| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥5018.0B | ¥5369.0B | -6.5% |
| Operating Income | ¥2782.2B | ¥3238.7B | -14.1% |
| Profit Before Tax | ¥2913.5B | ¥3353.6B | -13.1% |
| Net Income | ¥1189.7B | ¥1348.0B | -11.7% |
| ROE | 2.3% | 2.7% | - |
FY2026 Q1 results reported Revenue of ¥5,018.0B (YoY -¥351.0B, -6.5%), Operating Income of ¥2,782.2B (YoY -¥456.5B, -14.1%), Ordinary Income of ¥2,913.5B (YoY -¥43.9B, -1.3%), and Net Income attributable to owners of parent for the quarter of ¥1,094.1B (YoY -¥168.8B, -13.4%), reflecting declines in both top-line and profits. The primary driver of lower Revenue was adjustments in commodity prices and a 9.6% decline in Other Projects, while Operating Income deterioration was exacerbated by lower Revenue, a gross margin of 54.1% (down 540bp from 59.5% a year ago) and rising costs. Conversely, higher revenue from the Ichthys project (+7.8%), equity-method investment income of ¥344.3B (prior ¥352.7B), and financial income of ¥289.9B (prior ¥311.3B) provided support and helped contain declines at the Ordinary Income level. Net income margin compressed to 23.7% (prior 25.1%) due to a high effective tax rate of 59.2%, and ROE remained low at 2.3% (annualized). On the balance sheet, the Equity Ratio stood at 61.0% and the current ratio was 1.24x, maintaining robustness, and Cash and Cash Equivalents increased to ¥2,105B (vs FY-end +¥421B), strengthening liquidity.
[Revenue] Revenue was ¥5,018.0B, down ¥351.0B (-6.5%) year-on-year. By segment, Other Projects recorded ¥3,407.1B (YoY -9.6%, composition 67.9%) accounting for roughly 70% of consolidated Revenue, but declined due to commodity price adjustments and changes in production mix. Conversely, the Ichthys project achieved ¥986.3B (YoY +7.8%, composition 19.7%) with increased output stability and expanded sales contributing to higher Revenue. Domestic oil & gas business was ¥579.2B (YoY -11.0%, composition 11.5%), and Other businesses ¥45.4B (YoY +30.6%, composition 0.9%). The decline in the core Other Projects segment weighed on consolidated top-line, partially offset by Ichthys growth.
[Profitability] Cost of sales increased to ¥2,302.5B (prior ¥2,172.0B, +6.0%), resulting in Gross Profit of ¥2,715.5B and a gross margin of 54.1% (down 540bp from 59.5%). Selling, General & Administrative expenses were ¥322.2B (prior ¥307.6B, +4.7%), rising despite lower Revenue, and Operating Income amounted to ¥2,782.2B (Operating margin 55.4%, down 490bp from prior 60.3%). Equity-method investment income of ¥344.3B (prior ¥352.7B) and financial income of ¥289.9B (prior ¥311.3B) contributed in non-operating items, resulting in Profit Before Tax of ¥2,913.5B (prior ¥3,353.6B, -13.1%). Corporate income tax expense was ¥1,723.8B (effective tax rate 59.2%), producing Quarterly Net Income of ¥1,189.7B (prior ¥1,348.0B, -11.7%) and Net Income attributable to owners of parent of ¥1,094.1B (prior ¥1,262.9B, -13.4%). In summary, Ichthys revenue growth plus equity-method and financial income provided downside support, but commodity price adjustments, higher costs, and heavy tax burden led to lower Revenue and profits.
Domestic Oil & Gas Business (Revenue ¥579.2B, YoY -11.0%) saw segment profit fall sharply to ¥19.7B (from ¥113.4B prior), indicating a significant deterioration in profitability. Ichthys project (Revenue ¥986.3B, YoY +7.8%) achieved segment profit of ¥703.4B (from ¥741.7B prior), representing a small decline in profit despite revenue growth and suggesting a modest reduction in margin. Other Projects (Revenue ¥3,407.1B, YoY -9.6%) recorded segment profit of ¥351.0B (prior ¥355.7B), maintaining profit roughly flat despite Revenue decline, indicating some revenue stability. Non-reportable segments/Other businesses (Revenue ¥45.4B, YoY +30.6%) incurred a loss of ¥-14.8B (worsened from ¥-1.7B prior), reflecting losses from early-stage investments in renewables, CCS, and hydrogen. Overall, Ichthys’ high profitability (segment margin ~71%) drove consolidated profits, while Other Projects’ earnings stability contrasted with deterioration in domestic businesses.
[Profitability] Operating margin 55.4% (prior 60.3%), Net margin 23.7% (prior 25.1%)—still high but contracted. Gross margin 54.1% (down 540bp from 59.5%) with a notable rise in cost of sales. ROE 2.3% (quarterly basis, prior 2.7%) indicating low capital efficiency, constrained by high tax burden (effective tax rate 59.2%) and low total asset turnover of 0.063. [Cash Quality] Days Sales Outstanding (DSO) 185 days indicating prolonged receivables collection, and Days Inventory Outstanding (DIO) 108 days showing slower inventory turnover, implying working capital monetization takes time. [Investment Efficiency] Equity-method investment income ¥344.3B accounted for 11.8% of Profit Before Tax, indicating significant contribution from non-consolidated portfolio. Property, Plant & Equipment (other tangible fixed assets) ¥350.5B, up ¥94.8B year-end (+37.1%), reflecting ongoing project investments; monitor asset efficiency impact. [Financial Soundness] Equity Ratio 61.0% (prior year-end 61.4%), D/E ratio 0.26x (interest-bearing debt ¥1,341.2B / Net Assets ¥5,122.7B) indicating conservative capital structure. Current ratio 1.24x, and Cash & Cash Equivalents ¥2,105B plus Short-term Financial Assets ¥5,193B provide ample short-term liquidity. Deferred tax liabilities ¥6,587B should be recognized as potential future tax cash outflow/tax-rate change risk.
Trade receivables were ¥2,538B, down ¥93B from ¥2,631B at FY-end, slightly improving the receivables position, but DSO of 185 days means collection remains long and cash conversion risk persists. Inventories were ¥682B, roughly flat (FY-end ¥684B), with DIO 108 days indicating slow inventory turnover; attention required for impairment risk amid falling commodity prices and increased storage costs. Cash & Cash Equivalents were ¥2,105B, up ¥421B YoY (+25.0%), and Short-term Financial Assets expanded to ¥5,193B (from ¥4,774B at FY-end, +¥419B), strengthening liquidity. Interest-bearing debt totaled ¥1,341.2B (short-term ¥640.8B, long-term ¥697.4B), up ¥96.4B from ¥1,244.8B at FY-end, increasing the share of short-term debt, but ample short-term financial assets limit maturity mismatch. During the period, dividend payments of ¥583B and share buybacks of ¥100B were executed, returning a total of ¥683B to shareholders. Asset retirement obligations totaled ¥495.0B (current ¥15.7B, non-current ¥479.2B), a material long-term cash outflow consideration.
In addition to Operating Income ¥2,782B, equity-method investment income ¥344B (11.8% of Profit Before Tax) and financial income ¥290B (5.8% of Revenue) materially contributed at the Ordinary Income level, meaning non-core income accounts for about 17% of profit structure. Financial income includes FX gains and interest income and is sensitive to currency movements and interest rate environment. In operating expense details, exploration expenses decreased to ¥2.2B (prior ¥3.9B), providing temporary cost relief, while SG&A of ¥322B increased by ¥15B YoY (+4.7%), showing fixed-cost increases under declining Revenue and deteriorating operating leverage. Profit Before Tax ¥2,914B faced corporate income tax expense ¥1,724B (effective tax rate 59.2%), substantially compressing Net Income. No large extraordinary items were recorded; the main reasons for the profit decline are lower gross margin, higher costs, and heavy tax burden. Comprehensive income was ¥2,316B (Net attributable to owners of parent ¥2,139B), exceeding Net Income ¥1,190B (Net attributable to owners of parent ¥1,094B) due to Other Comprehensive Income of ¥1,126B (mainly translation differences of ¥1,117B from foreign operations) which lifted comprehensive income. FX valuation gains reflected in OCI indicate exchange-rate movements increase volatility in both P/L and OCI.
Progress against forecasts was not disclosed, but the full-year dividend forecast was maintained at ¥54 per share, indicating a stable dividend policy. Forecast revisions were implemented by Q1, suggesting assumptions for commodity prices and production plans were reviewed. The unchanged dividend forecast indicates some confidence in Cash Flow and dividend resources, but full-year outlook remains subject to revision depending on future commodity price trends and production/sales performance.
In Q1, prior-period dividends of ¥583B (equivalent to ¥50 per share) were paid and ¥100B of share buybacks were executed, totaling ¥683B in shareholder returns. The payout ratio relative to Q1 Net Income attributable to owners of parent ¥1,094B is approximately 53% (if annualized by multiplying the quarterly dividend by four, payout ratio would exceed ~200% on a simple annualized basis, but based on prior-period dividend actuals this is within an acceptable range). Full-year dividend forecast of ¥54 per share implies an +8.0% increase from prior ¥50, suggesting a stable increment policy; payout ratio depends on full-year earnings but signals intent to increase dividends steadily. Share buybacks are reflected in decreased capital surplus (prior FY-end ¥454.0B → ¥408.1B, -¥45.9B) and increased treasury stock (prior FY-end -¥221.6B → -¥231.6B, -¥10.0B), indicating a focus on ROE improvement. With an Equity Ratio of 61.0% and D/E 0.26x, dividend sustainability is high, though adjustments to return levels may be required if commodity prices decline or large investments accelerate. Total Return Ratio, combining dividends and buybacks, was ¥683B this quarter; if full-year profit is similar to the prior year, this suggests a Total Return Ratio in the 60% range.
Commodity Price Volatility: Declines in crude oil and LNG prices directly compress Revenue and gross margins; Q1 experienced a 540bp contraction in gross margin. Given high volatility and the fact that Other Projects account for ~70% of Revenue, price declines could materially widen Revenue/profit deterioration. Ichthys growth provides some support but the portfolio is highly price-sensitive.
Continued High Tax Burden: Effective tax rate of 59.2% imposes a heavy tax burden, with ~59% of Profit Before Tax flowing to taxes (Profit Before Tax ¥2,914B vs post-tax profit ¥1,190B). Resource taxation and special taxes in producing countries are significant; changes in tax regimes or FX can materially affect Net Income and ROE. Prolonged high tax rates would structurally suppress capital efficiency.
Working Capital Efficiency Deterioration: DSO 185 days and DIO 108 days indicate weakening receivables and inventory turnover, delaying conversion of earnings to cash. Receivables ¥2,538B and inventories ¥682B total ¥3,220B awaiting monetization; impairment risks during commodity price declines and prolonged receivables recovery could pressure Operating Cash Flow. Improving WC management is key to balancing capex and shareholder returns.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 55.4% | – | – |
| Net Margin | 23.7% | – | – |
Operating margin 55.4% and Net margin 23.7% are high-levels of profitability; although industry comparison data is limited, this is indicative of high profitability within the upstream energy sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -6.5% | – | – |
Revenue was down -6.5%, reflecting a contraction driven by commodity price adjustments.
※ Source: Company compilation
Ichthys project revenue growth and stability of equity-method investment income have functioned as support during the revenue decline; future production rates, realized prices, and the performance of equity-method investees will determine consolidated earnings stability. Ichthys’ high profitability (segment margin ~71%) is a key driver for earnings growth via production and sales expansion.
Structural factors — high tax burden (effective tax rate 59.2%) and slowed asset turnover (DSO 185 days, DIO 108 days) — are keeping ROE at a low level of 2.3%. Normalization of tax rates and improvement in working capital management would be catalysts for capital efficiency improvement. Monitor potential recovery in gross margin and cost controls for Operating margin improvement.
With an Equity Ratio of 61.0% and ample liquidity (Cash & Cash Equivalents + Short-term Financial Assets > ¥780.0B), financial resilience is strong. A payout ratio of ~53% (simple annualization) and ¥100B share buybacks demonstrate a clear shareholder-return stance, but returns may be flexibly adjusted in case of commodity price declines or accelerated large-scale investments. Asset retirement obligations ¥495.0B and deferred tax liabilities ¥6,587B are potential long-term cash outflow risks that should be monitored.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmark data are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as necessary.