Tohoku Electric Q2 FY2027: Revenue Jumps, Net Profit Falls 66%

Tohoku Electric posted first-half revenue of ¥1.7275 trillion for FY2027, up 47.8% from a year earlier. Operating profit fell 57.2% to ¥60.3 billion, while net income attributable to owners of the parent dropped 66.0% to ¥29.7 billion. Ordinary profit declined 63.5% to ¥45.8 billion, in sharp contrast to the surge in revenue.

• Revenue growth: Revenue increased by ¥558.5 billion, driven by a rise in trading outside the company's service area. Self-settled transactions associated with indirect auctions totaled ¥377.6 billion, up ¥350.9 billion from a year earlier.
• Pressure on earnings: The impact of the scheduled inspection of Onagawa Nuclear Power Station No. 2 and a time lag in the fuel-cost adjustment system weighed on results.
• Higher transmission and distribution costs: A rise in procurement prices for balancing capacity worsened the supply-demand balancing business and deepened losses in the transmission and distribution segment.
• Factors supporting earnings: Changes in market and sales conditions improved the earnings balance, while fair-value effects from electricity forward trading also provided support.

Self-settled transactions involve simultaneous sales and purchases and are recorded in both revenue and expenses. The company says they have no impact on earnings, so the revenue increase should not be read as a corresponding improvement in the profitability of electricity sales. Revenue swelled on higher trading, but profits fell sharply, with plant availability and the timing of fuel-cost adjustments shaping the half-year result.

The power generation and retail business increased revenue 54.3% to ¥1.4125 trillion, while segment profit fell 54.3% to ¥62.6 billion. Transmission and distribution also recorded higher revenue, but its loss widened, reflecting different operating conditions across the businesses.

Power generation and retail: Retail electricity sales volume rose 7.8% to 30.1 billion kWh, while wholesale volume increased 11.6% to 12.4 billion kWh. Total sales volume grew 8.8% to 42.4 billion kWh. New customer acquisitions and more bilateral transactions lifted sales, but the scheduled inspection of Onagawa No. 2 and the time lag in fuel-cost adjustments weighed on profit.

Transmission and distribution: Revenue from external customers rose 27.0% to ¥289.5 billion. Electricity demand in the service area fell 3.9%, as cooler summer temperatures than a year earlier reduced air-conditioning demand, among other factors. Lower standard wheeling charges and higher procurement prices for balancing capacity also weighed on results. The ordinary loss widened by ¥16.6 billion from a year earlier to ¥22.5 billion.

• Other: Revenue from external customers edged down 0.4% to ¥25.6 billion. Nuclear-related construction increased in the integrated facility engineering business, lifting segment profit 11.1% to ¥6.8 billion.

Higher sales volumes in power generation and retail did not translate into a profit recovery, as scheduled maintenance and procurement costs took their toll. In transmission and distribution, lower electricity demand and higher balancing costs were also a drag.

Total assets stood at ¥5.7735 trillion at the end of September 2026, up 0.7% from the end of the previous fiscal year. The equity ratio was unchanged at 19.4%. Tohoku Electric raised its annual dividend forecast to ¥42 per share from ¥40 in the previous year, including a forecast year-end dividend of ¥22.

Operating cash flow turned negative, while investing cash flow remained negative as the company continued spending on property, plant and equipment. Financing cash flow was positive, supported by borrowing and other factors, and cash and cash equivalents totaled ¥552.9 billion at the end of the first half. Growth in assets was partly driven by an increase in construction in progress, and interest-bearing debt also rose. The higher dividend forecast signals stronger shareholder returns, but the company did not announce a share buyback.

Tohoku Electric issued its consolidated forecast for FY2027 for the first time. The company had left its outlook undecided as of April 30, so there is no change from a previous forecast. It expects revenue to rise 46.3% from the previous year to ¥3.47 trillion and operating profit to increase 30.9% to ¥210 billion.

The company did not detail the assumptions behind its full-year forecast or the specific drivers of changes in its earnings in the results statement. It directed investors to a separate notice, released the same day, on revisions to its earnings and dividend forecasts. First-half net income was well below the year-earlier level, but the company expects full-year profit to exceed the previous year's result. Plant availability, the timing of fuel-cost adjustments and balancing costs in the second half will be key to meeting the forecast.

Scheduled plant inspections, the lag in fuel-cost adjustments and balancing-capacity procurement costs in transmission and distribution weighed on first-half profit. Improving these variable factors will be important if Tohoku Electric is to meet its full-year forecast.

• Nuclear plant operations: The scheduled inspection of Onagawa No. 2 reduced operating availability and hurt earnings in the power generation and retail business. Further changes in inspection schedules or operating conditions could affect profit through generation volumes and procurement costs.
• Fuel-cost adjustment lag: The time it takes for changes in fuel prices and other costs to feed through into electricity rates affects the earnings balance. This lag weighed on profit in the first half.
• Balancing costs: Higher procurement prices for balancing capacity widened losses in the transmission and distribution business. Continued changes in procurement prices or electricity supply and demand could delay a recovery in the segment's profitability.
• Demand and sales conditions: Cooler summer temperatures than a year earlier reduced air-conditioning demand from households and businesses. Weather and customer acquisition will affect electricity sales volumes and earnings.

In transmission and distribution in particular, higher revenue has not prevented losses from widening as costs increased. Profit recovery hinges not just on trading volumes, but on plant availability and lower procurement costs.