INPEX CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.52T
• Operating Income: ¥872.94B
• Net Income: ¥314.52B
• EPS: ¥245.37

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: INPEX delivered resilient earnings in FY2025 Q3 with net profit slightly up year over year despite lower revenue and operating profit, supported by robust margins and disciplined capital structure. Revenue was 15,206.47 (100M JPY), down 13.0% YoY, reflecting softer commodity pricing and/or volume normalization. Operating income was 8,729.43 (100M JPY), down 14.3% YoY, implying an operating margin of approximately 57.4%. Net income rose 1.4% YoY to 2,934.10 (100M JPY), lifting the net margin to 19.3%. Gross profit was 10,458.14 (100M JPY), yielding a gross margin of 68.8%, indicating continued cost discipline and favorable project economics. Based on back-calculations, operating margin compressed by roughly 90 bps YoY (from ~58.3% to ~57.4%), while net margin expanded by about 270 bps (from ~16.6% to ~19.3%). Equity-method income was 944.32 (100M JPY), a meaningful contributor but modest relative to trading company norms (10.4% ratio vs 20–50% typical for sogo shosha), highlighting that INPEX’s earnings remain primarily driven by its consolidated upstream/LNG operations. ROE stands at 6.2% (Net Margin 19.3% × Asset Turnover 0.211 × Leverage 1.52x), a moderate level for a capital-intensive E&P. ROIC is reported at 9.2%, above the 7–8% benchmark and signaling healthy capital efficiency at current cycle conditions. Earnings quality assessment is constrained because operating cash flow was not disclosed; OCF/NI and FCF coverage cannot be verified this quarter. Total comprehensive income was negative at -1,830.70 (100M JPY), implying sizable OCI losses (likely FX translation and/or FVOCI securities), which tempered equity accretion despite positive net profit. The effective tax rate appears elevated at 81.7%, underscoring fiscal/regulatory burdens typical in resource jurisdictions, which can introduce volatility between PBT and bottom line. The balance sheet remains conservative with an equity ratio of 62.3% and D/E of 0.52x, and cash & equivalents of 2,400.93 (100M JPY). Dividend payout ratio is 36.9%, suggesting adequate headroom given current profitability, though cash coverage is unassessed due to missing OCF/FCF data. Looking forward, earnings sensitivity to oil/LNG prices, equity-method affiliate performance, and tax/regulatory dynamics will be the principal swing factors, with ROIC > 8% offering a constructive baseline if commodity prices hold.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.2% = Net Profit Margin 19.3% × Asset Turnover 0.211 × Financial Leverage 1.52x. The most notable change vs last year appears in margins: operating profit fell 14.3% on a 13.0% revenue decline, implying ~90 bps operating margin compression, while net margin expanded by ~270 bps due to the mix of equity-method contributions and tax/other below-the-line effects. Business drivers: revenue softness likely stems from lower realized oil/LNG prices and/or volume normalization; cost base remains well managed (gross margin 68.8%), but operating leverage worked negatively on OI. Equity-method income (944.32) provided diversification and likely supported net margin resilience, as associate profits are taxed at the investee level and can create a favorable effective tax impact at the parent. Sustainability: margin levels are highly sensitive to commodity prices; cost discipline and long-term LNG offtake underpin baseline profitability, but the net margin uplift may not be fully sustainable if equity-method income normalizes or tax effects reverse. Watch for SG&A growth relative to revenue; SG&A is 996.68, but YoY SG&A growth not disclosed—however, OI decline exceeding revenue decline hints at mild negative operating leverage.

Growth Assessment

Top-line contracted 13.0% YoY to 15,206.47 (100M JPY), reflecting the commodity cycle. Operating profit fell 14.3% to 8,729.43, broadly tracking revenue with slight margin pressure. Net income increased 1.4% to 2,934.10, supported by associate contributions and below-the-line items despite a high effective tax rate. Equity-method income of 944.32 provided meaningful support but is a smaller component than trading houses, implying core operations drove most earnings. With ROIC at 9.2%, INPEX is exceeding typical cost-of-capital benchmarks, indicating ongoing project-level returns remain healthy. Outlook: earnings trajectory will hinge on realized oil/LNG price trends, LNG contract indexation (oil-linked and JKM exposures), production uptime at core assets (e.g., Ichthys LNG), and tax/regulatory regimes in producing countries. Near-term growth visibility is moderate; the company’s capital discipline and strong equity base support steadier through-cycle performance, but macro volatility remains the key swing factor.

Financial Health

Liquidity: Current ratio not calculable due to undisclosed current liabilities; we cannot confirm short-term coverage, and reported working capital equals current assets by construction given missing CL, so no conclusion should be drawn. Solvency: Equity ratio 62.3% and D/E 0.52x indicate a conservative capital structure for an upstream E&P. Total assets are 72,032.21 with equity of 47,344.11, implying financial flexibility. Maturity mismatch: Short-term and long-term borrowings are not disclosed this quarter; thus, refinancing and near-term liquidity risks cannot be assessed from the data. Off-balance sheet obligations: Not disclosed in the provided dataset; typical E&P commitments (long-term LNG shipping/processing, decommissioning, and take-or-pay) may exist but are not visible here.

Cash Flow Quality

OCF/Net Income cannot be evaluated as operating cash flow is unreported this quarter; hence, earnings quality cannot be validated against cash conversion (threshold >1.0). Free cash flow is also unreported, so coverage of dividends and capex commitments cannot be assessed. Working capital dynamics and potential timing effects (receivables 1,845.41; inventories 601.14) are visible on the asset side, but payables/current liabilities are unreported; thus, signs of working capital manipulation cannot be evaluated. Given the high effective tax rate and sizable equity-method income, monitor cash taxes paid and cash dividends received from associates in the full-year CF to corroborate earnings quality.

Dividend Sustainability

Payout ratio is 36.9%, below the 60% sustainability guideline, indicating comfortable coverage by accounting earnings. However, OCF and FCF are unreported for the period, preventing a cash-based coverage assessment. With ROIC at 9.2% and a conservative balance sheet (D/E 0.52x), the current dividend level appears supportable through the cycle, subject to commodity price swings and capex needs for sustaining and growth projects. Policy outlook: INPEX typically aligns shareholder returns with commodity cycle and investment pipeline; absent FCF disclosure, watch full-year guidance for capex, OCF, and net debt trajectory to gauge room for incremental buybacks or dividend step-ups.

Risk Assessment

Business Risks:

• Commodity price volatility (oil and LNG) directly impacts revenue and margins.
• Operational uptime and project execution risk at key assets (e.g., LNG value chain, offshore fields).
• Reserve replacement and development risk affecting medium-term production profile.
• Equity-method affiliate volatility (944.32 contribution) influencing bottom line.
• Regulatory/taxation changes in producing countries driving an elevated effective tax rate.

Financial Risks:

• Cash flow uncertainty due to missing OCF/FCF disclosure this quarter.
• Potential maturity mismatch risk cannot be assessed without current liabilities and debt maturity data.
• FX translation and FVOCI volatility evidenced by negative total comprehensive income (-1,830.70).
• Exposure to cost inflation (services, logistics) that can pressure capex and opex.

Key Concerns:

• Effective tax rate of 81.7% materially dilutes the pass-through from PBT to net profit.
• Negative comprehensive income despite positive net income indicates equity erosion via OCI in the period.
• Operating leverage turned slightly negative (OI down 14.3% vs revenue down 13.0%).
• Limited visibility on liquidity coverage due to undisclosed current liabilities and debt structure.

Investment Implications

Key Takeaways:

• Resilient bottom line (+1.4% YoY) despite revenue and operating profit declines highlights diversified profit drivers and cost discipline.
• ROIC at 9.2% exceeds benchmark, supporting value creation at current cycle conditions.
• Operating margin ~57.4% remains strong, though compressed ~90 bps YoY; net margin expanded ~270 bps aided by below-the-line items.
• Balance sheet is conservative (equity ratio 62.3%, D/E 0.52x), providing flexibility.
• Large negative OCI (-1,830.70) and high effective tax rate are key drags on equity build and earnings translation.
• Equity-method income is supportive but not dominant (10.4% dependency), differentiating INPEX from sogo shosha risk profiles.

Metrics to Watch:

• Realized oil/LNG prices and sales volumes; sensitivity to Brent and JKM/contracted indices.
• Operating cash flow, free cash flow, and cash tax payments to validate earnings quality.
• Capex trajectory and project milestones (timing, cost inflation, and start-up performance).
• Equity-method income trend and cash dividends received from affiliates.
• Effective tax rate drivers and guidance, including regimes in core producing countries.
• OCI components (FX translation, FVOCI) given the large negative swing this period.
• ROIC and unit cash costs to monitor structural profitability.

Relative Positioning: Within Japan’s energy complex, INPEX exhibits stronger asset-backed profitability and ROIC than typical trading company exposure to resources, with lower earnings reliance on equity-method income than sogo shosha. Its conservative leverage and integrated LNG exposure offer defensiveness, but earnings remain inherently cyclical with outsized sensitivity to commodity prices and fiscal regimes.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis