5017.T

Third Mid-Term Business Plan (FY2021-FY2024) Review

• The plan set a target of 10 billion yen core operating profit (excluding inventory impacts) and 8.5 billion yen ordinary profit for FY2024, based on assumptions of $60/bbl Dubai crude and 105 JPY/USD exchange rate. The plan missed profit targets in FY2024 due to inventory-driven cost increases, broad inflation-driven cost hikes, and low overseas product market prices, resulting in a 5.7 billion yen net loss that missed the ROE target.
• The 0.8x net debt-to-equity ratio (D/E) beat the 1.5x or lower target, driven by interest-bearing debt reduction and growth in consolidated net assets. Cumulative 4-year free cash flow reached 33.8 billion yen, exceeding the 25 billion yen plan target with a 135% achievement rate.
• Energy efficiency targets were exceeded: the FY2025 target of 15,000 kiloliters (crude equivalent) annual energy savings was already achieved in FY2024 at 17,421 kiloliters. Energy savings are projected to rise to 20,692 kiloliters after investment projects are completed during the 2025 large-scale regular turnaround.
• The company is targeting a 20%+ reduction in Scope 1 + Scope 2 CO2 emissions by FY2030 compared to FY2014, to 1.36 million tons. It will continue implementing energy saving investments and exploring CO2 reduction measures such as switching fuel to ammonia.

Operational Performance

• The Sodegaura Refinery maintained a high 94.5% utilization rate for the atmospheric distillation unit in FY2024, with only small-scale disruptions (a lightning-induced shutdown in late July) and no major accidents.
• Average Dubai crude price was $79/bbl for the full year, with an average exchange rate of 153 JPY/USD. Net debt and capital structure improved year-over-year: equity ratio rose 0.9 percentage points to 23%, and net D/E improved 0.29 points to 0.8x.

Shareholder Return Policy

• Per the stable dividend policy, the FY2024 year-end dividend is maintained at 12 yen per share, in line with prior guidance, despite the reported net loss, due to the continued core profit and improved balance sheet.

Fourth Mid-Term Business Plan Development

• Development of the fourth mid-term plan is ongoing. Management will assess the impact of external factors including crude price and exchange rate volatility, general price inflation, rising turnaround and operating costs, longer turnaround periods, ability to pass higher costs through to product prices, and deepening collaboration from the capital and business alliance with Idemitsu Kosan, with publication planned as early as possible.

• For FY2025, which is the 4-year cycle large-scale regular turnaround year for Sodegaura Refinery, the atmospheric distillation unit utilization is projected at 74.3%, with a 72-day shutdown planned. Crude processing volume is projected to fall 21% year-over-year to 6.163 million kiloliters, and product sales volume is projected to fall 21% year-over-year to 6.574 million kiloliters.
• Guidance assumes $65/bbl Dubai crude and 145 JPY/USD exchange rate. Full-year consolidated net sales are projected at 527.4 billion yen, a 312.7 billion yen year-over-year decrease. Reported operating loss is projected at 15.2 billion yen (9.6 billion yen larger loss year-over-year), reported ordinary loss is projected at 16.2 billion yen, and projected net loss attributable to parent shareholders is 15.8 billion yen. Excluding inventory impacts, core operating loss is projected at 2.3 billion yen and core ordinary loss at 3.3 billion yen.
• Despite the projected weak full-year performance, the annual dividend for FY2025 will be maintained at 12 yen per share, unchanged from FY2024, in line with the company's stable dividend policy.

The provided transcript only discloses consolidated full-year results for Fuji Oil, and does not break out financial performance for individual product segments. On a consolidated basis: reported net sales were 840.1 billion yen, with a reported operating loss of 5.5 billion yen, reported ordinary loss of 3.8 billion yen, and net loss attributable to parent company shareholders of 5.7 billion yen. Excluding inventory valuation impacts, core operating profit was 0.31 billion yen and core ordinary profit was 0.48 billion yen, marking 3 consecutive years of core profit. For volume: total crude processing was 7.839 million kiloliters, and total sales volume of petroleum and petrochemical products was 8.279 million kiloliters.

• There is high volatility in crude oil prices and foreign exchange rates. End-of-period crude price declines and yen appreciation in Q4 FY2024 created a 5.5 billion yen negative inventory impact that drove the full-year reported loss, with similar volatility risks expected in future periods.
• Prolonged low overseas and chemical product market conditions pressure product margins and profitability.
• Broad inflation and rising costs for maintenance, energy, and other operating expenses increase fixed and variable costs, with uncertainty around the ability to fully pass these cost increases through to product prices.
• The 72-day shutdown for the large-scale regular turnaround in FY2025 will significantly reduce processing and sales volume, creating projected large full-year losses. There are also risks of cost overruns or extended downtime for the turnaround work.
• External macroeconomic uncertainty around crude prices, exchange rates, and general price trends creates uncertainty for long-term planning and profitability.

No question and answer section is included in the provided earnings call transcript.