Cosmo Energy Holdings Co Ltd
TSE:5021
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Cosmo Energy Holdings Co Ltd
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Good morning. Thank you for your time today. I will now proceed with the presentation, starting with Page 3, which shows highlights of quarterly financial results as well as a summary of the P&L results for the first quarter of fiscal year 2021. .
Please refer to the table at the bottom of the slide as well.
To summarize, the progress rate of ordinary profit, excluding the inventory valuation effect, was 38%, which is a good progress for just 1 quarter of the year. In particular, the Petroleum business segment achieved a strong progress of over 50% in ordinary profit excluding inventory valuation. As the impact of COVID-19 pandemic eased, market conditions improved, driven by the recovery of crude oil prices. And in addition to the effect of increased volume, the full capacity operation of our plants contributed to earnings.
In addition, due to the short position where sales exceeded supply, the fixed cost burden was diluted and the breakeven ratio was lowered. Furthermore, as the impact of COVID-19 subsided, a profit structure that would increase resilience was realized, which we believe led to the good results.
We have left our earnings forecast unchanged this time. However, instead we are planning to review the forecast after carefully examining market conditions by second quarter earnings announcement.
Please turn to Page 4, which summarizes the impact of the COVID-19 pandemic. Again, we have not experienced any impact on business continuity such as the operation of refineries at this time. Crude oil prices remained at a high level. As for Petroleum products, the Q1 national average price for 4 major products was 103% of the FY '20 level and 92% of the FY '19 level. Jet fuel price was 46% of the FY '19 level.
As for Petrochemical products, shown on the right-hand side, the paraxylene price remained at a low level, while the benzene price was well above the pre-COVID level. Please refer to the lower graph for both prices.
The bottom panel shows an outlook for future impact from COVID-19. Domestic demand for Petroleum products has yet to return to the normal level -- to the level before the outbreak. We need to keep a close eye on future trends such as the recent resurgence of infections. Overseas, it will take time for jet fuel and other demands to recover, and the market is expected to remain sluggish.
Now please turn to Page 6, which shows the draft Sixth Strategic Energy Plan released in April 2021 by the Ministry of Economy, Trade and Industry. The assumed capacity of wind power generation facilities in FY 2030 has been revised upward significantly from 10 million-kilowatt to over 19.6 million kilowatt. To achieve this figure, more than 15 million-kilowatt or 1.5 million kilowatt per year will need to be developed. Wind power is an important power supply for our group, which aspires to achieve net zero carbon emissions, and we are working on this business with full commitment.
Just for your information, an annual capacity of more than 1.5 million kilowatt is equivalent to the capacity of 1.5 nuclear power plants.
Please turn to Page 7. This slide shows the progress of wind power generation projects, which we are working on and had been shared in previous meetings. Please refer to it later.
Please turn to Page 8. This chart shows our electricity sales volume. The chart on the left shows the yearly trend of electricity sales volume. As you can see, the volume has grown 1.7x in the past 5 years.
Let me turn to Page 10. This is an overview of the first quarter results, and I'll briefly discuss it here and explain the details by segment in Various Analysis slide later. Ordinary profit, excluding the inventory valuation effect of the Petroleum business, was up JPY 14.7 billion year-on-year to JPY 17.2 billion. Ordinary profit of the Petrochemical business is up JPY 11.3 billion to JPY 4.6 billion. Ordinary profit of the Oil E&P business remained JPY 6.7 billion, unchanged from the previous year.
Ordinary profit of the Renewable Energy business was down JPY 0.2 billion to JPY 0.5 billion.
Page 11 shows a summary of consolidated P&L. I will not read it one by one. Please refer to the progress rate on the right-hand side.
The progress in net income attributable to owners of the parent on the eighth line is very favorable at 70%. This is because the impact of inventory valuation on the ninth line, including a positive effect of JPY 19.4 billion.
Now I will skip Page 12, which shows the financial results by segment. Please go to Page 13, where I will take you through the details of the variance vis-a-vis the previous fiscal year using the waterfall chart. First of all, the Petroleum business, shown in green on the left, is up JPY 14.7 billion from JPY 2.5 billion to JPY 17.2 billion. As you can see, the margin and volume was plus JPY 16.8 billion, and the expense and other was minus JPY 2.1 billion. For details, margin was JPY 6.9 billion, which consists of JPY 7.5 billion for 4 major products and minus JPY 0.6 billion for other products.
Sales volume was JPY 7.5 billion, with JPY 4.9 billion for 4 major products and JPY 2.6 billion for other products. This reflects the reduced impact of COVID-19, improvement in margins due to the positive time lag effect of the crude oil price hike mentioned earlier and the improvement in the supply-demand balance due to the full capacity operation of refineries. As a result of these effects, imports and purchases were down, generating a positive effect of JPY 2.4 billion. Expense and other were minus JPY 2.1 billion, of which in-house fuel cost was minus JPY [ 3.5 ] billion and other expenses was plus JPY 1.4 billion.
Next, the Petrochemical business, shown in yellow on the right, increased JPY 11.3 billion from a negative JPY 6.7 billion to a positive JPY 4.6 billion. As a breakdown, price was plus JPY 6.4 billion. This reflects the absence of a special factor we had in the previous year related to the time lag impact of high-priced naphtha inventory as well as an improvement in petrochemical prices. Volume was plus JPY 4.4 billion due to the absence of regular maintenance this year. Expense and other was plus JPY 0.5 billion. Oil E&P was JPY 6.7 billion, unchanged from the previous year. As for the Oil E&P business, as you can see, the period covered is from January to March.
The price of crude oil during that period rose $9 from $51 to $60. So the impact of that is reflected here. Price was plus JPY 2.9 billion, and the volume was minus JPY 4.3 billion. There is also a technical factor here compared with the previous year. In the previous year, there was a positive time lag. So due to the absence of that factor, volume was minus JPY 4.3 billion. Expense and other was plus JPY 1.4 billion. As a result, the total amount was unchanged from the previous year.
Renewable Energy decreased by JPY 0.2 billion from JPY 0.7 billion to JPY 0.5 billion. This was mainly due to the upfront investment in offshore wind facilities, mainly in the area of personnel cost. Other was down JPY 1.5 billion from JPY 2.7 billion to JPY 1.2 billion, mainly due to the impact of consolidation processes.
Please refer to Page 14 for a summary of the consolidated balance sheet. The third line, net worth, was JPY 346.1 billion, an increase of JPY 21.2 billion from the end of March 2021.
Net worth ratio was 19.3%, an improvement of 0.3 percentage points. Net interest-bearing debt was JPY 586.2 billion, a deterioration of JPY 29.8 billion. While net interest-bearing debt increased, net worth was increased as well. As a result, net D/E ratio, shown on the sixth line, was unchanged from the end of the previous year.
As a supplementary information, the reason why net interest-bearing debt increased in Q1 is that the payment of gasoline tax, which is more than JPY 33 billion, was postponed from last year to this year. And also, in Q1 this year, there was a payment of corporate income tax as well as dividends. As a result of these seasonal factors, cash flow deteriorated by nearly JPY 30 billion. Please be aware, however, that we have generated more cash flow than we had anticipated.
Finally, Page 15 is a summary of capital expenditures. This year, the level of investment has been reduced because most of the strategic investments have already been completed. In particular, in Q1, since there was no major regular maintenance, there was a major drop in capital expenditures in the Petroleum and the Petrochemical business segments. That's all I have for today. Thank you very much.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]