ENEOS : Q＆A （103KB） （103KB）

About this update from Eneos Holdings, Inc.

ENEOS Holdings (5020,Tokyo) - Analyst Briefing Q&A for FY2025 1Q (Apr.-Jun.) ￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣ Date & time: Friday, August 8, 2025 (18:00 - 18:40) Number of attendees: 102 Content of questions: Please find below ￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣ - This document contains forward-looking statements. A cautionary statement appears in the endnote. - Q1. With capital investments of over 600 billion yen planned for the full year, the amount only reached 60.5 billion yen in the first quarter. How do you view the progress so far? Is this within the expected range, or is it because investment discipline has been tightened, so even with investments being made, it has remained at this level? Also, were any investments made utilizing the Allocation Management framework during the first quarter? A1. The progress of capital investment is generally in line with the plans or slightly less. The aim is to invest around 600 billion yen annually, but as originally planned, a certain amount is expected to be spent in the second quarter onwards. Some investments utilizing the Allocation Management framework were made in the first quarter, but most of them will be from July onwards. Q2. Regarding A1, what is the progress of Allocation Management? Are various investment projects being assessed, or are there only a few under consideration? A2. As part of our activities in the first quarter, we listed and reviewed various investment candidates. Through this, some projects were rejected at an early stage, while others are advancing to the next stage. Q3. While there were factors which reduced profits such as unexpected refinery issues, a deteriorating petrochemical market and negative time-lag, actual margins remained positive. Please explain whether the results were in line with expectations or slightly better than expected. A3. As you are aware, petroleum products are facing negative factors such as refinery issues, deterioration of petrochemical margins due to the sluggish aromatics market and negative time-lag, but actual margins are currently positive. Positive factors also include improved fuel efficiency due to lower crude oil prices and improved margins for lubricants mainly due to time-lag. Overall, although there were some negative factors due to refinery issues, petroleum product margins helped to offset these, and petroleum product result was generally in line with estimates. Other segments also saw some fluctuations but were generally in line. Q4. Regarding the ROIC improvement and governance enhancement of Group companies mentioned in the Fourth Medium-Term Management Plan, I would like to ask about the progress made in the first quarter. A4. We have set up a project team and are reviewing our options. However, this project will take so much time that the final goal is set for FY2027. Just for reference, the number of subsidiaries at the end of the first quarter was 482 (excluding affiliated companies), a decrease of 15 from the end of March. Q5. Regarding the impairment loss of 600 million yen due to tightened regulations on development, according to the slides, could you please explain the details? Also, is it correct to understand that if regulations are not tightened further, similar impairment losses will not occur? A5. Due to restrictions on the number of onshore wind power plants imposed by embankment regulations, we determined that future returns would be insufficient, leading to the cancellation of the project. We are also currently confirming whether the restrictions will have any impact on other projects, but, at this point, we do not believe that any projects will be affected. Q6. Please provide a numerical breakdown of the 35 billion yen increase in margin, expense, etc. (page 14 of the presentation material). A6. The breakdown is as follows: The largest proceeds were 28 billion yen from increased petroleum products margins, excluding time-lag effects. This was offset by an 11 billion yen decline in chemical margins. We saw a 6 billion yen improvement from cost reductions due to lower crude oil prices, and a 5 billion yen increase in lubricant margins, owing to time-lag effects and improved selling prices. Additionally, affiliated companies experienced a 6 billion yen increase in total, mainly from higher dividends and profits at affiliated gas companies. However, there was a 7 billion yen decrease due to reduced fuel efficiency caused by refinery issues, with other minor increases also contributing. Q7. Please explain in detail what refinery issues occurred in the first quarter. In addition, please describe your current understanding of whether the impact of such issues will continue in the second quarter and beyond, or whether they have already been resolved. A7. Multiple failures occurred at the same time, which was an unusual factor in the first quarter, with almost no precedents in the past. We believe that the possibility of recurrence is extremely low. Additionally, there have been ongoing issues due to initial design flaws, which have persisted to some extent in the past, but these issues coincided in the first quarter. We foresee potential for improvement in those problems caused by design flaws through ensuring recurrence prevention measures. Furthermore, as refinery issues have been steadily decreasing due to our four pillar measures in equipment strategy, inspection, construction quality, and operation, we believe that by continuing these efforts, we can mitigate issues to the level set forth in our Medium-Term Management Plan. It should be noted that there were still a certain number of issues that would affect the second quarter, and they were not resolved as of July. In August, the impact of the startup postponement after periodic repairs at the Sakai Refinery remains, but other issues have been resolved. Q8. Given you mentioned earlier that the first quarter was generally in line with expectations, may we interpret this as indicating your intention to implement additional shareholder returns at an early stage, consistent with the 50% total return ratio policy? Can we also expect that shareholder returns will be implemented from FY2025, which contributes to equity control to achieve your ROE target? A8. We are always mindful of the 50% total return ratio and flexible shareholder returns through Allocation Management and will implement them at an appropriate time while monitoring our investment schedule. We believe this will also support equity control. Q9. There have been reports that the Ministry of Economy, Trade and Industry is planning to require medium- to long-term electricity procurement contracts for electricity retailers. How do you think this will affect the company's financial performance? A9. As the Goi Thermal Power Plant has been launched, our supply capacity has been secured. Therefore, we do not believe there will be any impact from the mandatory requirement for the time being. Q10. Please tell us about the changes in margin and time-lag compared with the previous year. Please also explain the mechanism behind time-lag. A10. The margin indicator shown on page 10 is based on the difference between the spot market and CIF. On the other hand, page 14 incorporates the financial impact of margins analyzed within our company. We believe that the main factor behind reversed directions of the two figures is our profit-centered sales. Regarding the time-lag structure, in the case of petroleum products, while the costs are based on crude oil prices approximately three weeks earlier as they are sourced from the Middle East, the revenues reflect the current spot crude oil prices. Therefore, when crude oil prices fall, time-lag occurs negatively in terms of profit and losses. This document contains forward-looking statements. Actual results may differ materially from those expressed or implied by forward-looking statements due to various factors, including but not limited to the following: macroeconomic conditions and changes in the competitive environment in the energy, resources, or materials industries revision of laws and tightening of regulations risk of lawsuits and other legal risks

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