Sanwa: Cuts FY2027 operating profit forecast to ¥72bn

Sanwa kept its sales forecast unchanged while lowering its operating, ordinary and net profit forecasts. The previous forecast, revised forecast and prior-year results are as follows.

The revised operating profit forecast is ¥7.1 billion below the prior-year result, while ordinary profit is forecast to fall ¥6.65 billion. Net profit is expected to be ¥14.78 billion lower than a year earlier. Forecast earnings per share also fell to ¥216.81 from ¥288.08, below the prior-year ¥281.61.

Sanwa said domestic operations remain firm, while earnings conditions in overseas businesses have deteriorated. The main reasons for the lower profit forecasts are:

• Lower sales volumes: The overseas slowdown is expected to reduce sales volumes.
• Higher raw material and other costs: Inflation-driven cost increases are weighing on overseas earnings.
• Restructuring costs: These are contributing to lower operating, ordinary and net profit forecasts than previously expected.
• Sales forecast maintained: Sanwa kept its sales forecast at ¥677 billion, citing the expected benefits of passing on higher prices and foreign exchange effects.

Even with sales guidance unchanged, higher costs and lower sales volumes are eroding profit. Sales are expected to exceed the prior-year result, but each profit measure is forecast to fall, meaning revenue growth is not translating into higher earnings.

Sanwa made no change to its forecast for the second-quarter-end dividend for the year ending March 2027. It announced a revised forecast and an increase to the year-end dividend in a separate disclosure issued the same day.

Investors should assess the lower earnings forecast and the year-end dividend increase separately, as they reflect the earnings outlook and shareholder return policy, respectively. Key questions include how the overseas slowdown and higher costs will affect future profits, and whether earnings recover after the restructuring costs are booked.