ENEOS : Q＆A （109KB） （109KB）

About this update from Eneos Holdings, Inc.

＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿＿ ENEOS Holdings (5020, Tokyo) - Analyst Briefing Q&A for FY2025 Q3 ￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣ Date and time: Friday, February 13, 2026 (16:00-17:00) Number of attendees : 99 Main questions: Please find below ￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣￣ - This document contains forward-looking statements. A cautionary statement appears in the endnote. - Q1. How do you assess progress against the full-year plan as of the third quarter? Are you on track to meet next year's mid-term target of ¥450bn in operating profit excluding inventory valuation effects? A1. Our progress through the third quarter has been solid. We have maintained our full-year outlook given some uncertainty in the fourth quarter. That said, as of the third quarter, results were roughly ¥20bn above the level announced in November. The upside came primarily from the Petroleum Products segment, where domestic margins, export margins, and paraxylene margins collectively exceeded expectations by about ¥15bn. In addition, within Other segment, improved results-supported by higher copper prices in Metals-also contributed. Looking to next fiscal year, we expect a negative year-on-year impact from the absence of the gain on the sale of the marine transportation business. At the same time, we anticipate a recovery from the negative time-lag effects recorded this year, as well as further improvement of initiatives to reduce refinery disruptions, following the progress made this year. In petrochemicals, absolute margins remain low, but conditions have improved from the trough and we expect this to continue for the time being. In Oil & Natural Gas E&P, rig utilization at Japan Drilling Co., Ltd. was weak this fiscal year, but we expect activity to recover next year. Overall, we see upside potential for FY2026 and, together with initiatives such as Group company restructuring, we believe the mid-term plan target is achievable. Q2. Since the second quarter, are there any new developments in the use of the Allocation Management framework? With leverage remaining low, what is your approach to M&A and additional shareholder returns next fiscal year? A2. Utilization of the framework has not progressed meaningfully yet, but potential investments are piling up. Looking ahead, we believe we can deploy capital at returns above our hurdle rate. For shareholder returns, we will continue to execute at appropriate times consistent with our policy of a total payout ratio of 50% or more, balancing with investment opportunities. Q3. There is about a ¥15bn upside for domestic and export petroleum products margins versus the November plan. However, the domestic margins in the financial documents (p.8) appear to have narrowed. Did you see margin deterioration, as some peers did, due to the removal of the provisional tax rate? A3. The specific positive contributions were about ¥6bn from domestic margins, ¥5bn from export margins, and about ¥2bn from paraxylene margins. Versus the November plan, domestic margins were slightly higher, and export margins were significantly higher from October, though they have since leveled off. Paraxylene margins have also improved slightly. Regarding the removal of the provisional tax rate, we did not see any material impact on earnings. Q4. The refinery utilization rate excluding periodic repairs was 85% in January, close to your target of 90%. Is the current level effectively at full capacity? How will you close the remaining gap to 90%? A4. We are making steady progress toward the 90% target. There is still room for further improvement by reducing unplanned downtime and operational disruptions. We believe refinery utilization rate can be raised through capital investment in other bottlenecks not related to disruptions,. Regarding the full-year outlook, "Impact of margin, expense, etc." comprises about +¥20bn from domestic margins (excluding time-lag effects) and +¥17bn from export margins. While losses related to disruptions had a negative effect of several billion yen, this was offset by positives such as affiliates procuring LPG at favorable prices from the U.S. As for the "Volume impact" of -¥23bn, about -¥15bn is due to reduced exports caused by refinery issues. The remainder reflects lower domestic demand for petroleum products and a focus on higher-margin sales, totaling several billion yen of negative impact. Q5. Please break down the "Impact of margin, expense, etc." +¥31.2bn in the Petroleum Products segment on p.12, and also provide the absolute amounts for the "Time-lag" -¥2.5bn for last year and this year. A5. The main positive contributors are domestic margins (+¥40bn) and export margins (+¥21bn). On the negative side, petrochemical margins (especially benzene) were down by about -¥17bn, and lower refinery fuel efficiency due to operational disruptions was about -¥12bn. The time-lag in absolute terms was -¥36.6bn last year and -¥39.1bn this year. Q6. What is the current progress on Group company restructuring and AI initiatives? A6. We are still working through internal discussions, so we do not have specific numbers to share yet. However, preparations are progressing well. We expect to see visible results mainly from FY2027 onwards, and will provide further disclosures as soon as feasible. Q7. How much of the impact from higher operating rates have you incorporated into the mid-term plan? Are these benefits dependent on market conditions such as export margins, or would higher operating rates provide gains even if the market does not improve? A7. Refinery utilization is influenced to some extent by global market conditions. However, improving utilization not only reduces opportunity loss but also enhances fuel efficiency and other factors, so some benefits are independent of market conditions. At the market levels assumed when drafting the mid-term plan, the positive effects from higher utilization were as expected. Current performance is broadly in line with those assumptions. For reference, disruption-related losses worsened by about -¥20bn year on year for the nine months through the third quarter. Q8. For FY2025, shareholder returns appear slightly below the 50% total payout ratio. Are you considering any actions by fiscal year-end? Wasn't there further room for shareholder returns this time? A8. We always target a total payout ratio of 50% or more when making decisions, balancing this with our investment needs. Share buybacks are easier to decide when the investment outlook is clearer. This time, we did not conduct buybacks because the investment pipeline was not sufficiently clear. The timing is not fixed; we intend to act when appropriate. Q9. Can you describe the status and outlook for S-SBR(solution-polymerized styrene-butadiene rubber) and your expansion progress? A9. Global demand for S-SBR is expanding, and our strategy is to outgrow the market-progress is on track. The +¥1.0bn "Volume impact" in the High Performance Materials segment reflects higher S-SBR sales volume. With production across Thailand, Japan, and Europe, our three-site production footprint is capturing demand, and we are tracking well against the mid-term plan. Q10. Is there a possibility that you will not use the Allocation Management framework at all during the mid-term plan? Some companies avoid share buybacks, citing market liquidity. How do you view the framework's use and timing? A10. We do keep market liquidity in mind, but will use the framework during the mid-term plan period. The amount allocated to investments and shareholder returns will depend on our performance, leverage, and available investment opportunities. Unless the investment environment deteriorates significantly, we do not expect total usage to fall below ¥500bn. Q11. Long-term interest rates are higher than when you drafted the mid-term plan. Have you revised your WACC assumptions and applied this to your investment strategies and discussions? A11. Yes. We have already incorporated higher long-term interest rates into our WACC assumptions for investment decisions and target setting. Q12. The ¥500bn-¥1.0tn Allocation Management framework covers the sum of investment and shareholder returns. Based on your earlier comments, should we understand that any shortfall in investment would be reallocated to shareholders, so the total framework will be fully utilized? A12. It is correct that lower investment would create more capacity for returns. That said, we do not expect investment to trend toward zero. We will optimize the balance between value-accretive investments (above our hurdle rate) and shareholder returns. We have no intention to force investments; in periods of limited opportunities, more would logically be directed to shareholders. Q13. Paraxylene margins seem to have bottomed. What is your outlook? A13. We believe the worst period is behind us. However, because supply and demand have not fundamentally improved, we do not expect a major rebound in margins. This document contains forward-looking statements. Actual results may differ materially from these statements due to various factors. Such factors include: Changes in macroeconomic conditions or the competitive environment in the energy, resources, and materials industries Amendments to laws or strengthened regulations Risks such as litigation among others, but are not limited to these. Copyright © 2024 ENEOS Holdings, Inc.

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