I am Soichiro Tanaka. First, I would like to thank our shareholders and investors for their continued support and valuable feedback on the ENEOS Group's business activities. Let me now walk you through today's presentation materials. Please turn to page three. First, I will discuss the U.S. C4 materials business M&A announced today. We have decided to acquire 100% of the shares of TPC Holdings Incorporated, a company based in Houston, Texas, in the United States. TPC manufactures and sells C4 chemical products, including butadiene. C4 refers to compounds containing four carbon atoms. As shown in the middle of the slide, the target company generated average operating profit of approximately $100 million, or approximately JPY 15.5 billion over the past three years, excluding one-time factors. We believe the business offers stable earnings potential. As for the schedule, closing is currently expected in October of this year.
Please turn to page four for an overview of TPC's business. TPC uses crude C4 derived from shale gas sourced from chemical companies and other suppliers as feedstock to produce butadiene and various C4 derivative products shown on the slide. Many of its products hold high market shares in North America. Following this acquisition, the ENEOS Group will become the world's third-largest group in terms of butadiene production capacity.
Please turn to page five. Under our medium-term management plan, we position the High Performance Materials business as a future growth area. This M&A is aligned with that plan and is intended to establish a new earnings platform in the U.S. market where stable growth is expected to continue. From a market perspective, we view the United States as an attractive market. It offers access to stable and relatively low-cost shale gas-based feedstock, is a large market, and carries relatively low country risk.
In addition, TPC's production process centered on C4 extraction is an area where the ENEOS Group has a strong track record and deep expertise. By applying the operational expertise we have built over many years to the acquired business, we expect to generate synergies. Looking ahead, we will also leverage our global customer base and pursue further value creation through additional M&A and other strategic investments. Next, I will discuss our progress in the transformation to a robust management structure initiative. Please turn to page seven. This slide shows our progress in restructuring our group company organization. During the first quarter, we continued to streamline non-core businesses in line with the group company holding policy decision process announced in May.
As a result, the effective number of group companies was 260 as of the end of June 2026, a decrease of 15 companies from the end of March 2025, when the medium-term management plan began. Going forward, based on our plan to reduce the number of companies by approximately 100, we will continue to pursue divestitures at fair value as well as integration and consolidation of relevant companies. Through these efforts, we aim to both reduce the number of group companies and strengthen governance at the companies we retain, thereby improving ROIC across the entire group. Please turn to page eight. I will now discuss our response to the situation in the Middle East. In the first quarter, the disruption in the Strait of Hormuz had a significant impact on crude oil procurement.
Nevertheless, we maintained a stable domestic energy supply by diversifying our sourcing and utilizing petroleum reserves, among other measures. Uncertainty surrounding the Middle East situation remains, but we will continue to make every effort to ensure a stable supply. Please look at the right side of the slide. I will explain the status of refinery utilization. In the first quarter, the average refinery utilization rate was 84%, excluding periodic repairs and the impact of the Middle East situation. This represents an improvement from the FY 2025 average of 80% and reflects the continued benefits of our measures to reduce refinery troubles. We will continue working toward achieving our FY 2027 target of a 90% utilization rate under the medium-term management plan. Next, please turn to page nine. This page is provided for reference and shows the progress of our cash allocation. Please look at the left side of the slide.
In addition to the previously announced Petroleum Products refining and sales business M&A in Southeast Asia and Australia, the US C4 materials business M&A is also subject to the management allocation framework. Including these transactions, the total amount of investments decided on during the two-year period from FY 2025 to FY 2026 is approximately JPY 700 billion. Going forward, we will continue to allocate capital to the options expected to make the greatest contribution to enhancing corporate value over the medium to long term from the perspectives of both growth in investment and shareholder returns. Please turn to page 11. I will now discuss the financial highlights. For the first quarter of FY 2026, operating profit was JPY 482.6 billion, and operating profit excluding inventory valuation effects was JPY 287.4 billion, both representing year-on-year increases.
The increase was mainly driven by positive time lag effects related to the Middle East situation, improvements in refinery operations, and a significant improvement in overseas product market conditions. Regarding the full-year outlook, the Middle East situation has not yet stabilized, and it remains difficult to reasonably estimate its impact on future earnings. Therefore, we have decided to maintain the full-year outlook announced in May. Please turn to page 13 for the business environment. Dubai crude oil prices started the period at $109 per barrel and temporarily rose against the backdrop of heightened tensions in the Middle East. However, prices later declined on expectations that the situation in the Strait of Hormuz would normalize, ending the period at $68 per barrel. The average price for the quarter was $96 per barrel, up $29 year-on-year.
The exchange rate began at JPY 159 to the US dollar and the yen weakened, reflecting heightened tensions in the Middle East and the interest rate differential between Japan and the United States. The rate ended the period at JPY 162 to the US dollar. The quarterly average was JPY 159, JPY 14 weaker than the previous year. Pages 15 and 16 show the financial results summary and operating profit by segment. I will explain the details from page 17 onward. Please turn to page 17. Operating profit excluding inventory valuation in Petroleum Products business increased by JPY 125.0 billion year-on-year to JPY 211.4 billion.
Although the gain on the sale of the marine transportation business recorded in the previous fiscal year was no longer present, profit increased mainly due to positive time lag effects related to the Middle East situation, a significant improvement in refinery operations, and stronger overseas product market conditions. Operating profit in Oil and Natural Gas E&P business increased by JPY 11.6 billion year-on-year to JPY 27.1 billion, mainly reflecting higher resource prices and the impact of a weaker yen. Please turn to page 18. Operating profit in High Performance Materials business increased by JPY 6.4 billion year-on-year to JPY 11.7 billion, mainly due to higher butadiene market prices amid the Middle East situation.
Operating profit in Electricity business decreased by JPY 5.3 billion year-on-year to JPY 2.7 billion, mainly due to the end of the interconnection line-related scheme and higher power procurement costs. Please turn to page 19. Operating profit in the Renewable Energy business was JPY 0.3 billion, broadly unchanged year-on-year. Although profit was negatively affected by unfavorable sunlight and wind conditions, this was offset by the absence of impairment losses recorded in FY 2025. Operating profit in the Other segment increased by JPY 14.6 billion year-on-year to JPY 34.2 billion, mainly reflecting higher equity method earnings from JX Advanced Metals. On page 20, I will discuss cash flows and the balance sheet. On the left, operating cash flow for the first quarter included operating profit excluding inventory valuation of JPY 287.4 billion and depreciation and amortization of JPY 82.7 billion.
At the same time, working capital increased mainly because crude oil and product inventory levels were partially restored from the previous fiscal year-end through the diversification of procurement sources. As a result, operating cash inflow was JPY 58.6 billion. Investing cash flow was an outflow of JPY 139.1 billion, mainly due to capital investment of JPY 133.9 billion. As a result, free cash flow was an outflow of JPY 80.5 billion. As shown on the right, net interest-bearing debt including lease liabilities was JPY 1.883 trillion as of the end of June 2026, and the net D/E ratio was 0.44. Finally, pages 21 onward provide reference information, including assumptions and sensitivities. Please refer to them later as needed. This concludes my presentation. Thank you.