to ¥48.9 billion. The interim results statement did not disclose operating profit by business, so the extent to which sales growth contributed to earnings cannot be confirmed. Shikoku Electric's Ikata No. 3 reactor operated at full capacity, as it did in the year-earlier period, leaving nuclear power generation broadly flat.

Total assets stood at ¥1,764.5 billion at the end of September 2026, up ¥30.2 billion from the end of March. The equity ratio rose to 28.8% from 27.4%, while net assets increased by ¥33.1 billion from March to ¥510.6 billion.

The annual dividend forecast is ¥55 per share, up ¥5 from the previous year's ¥50. The forecast for the year-end dividend is ¥27.5 per share. The number of treasury shares was higher at the end of the period than at the end of the previous March, but the results statement did not announce a share buyback. The interim statement does not include cash flow figures, limiting assessment of funding, including operating cash flow and investment spending.

Higher electricity procurement costs and other expenses contributed to the decline in profit despite revenue growth. Based on the sales and cost trends in the results statement, changes in procurement costs and market conditions will be important factors shaping earnings.

• Electricity procurement costs: Purchased-power costs rose 30.8% year on year. If procurement expenses continue to climb, the benefit of increased wholesale sales may not translate into a meaningful improvement in profit.
• Declining retail sales: Retail electricity sales volume fell 7.0% year on year. Lower contracted demand and the reversal of the previous year's unusually hot weather affected sales, making demand trends important to revenue.
• Power plant operations: Nuclear power generation was broadly unchanged from a year earlier, with Ikata No. 3 operating at full capacity. Changes in plant operations could affect the power mix and procurement costs.
• Uncertainty around the earnings outlook: The company states that actual results may differ materially from its forecasts for various reasons. Changes in fuel prices and sales conditions warrant close attention.

Shikoku Electric forecasts revenue of ¥905.0 billion, operating profit of ¥44.5 billion and net income attributable to owners of the parent of ¥37.5 billion for FY2027. The company revised its outlook from the forecast announced most recently, but the interim results statement does not provide the previous figures or details of the reasons for the revision.

Operating profit fell year on year in the first half, and the full-year forecast also calls for lower profit than the previous year. The company expects revenue to grow but does not project a recovery in earnings, making second-half sales trends and changes in electricity procurement costs important to whether it meets its forecast. The specific reasons for the revision need to be checked in the company's separate notice on revisions to its earnings forecast.

The quarterly results also reflect changes to the consolidated group and equity-method affiliates. Yonden T&D Service became a consolidated subsidiary from the first quarter, while Mithra Solar Holding Ltd was added as an equity-method affiliate.

• Yonden T&D Service: Added as a consolidated subsidiary from the first-quarter consolidated accounting period.
• Mithra Solar Holding Ltd: Added as an equity-method affiliate from the first-quarter consolidated accounting period following an investment.

The changes bring the company's involvement in electricity-related services and solar power into its consolidated reporting. However, the results statement does not disclose the investment amount or either company's contribution to first-half profit, making it difficult to quantify their impact at this stage.