Idemitsu Kosan : Consolidated Financial Results for the Second Quarter of Fiscal Year 2023 (From April 1, 2023 to September 30, 2023)

November 14, 2023

Consolidated Financial Results for the Second Quarter of

Fiscal Year 2023 (From April 1, 2023 to September 30, 2023) [Japan GAAP]

Company Name: Idemitsu Kosan Co.,Ltd. (URL https://www.idemitsu.com/en/index.html)

Company Code: 5019, Shares listed on: Tokyo Stock Exchange

Name of Representative: Shunichi Kito, Representative Director & Chief Executive Officer

Contact Person: Daisuke Mogi, General Manager, Investor Relations Office, Finance & Accounting Department

Telephone: [phone]

Scheduled date of filing of quarterly securities report: November 14, 2023

Scheduled date of commencement of dividend payments: December 7, 2023

Supplementary materials for the quarterly financial results: Yes

Quarterly financial results presentation: Yes (for institutional investors and analysts)

(Figures less than ¥1 million are rounded off)

1. Consolidated Financial Results for the Second Quarter of FY2023 (From April 1, 2023 to September 30, 2023)

(1) Consolidated operating results

(Percentage figures represent changes from the corresponding previous period)

								Net income
	Net sales		Operating income	Ordinary income	attributable to owners
								of the parent
	¥million		%	¥million	%	¥million	%	¥million	%
2Q FY2023	4,024,462		(16.4)	202,921	(42.7)	226,460	(40.6)	164,946	(41.3)
2Q FY2022	4,814,088		67.9	354,077	97.5	381,220	93.4	280,798	96.8

Note: Comprehensive income	2Q FY2023	¥201,863 million (36.4%) 2Q FY2022 ¥317,605 million 93.4%
	Net income per share		Diluted net income
		per share
		¥		¥
2Q FY2023		574.44		－
2Q FY2022		944.46		－

(2) Consolidated financial position

		Total assets	Net assets	Equity ratio
		¥million	¥million	%
2Q FY2023		5,154,310	1,781,052	34.3
2Q FY2022		4,865,370	1,629,308	33.2
Reference: Total equity	2Q FY2023 ¥1,767,304 million FY2022	¥1,614,526 million

2. Dividends

		Cash dividends per share
	As of Jun.30	As of Sep.30		As of Dec.31	As of Mar.31		Total
	¥	¥	¥	¥		¥
FY2022	－	60.00		－	60.00		120.00
FY2023	－	80.00
FY2023				－	16.00			－
(Forecasts)
Note:

1. Revisions of the forecasts of cash dividends since the latest announcement: Yes
2. The Company plans to split the shares of its common stock on a 5-for-1 basis effective January 1, 2024. Regarding the year-end dividend (forecast) for the fiscal year ending March 31, 2024, the indicated amount reflects the effect of the stock split, while the annual dividend is indicated as "－". Excluding the effect of the stock split, the year-end dividend would be 80.00 yen per share and the annual dividend would be 160.00 yen per share.

3. Forecasts of Consolidated Financial Results for FY2023 (From April 1, 2023 to March 31, 2024)

(Percentage figures represent changes from the previous fiscal year)

								Net income	Net income
	Net sales		Operating income	Ordinary income	attributable to
		per share
								owners of the parent
	¥million		%	¥million	%	¥million	%	¥million	%	¥
FY2023	8,650,000		(8.5)	250,000	(11.5)	270,000	(16.0)	180,000	(29.0)	125.37

Note:

1. Revisions of the forecasts of consolidated financial results since the latest announcement: Yes
2. The Company plans to split the shares of its common stock on a 5-for-1 basis effective January 1, 2024. The forecast for basic net income per share for the fiscal year ending March 31, 2024 reflects the effect of the stock split. Excluding the effect of the stock split, the forecast for basic net income per share would be 626.87 yen.

* Notes

1. Changes of material consolidated subsidiaries during the six months ended September 30, 2023: None
2. Application of the accounting method peculiar to the preparation of the quarterly financial statements: Yes
3. Changes in accounting policies, accounting estimates and restatement
4. 1. Changes in accounting policies arising from revision of accounting standards: None
   2. Changes arising from other factors: None
   3. Changes in accounting estimates: None
   4. Restatement: None
5. Number of shares issued (common stock)
6. 1. Number of shares issued (including treasury stock)

As of September 30, 2023:	297,864,718	As of March 31, 2023:	297,864,718
b) Number of shares of treasury stock
As of September 30, 2023:	15,894,982	As of March 31, 2023:	4,859,945

1. Weighted average number of shares outstanding during the period Six months ended September 30, 2023: 287,142,892
   Six months ended September 30, 2022: 297,311,808

*1 This document is out of the scope of quarterly review by certified public accountants or audit firms.

*2 The financial forecasts above are based on information available and assumptions as of the date of publication of this document. Actual operating results may differ from the forecasts due to various factors. Additionally, for the assumptions used for the forecasts of the above, please refer to page 6 "Explanation of Forecasts of Consolidated Financial Results for FY2023" of the Appendix.

………………………………… 13

Contents of the Appendix

1. Qualitative Information on the Consolidated Operating Results for the Second Quarter of FY2023….…. 2

1. Explanation of Operating Results.………………………………………………………………………………... 2

(2) Explanation of Financial Position………………………………………………………………………………… 5

1. Explanation of Forecasts of Consolidated Financial Results for FY2023 …………………………………... 6

2. Consolidated Financial Statements for the Second Quarter of FY2023 and Major Notes…………………. 7

1. Consolidated Quarterly Balance Sheets ………………………………………………………………………….. 7
2. Consolidated Quarterly Statements of Income and Comprehensive Income ………………………………….. 9

1) Consolidated Quarterly Statements of Income ……………………………………………………………… 9

2) Consolidated Quarterly Statements of Comprehensive Income …………………………………………… 10

(3) Consolidated Quarterly Statements of Cash Flow……………………………………………..…………… 11

1. Notes to the Consolidated Quarterly Financial Statements………………………………………………….…. 13
2. 1. Notes on the Assumption of a Going Concern…………………………………………………………… 13
   2. Notes on Significant Changes in Shareholders' Equity…………………………………………………... 13

3) Application of the Accounting Method Peculiar to the Preparation of the Quarterly Financial Statements

1. Consolidated Segment Information ……………………………………………………………………..…… 14
2. Significant Subsequent Events …………………………………………………..………..………………… 16

1

1. Qualitative Information on the Consolidated Operating Results for the Second Quarter of FY2023

(1) Explanation of Operating Results

During the six months ended September 30, 2023, the domestic demand for main petroleum products increased for aircraft, but that for gasoline and other primary fuels remained at the almost same level from the previous year owing to a halt in the recovery from the decline in demand due to the COVID-19 pandemic since 2020.

Crude oil prices rose sharply in the first half of the previous fiscal year due to supply restrictions caused by the situation in the Ukraine/Russia conflict. Then the prices had been on a downward trend owing to concerns about an economic slowdown caused by the prospect of continued long-term interest rate hikes in the U.S., while, since July, crude oil prices have been on an upward trend due to awareness of tightening supply and demand as a result of the announcement by Saudi Arabia and Russia of an extension of voluntary production cuts by the end of the year, in addition to a decline in expectations of prolonged U.S. interest rate hikes. As a result, the average Dubai crude oil price from April to September decreased by $20.2/bbl from the same period last year to $82.3/bbl.

As for the dollar-to-yen exchange rate, Japan maintained its easy monetary policy against a series of rate hikes by the U.S., and the yen depreciated against the backdrop of differences in monetary policy between the countries. As a result, the average exchange rate between April and September against the dollar was ¥141.0.

(Crude oil price and exchange rate)

	Six months ended	Six months ended	Change
	September 30, 2022	September 30, 2023
Dubai Crude Oil ($/bbl)	102.5	82.3	(20.2)	(19.7)%
Exchange Rate (¥/$)	134.0	141.0	+7.0	+5.2%

The Idemitsu Group's consolidated net sales for the six months ended September 30, 2023 were ¥4,024.5 billion, down 16.4% year on year, mainly due to a decline in crude oil prices.

Operating income was ¥202.9 billion, down 42.7% year on year, mainly due to the reversal of the previous year's inventory valuation effects owing to the increase in crude oil prices associated with the surging crude oil prices in the petroleum segment, despite the recovery of domestic product margins owing to profit contribution arising from time lags in the petroleum segment.

Net non-operating income was ¥23.5 billion, down 13.3% year on year, mainly due to a decrease in equity in earnings of non-consolidated subsidiaries and affiliates. Consequently, ordinary income was ¥226.5 billion, down 40.6% year on year.

Net extraordinary income was ¥1.3 billion, down 92.2% year on year, mainly due to the absence of gain on sales of tangible fixed assets that was recorded by domestic subsidiaries in the previous fiscal year.

Income tax expenses, which consist of income taxes-current and income taxes-deferred, amounted to ¥63.8 billion, down 45.6% year on year, due to a decrease in net income before income taxes.

2

Consequently, net income attributable to owners of the parent was ¥164.9 billion, down 41.3% year on year.

The performance of our business by segment for the six months ended September 30, 2023, is as follows:

As to quarterly reporting periods, domestic subsidiaries use September 30 as their balance sheet date whereas overseas subsidiaries use June 30 as their balance sheet date, except for certain subsidiaries. As such, the following performance of the business segments includes the operating results of overseas subsidiaries for the six months ended June 30, 2023, and those of domestic subsidiaries for the six months ended September 30, 2023.

Net sales by segment

(Unit: ¥Billion)

	Segment		2nd Quarter of		2nd Quarter of	Change
			FY2022		FY2023	Amount		%
	Petroleum		3,814.1		3,189.1	(625.0)		(16.4)%
	Basic chemicals		363.0		280.2	(82.8)		(22.8)%
	Functional		245.6		248.4	+2.8		+1.1%
	materials
	Power and		89.8		72.1	(17.7)		(19.7)%
	renewable energy
	Resources		300.3		233.3	(67.0)		(22.3)%
	Other		1.3		1.4	+0.1		+8.3%
	Total		4,814.1		4,024.5	(789.6)		(16.4)%
Segment income or loss
							(Unit: ¥Billion)
				2nd Quarter of	2nd Quarter of	Change
				FY2022	FY2023	Amount		%
	Petroleum		269.3	121.7	(147.6)		(54.8)%
	: excluding effect of
	inventory valuation		61.1	105.0	+43.9		+71.9%
	Basic chemicals		14.2	12.0	(2.2)		(15.3)%
	Functional materials		8.6	13.4	+4.8		+55.9%
	Power and renewable		(2.9)	(0.4)	+2.4		－
	energy
	Resources		100.1	69.8	(30.3)		(30.3)%
	Other		0.5	0.8	+0.3		+63.9%
	Reconciliation		(15.4)	(6.0)	+9.4		－
	Total		374.3	211.2	(163.1)		(43.6)%
	: excluding effect of
	inventory valuation		166.2	194.6	+28.4		+17.1%

Note: Segment income (loss) is the total of operating income (loss) and equity in earnings (losses) of nonconsolidated subsidiaries and affiliates.

3

[Petroleum segment]

Net sales in the petroleum segment were ¥3,189.1 billion, down 16.4% year on year, mainly due to a decline in crude oil prices and lower sales volumes. Segment income was ¥121.7 billion, down 54.8% year on year, mainly due to effects of the inventory valuation in the previous fiscal year and a decrease in export volume caused by periodic repairs, despite an improvement in domestic product margins due to profit contribution arising from time lags. Excluding the effects of the inventory valuation, segment income was ¥105.0 billion, up 71.9% year on year.

[Basic chemicals segment]

Net sales in the basic chemicals segment were ¥280.2 billion, down 22.8% year on year, mainly due to a decrease in sales volumes caused by periodic repairs. Segment income was ¥12.0 billion, down 15.3% year on year, mainly due to a decrease in sales volumes and an increase in expenses.

[Functional materials segment]

Net sales in the functional materials segment were ¥248.4 billion, up 1.1% year on year, and segment income was ¥13.4 billion, up 55.9% year on year, mainly due to the elimination of negative time lags in the lubricants business.

[Power and renewable energy segment]

Net sales in the power and renewable energy segment were ¥72.1 billion, down 19.7% year on year. Segment loss was ¥0.4 billion, an improvement of ¥2.4 billion year on year, despite an improvement in the profitability of the electric power business through efforts based on the supply and sale of in-house power sources.

[Resources segment]

(Oil/natural gas exploration and production and geothermal energy business)

Net sales in the oil/natural gas exploration and production and geothermal energy business were ¥21.8 billion, down 2.1% year on year, and segment income was ¥10.5 billion, down 38.6% year on year, mainly owing to a decline in crude oil prices and an increase in operating expenses.

(Coal business and others)

In the coal business and others, net sales were ¥211.5 billion, down 23.9% year on year, and segment income was ¥59.3 billion, down 28.5% year on year, mainly due to a decrease in production volume caused by downsizing of mines and a reaction to the sharp rise in market prices in the previous fiscal year.

As a result of the above, total net sales in the resource segment were ¥233.3 billion, down 22.3% year on year, and segment income was ¥69.8 billion, down 30.3% year on year.

[Other segments]

Net sales in the other segment were ¥1.4 billion, up 8.3% year on year, and segment income was ¥0.8 billion, up 63.9% year on year.

4

1. Explanation of Financial Position Summarized Consolidated Balance Sheets

				(Unit: ¥Billion)
		FY2022	2nd Quarter of	Change
		FY2023
Current assets	2,732.1	2,999.4	+267.3
Fixed assets	2,133.3	2,155.0	+21.7
Total assets	4,865.4	5,154.3	+288.9
Current liabilities	2,164.0	2,317.4	+153.4
Non-current liabilities	1,072.1	1,055.9	(16.2)
Total liabilities	3,236.1	3,373.3	+137.2
Total net assets	1,629.3	1,781.1	+151.7
Total liabilities and net assets	4,865.4	5,154.3	+288.9

1) Total assets

Total assets were ¥5,154.3 billion, an increase of ¥288.9 billion from the end of the previous fiscal year, mainly due to an increase in notes and accounts receivables-trade as of September 30, 2023, due to the impact of holidays and an increase in inventories due to an increase in crude oil import prices and the impact of the depreciation of the yen.

2) Total liabilities

Total liabilities were ¥3,373.3 billion, an increase of ¥137.2 billion from the end of the previous fiscal year, mainly due to an increase in accounts payable-other as of September 30, 2023, due to the impact of holidays.

3) Total net assets

Total net assets were ¥1,781.1 billion, an increase of ¥151.7 billion from the end of the previous fiscal year, mainly due to net income attributable to owners of the parent of ¥164.9 billion, despite decreases due to the treasury stock acquisition of ¥32.0 billion and dividend payments of ¥17.6 billion.

As a result, the equity ratio improved from 33.2% at the end of the previous fiscal year to 34.3%, up 1.1 points. The Net D/E ratio as of September 30, 2023, was 0.7 (end of previous fiscal year: 0.9).

5

Summarized Consolidated Statements of Cash Flows

		(Unit: ¥Billion)
	2nd Quarter of	2nd Quarter of
	FY2022	FY2023
Cash flows from operating activities	(149.5)	206.9
Cash flows from investing activities	(14.7)	(58.2)
Cash flows from financing activities	109.7	(84.3)
Effect of exchange rate change on cash and cash	0.2	3.2
equivalents
Net increase (decrease) in cash and cash equivalents	(54.3)	+67.6
Cash and cash equivalents at the beginning of period	139.0	103.1
Cash and cash equivalents at the end of period	84.8	170.7

Cash and cash equivalents ("funds") as of September 30, 2023, were ¥170.7 billion, an increase of ¥67.6 billion compared with the end of the preceding fiscal year. Major factors for this decrease are as follows:

1) Cash flows from operating activities

Net cash provided by operating activities amounted to ¥206.9 billion, because of factors contributing to increased funds such as income before income taxes and depreciation, which were partially offset by factors contributing to decreased funds such as an increase in working capital caused by the rise in crude oil import prices and the depreciation of the yen.

2) Cash flows from investing activities

Net cash used in investing activities amounted to ¥58.2 billion, mainly due to the acquisition of tangible fixed assets as part of capital investment such as maintenance/replacement investment in refinery facilities.

3) Cash flows from financing activities

Net cash used in financing activities amounted to ¥84.3 billion, mainly due to treasury stock acquisition, dividend payments, and repayment of long-term loans payable.

(3) Explanation of Forecasts of Consolidated Financial Results for FY2023

The Company has revised its forecasts of the consolidated financial results for the year ending March 31, 2024, released on May 9, 2023, given the actual business results for the six months ended September 30, 2023, and the latest forecasts. Please refer to the "Announcement on Revisions to Consolidated Earnings Forecasts for the Fiscal Year Ending March 2024" announced today for details of the forecasts.

6

2. Consolidated Financial Statements for the Second Quarter of FY2023 and Major Notes

(1) Consolidated Quarterly Balance Sheets

			(Unit: ¥Million)
		FY2022	2nd Quarter of FY2023
		(As of March 31, 2023) (As of September 30, 2023)
Assets
Current assets:
Cash and deposits	105,192	173,058
Notes and accounts receivable, trade	841,798	934,268
Inventories	1,308,570	1,400,078
Accounts receivable, other	319,483	277,249
Other	157,757	215,344
Less: Allowance for doubtful accounts	(733)	(645)
Total current assets	2,732,068	2,999,354
Fixed assets:
Property, plant and equipment:
Machinery and equipment, net	265,024	278,655
Land	755,014	753,384
Other, net	369,975	358,125
Total property, plant and equipment	1,390,013	1,390,165
Intangible fixed assets:
Goodwill	140,481	135,925
Other	149,753	144,763
Total intangible fixed assets	290,235	280,689
Investments and other assets:
Investment securities	244,699	263,673
Other	210,960	220,713
Less: Allowance for doubtful accounts	(2,607)	(284)
Total investments and other assets	453,052	484,101
Total fixed assets	2,133,301	2,154,956
Total assets	4,865,370	5,154,310
Liabilities
Current liabilities:
Notes and accounts payable, trade	697,307	754,004
Short-term loans payable	486,701	539,200
Commercial paper	301,983	247,997
Current portion of bonds payable	－	10,000
Accounts payable, other	390,189	478,663
Income taxes payable	67,978	52,548
Provision for bonuses	17,122	14,122
Other	202,702	220,837
Total current liabilities	2,163,986	2,317,373
Non-current liabilities:
Bonds payable	150,000	140,000
Long-term loans payable	519,232	510,928
Liability for employees' retirement	60,351	57,619
benefits
Reserve for repair work	85,599	88,596
Asset retirement obligations	29,979	31,491
Other	226,913	227,249
Total non-current liabilities	1,072,076	1,055,885
Total liabilities	3,236,062	3,373,258
		7

			(Unit: ¥Million)
		FY2022	2nd Quarter of FY2023
		(As of March 31, 2023) (As of September 30, 2023)
Net assets
Shareholders' equity:
Common stock	168,351	168,351
Capital surplus	451,642	451,464
Retained earnings	848,910	996,610
Treasury stock	(14,788)	(46,826)
Total shareholders' equity	1,454,116	1,569,599
Accumulated other comprehensive income:
Unrealized gains (losses) on available-	3,918	5,256
for-sale securities
Deferred gains (losses) on hedging	(6,431)	(5,712)
activities, net
Surplus from land revaluation	154,641	154,228
Foreign currency translation adjustments	(4,571)	31,526
Defined retirement benefit plans	12,853	12,404
Total accumulated other comprehensive	160,410	197,705
income
Noncontrolling interests	14,781	13,748
Total net assets	1,629,308	1,781,052
Total liabilities and net assets		4,865,370	5,154,310

8