| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥26775.8B | ¥27999.5B | -4.4% |
| Operating Income / Operating Profit | ¥1447.9B | ¥1282.5B | +12.9% |
| Ordinary Income | ¥1492.5B | ¥1507.6B | -1.0% |
| Net Income / Net Profit | ¥822.4B | ¥589.3B | +39.6% |
| ROE | 11.2% | 8.3% | - |
FY2026 full year results: Revenue ¥26775.8B (YoY -¥1,223.7B -4.4%), Operating Income ¥1447.9B (YoY +¥165.4B +12.9%), Ordinary Income ¥1492.5B (YoY -¥15.1B -1.0%), Net Income attributable to owners of the parent ¥822.4B (YoY +¥233.1B +39.6%). Revenue declined due to lower crude oil prices and volume reductions, but substantial year-on-year operating profit growth was achieved through improved refining & marketing margins and SG&A discipline. Gross margin improved to 12.5% (prior year 10.9%) a +1.5pt improvement, and operating margin improved to 5.4% (prior year 4.6%) a +0.8pt improvement. Ordinary income slightly declined due to reduced non-operating foreign exchange gains (¥32.4B, prior year ¥162.1B), but strength at the operating level offset this. Despite recording business structure reform costs of ¥168.6B, which were flat versus the prior year charge of ¥168.6B, normalized corporate tax burden and an increase in non-controlling interests (¥82.2B, prior year ¥12.6B) drove a large net income increase of +39.6%.
[Revenue] Revenue was ¥26775.8B (YoY -4.4%), a decline. The primary drivers were lower crude/product prices and volume declines: Petroleum Business ¥23855.7B (-4.8%), Petrochemical Business ¥3327.7B (-2.2%), Petroleum Development Business ¥1303.5B (-3.2%) — all three core businesses decreased. Conversely, Renewable Energy Business expanded to ¥165.1B (+24.2%), reflecting progress in portfolio diversification. Segmental revenue composition: Petroleum 89.1%, Petrochemical 12.4%, Petroleum Development 4.9%, Renewables 0.6%, indicating high dependence on the Petroleum Business.
[Profitability] Operating Income was ¥1447.9B (+12.9%). Gross profit was ¥3360.2B (gross margin 12.5%, +1.5pt from 10.9%) supported by improved refining margins and optimized product mix. SG&A was ¥1912.3B (SG&A ratio 7.1%), up from ¥1785.7B prior year (+7.1%), but gross profit growth (¥+1,754B) more than offset this, improving operating margin to 5.4% (prior year 4.6%). Non-operating items saw foreign exchange gains shrink to ¥32.4B (prior year ¥162.1B), and decreases in interest income ¥49.2B (prior year ¥61.5B) and equity-method investment income ¥2.1B (prior year ¥31.3B); nevertheless, operating improvements limited the decline, and Ordinary Income was ¥1492.5B (-1.0%). Extraordinary items were net -¥37.1B (gain on sale of investment securities ¥66.4B, business structure reform costs ¥168.6B, etc.), with one-off costs at similar levels to the prior year. Corporate tax was ¥632.9B (effective tax rate 43.5%), down from ¥660.2B, resulting in after-tax Net Income of ¥822.4B (+39.6%). In summary, the company achieved lower revenue but higher profits.
The Petroleum Business is the core segment with Operating Income ¥762.6B (prior year ¥618.1B, +23.4%). Improved refining margins and sustained sales volumes contributed, with a segment margin of 3.2%. Petrochemical Business recorded a loss of -¥30.8B (prior year -¥50.4B), but the deficit narrowed; despite continued spread deterioration and soft demand, cost reductions are improving trends. Petroleum Development Business earned ¥652.7B (prior year ¥824.2B, -20.8%), maintaining high profitability despite lower income; declines were driven by lower crude prices and production, but segment margin remained very high at 50.1%. Renewable Energy Business doubled to ¥27.5B (prior year ¥12.6B, +118.3%) supported by expanded wind farm operations, with a high segment margin of 16.7%. Other was ¥50.1B (prior year ¥56.4B). After intersegment adjustments of -¥30.3B, consolidated Ordinary Income totaled ¥1492.5B.
[Profitability] Operating margin 5.4% (prior year 4.6%, +0.8pt), Net margin 3.1% (prior year 2.1%, +1.0pt), reflecting margin improvements and cost discipline. ROE 11.2% (prior year 9.7%, +1.5pt), driven by improved net margin, total asset turnover 1.22x (prior year 1.30x), and financial leverage 2.99x (prior year 3.05x). EBITDA ¥2,031.4B, EBITDA margin 7.6% (prior year 6.6%, +1.0pt). [Cash Quality] Operating Cash Flow / Net Income 2.60x (Operating Cash Flow ¥2,137.4B / Net Income ¥822.4B), Operating Cash Flow / EBITDA 1.05x, indicating strong cash conversion. Accrual ratio -17.5% ((Net Income ¥822.4B - Operating CF ¥2,137.4B) / Total Assets ¥21,965.6B) indicating cash-led earnings. [Investment Efficiency] Capital expenditure ¥832.5B is 1.43x depreciation ¥583.5B, indicating investment beyond replacement for growth/efficiency. Construction in progress ¥608.9B (6.7% of tangible fixed assets) increased +28.0% from prior year ¥475.9B, expanding the pipeline of future operational assets. [Financial Soundness] Equity Ratio 33.5% (prior year 32.8%, +0.7pt), interest-bearing debt ¥4,419.6B (short-term borrowings & CP ¥3,016.2B, long-term borrowings ¥1,905.0B, bonds ¥558.1B), Debt/EBITDA 2.18x, interest coverage 26.8x (EBITDA ¥2,031.4B / interest expense ¥75.6B) — debt tolerance is healthy. However, current ratio 108.6% and quick ratio 89.0% indicate tight short-term liquidity, short-term debt ratio 68.2% (current liabilities ¥9,948.9B / total liabilities ¥14,607.9B), cash / short-term debt ratio 0.55x (cash ¥1,659.0B / current liabilities ¥9,948.9B), requiring attention to refinancing risk.
Operating Cash Flow was ¥2,137.4B (prior year ¥1,371.2B, +55.9%), a significant increase. Operating cash flow subtotal (before working capital changes) was ¥2,546.8B, underpinned by depreciation ¥583.5B and robust pre-tax income ¥1,455.4B. Working capital changes contributed inflows via decrease in trade receivables (+¥259.3B) and inventory declines (+¥239.2B), with a slight increase in trade payables (-¥22.2B) resulting in net positive working capital contribution. After corporate tax payments of ¥447.0B, Operating Cash Flow totaled ¥2,137.4B. Investing Cash Flow was -¥847.0B (prior year -¥1,456.9B), including capital expenditure ¥832.5B and net acquisition/sale of investment securities +¥29.3B (acquisitions ¥31.0B, disposals ¥82.9B). Free Cash Flow was ¥1,290.4B (prior year -¥85.7B), a major improvement. Financing Cash Flow was -¥819.3B, reflecting long-term borrowings repayment ¥602.5B (issuance ¥195.0B, repayments ¥602.5B, net -¥407.5B), share buybacks ¥296.9B, and dividend payments ¥274.3B, partially offset by bond issuance ¥149.2B and CP increase ¥100.0B. Ending cash rose to ¥1,659.0B (prior year ¥1,269.3B, +30.7%), strengthening the liquidity buffer.
Against Ordinary Income ¥1492.5B, non-operating income totaled ¥137.1B (interest income ¥49.2B, foreign exchange gains ¥32.4B, other ¥55.5B), non-operating expenses totaled ¥92.5B (interest expense ¥54.1B, other ¥38.4B), yielding net non-operating +¥44.6B, a modest 3.0% of Ordinary Income. Foreign exchange gains fell from ¥162.1B to ¥32.4B, removing a temporary FX tailwind, but operating improvements compensated. Extraordinary items net -¥37.1B (4.5% of Net Income): gains on sale of investment securities ¥66.4B and gains on sale of fixed assets ¥12.1B offset by business structure reform costs ¥168.6B, impairment losses ¥5.7B, and losses on disposal of fixed assets ¥1.4B. The prior year also included business structure reform costs of ¥168.6B, indicating continued reform activity expected to raise underlying profit levels. Accrual ratio -17.5% corroborates cash-led earnings; Operating CF / Net Income 2.60x and Operating CF / EBITDA 1.05x indicate high earnings quality. Effective tax rate 43.5% exceeds industry average and compresses net margins.
FY2027 full year plan: Revenue ¥28700.0B (vs. this year +7.2%), Operating Income ¥1020.0B (vs. this year -29.6%), Ordinary Income ¥1150.0B (vs. this year -22.9%), Net Income ¥440.0B (approx. -46.5% vs. this year, EPS 277.10 yen) — a conservative forecast. Revenue growth assumptions reflect improved crude price and volume assumptions, but operating, ordinary and net profits are forecast to decline materially. Principal drivers: normalization of refining margins and reversal of temporary tailwinds, continued weak petrochemical profitability, and upstream profit declines. Full-year dividend planned at ¥75.00 (down substantially from this year’s effective ¥165 equivalent), with a payout ratio around 27%, set conservatively. Based on current progress (assuming ~50% progress against full-year plan at the half-year), the company views progress as steady but conservatively assumes margin deterioration and tax normalization in H2. The company discloses that actual results may differ from guidance due to market volatility.
This fiscal year dividend comprised Q2-end ¥150 and year-end ¥90, totaling ¥240, but due to a 2-for-1 stock split effective October 1, 2025, the effective annual dividend is ¥165 equivalent (post-split equivalent Q2-end ¥75 + year-end ¥90). Payout ratio is 49.1% (dividend-only basis, relative to split-adjusted EPS ¥453.06), returning roughly half of net income. Share buybacks totaled ¥296.9B, and total shareholder returns (dividends ¥274.3B + buybacks ¥296.9B) amounted to ¥571.2B, with a Total Return Ratio of 69.5%. Free Cash Flow ¥1,290.4B more than covers total returns, with FCF coverage 2.26x, indicating high sustainability. Cash and deposits ¥1,659.0B and Operating CF ¥2,137.4B provide ample liquidity, supporting continuation of dividends and buybacks. FY2027 dividend plan is ¥75.00 (reduced from this year’s effective ¥165), with a payout ratio of about 27% (based on planned EPS ¥277.10), reflecting a priority on conservative profit assumptions and balance sheet strengthening.
High dependence on Petroleum Business and market volatility: Petroleum Business accounts for 89.1% of revenues, so performance is closely linked to refining margins, crude prices and demand cycles. The full-year plan assumes Operating Income down -29.6%; if refining margins underperform assumptions or demand weakens materially, profits could fall below plan. Ongoing losses in Petrochemical Business (-¥30.8B) could persist; prolonged spread weakness would impair fixed cost absorption and exert downward pressure on consolidated profits.
Short-term liquidity and refinancing risk: Current ratio 108.6% and quick ratio 89.0% indicate tight short-term liquidity; short-term debt ratio 68.2% and cash/short-term debt 0.55x imply high refinancing sensitivity. If refinancing conditions worsen for CP/short-term borrowings totaling ¥3,016.2B (30.3% of current liabilities), funding costs could rise and liquidity tighten. Asset retirement obligations ¥331.5B (2.27% of liabilities) are near industry upper bounds and future cash outflows could affect long-term funding.
High tax burden and margin pressure: Effective tax rate 43.5% (corporate tax etc. ¥632.9B / pre-tax income ¥1,455.4B) exceeds industry average and compresses net margins. Changes in tax rules or reduction in tax incentives could further increase tax burden, impacting shareholder returns and investment capacity. Renewables sales expanded +24.2% but remain only 0.6% of total; unless decarbonization of the portfolio accelerates, carbon pricing and stricter environmental regulations could increase future costs.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.4% | 7.8% (4.6%–12.3%) | -2.3pt |
| Net Margin | 3.1% | 5.2% (2.3%–8.2%) | -2.1pt |
Both operating and net margins are below the manufacturing median, placing the company in the mid-to-lower range within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -4.4% | 3.7% (-0.4%–9.3%) | -8.1pt |
Revenue growth is negative and significantly lags the manufacturing median, placing the company in the bottom cohort within the industry.
※ Source: Company compilation
Margin improvement and strong Operating CF generation are central to the results. Despite Revenue down -4.4%, Operating Income +12.9% and Net Income +39.6% were achieved, with Operating CF ¥2,137.4B (+55.9% YoY) and Free CF ¥1,290.4B — exceptionally strong cash generation. Gross margin +1.5pt and operating margin +0.8pt reflect improved refining margins and cost discipline, supported by better Petroleum Business margins and high-margin upstream (Petroleum Development). However, Petrochemical losses and reduced FX gains increase profit volatility, and next year’s plan assumes a large Operating Income decline of -29.6%.
Monitor short-term liquidity and debt structure. Current ratio 108.6% and quick ratio 89.0% show tight short-term liquidity; short-term debt ratio 68.2% and cash/short-term debt 0.55x point to moderate refinancing risk. Of interest-bearing debt ¥4,419.6B, CP/short-term borrowings account for ¥3,016.2B, leaving the company exposed to funding cost increases in adverse markets. Long-term borrowings were reduced by ¥744.4B (-28.1%), progressing deleveraging, but reliance on short-term funding remains high. Asset retirement obligations ¥331.5B also pose a potential long-term cash outflow.
Progress on decarbonization portfolio shift and smoothing of dividend policy. Renewable sales grew +24.2% and construction in progress +28.0% suggests future capacity expansion. Petroleum dependence remains high at 89.1%, but high margins in Renewables (16.7%) and upstream (50.1%) create a high-margin portfolio. Dividend is planned to be reduced from this year’s effective ¥165 to ¥75 next year, with a conservative payout ratio ~27% against planned Net Income ¥440B, prioritizing conservative profit assumptions and balance sheet strengthening. Total returns including ¥296.9B buybacks are covered by FCF, indicating a maintained return stance.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.