Idemitsu Kosan Co., Ltd. · TSE:5019

Idemitsu Kosan — Q2 FY2022 Earnings Presentation

54 slides from Idemitsu Kosan's earnings presentation, Nov 8, 2022

  1. Slide 1: Presentation on Results for the 2nd Quarter FY2022

    Presentation on Results for the 2nd Quarter FY2022 November 8, 2022 Idemitsu Kosan Co.,Ltd.

  2. Slide 2: Table of Contents

    Table of Contents ◼ Highlights ◼ Results for the 2Q FY2022 ◼ Forecasts for FY2022 ◼ Reference ✓ Progress in the mid-term management plan ✓ Financial results ✓ Volume ✓ Crude/product price and operation ✓ Business overview 2

  3. Slide 3: Highlights

    €& idemitsu Highlights # © Idemitsu Kosan Co, Ltd. All Rights Fi

  4. Slide 4: Results for the 2Q FY2022

    Results for the 2Q FY2022 ◼ Summary ✓ Operating + equity income (segment income) increased to ¥182.4 billion, driven by positive inventory impact (+¥97.6 billion year-on- year) due to increased crude oil prices and JPY depreciation and increased profits in coal business due to strong coal market con

  5. Slide 5: Forecasts for FY2022

    Forecasts for FY2022 ◼ Summary ✓ While trends in the business environment remain unclear due to the lingering Russia/Ukraine situation, global inflation, etc., earnings forecasts were revised to reflect crude oil prices fluctuation, sharp JPY depreciation and soaring coal prices. ✓ The outperformed

  6. Slide 6: Results for the 2Q FY2022

    mResults for the 2Q FY2022 €& idemitsu

  7. Slide 7: Key Topics

    Key Topics ◼ Trends in Petroleum Demand ✓ Demand for core products and jet fuel both recovered due to easing of COVID-related activity restrictions ✓ Growth will slow down in 2H as activity restrictions had already eased in 2H of last year. As a result, sales of core products are expected to remain

  8. Slide 8: Operating Environment

    Operating Environment Dubai Crude Australian Coal Exchange Rate [USD/bbl] Oil Price [USD/ton] Spot Price [円/USD] (USD) 120.0 450.0 145.0 420.0 420.7 140.0 390.0 138.4 110.0 108.1 360.0 376.9 135.0 330.0 100.0 96.9 129.6 95.6 300.0 130.0 270.0 90.0 125.0 263.7 240.0 210.0 120.0 183.9 80.0 180.0 116.2

  9. Slide 9: Overview

    Overview ◼ Crude Oil/Coal/Exchange Rate [USD/bbl, USD/ton, JPY/USD] FY2021 2Q FY2022 2Q Change Crude Oil (Dubai) 69.3 102.5 33.2 +47.9% Crude Oil (Brent)* 64.9 107.6 42.7 +65.9% Australian Coal Spot Price* 98.8 320.3 221.5 +224.2% Exchange Rate (TTM) 109.8 134.0 24.2 +22.0% *Brent prices and Austral

  10. Slide 10: Segment Information

    Segment Information ◼ Operating ＋ Equity Income [¥ billions] FY2021 2Q FY2022 2Q Change Petroleum 155.7 269.3 113.6 +73.0% Excluding inventory impact 45.1 61.1 16.1 +35.7% Basic Chemicals 10.9 14.2 3.2 +29.7% Functional Materials 10.2 8.6 (1.6) (15.9%) Power and Renewable Energy (2.8) (2.9) (0.1) －

  11. Slide 11: Segment Information: Factors Affecting Operating + Equity Income

    Segment Information ◼ Factors Affecting Operating + Equity Income (excluding inventory impact, year on year) [￥billions] Price Consolidated adjustment, etc. Cost, non-core product etc. margin, fuel cost, etc. Margin, Vietnam, Margin etc. Export etc. (time-lag) Volume Shift to Volume Lubricants, equi

  12. Slide 12: Segment Information: Petroleum

    Segment Information [Petroleum] YoY＋¥16.1bn (FY21 2Q：¥45.1bn ➡ FY22 2Q：¥61.1bn) [Y-o-y change in Petroleum [Trends in Domestic Petroleum Product Margin*] sales volume (core products)] *Average margin of gasoline, diesel oil, kerosene, and heavy oil A (domestic spot –crude oil) (YoY) [Thousand KL] FY

  13. Slide 13: Segment Information: Chemicals, Functional Materials, Power

    Segment Information [Basic Chemicals] YoY＋¥3.2bn (FY21 2Q：¥10.9bn ➡ FY22 2Q：¥14.2bn) ✓ PX/MX product margins improved due to tighter supply/demand balance, etc., but SM margins decreased in response to major periodic repairs in Asia in the previous year and decreased demand for derivative products ✓

  14. Slide 14: Segment Information: Oil E&P and Coal

    Segment Information [Oil E&P] YoY -¥0.2 bn [Coal] YoY +¥78.8 bn (FY21 2Q：¥17.3bn ➡ FY22 2Q：¥17.1 bn) (FY21 2Q：¥4.2bn ➡ FY22 2Q：¥83.0 bn) <Crude Oil Production Volume <Coal Production Volume and Brent Crude Oil Price Trends> and Australian Coal Spot Price Trends> [Thousand BOE] [USD/bbl] [Thousand to

  15. Slide 15: Balance Sheet

    Balance Sheet [¥ billions] 3/31/2022 9/30/2022 Change 3/31/2022 9/30/2022 Change Cash and Total Current 140.3 87.3 (53.0) 2,061.3 2,545.2 483.9 Deposits Liabilities Receivables, Total Fixed 2,227.8 3,060.2 832.4 1,103.4 1,131.9 28.5 Inventory, etc. Liabilities Total Current 2,368.1 3,147.5 779.4 Tot

  16. Slide 16: Statement of Cash Flows

    Statement of Cash Flows [¥ billions] Cash Flow from Operating Activities (149.5) Net Income before tax 398.6 Depreciation Expense 56.7 Change in Working Capital (425.5) Other (179.4) Cash Flow from Investing Activities (14.7) Purchase of tangible fixed assets (47.2) Other 32.5 Cash Flow from Financi

  17. Slide 17: Forecasts for FY2022

    €& idemitsu mForecasts for FY2022 # © Idemitsu Kosan Co, Ltd. All Rights Fi 17

  18. Slide 18: Forecasts for FY2022

    Forecasts for FY2022 ◼ Crude Oil/Coal/Exchange Rate [USD/bbl, USD/ton, JPY/USD] 8/9 Revised Assumptions Change Forecasts Forecasts (from Oct.) Crude Oil (Dubai) 102.0 96.2 (5.8) (5.7%) 90.0 Crude Oil (Brent)* 105.1 102.4 (2.7) (2.5%) 93.5 Australian Coal Spot Price * 310.1 347.8 37.7 +12.2% 330.0 Ex

  19. Slide 19: Segment Information

    Segment Information ◼ Operating ＋ Equity Income [¥ billions] 8/9 Revised Change Forecasts Forecasts Petroleum 216.0 205.0 (11.0) (5.1%) Excluding inventory impact 76.0 85.0 9.0 +11.8% Basic Chemicals 10.0 18.0 8.0 +80.0% Functional Materials 19.0 17.0 (2.0) (10.5%) Power and Renewable Energy (9.0) (

  20. Slide 20: Segment Information: Factors Affecting Operating + Equity Income

    Segment Information ◼ Factors Affecting Operating + Equity Income Consolidated [¥ billions] (excluding inventory impact, Compared to the 8/9 forecasts) adjustment, etc. Price Exchange Cost, rate, etc. etc. Export Margin Exchange Margin rate, (time-lag) etc. Lubricants, Volume, Performance fuel cost,

  21. Slide 21: Segment Information: Petroleum, Basic Chemicals, Functional Materials

    Segment Information [Petroleum] +¥9.0bn (8/9 forecast: ¥76.0bn ➡ ¥85.0bn) ✓ Domestic product margins remain almost unchanged from the previous forecast ✓ Overall profits increased, supported by increased volume of core products, decreased fuel cost and increased export volume [Basic Chemicals] +¥8.0

  22. Slide 22: Segment Information: Power/Renewable, Oil E&P, Coal

    Segment Information [Power/Renewable Energy] ±¥0.0bn (8/9 forecast: -¥9.0bn ➡ -¥9.0bn) ✓ Forecasting some earnings improvement in the power business ✓ On the other hand, ES business forecast was revised downward in light of current progress in panel sales, etc. [Oil E&P] +¥6.0bn (8/9 forecast: ¥23.0

  23. Slide 23: Investments

    Investments [¥ billions] FY2022 1st half FY2022(5/10 Forecast) Maintenance Maintenance Strategic Total Strategic Total Renewal Renewal Petroleum, Basic Chemicals 3.4 31.3 34.7 6.0 66.0 72.0 Power/Renewable Energy, Functional Materials, 4.0 4.9 8.9 35.0 23.0 58.0 etc. Resources 6.6 6.1 12.7 21.0 19.0

  24. Slide 24: Reference Materials

    €& idemitsu mReference Materials # © Idemitsu Kosan Co, Ltd. All Rights Fi 24

  25. Slide 25: Topics on the progress in the mid-term plan

    Progress in the mid-term plan Topics on the progress in the mid-term plan ◼ Commenced basic planning towards commercialization of used plastic recycling (Basic Chemicals) ✓ Petrochemical recycling of used plastics in the Chiba plant area ✓ Commenced basic planning towards commercialization and aimin

  26. Slide 26: Topics on the progress in the mid-term plan

    Progress in the mid-term plan Topics on the progress in the mid-term plan ◼ Launched the first next-generation environment-friendly SS “apollostation Type Green” in Kochi (Petroleum) ✓ Japan’s first SS to use domestic CLT（Cross Laminated Timber) ✓ Installed solar panels and rapid EV rechargers to ac

  27. Slide 27: Financial Results

    Financial Results Financial Results [¥ billions] ◼ Net Sales by segment FY2021 2Q FY2022 2Q Change Petroleum 2,230.1 3,814.1 1,584.0 +71.0% Basic Chemicals 250.5 363.0 112.5 +44.9% Functional Materials 194.0 245.6 51.6 +26.6% Power and Renewable Energy 57.0 89.8 32.8 +57.5% Resources* 133.9 300.3 16

  28. Slide 28: Financial Results

    Financial Results Financial Results ◼ Quarterly segment income (cumulative, exc. inventory impact) [¥ billions] FY2021 FY2022 1Q 2Q 3Q 4Q 1Q 2Q Petroleum 29.6 45.1 73.7 136.5 57.4 61.1 Equity income 6.0 8.6 12.4 9.2 7.0 12.4 Basic Chemicals 6.7 10.9 7.6 8.2 8.1 14.2 Equity income 0.1 0.7 0.8 1.2 (0.

  29. Slide 29: Financial Results

    Financial Results Financial Results ◼ Quarterly segment income (Q on Q, exc. inventory impact) [¥ billions] FY2021 FY2022 1Q 2Q 3Q 4Q 1Q 2Q Petroleum 29.6 15.4 28.6 62.8 57.4 3.7 Equity income 6.0 2.6 3.8 (3.2) 7.0 5.4 Basic Chemicals 6.7 4.2 (3.3) 0.5 8.1 6.1 Equity income 0.1 0.5 0.1 0.5 (0.1) (0.

  30. Slide 30: Sensitivity

    Financial Results Sensitivity ◼ Major items affecting performance by changes in assumptions (FY2022 3-4Q) Revised Income Assumption Range of assumption Segment impact Contents Items fluctuation （from Oct. ） (¥ billions) Refining fuel cost, Crude oil price 90.0$/bbl ±10$/bbl ±7.0 time-lag Singapore E

  31. Slide 31: Sales Volume

    Volume Sales Volume ◼ Petroleum [thousand KL,％] FY 2021 2Q FY 2022 2Q Change Gasoline 6,406 6,640 234 3.6% Naphtha 60 190 130 216.3% Jet Fuel 806 1,149 343 42.6% Kerosene 788 826 38 4.8% Diesel Oil 4,898 5,096 199 4.1% Heavy Fuel Oil A 1,345 1,394 49 3.6% Heavy Fuel Oil C 1,071 1,267 196 18.3% Total

  32. Slide 32: Sales Volume

    Volume Sales Volume ◼ Basic Chemicals [kt,%] FY 2021 2Q FY 2022 2Q Change Basic Chemicals 1,769 1,709 (61) (3.4%) ◼ Functional Materials [KKL,kt,%] FY 2021 2Q FY 2022 2Q Change Lubricants 589 577 (12) (2.0%) Performance Chemicals 374 346 (28) (7.6%) *Lubricants include sales overseas ◼ Power/Renewab

  33. Slide 33: Production Volume

    Volume Production Volume ◼ Resources (Oil E&P) [KBOED,%] FY 2021 2Q FY 2022 2Q Change Norway 23.6 15.7 (7.9) (33.3%) Vietnam 11.8 18.2 6.4 54.2% Total('000BOED) 35.3 33.9 (1.5) (4.2%) Total('000BOE) 6,396 6,128 (268) (4.2%) *The numbers reflect our rights and ownership ratios based on our equity sha

  34. Slide 34: Sales Volume (Forecasts)

    Appendix Sales Volume(Forecasts) (volume data) ◼ Petroleum [KKL,％] 8/9 Revised Forecast Forecast Change Gasoline 12,780 12,960 180 1.4% Naphtha 230 320 90 39.1% Jet fuel 2,280 2,280 ー ー Kerosene 3,770 3,900 130 3.4% Diesel Oil 10,150 10,310 160 1.6% Heavy Fuel Oil A 3,100 3,290 190 6.1% Heavy Fuel O

  35. Slide 35: Sales Volume (Forecast)

    Appendix Sales Volume(Forecast) (volume data) ◼ Basic Chemicals [kt,%] 8/9 Revised Forecast Forecast Change Basic Chemicals 3,870 3,760 (110) (2.9%) ◼ Functional Materials [KKL,kt,%] 8/9 Revised Forecast Forecast Change Lubricants* 1,230 1,210 (20) (1.7%) Performance Chemicals 780 720 (60) (7.7%) *i

  36. Slide 36: Production Volume (Forecasts)

    Appendix Production Volume(Forecasts) (volume data) ◼ Resources (Oil E&P) [KBOED,%] 8/9 Revised Change Forecast Forecast Norway 14.8 14.8 ー ー Vietnam 14.6 16.3 1.7 11.7% Total('000BOED) 29.3 31.0 1.7 5.9% Total('000BOE) 10,700 11,330 630 5.9% *The numbers reflect our rights and ownership ratios base

  37. Slide 37: Crude Oil Prices (Dubai and Brent)

    Appendix Crude Oil Prices(Dubai and Brent) (Crude price) [USD/bbl] 130 Brent Dubai 110 90 70 50 30 10 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 37

  38. Slide 38: Gasoline-Crude Oil (Domestic spot price and spread)

    Appendix Gasoline-Crude Oil(Domestic spot price and spread) (Product market) [Price :JPY/L] [Spread：JPY/L] 140 25 120 20 100 15 80 60 10 40 Spread 5 20 Crude oil Gasoline 0 0 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 38

  39. Slide 39: Diesel-Crude Oil (Domestic spot price and spread)

    Appendix Diesel-Crude Oil(Domestic spot price and spread) (Product market) [Price :JPY/L] [Spread：JPY/L] 140 25 120 20 100 15 80 60 10 40 Spread 5 20 Crude oil Diesel oil 0 0 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 39

  40. Slide 40: Gasoline-Crude Oil (Singapore spot price and spread)

    Appendix Gasoline-Crude Oil(Singapore spot price and spread) (Product market) [Price :USD/bbl] [Spread：USD/bbl] 160 40 140 35 30 120 25 100 20 80 15 60 10 40 5 Spread 20 Dubai 0 Gasoline 0 -5 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 40

  41. Slide 41: Diesel-Crude Oil (Singapore spot price and spread)

    Appendix Diesel-Crude Oil(Singapore spot price and spread) (Product market) [Price :USD/bbl] [Spread：USD/bbl] 180 70 160 60 140 50 120 100 40 80 30 60 20 40 Spread 10 20 Dubai Diesel Oil 0 0 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 41

  42. Slide 42: Para-Xylene, Mixed Xylene-Naphtha

    Appendix Para-Xylene, Mixed Xylene-Naphtha (Product market) (price and spread) [Price :USD/ton] [Spread：USD/ton] 1,400 700 PX spread Mx spread Naptha 1,200 PX MX 600 1,000 500 800 400 600 300 400 200 200 100 0 0 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 42

  43. Slide 43: Styrene Monomer-Naphtha

    Appendix Styrene Monomer-Naphtha (Product market) (price and spread) [Price :USD/ton] [Spread：USD/ton] 1,600 1,000 900 1,400 800 1,200 700 1,000 600 800 500 400 600 300 400 200 200 100 SM spread Naptha SM 0 0 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 43

  44. Slide 44: Operational Data

    Appendix Operational Data (Operational data) ◼ Refineries Utilization FY2022 FY2017 FY2018 FY2019 FY2020 FY2021 2Q Idemitsu 88% 88% Kosan 87% 78% 77% 83% Former 88% 93% Showa Shell *on BCD basis ◼ Number of Service Stations FY2022 FY2017 FY2018 FY2019 FY2020 FY2021 2Q Idemitsu 3,545 3,501 3,446 3,42

  45. Slide 45: Overview of the Company

    Appendix Overview of the Company (Business Overview) as of the end of March, 2022 ∎ Petroleum Segment ∎ Functional Materials Segment  Refining Capacity 945 KBD *1) (Lubricants, Performance chemicals, Electronic  Domestic fuel oil sales volume materials, Functional asphalt, Agri-bio, Lithium 34 mil

  46. Slide 46: Petroleum Segment

    Appendix Petroleum Segment (Business Overview) as of the end of March, 2022 [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 2

  47. Slide 47: Basic Chemicals Segment

    Appendix Basic Chemicals Segment (Business Overview) as of the end of March, 2022 [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 0.37 0.27 0.21 Aichi 0.17 Tokuy

  48. Slide 48: Functional Materials Segment

    Appendix Functional Materials Segment (Business Overview) Lubricants Performance Chemicals ◆Product categories ◆Product categories ・Automotive lubricants (engine oil, etc.) ・Engineering plastics ・Grease ・Adhesives Engineering ・Industrial lubricants (hydraulic actuation oil, cutting oil, ・Solvents, e

  49. Slide 49: Functional Materials Segment

    Appendix Functional Materials Segment (Business Overview) Electronic Materials High Performance Asphalt ◆Product categories ◆Asphalt manufacturer which aims to develop state-of- ・Organic EL materials the-art technologies ・Display semiconductor materials etc. ・Recycling, longer life, carbon neutralit

  50. Slide 50: Power /Renewable Energy Segment

    Appendix Power /Renewable Energy Segment (Business Overview) Power generation Stake Owned Power Category Power Plant Operating Company capacity* (%) (10,000 KW) Solar 34 domestic locations Idemitsu, other ー 18.1 Biomass Keihin Biomass Power Plant (Kanagawa) Keihin Biomass Power 100 4.9 Tosa Power Pl

  51. Slide 51: Resources Segment (Oil E&P, Gas)

    Appendix Resources Segment (Oil E&P, Gas) (Business Overview) Business Overview Production Oil/Gas Reserves 1. Producing crude oil/gas in Norwegian North Sea and ◆Reserves *2,3 selling them mainly in Europe [million BOE] 110 2. Commencing gas field development in Vietnam and other parts of Southeast

  52. Slide 52: Reserve Estimates

    Appendix Reserve Estimates (Business Overview) ◆ Reserve Estimation Standards ・Idemitsu’s reserves estimation is conducted based on PRMS (Petroleum Resources Management System) standards ・PRMS standards were established jointly by the Society of Petroleum Engineers (SPE), the World Petroleum Congres

  53. Slide 53: Resources Segment (Coal)

    Appendix Resources Segment (Coal) (Business Overview) Business Overview Low-carbon Solutions 1. Owns Australian coal mines and has an integrated supply chain from production to sales to provide a ◆Idemitsu Green Energy Pellets stable supply of low-cost coal to Asia (black pellets) 2. Provides high-e

  54. Slide 54: 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

Idemitsu Kosan — Q2 FY2022 Earnings Presentation on 6ix