Harvesting the Results of FY2017–FY2020 and Expanding into Growth Areas

「Under the medium-term management plan for FY2026–FY2030, guided by the 2030 vision, “Responsible Transformers,” we will pursue initiatives built around the business strategies “GRIT,” “GROWTH” and “CNX,” together with the human resources strategies “Make Every Employee a Driver of Transformation” and “More Co-Creation & Innovation,” with strengthening the business platform that supports these strategies as a central pillar. We aim to achieve financial targets for FY2030 including ROE of 13% and ROIC of 7%.」

「26年度のタイムラグ（燃料油、基礎化学品）を除いた在庫影響除き当期純利益は中期計画の27年度と同水準であり、27年度のROE12％達成は可能な水準」

「The outlook for cumulative results over the medium-term management plan period (2023–2025) is expected to exceed the initial targets set when the plan was formulated in November 2022. Operating profit plus equity-accounted income is now forecast at ¥672.2 billion, versus the initial target of ¥560 billion, while net income is now forecast at ¥436.9 billion, versus the initial target of ¥380 billion.」

「For the 16 new business projects set out in the medium-term management plan, we conducted investment screening based on criteria including market potential, the extent to which the Company's existing assets could be utilised, the availability of strong business partners and the Company's technological advantages, and selected the following 4 priority businesses as investments to pursue toward carbon neutrality by 2050.」

「FY2025 ROE target 8% At least 10%」

「This medium-term management plan is positioned as an execution plan toward the 2030 vision, “Responsible Transformers,” and we will work to maximise the profitability of existing businesses and create new sources of earnings in pursuit of the targets below. We aim for segment profit of ¥190 billion in FY2025, an increase of ¥30 billion compared with the FY2022 outlook after adjusting the assumptions.」

「The Company announced a medium-term management plan in November 2019, but the business environment changed substantially as the COVID-19 pandemic spread. In addition, Japan's declaration of carbon neutrality by 2050 has accelerated the move toward decarbonisation. In reviewing the medium-term management plan, we recognised that the likelihood had increased of Scenario 4, “Hekiten,” under which oil demand in the Asia-Pacific region peaks and begins to decline earlier than expected.」

「Cumulative over the medium-term plan period (3 years): net income ¥480 billion; operating profit + equity-accounted income ¥720 billion; ROE of at least 10%; FCF ¥400 billion」

「We aim to achieve operating profit of ¥260 billion in FY2022, including equity-accounted income, through increased integration synergies in the Fuel Oil segment, improved profitability at the Nghi Son refinery, expansion of the High-Performance Materials segment centred on lubricants, and expansion of overseas renewable power development, among other initiatives.」

「Following the management integration with Showa Shell from the first quarter of the current fiscal year, the reportable segments have been reorganised from the previous 3 segments, “Petroleum Products,” “Petrochemical Products” and “Resources,” into 5 segments: “Fuel Oil,” “Basic Chemicals,” “High-Performance Materials,” “Power and Renewable Energy” and “Resources.”」

「The integrated company's management targets, shareholder return policy and medium-term management plan for FY2019–FY2021 include net income of at least ¥500 billion in aggregate over the 3 years, annual integration synergies of ¥60 billion in FY2021, ROE of over 10% in FY2021, a net debt-to-equity ratio of no more than 0.5x in FY2021 and a total payout ratio of at least 50%.」

「The integrated company's management targets, shareholder return policy and medium-term management plan for FY2019–FY2021 include net income of at least ¥500 billion in aggregate over the 3 years, annual integration synergies of ¥60 billion in FY2021, ROE of over 10% in FY2021, a net debt-to-equity ratio of no more than 0.5x in FY2021 and a total payout ratio of at least 50%.」

「On 16 October 2018, the two companies each held a board meeting and resolved to enter into an agreement for a share exchange under which Idemitsu Kosan would become the wholly owning parent company and Showa Shell the wholly owned subsidiary, subject to approval at the shareholders' meetings of both companies and approval from the relevant government authorities and other parties, and they entered into this share exchange agreement.」

「Showa Shell and Idemitsu Kosan plan to formulate and announce, after separate discussions and by the time of the extraordinary general meetings of shareholders of both companies concerning approval of this share exchange agreement, a medium-term management plan covering FY2019 through FY2021 after implementation of this management integration, taking into account the expected benefits of the share exchange (the “Plan Period Fiscal Years”). The plan is expected to set a target for net income for the Plan Period Fiscal Years of at least ¥500 billion in aggregate.」

「Based on its long-term view of the external environment, the Group has established its 2030 management vision and management targets and formulated the Fifth Consolidated Medium-Term Management Plan covering the 3 years from FY2018 through FY2020, as follows.」

「The company raised ¥119.5 billion on 20 July 2017 through a public offering of 48 million new shares. Of the proceeds from the issuance of new shares, ¥52.2 billion is planned to be allocated to strategic investments. The remainder was used to repay short-term borrowings from financial institutions incurred in connection with the acquisition of shares in 昭和シェル石油株式会社.」

「The company raised ¥119.5 billion on 20 July 2017 through a public offering of 48 million new shares. Of the proceeds from the issuance of new shares, ¥52.2 billion is planned to be allocated to strategic investments. The remainder was used to repay short-term borrowings from financial institutions incurred in connection with the acquisition of shares in 昭和シェル石油株式会社.」

「The company plans to allocate a total of ¥25.5 billion by the end of March 2020 to investments and loans for Nghi Son Refinery and Petrochemical LLC, its overseas subsidiary Idemitsu Lube Techno Indonesia and Idemitsu Lube India, Idemitsu Q8 Petroleum LLC, a joint venture between the company and Kuwait Petroleum International, and 台塑出光特用化学品股份有限公司, a joint venture between the company and Formosa Petrochemical Corporation. It also plans to allocate a total of ¥11.22 billion by the end of March 2020 to capital expenditures for the C8 splitter (distillation column) at the Aichi Refinery, manufacturing equipment related to organic EL materials, equipment for survey activities in areas for new geothermal projects and other purposes. A total of ¥15.5 billion is planned to be allocated by the end of March 2020 to research and development in advanced technology fields, including the development and expansion of applications for organic EL materials and industrial demonstration equipment for solid electrolytes.」

「Going forward, we will position the period from FY2017 through around FY2020 as a phase for harvesting the results of the Fourth Medium-Term Management Plan and expanding into further growth areas, while addressing management priorities. The Group's three company-wide priority issues are as follows: • Continued structural reform of the domestic core businesses (fuel oil and basic chemicals) • Continued expansion of overseas operations • Expansion of the high-performance materials business (lubricants, functional materials and electronic materials)」