Supporting Material for 1Q Results 2018

Transcription

1 1 Supporting Material for Results From Jan/218 to Mar/218-9 th May 218 Showa Shell Sekiyu K.K

2 Notes 2 This document contains forward-looking statements concerning the results of operations and businesses of Showa Shell Sekiyu K.K.. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements.

3 Jan-Mar 218 Overview 3 Oil Business operating income (Excl. Inventory Valuation*) Jan-Mar Jan-Mar 218 Billion Yen Energy Solutions Business operating income Others operating income.2.2 Operating income (Excl. Inventory Valuation*) Ordinary income Ordinary income (Excl. Inventory Valuation*) Net income attributable to owners of the parent Net income attributable to owners of the parent (Excl. Inventory Valuation*) Net income attributable to owners of the parent per share, yen per share * Including the effect of Lower of cost or market value method for Oil Financial Result Highlights Ordinary income excluding adjustments for inventory valuation was 26.5 billion yen, an increase over the same period last fiscal year. Inventory valuation provided a positive impact of 6.1 billion yen. Oil Business operating income, excluding the impact of inventory valuation, was 27.9 billion. The operating loss in the Energy Solution Business was smaller than the loss recorded in the same period last fiscal year. Highlights (Oil) Domestic fuel margins continued to remain strong. The margin on kerosene, in particular, was boosted by strong demand that resulted from colder weather. Domestic sales volume for the four main fuels, such as gasoline and diesel oil, was slightly less than last fiscal year, when the impact of supply to the other refineries under the business partnerships in the Yokkaichi area is excluded. Utilization of group refineries exceeded both the previous year and the industry average. Highlights (Energy Solutions) (Solar Business) Progress was made on reducing costs, but sales volume declined due to the slippage of some shipments. The magnitude of the red ink improved slightly from the same period last year. (Power Business) Group power plants continued to operate stably and efficiently, generating consistent profit. Sales in both the highvoltage and low-voltage markets expanded steadily.

4 Business Environment Crude Oil and Foreign Exchange 4 USD/bbl Dubai crude oil Exchange rate (USD) Crude oil CIF Japan (JCC) Yen/USD Yen/L Q 3Q 4Q Q 3Q 4Q Q 3Q 4Q Source: Trade Statistics of Japan

5 Margin Environment Oil Business (Jan-Mar) 5 Japanese refining margins Asia Far East petrochemicals margins 2 /L 7 USD/ton Q 3Q 4Q 218 2Q 3Q 4Q 218 Gasoline Diesel oil Kerosene Mixed Xylene Propylene Benzene Domestic spot prices minus crude oil CIF Spot prices minus Dubai spot price The margins on domestic fuels in the January through March period improved over the same period last year for all three fuel types. Despite a slight year on year decline in gasoline, which was due in part to it being the off-season for demand, middle distillates produced strong results and demand for kerosene was particularly strong. The margins on petrochemicals were roughly on par with the same period last year. The margin on mixed xylene, a key product of the company, was supported by market prices for para xylene with the strong demand. The margins on propylene and benzene were also steady.

6 Highlights of Financial Results (Jan-Mar) 6 Crude oil price & exchange rate Highlights of financial results (million yen) 218 Jan-Mar Jan-Mar 218 Jan-Mar Jan-Mar Changes Dubai crude oil price (USD/bbl) Exchange Rate ( /USD) Changes vs. Sales 53,116 61, , % Operating income 22,643 31, , % Non-Operating income 1, % Ordinary income 24,159 32, , % Inventory valuation* 8,466 6,17-2, % Excl. Inventory Valuation* 15,692 26, , % Extraordinary income -1,67 2,62 + 3,13 - Net income attributable to owners of the parent 14,94 23, , % Excl. Inventory Valuation* 8,24 19,16 + 1, % * Including the effect of Lower of cost or market value method for Oil

7 Information by Business Segment (Jan-Mar) 7 Sales (million yen) Operating income (million yen) 218 Jan-Mar Jan-Mar 218 Jan-Mar Jan-Mar Changes vs. Oil Business 478, , , % Energy Solutions Business 22,296 21,266-1,29-4.6% Others 1,947 1, % Total sales 53,116 61, , % Changes vs. Oil Business 25,447 34,81 + 8, % Inventory valuation 8,466 6,17-2, % Excl. Inventory Valuation 16,981 27, , % Energy Solutions Business -3,89-2, Others % Adjustment Total Operating Income 22,643 31, , % Excl. Inventory Valuation 14,176 25, , % Oil Business: Manufacturing and sales of oil products, such as gasoline, naphtha, kerosene, diesel oil, fuel oil, lubricants, LPG, bitumen, and chemicals Energy Solutions Business: Manufacturing and sales of solar modules and electricity Others: Leasing and administration of properties, construction works, sale and lease of auto accessories, etc.

8 Earnings Performance (Jan-Mar) 8 Oil Business Energy Solutions Business Billion yen 4 Quarterly operating income Billion yen 6 Quarterly operating income Q 3Q 4Q Q 3Q 4Q 218 Operating Income(Excl. Inventory valuation) Operating Income Operating income during excluding the impact of inventory valuation, was 27.9 billion yen, securing operating income exceeding the 2-billion-yen-level for the Oil Business for the second consecutive quarter. Supply capacity for the industry as a whole is at an appropriate level, and this combined with the firm demand for kerosene due to the cooler weather, boosted margins. Although crude oil prices have fallen from the level at the beginning of the year, they have risen compared to the same period last year, and a gain on inventory valuation was recognized during. The operating loss for the Energy Solutions Business for was larger than in the fourth quarter of last year, but this marked an improvement over the same period last year. Despite progress on reducing costs in the Solar Business, sales volume declined due to slippage of shipments for some projects and only minor improvement in the magnitude of the loss over last year was seen. In the Power Business, Group power plants continued to operate stably and efficiently. We also expanded our sales steadily and these two factors generated a healthy, stable profit.

9 Ordinary Income vs (Unit: Billion Yen) Ordinary income +8.5 Inventory valuation* 24.1 Inventory valuation* *Excl. Inventory valuation Ordinary Income Oil Excl. Products Inventory Valuation Nonope. Petrochemicals Refinery cost and M&A Solar Business Subsidiaries Power Business Others etc. Excl. Inventory Valuation Ordinary Income Oil Business Energy Solutions Business 218 * Including the effect of Lower of cost or market value method for Oil

10 Oil Business Operational Performance (Jan-Mar) 1 1 % Refinery utilization % 12 Domestic sales volume growth YonY (4 products total*) Q 216 3Q 216 4Q 216 2Q 3Q 4Q Q 216 3Q 216 4Q 216 2Q 3Q 4Q 218 Showa Shell Group refinery utilisation including planned SDM impact Japanese industry refinery utilisation including planned SDM impact Showa Shell Group refinery utilisation excluding planned SDM impact Showa Shell Industry * 4 products: Gasoline, Kerosene, Gas oil, A-type fuel oil Source of Industry: Petroleum Association of Japan Source of Industry: Statistics by METI Industry in 218 is based on flash report. Refinery utilization remained stable for the Group as a whole during, exceeding both the previous year and the industry average. Total domestic sales volume for the four main fuels that are relatively higher value-added, such as gasoline, kerosene, and diesel oil, was slightly less than last fiscal year, when the impact from business partnerships in the Yokkaichi area is excluded. Export volume increased over the first quarter of last fiscal year, during which regular maintenance was scheduled during the second quarter. We are continuing efforts to maximize production of chemical products and the Yokkaichi Refinery is operating Toluene Disproportionation Process (TDP) facilities at a high level.

11 Crude Oil Refined and Sales Volume (Jan-Mar) 11 Crude oil refined & utilization rate 218 Jan-Mar Jan-Mar Changes Crude oil refined (thousand KL) 5,989 6, Refinery utilization rate 94.1% 97.% + 2.9% Sales volume by products (Thousand KL) 218 Jan-Mar Jan-Mar vs. [Note] The numbers of crude oil refined and utilization rate based on the Keihin(Toa Sekiyu), Yokkaichi, and Yamaguchi(Seibu Sekiyu) Refineries Gasoline 1,968 2, % Jet Fuel % Kerosines 1,159 1, % Diesel Oil 1,312 1, % Fuel Oil A % Fuel Oil C % Chemicals*(thousand MT) % Others % Total Domestic sales 6,637 7, % Export % Grand Total 7,24 7, % *Chemicals: Mixed Xylene, Benzene, Propylene

12 Solar Business Operational Performance (Jan-Mar) 12 MW 3 Quarterly panel shipment volume MW 1, Panel allocation by region/usage Q 3Q 4Q Japan Overseas for BOT Panel shipment volume for decreased on a year on year basis and compared to last quarter. Despite our continuous effort in focusing on the domestic market, our sales volume declined slightly in the domestic market due to the slippage of some projects. We also began selling SmaCIS (S-type) higher-output solar modules that apply the SmaCIS concept in January 218. Orders for the strategic product for the domestic residential market are steady, and we intend to put even greater effort into initiatives aimed at expanding our share of the residential market. We finished consolidating production from the Tohoku and Miyazaki Plants at the Kunitomi Plant as a part of the restructuring of the production aimed at improving cost competitiveness. We will strive to generate benefits from further cost reductions through multifunctionality and plant consolidation. Despite the progress made in reducing costs, including production costs, the unit sales price has continued to fall. In addition to this, the slippage of shipments resulted in a slight profit improvement only.

13 Forecast of Fiscal Year Results for 218 (Jan/218 Mar/219) 13 There has been no change in the financial forecast announced on February 14 for the period from January to December 218. A financial forecast for the period from January 219 to March 219 was added. million yen *Forecast for Others and adjustment is included in the Oil Business. A B C (Results) (Results) (Forecast) Jan -Dec Jan -Mar 218 Jan 218-Mar 219 Net sales 2,45,936 2,647,741 2,6, - 47,741 Operating income 78,477 11,344 98, - 12,344 Inventory valuation 24,473 3,644 9, - 21,644 Excl.Inventory valuation 54,4 79,7 89, + 9,299 - Oil Business 6,339 88,25 83, - 5,25 - Energy Solutions Business -7,824-1,273 6, + 16,273 - Others and adjustment* 1,489 1, ,723 Ordinary income 92, ,76 98, - 27,76 Excl.Inventory valuation 68,5 95,62 89, - 6,62 Net income attributable to owners of the parent 42,751 66,178 66, A change in the accounting period (fiscal year-end) was approved at the 16th Annual General Meeting of Shareholders. The fiscal year-end for the company is therefore changing from December 31 to March 31 from fiscal year ending March 31, 219. Fiscal year ending March 31, 219 will consequently be 15 months long, from January 1, 218 to March 31, 219. C-B

14 Base Assumptions and Sensitivity Analysis 14 Base Assumptions (Full Year Averages) and Inventory Valuation Sensitivity in the Financial Forecast (for April 218 to March 219) (Results) (Forcast) Impact to inventory Unit Jan -Dec Jan 218-Mar 219 valuation (billion yen) Dubai crude oil price (USD/bbl) USD/bbl 1.1 Exchange rate (Yen/USD) Yen/USD.7 -Oil Business- * The impact would change based on the timing of the crude oil price fluctuation and the inventory volume. * Sensitivity for Lower of Costs or Markets not included. We expect steady domestic demand to keep sales volume level with the same period last year. Although we expect margins to remain steady, the positive time lag that was beneficial in fiscal year ended December 31, to disappear based on the assumption of an oil price of USD6 per barrel through fiscal year ending March 31, 219. While we have regular maintenance planned at some of our refineries, we do expect the impact on operations to be minor compared to. We therefore project an increase in product exports and in chemicals sales volume. -Energy Solutions Business- (Solar) We will continue to focus on sales in the domestic market. We expect to achieve growth in profit by improving structural cost competitiveness through such means as consolidating plants. (Power) We expect improvement in profitability over last year. This will be achieved by working to expand sales volume while maintaining stable power plant operation and continuing to optimize the sales portfolio.

15 Data Book 15

16 Breakdown on Forecast of Fiscal Year Results for 218 (Jan/218 Mar/219) 16 A B C D million yen (Results) (Results) (Forcast) (Forcast) C-A D-B Jan -Dec Jan 218-Mar 218 Jan 218-Dec 218 Jan 219-Mar 219 Net sales 2,45,936 61,84 2,1, 5, + 54,63-11,84 Operating income 78,477 31,866 77, 21, - 1,477-1,866 Inventory valuation 24,473 6,17 9, - 15,473-6,17 Excl.Inventory valuation 54,4 25,696 68, 21, + 13,995-4,696 - Oil Business 6,339 27,911 64, 19, + 3,66-8,911 - Energy Solutions Business -7,824-2,448 4, 2, + 11, ,448 - Others and adjustment* 1, , Ordinary income 92,973 32,733 77, 21, - 15,973-11,733 Excl.Inventory valuation 68,5 26,562 68, 21, - 5-5,562 Net income attributable to owners of the parent 42,751 23,426 51, 15, + 8,248-8,426 *Forecast for Others and adjustment is included in the Oil Business.

17 Quarterly Trend of Ordinary Income 17 Billion yen Ordinary Income -8.8 Ordinary Income(Excl.Inventory valuation) 2Q 3Q 4Q 2Q 3Q 4Q

18 Quarterly Trend of Operating Income by Business Segment 18 Billion yen 3 25 Oil Business operating income(excl.inventory valuation) Energy Solutions Business operating income Q 3Q 4Q 2Q 3Q 4Q

19 Crude Oil Price (Platt s Dubai) 19 (USD/bbl) Average 64. USD/bbl Average 41.4 USD/bbl Average 53.1 USD/bbl

20 Exchange Rates (JPY/USD TTM) 2 13 (JPY/USD) 218 Average 18.2 JPY/USD Average 18.8 JPY/USD Average JPY/USD

21 Domestic Market (1) : Regular Gasoline 21 Crude & Product price /L Spread /L Regular Gasoline (Domestic Spot Price) 3 Crude CIF Spread (Domestic spot price-cif) CIF of April, 218 is provisional. 5

22 Domestic Market (2) : Diesel Oil 22 Crude & Product price /L Spread /L Diesel Oil (Domestic Spot Price) Crude CIF Spread (Domestic spot price-cif) CIF of April, 218 is provisional. 5

23 Domestic Market (3) : Kerosene 23 Crude & Product price /L Spread /L Kerosene (Domestic Spot Price) 3 Crude CIF Spread (Domestic spot price-cif) CIF of April, 218 is provisional. 5

24 Global Market (1) : Gasoline Unleaded 24 $/bbl Gasoline Unleaded (92RON Asian Spot Price) Spread $/ bbl Platts Dubai Spread (Spot price Dubai)

25 Global Market (2) : Diesel Oil 25 $/bbl Spread $/ bbl 4 8 Diesel Oil (Asian Spot Price) 3 6 Platts Dubai Spread (Spot price Dubai)

26 Global Market (3) : Mixed Xylene 26 $/MT 1, Spread $/ MT 1,5 9 Mixed Xylene (Asian Spot Price) 1, 6 Platts Dubai Spread (Spot price Dubai)

27 Topics Alliance with Idemitsu Kosan 27 Section Activities Optimization of crude oil purchase (crude oil exchange) Purchase of crude oil / Shipping Optimization of crude oil tanker allocation (mutual lending of cargo space and reduction in demurrage charges) Lending of reserve stocks Mutual lending of bunkers Procurement Supply / Demand Joint procurement (Joint procurement at refineries, etc) Exchange of finished products (mutual lending during regular maintenance at refineries) Exchange of semi-products and residue for optimal production (improvement in refinery utilization) Initiation of test run of the system for the optimization of production planning Distribution Sales Overseas The harmonization of organizations / The integration of employees Efficiency improvement in logistics network (mutual use of depots, reduction in transfer mileage) Reduction in the number of the aviation fuel supply lorries Conclusion of a partnership agreement on trading oil products Workshops for employees at each level (for a cumulative total of 1,8 employees) Partial integration of offices (crude oil and product supply, procurement, and HSSE divisions)

28 Topics ESG (Initiatives for Sustainability: SDGs) 28 (Completion) (Plan) 1. Cross-organizational team set up for SDGs (25 participants from each division) 2. Confirmation of relationship between corporate business activities and SDGs. Confirm the relationship of the corporate business activities in each division with social issues by cross-referencing them with the 17 SDGs (and assigning ratings of positive/negative, strong/weak, etc.). 3. Multidimensional review. The team members on the cross-organizational SDG team will verify the relationship between our corporate business activities and social issues from various perspectives. 4. Specify the content of initiatives to strengthen current systems and add new ones. 5. Assign a numerical order of priority to company initiatives (specify key areas). 6. Strengthen initiatives in each division and implement countermeasures.

29 Showa Shell Sekiyu is a Shell licensee and uses Shell trade marks under licence. The views expressed in this release or statement are made by Showa Shell Sekiyu, and are not made on behalf of, nor do they necessarily reflect the views of, any company of the Shell Group of Companies. 29