1Q revenue hit a record high on capacity expansion in the apparel manufacturing business; the pace of recovery in FX-adjusted operating income is the key focus of these results

Key Positives From The 1Q Results

Revenue of JPY 18,958M (+11.8% YoY) marked a record high for a first quarter, per company disclosure. The apparel manufacturing business drove the top line, with unit shipments of 14.18M pieces (+12.0% YoY) on the back of capacity expansion in Vietnam, Indonesia and Bangladesh. Translation gains from a weaker yen at quarter-end added further support, lifting recurring profit and net income sharply.

• Revenue of JPY 18,958M (+11.8% YoY), a record high for a first quarter (company disclosure)
• Apparel manufacturing revenue of JPY 16,585M (+16.2% YoY) with segment profit of JPY 1,278M (+47.1% YoY) — growth in both top line and earnings
• By product category, casualwear at JPY 10,313M (+14.5% YoY) was the main driver
• By production region, Vietnam at JPY 5,472M (+18.4% YoY) and Indonesia at JPY 1,009M (+118.9% YoY) reflected contributions from expanded sites
• Net income of JPY 549M (+63.1% YoY), EPS of JPY 52.36 (+62.1% YoY). Dividend guidance maintained at JPY 115 annually

Key Concerns From The 1Q Results

FX-adjusted operating income — the best proxy for underlying earnings power — fell to JPY 850M (-21.7% YoY). Up-front costs associated with new line ramp-ups in apparel manufacturing and lower volumes in the lamination film business weighed on profitability. Note that the increase in recurring profit was largely driven by FX gains from financing transactions of JPY 187M (versus a loss of JPY 354M a year earlier).

• FX-adjusted operating margin of 4.5% (-1.9pt YoY); underlying profitability deteriorated despite top-line growth
• Apparel manufacturing FX-adjusted operating income of JPY 1,066M (+4.1% YoY); the gap versus +16.2% revenue growth points to the burden of up-front costs
• Lamination film volumes fell to 3.74M yards (-14.1% YoY), with FX-adjusted operating income of JPY 119M (-66.0% YoY)
• The company disclosed that persistently high raw material (petroleum-derived resin) costs will weigh on lamination film earnings from 2H onward
• Inventories of JPY 17,846M (+14.3% versus prior year-end) and a JPY 1,532M increase in short-term borrowings pushed the equity ratio down to 51.1% (-2.0pt)

Focus Areas / Items To Monitor Going Forward

• Timing of the peak-out in up-front costs associated with new line ramp-ups in apparel manufacturing, and the magnitude of the 2H recovery in FX-adjusted operating income
• Progress on the customer mix review in the lamination film business, and the timing of revenue contribution from expanded domestic China sales and customer diversification at the Vietnam plant
• The impact of divergence between actual rates and the full-year assumptions (average rate of JPY 151.3/USD, year-end rate of JPY 152.0/USD) on FX gains/losses from operating and financing transactions respectively

Key Financial Highlights

The divergence in direction between operating income and recurring profit stems from where FX gains/losses are booked. Gains from operating transactions declined to JPY 702M, while financing transactions swung to a JPY 187M gain, boosting recurring profit (company disclosure). The average rate moved from JPY 152.6 to JPY 157.0/USD and the period-end rate from JPY 159.9 to JPY 162.4/USD, a yen-weakening trend.

Performance By Business Segment

Apparel manufacturing captured stronger orders for casualwear and workwear through expanded supply capacity from additional lines and headcount, delivering growth in both revenue and profit. The lamination film business saw revenue and profit decline on weak market conditions in China and the customer mix review. Note that segment profit is presented on a recurring profit basis.

Segment Performance Table

*Revenue represents sales to external customers. There are no inter-segment sales. Margins are estimated in this report.

Progress Versus Full-Year Guidance

Revenue progress of 23.7% exceeded the 22.8% run rate versus full-year actuals in the year-ago quarter (estimated in this report). However, FX-adjusted operating income progress of 16.0% lagged the comparable 22.5% (same basis). Given the seasonal skew of apparel manufacturing revenue and profit toward 2H, productivity improvement on new lines and pass-through of higher resin prices are key to 2H progress.

*Progress rates per company disclosure.

• Quarterly revenue in apparel manufacturing is weighted toward 2H (prior-year actuals: 1Q JPY 14,266M → 3Q JPY 18,062M → 4Q JPY 18,265M)
• The lamination film business recorded a segment loss of -JPY 57M in 3Q of the prior year; quarterly volatility is high
• For consolidated results, the parent and the Myanmar subsidiary use April–June as 1Q, while other overseas subsidiaries use January–March (company disclosure)

Changes To Guidance

No change from the full-year consolidated guidance announced on May 14, 2026. Maintained at revenue of JPY 80,000M (+7.7% YoY), operating income of JPY 3,400M (+56.3% YoY), FX-adjusted operating income of JPY 5,300M (+10.1% YoY), recurring profit of JPY 4,900M (-9.1% YoY), and net income of JPY 3,400M (+9.1% YoY).

Commentary On Shareholder Returns

Dividend guidance for FY3/27 is maintained at JPY 115 at year-end (JPY 115 annually). The prior-year annual dividend of JPY 100 comprised an ordinary dividend of JPY 90 and a commemorative dividend of JPY 10; on an ordinary dividend basis this represents an increase from JPY 90 to JPY 115. Dividends paid during 1Q totaled JPY 1,049M.

Financial Position

Total assets increased on higher inventories and capex, while interest-bearing debt also rose, primarily on increased short-term borrowings. That said, cash and deposits of JPY 21,737M exceed interest-bearing debt of JPY 16,229M, leaving the company in a net cash position.

News Released Alongside The Earnings Announcement

None

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

• None