Slide 1: Presentation on Results for the 2nd Quarter FY2023
Presentation on Results for the 2nd Quarter FY2023 November 14, 2023 Idemitsu Kosan Co.,Ltd.
Slide 2: Table of Contents
Table of Contents ◼ Initiatives aimed at enhancing corporate and equity value -Action to Implement Management that is Conscious of Cost of Capital and Stock Price- ◼ Highlights ◼ Results for the 2Q FY2023 ◼ Forecasts for FY2023 ◼ Progress on the mid-term management plan ◼ Reference ✓ Financial resul
Slide 3: Initiatives aimed at enhancing corporate and equity value
◼Initiatives aimed at enhancing corporate and equity value -Action to Implement Management that is Conscious of Cost of Capital And Stock Price- 3
Slide 4: FY25 ROE target revised upward to ≥10%, PBR ≥ 1.0
To Improve Corporate Value and Equity Value FY25 ROE target revised upward to “≥ 10%” Reduce cost of capital to rapidly achieve PBR ≥ 1.0 Further accelerate medium-term plan initiatives Business strategy Capital/financial strategy • Promote structural reforms • Promote capital/ financial ➢ Further e
Slide 5: Upward Revision of the FY25 ROE Target
Upward Revision of the FY25 ROE Target ◼ FY25 ROE target: At the medium-term plan announcement (11/2022) Current revision 8.0% ≥10% ◼ Reason for the upward revision ✓ Considering both necessity for further improvement of return on capital from existing businesses and the cost of capital expected by
Slide 6: Review of the Shareholder Returns Policy
Review of the Shareholder Returns Policy ◼ Current ✓ Total payout ratio of at least 50% of cumulative net income excluding inventory impact in FY23-25 ✓ Provide stable dividends of ¥120/share Stronger focus on return on capital and shareholder return ◼ Revised ✓ Total payout ratio of at least 50% of
Slide 7: Reduce Cost of Capital through Business Transformation
Reduce Cost of Capital through Business Transformation Enhance earnings to achieve Transition to decarbonized ROE ≥ 10% businesses Achieve GHG reduction targets Convert “quality” of profits Non-fossil fuel Business business Transformation Transition to growing businesses (incl. new businesses) Expan
Slide 8: Major Progress towards Business Transformation
Major Progress towards Business Transformation Adapt to needs for CN of fossil fuel ■Our key strengths Hydrogen/ Collaboration on supply chain establishment - location of production and Ammonia (Tosoh、Tokuyama, Zeon, JERA, KEPCO) transportation - production technologies Biofuel Collaboration on secu
Slide 9: Towards the Achievement of GHG Reduction Targets
Towards the Achievement of GHG Reduction Targets (New Scope 3 Indicator) ✓ Aiming to reduce emission throughout the supply chain through business transformation ✓ A new indicator “carbon intensity” will be used to set targets and promote further initiatives [Formula] [Target ‐ vs. 2020] Carbon CO2 e
Slide 10: Expand the Shareholder/Investor Base and Improve Communication
Expand the Shareholder/Investor Base and Improve Communication ◼ Stock split ✓ The stock split will be implemented to increase shareholders who identify with our group’s medium-to-long-term strategy by reducing the share price and making it easier to invest in our stock Minimum Record date: 12/31/20
Slide 11: Highlights
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Slide 12: Results for the 2Q FY2023
Results for the 2Q FY2023 ◼ Summary ✓ Operating + equity income (segment income) decreased by ¥163.1 billion y- o-y, due to reversal of inventory impact resulting from increased crude oil prices in the previous fiscal year, etc. ✓ Segment income excluding inventory impact increased by ¥28.4 billion,
Slide 13: Revision of Forecasts for FY2023
Revision of Forecasts for FY2023 ◼ Overview ✓ Revised forecasts upward to reflect changes in the external environment such as increased crude oil prices and further JPY depreciation [¥ billions] 5/9 Revised Change Forecast Forecasts Operating Income + Equity Income 155 265 +110 Inventory impact (30)
Slide 14: Results for the 2Q FY2023
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Slide 15: Key Topics
Key Topics ◼ Trends in Petroleum Demand and Sales ✓ Demand for core products, particularly gasoline, has stabilized after recovery from reduction under COVID-19 ✓ Jet fuel demand has remained on a recovery trend since FY2020 2Q FY2020 FY2021 FY2022 FY2023 Core products 94.6％ 98.6％ 100.9％ 98.0％ Gasol
Slide 16: Operating Environment
Operating Environment Dubai Crude Australian Coal Exchange Rate [USD/bbl] Oil Price [USD/ton] Spot Price [JPY/USD] (USD) 120.0 450.0 150.0 FY2023 FY2022 420.0 420.7 390.0 144.6 110.0 145.0 376.8 379.5 108.1 360.0 141.6 330.0 100.0 140.0 300.0 96.9 137.4 138.4 270.0 263.7 90.0 135.0 86.7 240.0 247.8
Slide 17: Overview
Overview ◼ Crude Oil/Coal/Exchange Rate [USD/bbl, USD/ton, JPY/USD] 2Q FY2022 2Q FY2023 Change Crude Oil (Dubai) 102.5 82.3 (20.2) (19.7%) Crude Oil (Brent)* 107.6 79.8 (27.8) (25.8%) Australian Coal Spot Price* 320.3 204.3 (116.0) (36.2%) Exchange Rate (TTM) 134.0 141.0 +7.0 +5.2% *Brent prices and
Slide 18: Segment Information
Segment Information ◼ Operating ＋ Equity Income [¥ billions] 2Q FY2022 2Q FY2023 Change Petroleum 269.3 121.7 (147.6) (54.8%) Excluding inventory impact 61.1 105.0 +43.9 +71.9% Basic Chemicals 14.2 12.0 (2.2) (15.3%) Functional Materials 8.6 13.4 +4.8 +55.9% Power and Renewable Energy (2.9) (0.4) +2
Slide 19: Segment Information
Segment Information ◼ Factors Affecting Operating + Equity Income (excluding inventory impact, y-o-y) [￥billions] fuel cost, etc. Solar, Export non-core etc. products Vietnam, Lubricants, etc. margin Cost, etc. etc. Norway core products margin Volume (time-lag) Volume Consolidated adjustment, etc. E
Slide 20: Segment Information: Petroleum
Segment Information [Petroleum] YoY+¥43.9 (2Q FY22：¥61.1bn ➡ 2Q FY23：¥105.0bn) [Y-o-y change in Petroleum sales volume [Trends in Domestic Petroleum Product Margin*] (core products)] *Average margin of gasoline, diesel oil, kerosene, and heavy oil A (domestic spot –crude oil) [Thousand KL] (YoY) [￥/
Slide 21: Segment Information
Segment Information [Basic Chemicals] YoY-¥2.2bn (2Q FY22: ¥14.2bn ➡ 2Q FY23: ¥12.0bn) ✓ Decreased as a result of sales volume reduction and cost increase due to shut down maintenance ✓ Product margin was unchanged in total [USD/ton] Product 2Q FY22 2Q FY23 Change Price Margin Price Margin Price Mar
Slide 22: Segment Information: Oil E&P and Coal
Segment Information [Oil E&P] YoY -¥6.6 bn [Coal] YoY -¥23.7 bn (2Q FY22：¥17.1bn ➡ 2Q FY23：¥10.5 bn) (2Q FY22：¥83.0bn ➡ 2Q FY23：¥59.3 bn) <Crude Oil Production Volume <Coal Production Volume and Brent Crude Oil Price Trends> and Australian Coal Spot Price Trends> FY2022 FY2023 FY2022 FY2023 [Thousan
Slide 23: Balance Sheet
Balance Sheet [¥ billions] 3/31/2023 9/30/2023 Change 3/31/2023 9/30/2023 Change Total Current Cash and Deposits 105.2 173.1 +67.9 Liabilities 2,164.0 2,317.4 +153.4 Receivables, Total Fixed Inventory, etc. 2,626.9 2,826.3 +199.4 Liabilities 1,072.1 1,055.9 (16.2) Total Current Assets 2,732.1 2,999.
Slide 24: Statement of Cash Flows
Statement of Cash Flows [¥ billions] Cash Flow from Operating Activities 206.9 Net Income before tax 227.8 Depreciation Expense 53.7 Change in Working Capital (115.5) Other 40.9 Cash Flow from Investing Activities (58.2) Purchase of tangible fixed assets (40.0) Other (18.2) Cash Flow from Financing
Slide 25: Forecasts for FY2023
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Slide 26: Forecasts for FY2023
Forecasts for FY2023 ◼ Crude Oil/Coal/Exchange Rate [USD/bbl, USD/ton, JPY/USD] 5/9 Revised Assumptions Change (from Oct.) Forecasts Forecasts Crude Oil (Dubai) 80.0 83.6 +3.6 +4.5% 85.0 Crude Oil (Brent)* 85.0 83.2 (1.8) (2.1%) 86.5 Australian Coal Spot Price * 170.0 175.3 +5.3 +3.1% 145.0 Exchange
Slide 27: Segment Information
Segment Information ◼ Operating ＋ Equity Income [¥ billions] 5/9 Revised Change Forecasts Forecasts Petroleum 43.0 135.0 +92.0 +214.0% Excluding inventory impact 73.0 90.0 +17.0 +23.3% Basic Chemicals 21.0 21.0 ー ー Functional Materials 19.0 23.0 +4.0 +21.0% Power and Renewable Energy 0.0 (5.0) (5.0)
Slide 28: Segment Information
Segment Information ◼ Factors Affecting Operating + Equity Income [¥ billions] (excluding inventory impact, Compared to the 5/9 forecasts) Consolidated adjustment, Exchange etc. rate, etc. Performance Chemicals, Price etc. Vietnam Volume Export Margin Power core products Volume margin (time-lag) non
Slide 29: Segment Information
Segment Information [Petroleum] +¥17 bn (5/9 announcement: ¥73 bn ➡ revised forecast: ¥90 bn) ✓ Revised upward to reflect improved export margins, positive time-lag effects resulting from a rise in crude oil prices, etc. ✓ A fall in non-core product margins and increased fuel costs partially offset
Slide 30: Segment Information
Segment Information [Power/Renewable Energy] -¥5 bn (5/9 announcement: ¥0 ➡ revised forecast: -¥5 bn) ✓ Power business: Factored by the decrease in generated power volume due to an extension of the regular power plant maintenance period and reflected risk of a profit decrease in wholesale resulting
Slide 31: Progress on the Medium-Term Plan
◼Progress on the Medium-Term Plan *The icons on topics (from next page) related to progress in the medium-term plan shows business areas below Energy Diverse resource conservation Smart Yorozuya one step ahead /circulation solutions 31
Slide 32: Topics Affecting Progress on the Medium-term Plan (1/4)
Topics Affecting Progress on Progress on the Medium-term Plan the Medium-term Plan (1/4) ◼ Commenced cooperation toward mass production of all-solid-state batteries for BEVs with Toyota ✓ Working together in developing mass production technology of solid electrolytes, improving productivity and esta
Slide 33: Topics Affecting Progress on the Medium-term Plan (2/4)
Topics Affecting Progress on Progress on the Medium-term Plan the Medium-term Plan (2/4) ◼ Commenced joint study with LOPS on SAF feedstock procurement ✓ Aiming to establish a system to stably procure SAF feedstocks such as waste cooking oil from various parts of Japan by the late 2020s (Link to our
Slide 34: Topics Affecting Progress on the Medium-term Plan (3/4)
Topics Affecting Progress on Progress on the Medium-term Plan the Medium-term Plan (3/4) ◼ Launched demonstration test on recycling marine plastic waste with Mitsui O.S.K. Lines ✓ To utilize marine plastic wastes using an automated marine debris collection device ✓ Aiming to produce generated oil by
Slide 35: Topics Affecting Progress on the Medium-term Plan (4/4)
Topics Affecting Progress on Progress on the Medium-term Plan the Medium-term Plan (4/4) ◼ Withdrawal from the Bisphenol A business ✓ The business environment has deteriorated owing to an oversupply caused by the expansion of facilities in Asia ✓ Planning to stop operating the manufacturing equipmen
Slide 36: Investments
Progress on the Medium-term Plan Investments [¥ billions] FY23 Forecast FY23 1H Results *unchanged from 5/9 announcement Strategic Maintenance Total Strategic Maintenance Total Existing Businesses 5.5 40.6 46.1 53.0 102.0 155.0 Business Structure 8.6 0 8.6 87.0 0.0 87.0 Reforms Total 14.1 40.6 54.7
Slide 37: Reference
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Slide 38: Financial Results
Financial Results Financial Results ◼ Net Sales by segment [¥ billions] 2Q FY2022 2Q FY2023 Change Petroleum 3,814.1 3,189.1 (625.0) (16.4%) Basic Chemicals 363.0 280.2 (82.8) (22.8%) Functional Materials 245.6 248.4 +2.8 +1.1% Power and Renewable Energy 89.8 72.1 (17.7) (19.7%) Resources* 300.3 233
Slide 39: Financial Results
Financial Results Financial Results ◼ Quarterly segment income (cumulative, exc. inventory impact) [¥ billions] FY2022 FY2023 1Q 2Q 3Q 4Q 1Q 2Q Petroleum 57.4 61.1 1.2 17.3 18.4 105.0 Equity income 7.0 12.4 12.8 12.9 4.9 3.8 Basic Chemicals 8.1 14.2 11.4 10.1 (1.4) 12.0 Equity income (0.1) (0.1) 0.5
Slide 40: Financial Results
Financial Results Financial Results ◼ Quarterly segment income (Q on Q, exc. inventory impact) [¥ billions] FY2022 FY2023 1Q 2Q 3Q 4Q 1Q 2Q Petroleum 57.4 3.7 (59.9) 16.1 18.4 86.6 Equity income 7.0 5.4 0.4 0.1 4.9 (1.0) Basic Chemicals 8.1 6.1 (2.8) (1.3) (1.4) 13.4 Equity income (0.1) (0.0) 0.6 (0
Slide 41: Sensitivity
Financial Results Sensitivity ◼ Major items affecting operating profit by changes in assumptions (3-4Q) Revised Income Assumption Range of assumption Segment impact Major Factors Items fluctuation （from Oct.） (¥ billions) Fuel cost, Crude oil price 85.0$/bbl ±10$/bbl ±15.0 time-lag Singapore ー ±5$/b
Slide 42: Sales Volume
Volume Sales Volume ◼ Petroleum [thousand KL,％] 2Q FY2022 2Q FY2023 Change Gasoline 6,640 6,537 (103) (1.5%) Naphtha 190 192 +2 +0.8% Jet Fuel 1,149 1,244 +95 +8.3% Kerosene 826 750 (75) (9.1%) Diesel Oil 5,096 5,028 (69) (1.3%) Heavy Fuel Oil A 1,394 1,368 (26) (1.9%) Heavy Fuel Oil C 1,267 1,159 (
Slide 43: Sales Volume
Volume Sales Volume ◼ Basic Chemicals [kt,%] 2Q FY2022 2Q FY2023 Change Basic Chemicals 1,709 1,617 (91) (5.3%) ◼ Functional Materials [KKL,kt,%] 2Q FY2022 2Q FY2023 Change Lubricants 577 565 (12) (2.0%) Performance Chemicals 346 299 (47) (13.6%) *Lubricants include sales overseas ◼ Power/Renewable
Slide 44: Production Volume
Volume Production Volume ◼ Resources (Oil E&P) [KBOED,%] 2Q FY2022 2Q FY2023 Change Vietnam 15.8 16.8 +1.0 +6.2% Norway 15.7 14.8 (0.9) (5.8%) Total('000BOED) 31.5 31.6 +0.1 +0.2% Total('000BOE) 5,708 5,718 +10 +0.2% *The numbers reflect our rights and ownership ratios based on our equity share *The
Slide 45: Sales Volume (Forecast)
Volume Sales Volume(Forecast) ◼ Petroleum [KKL,％] 5/9 Revised Change Forecast Forecast Gasoline 12,700 12,700 ー ー Naphtha 210 350 +140 +66.7% Jet Fuel 2,330 2,470 +140 +6.0% Kerosene 3,720 3,680 (40) (1.1%) Diesel Oil 10,530 10,320 (210) (2.0%) Heavy Fuel Oil A 3,230 3,240 +10 0.3% Heavy Fuel Oil C
Slide 46: Sales Volume (Forecast)
Volume Sales Volume(Forecast) ◼ Basic Chemicals [kt,%] 5/9 Revised Change Forecast Forecast Basic Chemicals 3,780 3,600 (180) (4.8%) ◼ Functional Materials [KKL,kt,%] 5/9 Revised Change Forecast Forecast Lubricants 1,220 1,160 (60) (4.9%) Performance Chemicals 720 710 (10) (1.4%) *includes sales ove
Slide 47: Production Volume (Forecast)
Volume Production Volume(Forecast) ◼ Resources (Oil E&P) [KBOED,%] 5/9 Revised Change Forecast Forecast Norway 14.0 15.3 +1.2 +8.9% Vietnam 12.8 13.0 +0.3 +2.1% Total('000BOED) 26.8 28.3 +1.5 +5.7% Total('000BOE) 9,779 10,333 +554 +5.7% *The numbers reflect our rights and ownership ratios based on o
Slide 48: Segment Information
Forecasts Segment Information ◼ Factors Affecting Operating + Equity Income (excluding inventory impact, y-o-y) [￥billions] fuel cost, Importing cost Cost, Lubricants, and affiliates etc. etc. etc. Vietnam Volume Power Export Norway non-core products Volume margin core products Price margin (time-la
Slide 49: Crude Oil Prices (Dubai and Brent)
Crude price Crude Oil Prices(Dubai and Brent) [USD/bbl] 130 Brent Dubai 110 90 70 50 30 10 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 49
Slide 50: Gasoline-Crude Oil (Domestic spot price and spread)
Product market price Gasoline-Crude Oil(Domestic spot price and spread) [Price :JPY/L] [Spread：JPY/L] 140 25 Spread Crude oil 120 Gasoline 20 100 15 80 60 10 40 5 20 0 0 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 50
Slide 51: Diesel-Crude Oil (Domestic spot price and spread)
Product market price Diesel-Crude Oil(Domestic spot price and spread) [Price :JPY/L] [Spread：JPY/L] 140 25 Spread 120 Crude oil Diesel oil 20 100 15 80 60 10 40 5 20 0 0 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 51
Slide 52: Gasoline-Crude Oil (Singapore spot price and spread)
Product market price Gasoline-Crude Oil(Singapore spot price and spread) [Price :USD/bbl] [Spread：USD/bbl] 160 40 Spread 140 35 Dubai Gasoline 30 120 25 100 20 80 15 60 10 40 5 20 0 0 -5 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 52
Slide 53: Diesel-Crude Oil (Singapore spot price and spread)
Product market price Diesel-Crude Oil(Singapore spot price and spread) [Price :USD/bbl] [Spread：USD/bbl] 180 70 Spread 160 Dubai 60 Diesel Oil 140 50 120 100 40 80 30 60 20 40 10 20 0 0 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 53
Slide 54: Para-Xylene, Mixed Xylene-Naphtha
Product market price Para-Xylene, Mixed Xylene-Naphtha (price and spread) [Price :USD/ton] [Spread：USD/ton] 1,400 600 PX spread Mx spread Naptha PX MX 1,200 500 1,000 400 800 300 600 200 400 100 200 0 0 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 54
Slide 55: Styrene Monomer-Naphtha
Product market price Styrene Monomer-Naphtha (price and spread) [Price :USD/ton] [Spread：USD/ton] 1,600 800 SM spread Naptha 1,400 700 SM 1,200 600 1,000 500 800 400 600 300 400 200 200 100 0 0 Apr-19 Apr-20 Apr-21 Apr-22 Apr-23 55
Slide 56: Operational Data
Operation Operational Data ◼ Refineries Utilization FY2023 FY2019 FY2020 FY2021 FY2022 （2Q） 87% 78% 77% 83％ 75％ *on BCD basis(including regular maintenance) ◼ Number of Service Stations FY2023 FY2019 FY2020 FY2021 FY2022 （2Q） 6,384 6,311 6,216 6,136 6,046 56
Slide 57: Overview of the Company
Business Overview Overview of the Company FY2022, actual or as of the end of March 2023 ∎ Petroleum Segment ∎ Functional Materials Segment Refining Capacity 945 KBD *1,2) (Lubricants, Performance Chemicals, Electronic Domestic fuel oil sales volume Materials, Bitumen (High Performance Asphalt),
Slide 58: Petroleum Segment
Business Overview Petroleum Segment as of the end of March 2023 [KB/D] Operating Refining Refinery RH FCC RFCC FLG Equity Ratio Company Capacity Japan Idemitsu Hokkaido 150 42 33 Kosan Chiba 190 40 45 Aichi 160 60 50 Showa Yokkaichi Yokkaichi 255 45 61 75.0% Sekiyu Toa Oil Keihin 70 42 27 100.0% Sei
Slide 59: Basic Chemicals Segment
Business Overview Basic Chemicals Segment as of the end of March 2023 [mil tons/year] Production Capacity for core products Operating Company Complex/Factory/Refinery Styrene Equity Ratio Ethylene Para-Xylene Mixed Xylene Monomer Japan Idemitsu Kosan Chiba 0.374 0.265 0.210 Aichi 0.357 0.170 Tokuyam
Slide 60: Functional Materials Segment (1/2)
Business Overview Functional Materials Segment (1/2) Lubricants Performance Chemicals ◆Product categories ◆Product categories ・Automotive lubricants (engine oil, etc.) ・Engineering plastics, adhesives materials, derivative ・Grease products, solvents and functional materials ・Industrial lubricants (h
Slide 61: Functional Materials Segment (2/2)
Business Overview Functional Materials Segment (2/2) Electronic Materials Bitumen (High Performance Asphalt) ◆Product categories ◆Asphalt manufacturer which aims to develop state-of-the-art ・Organic EL materials technologies ・Display semiconductor materials etc. ・Recycling, longer life, carbon neutr
Slide 62: Power/Renewable Energy Segment
Business Overview Power /Renewable Energy Segment Stake Owned Power generation capacity* Power Category Power Plant Operating Company (%) (10,000 KW) Solar 34 domestic locations Idemitsu, other ー 18.7 Biomass Keihin Biomass Power Plant (Kanagawa) Keihin Biomass Power 100 4.9 Tosa Power Plant (Kochi)
Slide 63: Resources Segment (Gas and Oil E&P)
Business Overview Resources Segment (Gas and Oil E&P) Business Overview Production Oil/Gas Reserves 1. Producing and selling crude oil/gas in Vietnam and Norway ◆Reserves *2,3 [million BOE] 2. Exploration and development of gas in Vietnam and other 150 parts of Southeast Asia to shift to production
Slide 64: Resource Segment (Coal)
Business Overview Resource Segment (Coal) Business Overview Business Structure Reforms [Business Strategy] ◆Idemitsu Green Energy Pellets (black pellets) ◆Stable supply and profit maximization by leveraging the highly competitive Boggabri Mine ・CO2 emissions can be reduced by replacing coal with ◆En
Slide 65: Precaution statement about forecasts
Precaution statement about forecasts Any information about forecasts for the Company’s operating results, management strategy and management policy contained in this documents other than historical facts is prepared, according to judgments made by the top management of the Company based on informati