Supporting Material for the FY2017 Results. 14 th February 2018 Showa Shell Sekiyu K.K

Transcription

1 1 Supporting Material for the FY Results 14 th February 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-Sep Overview 3 Jan-Dec 216 Jan-Dec Billion Yen Oil Business operating income (CCS*) Energy Solutions Business operating income CCS* operating income Ordinary income CCS* ordinary income Net income attributable to owners of the parent CCS* net income attributable to owners of the parent Net income attributable to owners of the parent per share, yen per share Cash from operating activities Dividend per share (yen/share) (Note) Others and adjustment are included in the Oil Business. * CCS: Current Cost of Supply ** Kodokaho: a law to enhance 1)non-fossil fuel use and 2)effective utilization of fossil fuel by energy suppliers. Financial Result Highlights CCS (current cost of supply) ordinary income was 68.5 billion yen, recording much higher y-o-y. Inventory valuation had a positive impact of 24.4 billion yen. The Oil Business secured operating income on a current cost of supply basis of 61.8 billion yen. The operating loss in the Energy Solutions Business contracted y-o-y. Operating cash flow was 47.3 billion yen. Although it was at a healthy level, it shrank y-o-y due to the increase of working capital caused by crude price rise. Based on the mid-term forecast of the cash balance, we raised our annual dividend 2 yen/share to 4 yen/share for. Highlights (Oil) Domestic fuel margins improved mainly due to the completion in response to the 2nd Kodokaho, among other factors. Full-year domestic sales volume for four main fuels, such as gasoline and diesel oil, was on par y-o-y when excluding the impact of supply to the other refiner along with the business partnerships in the Yokkaichi area. Exports of products were down y-o-y due to the regular maintenance at our mainstay Yokkaichi Refinery. Highlights (Energy Solutions) (Solar Business) The focus was on domestic sales. Shipment volume including overseas sales was less than in the previous year, but domestic shipment volume grew. The loss shrank y-o-y. (Power Business) Group power plants continued to operate stably and efficiently, generating stable profit. Both high-voltage and lowvoltage sales grew 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 2Q 3Q Q 2Q 3Q Q 2Q 3Q Source: Trade Statistics of Japan

5 Margin Environment Oil Business (Oct-Dec) 5 2 /L Japanese refining margins 6 Asia Far East petrochemicals margins USD/ton Q 2Q 3Q 216 1Q 2Q 3Q Gasoline Diesel oil Kerosene Mixed Xylene Propylene Benzene Domestic spot prices minus crude oil CIF Spot prices minus Dubai spot price October-December domestic fuel margins improved over both the previous year and the previous quarter. Due to the completion in response to the 2nd Kodokaho, margins has been particularly steady since July onward. Additionally, thanks to gradually increasing crude oil prices, we benefited from a positive time lag in which wholesale product prices rose before cost of sales did. Petrochemical margins fell for mixed xylene, our mainstay product. Propylene and benzene margins were relatively strong thanks to firm demand.

6 Highlights of Financial Results (Jan-Dec) 6 Crude oil price & exchange rate Highlights of financial results (million yen) 216 Jan-Dec Jan-Dec 216 Jan-Dec Jan-Dec Changes Dubai crude oil price (USD/bbl) Exchange Rate ( /USD) Changes vs. 216 Sales 1,726,75 2,45, , % Operating income 46,41 78, , % Non-Operating income 1,429 14, , % Ordinary income 47,84 92, , % Inventory valuation 11,223 24, , % CCS ordinary income 36,617 68,5 + 31, % Extraordinary income -7,176-23,655-16,478 - Net income attributable to owners of the parent 16,919 42, , % CCS net income attributable to owners of the parent 9,46 25, , % Notes CCS ordinary income(ordinary income on Current Cost of Supply basis): Ordinary income based on costs excluding inventory valuation effects.

7 Information by Business Segment (Jan-Dec) 7 Sales (million yen) Operating income (million yen) 216 Jan-Dec Jan-Dec 216 Jan-Dec Jan-Dec Changes vs. 216 Oil Business 1,595,529 1,921, , % Energy Solutions Business 121,3 114,554-6, % Others 9,245 1, % Total sales 1,726,75 2,45, , % Changes vs. 216 Oil Business 53,842 84, , % Inventory valuation 11,223 24, , % Oil Business CCS OP 42,619 6, , % Energy Solutions Business -9,173-7, ,349 - Others 1,746 1, % Adjustment Total Operating Income 46,41 78, , % Total CCS operating income 35,187 54,4 + 18, % 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 (Oct-Dec) 8 Oil Business Energy Solutions Business Billion yen 4 Quarterly operating income Billion yen 6 Quarterly operating income Q 2Q 3Q Q 2Q 3Q CCS Oil Operating Income Oil Operating Income Q4 CCS operating income was 21.9 billion yen and the Oil Business secured a high level of quarterly income. For the full year, CCS operating income was in line with expectations. The completion in response to the 2nd Kodokaho, among other factors, normalized the supply capacity for the industry as a whole, and resulted in stable refining margins of domestic oil products, particularly from Q3 onward. Because crude oil prices rose gradually, we booked income from inventory valuation in Q4. While Q4 Energy Solutions Business operating income was negative, business income including income from booked non-operating BOT sales regained profitability. In the Solar Business, the price of panels continued to decline, but we increased our focus on domestic sales in line with the new business strategy. The resulting fullyear loss in operating income was lower y-o-y. In the Power Business, Group power plants continued to operate stably and efficiently. We also expanded our sales steadily, that generated healthy and stable profit.

9 Ordinary Income FY 216 vs FY 9 (Unit: Billion Yen) Ordinary income **Stock Effect etc. **Stock Effect etc CCS Ordinary income Ordinary Income Oil *CCS Products Ordinary Income Nonope. Refinery Solar cost and Business Petrochemicals M&A Subsidiaries Power Business Others etc. *CCS Ordinary Income Ordinary Income FY 216 FY * CCS: Current Cost of Supply ** Including the effect of Lower of cost or market value method for Oil

10 1 % Oil Business Operational Performance (Oct-Dec) Refinery utilization % 12 Domestic sales volume growth YonY (4 products total*) Q 215 2Q 215 3Q Q 216 2Q 216 3Q Q 2Q 3Q 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 Source of Industry: Petroleum Association of Japan 1Q 215 2Q 215 3Q Q 216 Showa Shell 2Q 216 3Q Industry 1Q 2Q * 4 products: Gasoline, Kerosene, Gas oil, A-type fuel oil Source of Industry: Statistics by METI Industry in is based on flash report. Refinery utilization for Q4 was characterized by generally steady operations for the group as a whole, and despite problems at some refineries, the utilization rate continued to be above the industry average. When excluding the impact of the products supply to Cosmo Oil in the Yokkaichi area beginning in March, sales volume for four main fuels (gasoline, kerosene and gas oil, etc.) was roughly even y-o-y and on par with the industry average. Full-year sales volume was meanwhile on par y-o-y, while the growth rate was equal to the industry average. Export volume was also lower y-o-y due to the impact of product supply to Cosmo Oil in Yokkaichi area, as well as the regular major maintenance at the Yokkaichi Refinery. 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. 3Q

11 Crude Oil Refined and Sales Volume (Jan-Sep) 11 Crude oil refined & utilization rate 216 Jan-Dec Jan-Dec Changes Crude oil refined (thousand KL) 22,51 22, Refinery utilization rate 85.2% 87.6% + 2.4% Sales volume by products (Thousand KL) 216 Jan-Dec Jan-Dec vs. 216 [Note] The numbers of crude oil refined and utilization rate based on the Keihin(Toa Sekiyu), Yokkaichi, and Yamaguchi(Seibu Sekiyu) Refineries Gasoline 8,678 8, % Jet Fuel 1,919 2, % Kerosines 2,67 2, % Diesel Oil 5,337 5, % Fuel Oil A 2,8 2, % Fuel Oil C 1,168 1, % Chemicals*(thousand MT) 1,73 1,31-4.% Others 2,2 2, % Total Domestic sales 25,54 26, % Export 1,487 1,1-32.7% Grand Total 26,54 27, % *Chemicals: Mixed Xylene, Benzene, Propylene

12 Solar Business Operational Performance (Oct-Dec) 12 MW 4 Quarterly panel shipment volume MW 1, Panel allocation by region/usage Q 2Q 3Q Japan Overseas for BOT Panel shipment volume for Q4 saw y-o-y increase on a quarterly basis as well as on an annual basis. While our focus remains on domestic sales, we are actively engaged in profitable overseas shipping, primarily to the U.S. Full-year shipment volume was slightly down y-o-y as a result of controls on overseas sales, but domestic shipment volume itself was higher. BOT deals sold approximately 18 MW in Japan and abroad for the year, in line with our plan. As part of our restructuring of production designed to improve cost competitiveness, we suspended production at the Tohoku Plant at the end of September. We also halted production at the Miyazaki Plant at the end of December to consolidate production at the Kunitomi Plant. 6.1 billion yen of the assets of Solar Frontier, our 1% subsidiary, in Kunitomi Plant and Miyazaki Plant was impaired at the end of. We began the sales of the SFK Series, a new and high-power product of our CIS thin-film solar module, in January 218. The SFK series is also characterized with the SmaCIS concept, increasing installation volumes, reducing costs through simple construction method, and beautiful exteriors. Furthermore, in November we achieved energy conversion efficiency of 22.9%, the highest in the world for any thin-film solar cells, as we continued our efforts to raise output.

13 Cash Allocation and Shareholders Returns 13 Billion yen Cash flow gain/out Cash flow from operating activities Cash flow from investing activities Dividend payout Operating cash performance Dividend pay-out Investment 2 1 Balance sheet (%) Gearing ratio Operating cash flow for January-December was 47.3 billion yen. Although an increase in accounts payable accompanying the rise in crude oil prices had a negative effect on the Oil Business' cash flow, combined operating cash flow for the Oil Business and the Energy Solutions Business was a positive contribution. We also sustained positive free cash flow Finances achieved a certain level of health, as net interestbearing debt dropped to 67 billion yen and our gearing ratio was about 21%. *Gearing ratio: Net interest-bearing debt / (Total shareholders' equity + net interest-bearing debt)

14 The Change of the Business Year 14 Showa Shell Sekiyu K.K. hereby announces that, subject to shareholder approval of a partial amendment to the Articles of Incorporation at the 16th Annual General Meeting of Shareholders to be held on 28/Mar/218, it resolved to change its accounting period (closing date) at the meeting of the Board of Directors held on 14/Feb/218. Reason for the change of the business year We propose to change the business year of the Company to commence on 1/Apr of each year and end on 31/Mar of the following year in order (i) to enhance dialogues with stakeholders by making it easier to compare the Company with other competitors, (ii) to promptly deal with the change of accounting standards and tax regulations, and (iii) to streamline the business operation and sustainably enhance the Company s corporate value by matching the business year with Idemitsu Kosan Co., Ltd., with whom we are working towards business collaboration as Brighter Energy Alliance. Details of the change in the accounting period Current closing date: 31/December every year New closing date: 31/March every year The 17th term, which is the elapsed period of the business year change, is the period from 1/Jan/218 to 31/Mar/219. It is scheduled to be settled for fifteen months. As we change the business year, record dates of interim dividends and dividends will be changed to 3/Sep every year and 31/Mar every year respectively. (This change of record dates will be validated at the end of our 17 th business year. Therefore, the record date of interim dividends of our 17 th business year will be 3/Jun/218.) In this earnings call material, we announce our financial forecast from Jan/218 to Dec/218. We will announce the forecast of 15 months from Jan/218 to Mar/219 when we re ready to announce it. Meanwhile we announce our annual dividend forecast from 1/Jan/218 to 31/Mar/219 in this material.

15 Shareholders Returns 15 Unit: Yen (Forecast*) Full-year dividend per share Interim dividend per share (billion yen) *An annual dividend forecast for 218 is applied to 15 months from 1/Jan/218 to 31/Mar/219 as written in the p.14 of this material. Forecast of operating cash flow/allocation under the Mid-Term Business Strategy (-221 ) New Business Energy Solutions Oil Cash In Additional Dividend Strategic investment for the future growth Stable dividend Cash Out We have achieved a certain level of financial health. Based on the projected mid-term cash balance, we increase an annual dividend 2yen to 4 yen/share in fiscal. In addition, we expect to generate strong operating cash flow, with annual dividends per share of 52.5 yen in fiscal 218. Based on our newly formulated medium-term business strategy, we will continue to actively consider strategic investments oriented toward future growth.

16 Forecast of Full Year Results for 218 (1) million yen vs. Results Forecast Net sales 2,45,936 2,1, + 54,64 Operating income 78,477 77, - 1,477 Inventory valuation 24,473 9, - 15,473 CCS operating income 54,4 68, + 13,996 - Oil Business 6,339 64, + 3,661 - Energy Solutions Business -7,824 4, + 11,824 - Others and adjustment* 1, ,489 Ordinary income 92,973 77, - 15,973 CCS ordinary income 68,5 68, - 5 Net income attributable to owners of the parent 42,751 51, + 8,249 *218 forecast for Others and adjustment is included in the Oil Business. Base assumptions (Full year average) and inventory valuation sensitivity (For January to December, 218) 218 Impact to inventory Unit Results Forecast valuation (billion yen) Dubai crude oil price (USD/bbl) USD/bbl 1.8 Exchange rate (Yen/USD) Yen/USD.9 * The impact would change by the timing of crude oil price fluctuation and inventory volume.

17 Forecast of Full Year Results for 218 (2) Operating Income by segment 9 7 Billion yen Oil Business inventory valuation Operating income 78.4 * Others and adjustment is included in the Oil Business. Operating income Oil Business CCS operating Income 1-1 Energy Solutions Business <Key factors for forecast> Results 218 Forcast (Oil) We expect sales volume to remain level y-o-y in the expectation of steady domestic demand. While we predict stable margins, we project operating income will remain stable y-o-y under the assumption that crude oil prices will be $6 per barrel, as this would eliminate the positive time lag effect we benefited from in. While we have a regular maintenance at one of our refineries, we expect the effects to be less severe than in. Therefore we project some increase in product exports and chemicals sales volume. (Solar) We will continue to focus on sales in the domestic market. We project improved revenues by promoting structural cost competitiveness, such as consolidating plants. (Power) We project greater revenues over the previous year due to the expansion of sales, while we continue the optimization of our sales portfolio and the efficient operation of our power plants.

18 Aliance with Idemitsu Kosan 18 (1) Activities during (Oct Dec) in Section Purchase of crude oil / Shipping Procurement Supply / Demand Activities Optimization of crude oil purchase (crude oil exchange) Optimization of crude oil tanker allocation (mutual lending of cargo space and reduction in demurrage charges) Lending of reserve stocks Mutual lending of bunkers 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 Efficiency improvement in logistics network(mutual use of depots, reduction in transfer mileage) Reduction in the number of the aviation fuel supply lorries Meetings on joint business development overseas

19 Aliance with Idemitsu Kosan 19 (2) Forecast for synergy by year (calculated based on the activities in a full-year) Billion yen *Each year starts from April and ends in March st year 2nd year 3rd year We have raised our three-year goal from 25 billion yen to 3 billion yen. In order to generate greater synergies, we will consolidate the offices of some departments and otherwise pursue further action.

20 Data Book 2

21 Highlights of Financial Results (Oct-Dec) 21 Crude oil price & exchange rate Highlights of financial results (million yen) 216 Oct-Dec Oct-Dec 216 Oct-Dec Oct-Dec Changes Dubai crude oil price (USD/bbl) Exchange Rate (\/USD) Changes vs. 216 Sales 462, , , % Operating income 19,121 37, , % Non-Operating income 4,15 1,41 + 6, % Ordinary income 23,271 48, , % Inventory valuation 11,118 17,28 + 6, % CCS ordinary income 12,153 31, , % Extraordinary income -9,397-11,26-1,863 - Net income attributable to owners of the parent 5,683 23, , % CCS net income attributable to owners of the parent -1,758 11, ,421 - Notes CCS ordinary income(ordinary income on Current Cost of Supply basis): Ordinary income based on costs excluding inventory valuation effects.

22 Information by Business Segment (Oct-Dec) 22 Sales (million yen) Operating income (million yen) 216 Oct-Dec Oct-Dec 216 Oct-Dec Oct-Dec Changes vs. 216 Oil Business 428, , , % Energy Solutions Business 3,764 41, , % Others 2,933 3, % Total sales 462, , , % Changes vs. 216 Oil Business 21,984 39, , % Inventory valuation 11,118 17,28 + 6, % Oil Business CCS OP 1,866 21, , % Energy Solutions Business -3,62-1, ,757 - Others % Adjustment % Total Operating Income 19,121 37, , % Total CCS operating income 8,3 2, , % 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.

23 Crude Oil Refined and Sales Volume (Oct-Dec) 23 Crude oil refined & utilization rate 216 Oct-Dec Jul-Sep Changes Crude oil refined (thousand KL) 5,15 6, ,12 Refinery utilization rate 77.% 94.3% % [Note] The numbers of crude oil refined and utilization rate based on the Keihin, Yokkaichi, and Yamaguchi Refineries Sales volume by products (Thousand KL) 216 Oct-Dec Oct-Dec vs. 216 Gasoline 2,193 2, % Jet Fuel % Kerosines % Diesel Oil 1,369 1, % Fuel Oil A % Fuel Oil C % Chemicals*(thousand MT) % Others % Total Domestic sales 6,534 7, % Export % Grand Total 6,69 7, % *Chemicals: Mixed Xylene, Benzene, Propylene

24 Quarterly Trend of Ordinary Income 24 Billion yen Ordinary Income CCS Ordinary Income 1Q 2Q 3Q 1Q 2Q 3Q 1Q 2Q 3Q

25 Quarterly Trend of Operating Income by Business Segment 25 Billion yen Oil Business CCS operating income Energy Solutions Business operating income Q 2Q 3Q 1Q 2Q 3Q 1Q 2Q 3Q

26 Crude Oil Price (Platt s Dubai) 26 (USD/bbl) Average 53.1 USD/bbl Average 41.4 USD/bbl Average 5.8 USD/bbl

27 Exchange Rates (JPY/USD TTM) 27 (JPY/USD) Average 18.8 JPY/USD Average JPY/USD Average JPY/USD

28 Domestic Market (1) : Regular Gasoline 28 Crude & Product price /L Spread /L Regular Gasoline (Domestic Spot Price) Crude CIF Spread (Domestic spot price-cif) CIF of January, 218 is provisional. 5

29 Domestic Market (2) : Diesel Oil 29 Crude & Product price /L Spread /L Diesel Oil (Domestic Spot Price) Crude CIF Spread (Domestic spot price-cif) CIF of January, 218 is provisional.

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

31 Global Market (1) : Gasoline Unleaded 31 $/bbl Spread $/ bbl Gasoline Unleaded (92RON Asian Spot Price) Platts Dubai Spread (Spot price Dubai)

32 Global Market (2) : Diesel Oil 32 $/bbl Spread $/ bbl Diesel Oil (Asian Spot Price) 3 6 Platts Dubai Spread (Spot price Dubai)

33 Global Market (3) : Mixed Xylene 33 $/MT Spread $/ MT 1, , Mixed Xylene (Asian Spot Price) 1, 6 Platts Dubai Spread (Spot price Dubai)

34 34 TOPICS: ESG (Initiatives for sustainability: SDGs) Yr 23 Improve our corporate value Cross-functional team was organized in the end of Review the existing businesses in the context of SDGs Positive areas Do more Negative areas Reduce risk via concrete improvements Use SDGs in examining and promoting new businesses Use SDGs as hints for creating ideas Verify the direction of the initiatives we take

35 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. 35