| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥117654.7B | ¥123224.9B | -4.5% |
| Operating Income / Operating Profit | ¥4666.3B | ¥1060.9B | +339.8% |
| Profit Before Tax | ¥4487.6B | ¥882.2B | +408.7% |
| Net Income | ¥3072.2B | ¥2869.2B | +7.1% |
| ROE | 8.2% | 8.3% | - |
The fiscal year ended March 2026 results show Revenue / Net Sales of ¥117,654.7B (¥5,567.8B decrease YoY, ▲4.5%), a decline in topline, while Operating Income improved materially to ¥4,666.3B (¥3,605.4B increase YoY, +339.8%). Profit Before Tax was ¥4,487.6B (¥360.4B increase YoY) and Profit Attributable to Owners of Parent was ¥2,587.3B (¥326.6B increase YoY, +14.4%), marking a clear earnings-uptrend. Operating margin improved from 0.86% in the prior year to 4.0% (+3.14pt), and gross margin rose from 8.95% to 10.4% (+1.45pt). Impairment losses narrowed substantially to ¥480.1B (prior year ¥2,045.2B). Equity-method investment income surged to ¥810.2B (prior year ¥9.6B), with the equity-method treatment of JX Metals lifting non-operating profitability. The removal of discontinued operations related to the JX Metals listing in the prior consolidated fiscal year means year-on-year comparisons better reflect continuing operations. Improvement in refining margins in the petroleum products business and the reduction of one-off expenses drove improvement in the earnings structure.
[Revenue] Revenue was ¥117,654.7B (▲4.5% YoY). The core Petroleum Products segment accounted for ¥103,417.9B (▲5.1% YoY), representing 87.9% of total sales; declines were mainly due to crude price movements and lower sales volumes. Oil & Gas Development recorded ¥2,167.4B (▲10.7%) pressured by lower commodity prices. Functional Materials declined slightly to ¥3,365.1B (▲2.3%). Conversely, Electricity expanded to ¥3,322.0B (+6.1%) and Renewable Energy grew to ¥468.6B (+8.1%), reflecting progress in energy portfolio diversification. Other category was ¥4,913.7B (+3.1%), where the contribution from JX Metals, now subject to the equity-method, altered the quality of the revenue mix.
[Profitability] Cost of sales was ¥105,420.5B, yielding Gross Profit of ¥12,234.2B and a Gross Margin of 10.4% (up +1.45pt from 8.95% prior year). SG&A was ¥872.35B (SG&A ratio 7.4%, up +0.44pt from 6.98%), increasing fixed cost burden; however, gross margin improvement outpaced this and Operating Income widened to ¥4,666.3B (Operating margin 4.0%). Equity-method investment income of ¥810.2B (prior year ¥9.6B) reached roughly 17% of Operating Income, and the equity-method treatment of JX Metals materially contributed to profitability. Other income included one-offs such as ¥764.4B gains on sale of subsidiary shares within Other Income of ¥1,449.5B. Other expenses reduced substantially to ¥1,104.1B from ¥2,328.3B prior year, and impairment losses declined to ¥480.1B from ¥2,045.2B, significantly lowering non-recurring burdens. Financial income was ¥207.8B and financial expenses ¥386.5B, netting a financial burden of ¥▲178.7B. Profit Before Tax was ¥4,487.6B; after income taxes of ¥1,415.3B (effective tax rate 31.5%), Net Income was ¥3,072.2B (+7.1%) and Profit Attributable to Owners of Parent was ¥2,587.3B (+14.4%), indicating a structural shift from revenue decline with profit increase to revenue decline with profit expansion. In conclusion, reduced revenue with increased profit was achieved via core margin improvement, shrinking one-off expenses, and expanded equity-method income working in concert.
The Petroleum Products segment posted Revenue of ¥103,417.9B (▲5.1%) and Operating Income of ¥2,923.6B (+676.6%), a substantial profit recovery with a margin of 2.8% (up +2.4pt from 0.4%). Improved refining margins and reduced impairments contributed, restoring profitability as a continuing operation. Oil & Gas Development revenue was ¥2,167.4B (▲10.7%) with Operating Income ¥508.3B (▲41.8%), margin 23.5% (prior 33.0%)—still high but weighed by lower resource prices. Functional Materials revenue was ¥3,365.1B (▲2.3%) and Operating Income ¥110.8B (▲37.3%), margin down to 3.3% (prior 5.1%) reflecting weak market conditions. Electricity revenue was ¥3,322.0B (+6.1%) with Operating Income ¥220.0B (+4.9%), margin 6.6% (prior 6.5%)—stable. Renewable Energy revenue was ¥468.6B (+8.1%) with Operating Loss ¥▲9.3B (improvement +94.5% from prior year ▲169.1B). Other category revenue was ¥4,913.7B (+3.1%) with Operating Income ¥927.6B (+84.0%), margin 18.9%; the equity-method recognition of JX Metals has made this a high-return and strategically important segment, contributing roughly 20% of group profit. Segment assets: Petroleum Products ¥5,938.08B, Oil & Gas Development ¥1,294.20B, Other ¥3,338.12B, with Other expanding due to inclusion of equity-method investments.
[Profitability] Operating margin improved to 4.0% from 0.86% prior (+3.14pt), driven by Gross Margin expansion to 10.4% (from 8.95%) and reduced one-offs. ROE improved to 8.0% (up +0.9pt from 7.1%), indicating improved return on equity; Profit Attributable to Owners of Parent of ¥2,587B versus average parent equity of approximately ¥3.24T. Net margin improved to 2.6% (prior 2.3%) but remains below the industry median of 5.2%, reflecting the low-margin nature of refining & marketing. [Cash Quality] Operating Cash Flow (OCF) was ¥6,199.8B, about 2.0x Net Income ¥3,072.2B, aided by non-cash additions including depreciation ¥3,291.9B and impairments ¥480.1B and inventory declines ¥378.3B. OCF/Sales was 5.3%. EBITDA was approximately ¥7,958B (Operating Income ¥4,666B + depreciation & amortization ¥3,292B), yielding an OCF-to-EBITDA ratio of 0.78x—cash conversion is healthy but has room to improve. [Investment Efficiency] Total asset turnover was 1.29x (Revenue ¥11,765.5B / average total assets ¥9.09T), mid-range for manufacturing, with stable asset efficiency. Capital expenditures were ¥2,403.0B, 0.73x depreciation, indicating conservative, maintenance-focused capex with selective growth investment. [Financial Soundness] Equity Ratio was 37.1% (up +1.8pt from 35.3%), around industry median. Current ratio 158.3% (current assets ¥4.29T / current liabilities ¥2.71T) indicates sound short-term liquidity. Interest-bearing debt (bonds & borrowings) totaled current ¥588,630B + non-current ¥1,602.86B = ¥2,1914.9B (note: figures presented as in source), with lease liabilities ¥424.24B and cash ¥877.30B held, resulting in net interest-bearing debt around ¥1,738.4B and an EBITDA multiple of 2.2x, within acceptable range. Interest coverage (Operating Income ¥4,666B / interest paid ¥378.5B) is approximately 12.3x, a comfortable level. Goodwill ¥742.0B is 2.0% of net assets—M&A risk limited.
Operating Cash Flow was ¥6,199.8B (+7.5% YoY), 1.38x Profit Before Tax ¥4,487.6B. Major items included non-cash additions: depreciation & amortization ¥3,291.9B and impairment losses ¥480.1B, adjustments for equity-method investment income ▲¥810.2B, and exclusion of gains on sale of subsidiary shares ▲¥764.4B. Working capital contributed via inventory decrease +¥378.3B, while accounts receivable increase ▲¥129.2B and accounts payable decrease ▲¥312.3B were headwinds, resulting in a small net positive. Corporate tax payments ¥946.2B and interest paid ¥378.5B were cash outflows; dividend receipts ¥299.9B provided inflows. Investing Cash Flow was ▲¥2,519.5B with capex ▲¥2,403.0B (including exploration & development ¥365.3B) as the main outflow; inflows included proceeds from sale of tangible fixed assets ¥165.2B, proceeds from sale of subsidiary shares ¥787.3B (partial divestitures including JX Metals), and sale of investment securities ¥444.4B. Net outflow widened from prior year +¥1,307.7B but remained at maintenance levels. Free Cash Flow (FCF) was ¥3,680.3B (OCF + Investing CF), ample to cover dividends ¥808.3B and capex, yielding an FCF coverage of about 4.5x. Financing Cash Flow was ▲¥3,610.3B, including long-term borrowings repayments ▲¥1,657.5B, bond redemptions ▲¥111.3B, lease liability repayments ▲¥909.8B, dividend payments ▲¥808.3B (parent), and acquisition of treasury stock of subsidiaries ▲¥281.6B (possibly related to JX Metals listing), partly offset by short-term borrowings increase ¥136.9B. Cash and cash equivalents rose by ¥307.4B from ¥846.56B at the beginning of the period to ¥877.30B at period end, including foreign exchange effects +¥155.9B. Overall, FCF generation is robust, working capital management improved, and there is ample headroom for investment and shareholder returns.
Of Operating Income ¥4,666.3B, recurring sources include refining & marketing margins and equity-method investment income (¥810.2B). Equity-method income is structurally recorded post-listing of the metals business but is highly market-sensitive and carries volatility risk. One-off factors included gains on sale of subsidiary shares ¥764.4B included in Other Income ¥1,449.5B, and a large reduction in impairment losses (¥480.1B vs prior year ¥2,045.2B, an improvement of ▲¥1,565.1B). Operating improvement was driven by both margin recovery and the removal of one-off charges. Non-operating recurring income includes dividend receipts ¥299.9B; outside of equity-method investments, other financial income ¥207.8B was limited. The difference between Profit Before Tax ¥4,487.6B and Net Income ¥3,072.2B was mainly income taxes ¥1,415.3B, with an effective tax rate of 31.5%—a reasonable level. Comprehensive income was ¥4,201.7B, exceeding Net Income ¥3,072.2B; Other Comprehensive Income ¥1,129.5B was driven by foreign currency translation adjustments of foreign operations ¥566.9B and remeasurements of defined benefit plans ¥224.8B, with FX contributing to capital accumulation. OCF remained about 2.0x Net Income after adding back non-cash items such as impairments and depreciation, and changes in receivables, inventory, and payables resulted in net cash outflow of only around ¥58.4B, indicating small accruals and high cash realization. Overall, operating profit improvement stems from core margin recovery, structural contribution from equity-method income, and the reduction of non-recurring expenses; excluding equity-method items, recurrence is high.
The FY2027 forecast calls for Revenue / Net Sales ¥128,500.0B (+9.2% YoY), Operating Income ¥6,100.0B (+30.7%), and Profit Attributable to Owners of Parent ¥4,150.0B (+60.4%), an optimistic plan. Revenue is assumed to increase on recovery in Petroleum Products volumes and price rises. Operating Income assumes sustained strong refining margins, stable contribution from equity-method investments (JX Metals etc.), and normalization of one-off expenses, implying an Operating Income increase of ¥1,433.7B. Forecast Operating margin is 4.7% (up +0.7pt from current 4.0%), assuming both top-line growth and margin improvement. The increase in Profit Attributable to Owners of Parent of ¥1,562.7B is mainly from operating gains and normalization of special items; forecast EPS 154.28 yen vs current 96.18 yen is a substantial rise. Based on current period performance, progress rates are 76.5% for Operating Income and 62.3% for Net Income, indicating underperformance relative to the forecast year-to-date but reflecting seasonality skewed to the second half and expected market improvements. Forecast dividend is 17 yen (year-end) maintaining annual dividend of 34 yen; payout ratio is expected to fall to 22.0% on forecast EPS 154.28 yen, leaving scope for further increases. Achieving guidance depends on sustained refining margins, stability of equity-method investees' earnings, and normalization of inventory valuation gains/losses; crude price and FX movements are key risk factors.
Annual dividend is ¥34 per share (interim ¥17, year-end ¥17) with total dividends of approximately ¥808.3B. Relative to Profit Attributable to Owners of Parent ¥2,587.3B, the dividend payout ratio is about 31.2% (prior 32.5%), a healthy level. Dividends are based on average shares outstanding during the period 2,689.96 million shares; using shares outstanding at period-end 2,706.77 million less treasury stock 16.87 million shares, payout ratio is about 35.6%—slightly higher but still sustainable. FCF of ¥3,680.3B comfortably covers dividends ¥808.3B, with FCF coverage about 4.5x. Cash balance ¥877.30B and OCF ¥6,199.8B support dividend sustainability. Share buybacks were minor in Financing CF at ▲¥4.0B; however, a large cancellation of treasury stock (¥248.13B) was implemented to reduce shares outstanding, simplify capital structure, and offset dilution to per-share value. Total shareholder return ratio is essentially at the dividend level given limited buybacks. For FY2027 the company plans to maintain an annual dividend of ¥34 (year-end 17 yen), and the payout ratio is expected to decline to 22.0% on forecast EPS 154.28 yen, expanding room for dividend increases. Dividend yield will depend on share price, but dividend sustainability and growth are supported by the financial base and earnings trend.
Crude Price & Refining Margin Volatility: Petroleum Products account for 87.9% of Revenue, and the spread between crude procurement cost and product selling prices (crack margin) drives profitability. Although Gross Margin improved to 10.4% this period, sudden crude price spikes or supply-demand tightening that compress product margins would directly hit Operating Income. Inventory valuation gains/losses also fluctuate quarterly, affecting OCF and working capital. Hedging mitigates some risk but market volatility cannot be fully avoided; close monitoring is required.
Market Dependence of Equity-Method Investees (JX Metals etc.): Equity-method investment income of ¥810.2B represents about 17% of Operating Income and links earnings directly to metals market conditions. Although JX Metals continues to contribute post-listing under the equity-method, copper and non-ferrous metal price and demand swings and FX exposure can cause large earnings volatility. FY2027 guidance assumes stable equity-method income; market deterioration presents downside risk.
Energy Transition & Regulatory Tightening: Accelerated decarbonization policies could structurally reduce fuel demand and hasten shift to renewables. Petroleum Products sales volumes face mid-to-long-term declining pressure; stricter fuel economy and emissions regulations could lower refining & marketing profitability. While power and renewable businesses are growth areas, current profitability is low (Electricity margin 6.6%, Renewable Energy loss), so speed of portfolio transition is key to maintaining earnings. Regulatory compliance costs and required capex could also increase.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 8.0% | 6.3% (3.2%–9.9%) | +1.7pt |
| Operating Margin | 4.0% | 7.8% (4.6%–12.3%) | -3.8pt |
| Net Margin | 2.6% | 5.2% (2.3%–8.2%) | -2.6pt |
ROE exceeds the industry median by +1.7pt indicating relatively good returns, but Operating and Net margins lag the median, reflecting the low-margin structure of refining & marketing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -4.5% | 3.7% (-0.4%–9.3%) | -8.2pt |
Revenue growth trails the industry median by ▲8.2pt, impacted by crude prices and lower sales volumes, underperforming overall manufacturing sector trends.
※Source: Company compilation
Large improvement in Operating Income and shift in earnings structure: Operating Income ¥4,666.3B (+339.8% YoY) was driven by Gross Margin improvement (+1.45pt), impairment reduction, and a rapid increase in equity-method income ¥810.2B. The Petroleum Products segment recovered to a 2.8% margin, and equity-method recognition of JX Metals diversified the profit portfolio with structured non-operating contributions. FY2027 guidance targets Operating Income +30.7%; if achieved, it would confirm a strengthened earnings base assuming sustained refining margins and stable equity-method contributions.
Recovery in FCF generation and expanded shareholder return capacity: FCF ¥3,680.3B covers dividends ¥808.3B roughly 4.5x; OCF ¥6,199.8B is about 2.0x Net Income indicating high quality, driven by inventory declines and improved working capital management. Capex is 0.73x depreciation—conservative—and financial soundness (Equity Ratio 37.1%, Interest Coverage 12.3x) is solid. Payout ratio 31.2% leaves headroom, and the forecast payout ratio of 22.0% expands scope for future increases. Cancellation of treasury stock ¥248.13B indicates intent to improve capital efficiency.
Balance between market dependence and structural transition risk: Petroleum Products account for 87.9% of Revenue and 62.6% of Operating Income, so sensitivity to crude and margin swings remains high. Expansion of equity-method income improves diversification but adds metals market exposure. Energy transition and regulatory tightening pose medium-to-long-term headwinds; Electricity and Renewables are part of the shift but scale and profitability need improvement (Renewables currently loss-making). Short-term earnings growth is expected from refining margin recovery and removal of one-offs, but long-term sustainable growth hinges on successful portfolio reallocation and capital allocation toward low-carbon businesses.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific securities. Industry benchmarks are compiled by the firm based on public financial statements and are provided for reference only. Investment decisions are your responsibility; consult professional advisors as needed before making investment decisions.