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

INPEX’s FY2025 Q3 (IFRS, consolidated) shows resilient profitability on a strong balance sheet despite top-line softness and notable tax/OCI volatility. Revenue was 15,206.47 (100M JPY), down 13.0% YoY, with operating income of 8,729.43 (100M JPY), down 14.3% YoY, indicating some operating deleverage but still very high operating efficiency. Net income rose slightly by 1.4% YoY to 2,934.10 (100M JPY), supported by strong underlying operations and material contributions from equity-method investees (944.32 (100M JPY)), though the tax line was unusually heavy. The calculated net profit margin is 19.3%, and operating margin (calculated) is approximately 57.4%, reflecting the high-margin profile typical of upstream E&P in a favorable cost environment. Gross profit is reported at 10,458.14 (100M JPY), implying a gross margin of 68.8%; however, this conflicts with the separately reported cost of sales figure, suggesting differences in classification under IFRS or disclosure presentation. The effective tax rate is indicated at 81.7% (income tax of 7,448.16 (100M JPY) versus profit before tax of 9,118.43 (100M JPY)), which does not reconcile intuitively with the reported net income; this likely reflects timing, jurisdictional mix, deferred tax effects, or other reconciling items, and warrants monitoring. Total comprehensive income was negative at -1,830.70 (100M JPY), implying sizable OCI losses (likely FX/hedging/valuation-related), which reduced equity versus what net income alone would suggest. The balance sheet remains robust: total assets are 72,032.21 (100M JPY), equity is 47,344.11 (100M JPY), and the equity ratio is a solid 62.3%. Leverage is modest with a debt-to-equity proxy of 0.47x (using total liabilities), supporting financial flexibility into capex cycles. DuPont shows ROE at 6.2%, driven by a 19.3% net margin, 0.211x asset turnover, and 1.52x financial leverage—returns are mainly margin-driven rather than asset velocity. Cash and equivalents stand at 2,416.75 (100M JPY), providing liquidity, though current liability details and operating cash flow are unreported, limiting a full liquidity and cash conversion assessment. Dividend payout ratio is indicated at 36.9%, suggesting a measured shareholder return framework consistent with earnings capacity, although DPS and FCF are unreported. Equity-method income of 944.32 (100M JPY) is sizable relative to PBT (around 10%), indicating that JV/associate performance remains an important earnings pillar. Revenue softness and a dip in operating income reflect energy price normalization or volume mix, but margins remain high, highlighting favorable cost discipline. Key data limitations include a lack of cash flow, capex, and current liability detail, as well as inconsistencies between cost of sales and gross profit and between tax expense and net income, which should be clarified with management disclosures. Overall, INPEX appears fundamentally strong with high margins and low balance-sheet risk, albeit with earnings sensitivity to commodity prices, tax effects, and OCI volatility.

Profitability Analysis

ROE decomposition (DuPont): Net margin 19.3% x Asset turnover 0.211 x Financial leverage 1.52x = ROE ~6.2% (matches reported). Profitability is margin-led: the calculated operating margin is approximately 57.4% (8,729.43 / 15,206.47), and gross margin is disclosed at 68.8%. The gap between gross and operating margin (approx. 11.4pp) reflects relatively lean SG&A (996.68 (100M JPY), ~6.6% of revenue), consistent with upstream scale economics. Equity-method income (944.32 (100M JPY)) contributed meaningfully to pre-tax profit (about 10.4% of PBT), diversifying profit sources. Operating leverage: revenue fell 13.0% YoY while operating income fell 14.3% YoY, implying a slight negative operating leverage in this period. Margin quality appears strong, but the inconsistency between reported cost of sales and gross profit suggests classification nuances under IFRS; we anchor margin analysis on the internally consistent gross margin and revenue figures provided. High effective tax rate (81.7%) depresses after-tax returns versus pre-tax profitability; normalization of the tax rate would lift ROE. Overall, returns are constrained by asset intensity (asset turnover 0.211) typical for E&P, while cost control and pricing underpin robust margins.

Growth Assessment

Revenue declined 13.0% YoY to 15,206.47 (100M JPY), suggesting normalization from prior commodity price peaks or volume/mix headwinds. Operating income decreased 14.3% YoY to 8,729.43 (100M JPY), indicating modest negative operating leverage. Net income nevertheless grew 1.4% YoY to 2,934.10 (100M JPY), implying supportive non-operating items and/or associate contributions, despite heavy reported taxes. Sustainability: The high gross and operating margins indicate a resilient cost position; however, top-line sensitivity to commodity prices remains a structural feature. Equity-method income (944.32 (100M JPY)) is material; continuity of associate/JV performance is important for sustaining PBT. Total comprehensive income was -1,830.70 (100M JPY), signaling OCI volatility that can dampen equity growth even when net income is stable. Outlook: With no guidance or OCF/capex data provided, growth visibility is constrained; future performance will hinge on realized oil/LNG prices, production volumes, project ramp-ups, and the tax/jurisdictional mix. Given asset intensity and the 0.211x asset turnover, growth will likely come from incremental volume and price rather than rapid asset cycling. Monitoring of tax effects is essential, as the 81.7% effective rate is likely non-recurring at that level if driven by temporary factors.

Financial Health

Balance sheet strength is a key positive: equity of 47,344.11 (100M JPY) on assets of 72,032.21 (100M JPY) yields a 62.3% equity ratio. Total liabilities of 22,430.29 (100M JPY) equate to a 0.47x debt-to-equity proxy (using total liabilities due to missing debt detail), indicating low leverage. Cash & equivalents are 2,416.75 (100M JPY), supporting liquidity; however, current liabilities and detailed debt maturity profiles are unreported, so classic liquidity ratios (current, quick) cannot be calculated. Working capital is shown as 8,702.06 (100M JPY), but this equals current assets due to missing current liability data and therefore is not an analytical working capital figure. Accounts receivable of 2,674.76 (100M JPY) and inventories of 672.41 (100M JPY) appear manageable relative to revenue, consistent with upstream sales and inventory dynamics. Noncurrent assets dominate (65,106.56 (100M JPY)), reflecting capital-intensive upstream projects. Negative total comprehensive income indicates OCI headwinds to equity; despite this, capitalization remains conservative.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported, limiting assessment of earnings-to-cash conversion. Consequently, OCF/Net Income and FCF coverage of dividends cannot be evaluated. Cash & equivalents of 2,416.75 (100M JPY) provide liquidity, but without capex data we cannot judge reinvestment intensity versus internally generated cash. Earnings quality signals are mixed: strong operating margin suggests robust underlying cash generation, but the high effective tax rate and negative OCI introduce volatility between accounting profit, equity, and cash. Working capital detail is insufficient (no current liabilities breakdown) to analyze cash tied up in receivables or inventory. Equity-method income is sizable; associated dividends or distributions (unreported) affect cash realization from those profits. In sum, cash flow quality appears likely solid given the margin structure but cannot be substantiated without OCF/FCF disclosure.

Dividend Sustainability

The payout ratio is indicated at 36.9%; DPS and total dividends are unreported, and FCF coverage cannot be calculated. With net income at 2,934.10 (100M JPY) and a strong equity base, earnings-based capacity to pay dividends appears adequate at this payout level. Cash & equivalents of 2,416.75 (100M JPY) provide a buffer, but without OCF/FCF and capex, sustainability through cycles cannot be firmly assessed. Policy outlook cannot be inferred from data provided; however, the conservative leverage (0.47x liabilities/equity) affords flexibility to maintain dividends through moderate cycles. Key swing factors for sustainability include realized commodity prices, production volumes, tax normalization, and capex intensity.

Risk Assessment

Business Risks:

• Commodity price volatility (oil, gas, LNG) directly impacting revenue and margins
• Production volume and reserve replacement risk inherent in upstream E&P
• Project execution and capex overrun risk on large-scale developments
• Contract and pricing exposure in LNG sales (indexation, spot exposure)
• Geopolitical and country risks in operating jurisdictions and JV/associate exposure
• Regulatory and environmental/ESG pressures affecting project approvals and costs
• Counterparty risk in offtake and JV arrangements
• Operational risks (unplanned shutdowns, exploration outcomes, lifting costs)

Financial Risks:

• Tax rate volatility; currently indicated effective tax of 81.7% distorts net earnings
• OCI volatility driving swings in total comprehensive income and equity
• Potential need for external funding during capex peaks (debt markets exposure)
• FX risk affecting revenues, costs, and OCI
• Associate/JV performance risk affecting equity-method income and cash distributions

Key Concerns:

• Inconsistency between gross profit and cost of sales figures under IFRS classification
• Mismatch between reported tax expense and net income implying complex reconciling items
• Lack of OCF, FCF, and capex disclosure, limiting dividend coverage and cash quality assessment

Investment Implications

Key Takeaways:

• High-margin profile persists: gross margin 68.8%, operating margin ~57.4%
• ROE of 6.2% is margin-driven but constrained by low asset turnover (0.211x) and high reported taxes
• Balance sheet is strong with 62.3% equity ratio and a 0.47x liabilities-to-equity proxy
• Revenue and operating income declined 13.0% and 14.3% YoY, respectively, pointing to some operating deleverage
• Equity-method income is material (944.32 (100M JPY)), supporting PBT
• Total comprehensive income negative (-1,830.70 (100M JPY)), indicating OCI headwinds
• Dividend payout ratio at 36.9% suggests measured returns, but FCF coverage is unconfirmed

Metrics to Watch:

• Realized oil and LNG prices and sales volumes
• Operating cash flow and free cash flow once disclosed; OCF/Net Income ratio
• Capex trajectory and project milestones; cost discipline
• Effective tax rate normalization and drivers of tax expense
• Equity-method income sustainability and cash distributions
• OCI components (FX, hedging, valuation) impacting equity
• Net debt metrics and maturity profile once debt detail is disclosed

Relative Positioning: Within Japan-listed energy peers, INPEX exhibits a conservative capital structure with high equity ratio and strong operating margins, indicating robust underlying economics; however, earnings are sensitive to commodity cycles, tax effects, and OCI volatility, and returns on equity are moderated by asset intensity.

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