Earnings Call: Q1 2026

Aug 7, 2025

Summary

Q1 ordinary profit was ¥4.2bn, or ¥21.1bn excluding inventory valuation; reported parent-attributable profit was a ¥2.0bn loss. Full-year guidance was unchanged, while petroleum and E&P earnings faced time-lag and FX pressures.

Thank you very much for taking time out of your busy schedule today to participate in the financial results briefing for the first quarter of FY 2025. I'll explain the highlights of the first quarter and initiatives to enhance enterprise value. First, please turn to page three for the first quarter financial results. Ordinary profit was JPY 4.2 billion, and ordinary profit excluding the impact of inventory valuation was JPY 21.1 billion, with the impact of minus JPY 16.9 billion. Profit attributable to owners of parent was minus JPY 2 billion, and profit attributable to owners of parent, excluding the impact of inventory valuation, was JPY 9.8 billion. The table at the bottom shows the major management indicators for FY 2025. Net worth on line eight was JPY 562.9 billion, net worth ratio on line nine was 26.7%, and Net D/E ratio on line 10 was 0.93 times. There are no revisions to the FY 2025 full year forecast shown on the far right. From the next page, I'll explain our initiatives to enhance our enterprise value. Please turn to page five. The company regards the appropriate return to shareholders as one of its key management policies. While steadily implementing the measures already announced, we plan to achieve a cumulative total payout ratio of 60% or more over the three-year period of the MTMP as our commitment. Also, we plan a stock split as of October 1st. The year-end dividend per share for FY 2025 is set at 90 yen in accordance with the stock split ratio. As stated in the three-pronged capital policy, the annual dividend per share will be JPY 330 on a pre-stock split basis with no substantial change. Please turn to page six. From this page, I'll cover the major topics of each segment. First, I'll explain how we will secure profitability for the oil business field in maximizing refinery operating ratio. In FY 2025, we'll continue our efforts to maximize refinery operating ratio by reducing unplanned shutdowns and shortening the regular maintenance period through DX to further strengthen the competitiveness of our refineries. As an initiative, we have introduced a system to consolidate maintenance functions, which had been introduced at the Chiba Refinery to the head office. The system enables maintenance support from the head office based on data collected from the refineries. We'll continue to implement predictive maintenance as part of our maintenance strategy, with a focus on building a data integration platform. Please turn to page seven. On this page, I'll explain about ramping up production at the Hail Oil Field. The production increase by water injections, which have been implemented since December 2024, is progressing steadily. As shown by the chart, its effect has already become evident in the first quarter, and we expect its contribution to full-year earnings. Please turn to page eight. From this page, I'll explain the expansion of the new business fields to drive growth. On page eight, I'll explain our initiatives to bolster the green electricity supply chain. Regarding the demand for wind power at Cosmo Eco Power, the Shin-Mutsu Ogawara Wind Farm started its operation in FY 2025. For the energy storage business, we have installed storage batteries at the Yokkaichi Kasumi Power Plant and launched the demonstration operations. In the area of green electricity sales, we are working to expand our business through the development of new customers and corporate PPAs. Please turn to page nine. This page is about SAF. As you may already know, we started supplying Japan's first domestically produced SAF this fiscal year. The domestic SAF supply project at Haneda Airport has been selected as the first recipient of the subsidy under the Tokyo Metropolitan Government's Domestic SAF Utilization Promotion Project. As part of efforts to increase the supply of SAF, our overseas subsidiary has obtained certification and expanded import channels for foreign-produced SAF and other fuels. We will continue to promote initiatives to further expand the SAF business. This fiscal year is the final year of our MTMP. We will continue to make concerted efforts to increase our enterprise value, which is the main theme of the 7th MTMP. This concludes my presentation. Thank you very much. Next, Mr. Iwai, please. I will now explain the details of the financial results for the first quarter of FY 2025. Please turn to page 11. Consolidated ordinary profit for the first quarter of FY 2025 was JPY 4.2 billion. Consolidated ordinary profit excluding the impact of inventory valuation was JPY 21.1 billion. By segment, ordinary profit excluding the impact of inventory valuation in the petroleum business was JPY 10.4 billion, down JPY 14.5 billion year-on-year. Despite solid underlying margins, profit decreased due to the time lag with lower crude oil prices. Next, in the petrochemical business, ordinary profit was minus JPY 2.9 billion, down JPY 1.7 billion year-on-year. Although earnings improved due to business restructuring, profit decreased due to the impact of inventory at the beginning of the fiscal year and the deteriorating market conditions. In the oil E&P business, ordinary profit was JPY 8.9 billion, down JPY 7.7 billion year-on-year. Despite a decline in profit due to foreign exchange effects, production volume improved. In the renewable energy business, ordinary profit was JPY 0.2 billion, up JPY 0.2 billion year-on-year. This was due to favorable wind conditions. Please turn to page 12 for the overview of the overall profit and loss. Net sales on line one was JPY 648.5 billion, down JPY 6.6 billion year-on-year. Operating profit on line two was JPY 8 billion. Ordinary profit on line four was JPY 4.2 billion. Profit attributable to owners of parent on line eight was minus JPY 2 billion. With the impact of inventory valuation of minus JPY 16.9 billion, ordinary profit excluding the impact of inventory valuation on line 10 was JPY 21.1 billion. Profit attributable to owners of parent excluding the impact of inventory valuation on line 11 was JPY 9.8 billion. All the profit items posted year-on-year decrease, and the main reason for this was that yen depreciated from the beginning to the end of the previous fiscal year, resulting in a positive time lag in the petroleum business and a large foreign exchange gain in the oil E&P business. Please turn to page 14. I will explain the details of the year-on-year changes in ordinary profit for the first quarter with a waterfall chart. Petroleum business was down JPY 14.5 billion year-on-year. The breakdown includes minus JPY 11.9 billion for margins and sales volume, of which margin of four main products was minus JPY 13.3 billion. While there was a margin improvement of JPY 5.2 billion in real terms, the time lag caused a decrease of JPY 19.1 billion. Margin of other products was minus JPY 3.4 billion. This was due to the impact of softening overseas market conditions, mainly for jet fuel. Import purchase and export was up JPY 5.6 billion. This was due to the elimination of the impact of the regular maintenance at the Chiba refinery in the previous fiscal year. Next is the breakdown of minus JPY 1.7 billion in the petrochemical business. Price was minus JPY 3.5 billion. This was due to the increased impact of deteriorating market conditions. Expenses and others increased by JPY 1.8 billion. We recognize that this indicates the effects of the structural improvement in the petrochemical business. Next is about the minus JPY 7.7 billion year-on-year decrease in the oil E&P business. Volume increased JPY 7.5 billion, and this increase is a rebound from the partial decrease in shipment volume in the previous fiscal year due to a shipping pipeline trouble. Expenses and others were minus JPY 14.8 billion. This includes the impact of the foreign exchange loss of minus JPY 11.2 billion to be recognized this year, a change from the foreign exchange gain in the previous fiscal year. Please turn to page 15 for the overview of the balance sheet. Total assets on line one was JPY 2 trillion, 110.5 billion, down JPY 46.1 billion year-on-year. Net worth on line three was JPY 562.9 billion. Net worth ratio on line four was 26.7%. Net D/E ratio on line six was 0.93 times. We have achieved a target level of the 7th MTMP in terms of the financial indicator. Lastly, on page 16, I'll explain the overview of capital expenditure. Capital expenditure on line one was JPY 12.2 billion, down JPY 7.3 billion year-on-year. The table on the right shows capital expenditure by segment. The petrochemical business on line two decreased this fiscal year due to the absence of regular maintenance at Maruzen Petrochemical in the first quarter of the previous fiscal year. On the left table, depreciation expense on line two was JPY 14.2 billion, which is almost the same level as the previous fiscal year. This concludes my presentation.