Announcement on Revised the 5th Medium Term Management Plan (FY2013-2017)
November 5, 2015
Cosmo Energy Holdings Co., Ltd.
Cosmo Energy Group formulated the 5th Medium Term Management Plan (FY2013-2017) and have been trying to reach the goal of the plan since then.
We conducted various additional actions like the transformation to Holding company structure, the action to fortify refinery competitiveness etc., in addition, our management environment like fluctuation of crude price and foreign exchange ranged much. We hereby announce that Cosmo Energy Group revised the 5th Term Management Plan in view of above mentioned circumstances.
1.Conditions and Main Additional Actions
（1）Revision of Preconditions
| Item | Year | Revised | Original |
|---|---|---|---|
| Dubai Crude | FY2016 | $60/BBL | $100/BBL |
| FY2017 | $70/BBL | ||
| Foreign Exchange | FY2016～17 | ¥120/$ | ¥90/$ |
（2）Main Additional Actions
Competitiveness Enhancement of Oil Refining & Sales Business
- Establishment of Keiyo Seisei JV G.K. with Tonen General which aims at 10 billion yen synergy merit in total
- Decision of business alliance with Showa Shell Group as for Yokkaichi Refinery to fortify competitiveness
- Establishment GYXIS to merge LP Gas Whole sale with other companies
IPIC Alliance Enhancement
- Enhancement of Alliance with CEPSA and study of new oil field concession acquisition
2.Revised Earning Plan
Consolidated Ordinary Income excluding impact of inventory valuation for FY2017 is expected to be 110.7 Billion Yen (-1.3 Billion Yen versus Original Plan).
The level of ordinary income for FY 2017 will be maintained regardless of reduction of E& P business profit due to improvement of oil refining business
Main Earning Items
| Item | FY 2017 Revised | FY 2017 Original | Increase/ decrease | |
|---|---|---|---|---|
| Operating income excluding impact of inventory valuation | 110.7 | 112.0 | -1.3 | |
| Petroleum Business | 57.0 | 18.0 | +39.0 | |
| (excluding impact of inventory valuation) | 37.0 | 18.0 | +19.0 | |
| Petrochemical Business | 5.0 | 10.0 | -5.0 | |
| (excluding impact of inventory valuation) | 5.0 | 10.0 | -5.0 | |
| Oil Exploration & Production Business | 61.0 | 77.5 | -16.5 | |
| Others | 7.7 | 6.5 | +1.2 | |
| Net Income excluding impact of inventory valuation * | 59.0 | 45.0 | +14.0 | |
| Net Income * | 75.0 | +30.0 | ||
* Net Income indicates "Net Income attributable to shareholder of parent company".
3.Factors of increase and decrease analysis for each segment(in contrast with original plan)
Factors of increase and decrease analysis for each segment
(in contrast with original plan)
■Petroleum Business
+19 Billion Yen
- Cost reduction along with crude price down and sales volume decline.
+6.2 Billion Yen
- Change of Refinery Turnaround Year
+6.0 Billion Yen
- Optimized Operation of Secondary Units along with Official Capacity Cut
+3.3 Billion Yen
- Synergy Merit before completion of pipelines of Chiba Refinery
+0.5 Billion Yen
- Margin, Quantity, and Others
+3.0 Billion Yen
■Petrochemical Business
- 5.0 Billion Yen
- Reduction of Market
-7.3 Billion Yen
- Rationalization/ Energy Saving
+2.3 Billion Yen
■Oil Exploration & Production Business
-16.5 Billion Yen
- Affection by Crude Price Reduction
-30.5 Billion Yen
- Affection by Foreign Exchange Market
+18.5 Billion Yen
- Operational Cost & Others
-4.5 Billion Yen
■Other Business
+1.2 Billion Yen
- Consolidation Adjustment & Others
+1.2 Billion Yen
4.Capital Investment(in contrast with original plan)
Strategic investment like building new pipeline at Chiba Refinery as additional actions for growth will be performed steadily regardless of increase of Yen base investment amount due to fluctuation of foreign exchange.
Amount of capital investment will be reduced after next Medium Term Management Plan as massive investment to Hail Oil Field Project will be decreased amid this Medium Term Management Plan.
（1）Amount of Capital Investment during this Medium Term Management Plan
(FY2013-2017) (in contrast with original plan)
| FY 2017 Revised* | FY 2017 Original | Increase/decrease |
|---|---|---|
| 360 Billion Yen | 280 Billion Yen | +80 Billion Yen |
*Excluding Subsidy
（2）Breakout of additional 80 Billion Yen compare to Original Plan
■Oil Exploration & Production Business
+60 Billion Yen
- Affection of foreign exchange by depreciation of JPY
■Main strategic investment etc.
+20 Billion Yen
- Construction of incremental pipelines at Chiba Refinery
- Construction for Building Refinery Resilience
5.Cash Balance
Cash Balance during FY 2013-2017 will be as follows.
| Cash-In(*) | 400 Billion Yen |
|
| Cash-Out(*) | 360 Billion Yen |
|
| Free Cash Flow | 40 Billion Yen |
|
*Excluding Subsidy
6.Improvement Financial Characteristic
Improvement of Debt Equity Ratio will be expected toward the final year of Medium Term Management Plan including Substantial Capital Reinforcement by hybrid finance which was performed in April 2015.
（1）Main Financial Index
| Item | FY2017 Revised | FY2017 Original | Increase/decrease
|
|---|---|---|---|
| Current Net Income *1 (Billion Yen) | 75 | 45 | 30
|
| Net Asset(Billion Yen) | 359.1 | 415.5 | -56.4
|
| Capital Adequacy Ratio(％) | 18.8 | 21.5 | -2.7 |
| Net Debt Equity Ratio(times) *2 (based on rating) | 1.9 | 1.6 | 0.3 |
| ROE(%) | 22.0 | 13.3 | 8.7 |
*1 Net Income indicates "Net Income attributable to shareholder of parent company".
*2 50% of original amount of Hybrid Load regarded as Equity is counted as Equity by the assessment of Japan Credit Agency, Ltd. (50% of 60 billion Yen Hybrid Loan started on 1st April 2015 is included into Equity )
（2）Comparison of Debt Equity Ratio including Hybrid Loan (Times)
| As of 31st Mar 2015 | As of 31st Mar 2016 (forecast) | As of 31st Mar 2017 (forecast) | As of 31st Mar 2018 (Revised Medium Term Management Plan) |
|---|---|---|---|
| 3.6 | 2.9 | 2.8 | 1.9 |