INPEX (1605) FY2026 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending December 2026, the Company reported lower profit without revenue growth, as resource prices and production volumes fluctuated and the effective tax rate remained high. Revenue was ¥5,018.0B (¥5,369.0B in the previous year period, YoY-6.5%), Operating Income was ¥2,782.2B (¥3,238.7B, YoY-14.1%), Profit Before Tax was ¥2,913.5B (YoY-13.1%), and Net Income was ¥1,189.7B (¥1,348.0B, YoY-11.7%). The gross profit margin declined as cost of revenue increased despite lower revenue, while income tax expense reached 59.2% of Profit Before Tax, exerting downward pressure on Net Income.

Factors Affecting Earnings

【Revenue】Revenue was ¥5,018.0B, a YoY decrease of -6.5%. By segment, the Ichthys Project in Overseas O&G maintained revenue growth at ¥986.3B (YoY+7.8%), while Other Projects generated ¥3,407.1B (down -9.6%) and Domestic O&G generated ¥579.2B (down -11.0%), leading the overall revenue decline. Other Businesses (renewable energy, CCS, hydrogen, etc.) expanded to ¥45.4B (up +30.6%), although their scale remains small.

【Profit and Loss】Operating Income was ¥2,782.2B, a YoY decline of -14.1%. Cost of revenue increased to ¥2,302.5B (up +6.0%) despite lower revenue, causing the gross profit margin to decline to 54.1%. Selling, general and administrative expenses also increased to ¥322.2B (up +4.7%), exceeding the rate of revenue decline and causing operating leverage to work in the opposite direction. By segment, Domestic O&G profit fell sharply to ¥19.7B (down -82.6%), while Ichthys also declined slightly to ¥703.4B (down -5.2%). Although Net Income declined by YoY-11.7%, the decrease was slightly smaller than the -13.1% decline in Profit Before Tax because equity-method investment income of ¥344.3B (down -2.4%) provided support. Overall, the results represented lower revenue and lower profit, with rising costs and deteriorating profitability in Domestic O&G weighing on earnings.

Segment Analysis

The core Ichthys Project generated revenue of ¥986.3B (YoY+7.8%) and segment profit of ¥703.4B (down -5.2%), maintaining a high profit margin of 71.3%. However, this was down from 76.1% in the previous year, and the project remained the largest source of profit, accounting for 66.4% of total reportable segment profit. Domestic O&G generated revenue of ¥579.2B (down -11.0%), while segment profit plunged to ¥19.7B (down -82.6%), reducing the profit margin to 3.4%. Other Projects (Overseas O&G) generated revenue of ¥3,407.1B (down -9.6%) and profit of ¥351.0B (down -1.3%), with the profit margin remaining broadly flat at 10.3%. Other Businesses not included in the reportable segments (renewable energy, CCS, hydrogen, etc.) generated revenue of ¥45.4B (up +30.6%), but the segment loss widened to ¥14.8B (segment loss of ¥-1.7B in the previous year), indicating that monetization of new business areas remains a challenge.

Key Financial Indicators

【Profitability】The Operating Income margin was 55.4% (60.3% in the previous year), while the Net Income margin was 23.7% (21.8% attributable profit margin, compared with 23.5% in the previous year). Both remained at high levels but declined from the previous year. The gross profit margin was 54.1%, approximately 5.4pt lower than the previous year’s 59.5%, primarily due to higher costs.【Cash Flow Quality】Although Operating Cash Flow (OCF) and investing cash flow have not been disclosed, cash and cash equivalents were ¥2,104.8B, an increase of +¥420.8B from ¥1,684.1B at the beginning of the period. Operating receivables declined and operating payables increased, indicating that working capital supplemented cash generation. 【Investment Efficiency】Annualized ROE was 9.3%. Reflecting the characteristics of a capital-intensive business with low total asset turnover, there remains room to improve profit-generation efficiency relative to the scale of assets and equity. The effective tax rate was high at 59.2%, limiting the conversion of Profit Before Tax into Net Income.【Financial Soundness】The Equity Ratio was a solid 61.0%, while the current ratio was approximately 123.8% (current assets of ¥1,228.2B ÷ current liabilities of ¥992.2B). Meanwhile, bonds and borrowings included in current liabilities increased to ¥640.8B, up +18.3% from the end of the previous fiscal year, making the shortening of debt maturities a monitoring point.

Cash Flow Analysis

As the details of Operating Cash Flow, investing cash flow, and financing cash flow have not been disclosed in these financial results, cash trends are analyzed based on changes in the balance sheet. Cash and cash equivalents amounted to ¥2,104.8B, an increase of ¥420.8B from ¥1,684.1B at the end of the previous consolidated fiscal year. Operating receivables were ¥2,538.2B, down ¥92.3B from the end of the previous fiscal year, while inventories also declined by ¥2.1B, indicating no cash accumulation in working capital. Meanwhile, operating payables were ¥2,282.2B, up ¥105.3B from the end of the previous fiscal year, contributing to the supplementation of short-term funding. In terms of financing activities, share repurchases of ¥99.8B and dividend payments of ¥583.2B were identified. The increase in cash exceeding these funding requirements suggests that cash generation from the business exceeded the total amount returned to shareholders.

Earnings Quality

In assessing the quality of quarterly profit, equity-method investment income of ¥344.3B accounted for 12.4% of Operating Income of ¥2,782.2B, indicating that earnings depend not only on consolidated businesses but also on the performance of equity-method affiliates. Finance income of ¥289.9B exceeded finance costs of ¥158.5B, with net finance income of ¥131.4B contributing as a recurring factor supporting Profit Before Tax. Meanwhile, income tax expense was ¥1,723.8B, and the effective tax rate remained high at 59.2% (59.8% in the previous year), resulting in a conversion rate from Profit Before Tax of ¥2,913.5B to Net Income of only approximately 40.8%. Comprehensive income was ¥2,316.0B, substantially exceeding Net Income of ¥1,189.7B. Most of the difference was attributable to foreign currency translation adjustments for foreign operations of ¥1,117.4B, a non-cash and non-recurring fluctuation that should be evaluated separately from the business’s recurring earnings power.

Earnings Forecasts and Guidance

Although the earnings forecast was revised during the quarter, there was no revision to the dividend forecast. The full-year ordinary common stock dividend forecast remains ¥108 per share (¥54 each for the interim and year-end dividends). Since the full-year forecasts for Revenue and profit are not included in the disclosed information, progress rates have not been calculated.

Shareholder Returns

The full-year ordinary common stock dividend forecast remains unchanged at ¥108 per share. Based on the average number of shares outstanding during the period of 1,162,980,000 shares, the estimated annual total dividend amount is approximately ¥1,256B. Dividend payments during the quarter were ¥583.2B (attributable to owners of the parent), resulting in a Payout Ratio of approximately 53.3% relative to quarterly profit attributable to owners of the parent of ¥1,094.1B. Including share repurchases of ¥99.8B, total shareholder returns during the quarter amounted to ¥683.0B, resulting in a Total Return Ratio of approximately 62.4% relative to profit attributable to owners of the parent; this should be evaluated separately from the Payout Ratio. Retained earnings were ¥33,955.7B, and equity attributable to owners of the parent was ¥48,899.4B, providing a strong capital base. The shareholder returns during the quarter remained within the Company’s capital capacity.

Risk Factors

1. High Tax Burden Risk: The effective tax rate was high at 59.2% (income tax expense of ¥1,723.8B ÷ Profit Before Tax of ¥2,913.5B), significantly limiting the conversion of strong pre-tax earnings into Net Income and ROE.

2. Concentration of Profit in the Core Project: Segment profit from the Ichthys Project of ¥703.4B accounted for 66.4% of total reportable segment profit, creating a structure in which operational and profitability fluctuations at the project directly affect overall Company performance.

3. Profitability Volatility in Domestic O&G and New Businesses: Segment profit in Domestic O&G plunged to ¥19.7B, down 82.6% year on year, while Other Businesses, including renewable energy, CCS, and hydrogen, expanded their segment loss to ¥14.8B. This demonstrates the emergence of earnings volatility driven by resource prices and project-specific profitability.

Industry Benchmarks (For Reference; Company Research)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin are both at high levels, but relative comparisons are limited because industry median data has not been fully compiled.

Growth and Capital Efficiency

The Revenue growth rate is negative, indicating a period of declining revenue driven by trends in resource prices and production volumes.

※Source: Company research

Key Points from the Financial Results

1. The Operating Income margin of 55.4% and profit attributable to owners of the parent margin of 21.8% remained high, but both declined from the previous year period. The approximately 5.4pt decline in the gross profit margin was the starting point of the deterioration in profitability.

2. The high tax burden, reflected in an effective tax rate of 59.2%, creates a difference between the -13.1% decline in Profit Before Tax and the -11.7% decline in Net Income, supported by equity-method investment income, while structurally constraining growth in Net Income.

3. Profit concentration in the Ichthys Project remains high, with the project accounting for 66.4% of total reportable segment profit. Its operating and profitability trends therefore remain important drivers of fluctuations in overall Company performance.

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available financial results data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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