Supporting Materials for 1 st Quarter Results 2015

Transcription

1 Supporting Materials for 1 st Quarter Results th May 2015 Showa Shell Sekiyu K.K. Showa Shell Sekiyu K.K. 1

2 Notes 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. Showa Shell Sekiyu K.K. 2

3 Jan-Mar 2015 Overview (Note) Others and adjustments are included in the Oil Business. * CCS: Current Cost of Supply Jan-Mar Jan-Mar 2015 Yen Billion Oil Business operating income (CCS*) Energy Solutions Business operating income CCS* operating income Ordinary income CCS* ordinary income Net earnings Net earnings per share, yen per share Q 2015 Results CCS ordinary income improved YonY and remained positive, although crude oil price fall through January caused significant inventory valuation losses. Oil Business CCS profits improved YonY and returned to positive. Energy Solutions Business profits decreased YonY mainly due to Solar Business. Highlights (Oil) CCS-based domestic fuel margins improved as the bottoming-out of crude oil prices in February onwards reduced the time lag effects. Total sales volume of 4 major fuels, such as gasoline and diesel oil, grew YonY for the first time in 3 quarters. Solid sales progress of new premium gasoline Shell V-Power contributed. Group refineries operated at higher run rates than industry average. Highlights (Energy Solutions) (Solar) Operating income declined YonY due to panel shipment decrease, lower selling prices, and once-off Tohoku Plant start-up costs. Cost reduction and midterm-strategic sales efforts continued. (Power) Operating income declined YonY, but stayed in line with plan. Stable plant operation helped. Showa Shell Sekiyu K.K. 3

4 Business Environment - Crude Oil and Foreign Exchange Dubai crude oil Exchange rate (USD) Crude oil CIF Japan USD/bbl yen/usd Yen/L 1Q 2Q 3Q 4Q 1Q 2Q Q 4Q 1Q 2Q 3Q 4Q Q Q Q Source: Trade Statistics of Japan Showa Shell Sekiyu K.K. 4

5 Margin Environment - Oil Business Japanese refining margins Asia Far East petrochemicals margins Domestic spot prices minus crude oil CIF Spot prices minus Dubai spot price Domestic fuel margins improved in 1Q from 4Q, when crude oil prices consistently fell. The bottoming-out of crude oil prices in February onwards eliminated the time lag effect (when wholesale fuel prices drop earlier than costs of processed crude oil) and the supply-demand balance remained healthy. Margins of benzene declined due to temporary oversupply. Petrochemical margins as a whole remained at lower levels. Showa Shell Sekiyu K.K. 5

6 Highlights of Financial Results, Jan-Mar 2015 Crude oil price & exchange rate Results 2015 Results Jan-Mar Jan-Mar Dubai crude oil price (USD/bbl) Exchange Rate (\/USD) Highlights of financial results (million yen) Results 2015 Results Jan - Mar Jan - Mar Changes vs. (%) Sales 810, , , % Operating income 6,721-18,941-25,662 - Non-Operating income % Ordinary income 7,052-18,823-25,876 - Inventory valuation 3,846-26,800-30,646 - CCS ordinary income 3,206 7, , % Extraordinary income 1,919 1, % Net income 6,812-14,354-21,167 - Notes CCS ordinary income(ordinary income on Current Cost of Supply basis): ordinary income based on costs excluding inventory valuation effects. Showa Shell Sekiyu K.K. 6

7 Sales Information by Business Segment, Jan-Mar 2015 (million yen) Operating income (million yen) Results 2015 Results Jan - Mar Jan - Mar Results 2015 Results Jan - Mar Jan - Mar Oil Business ,566-18,808 - Inventory valuation 3,846-26,800-30,646 - Oil Business CCS OP -3,604 8, ,837 - Energy Solutions Business 6, ,837 - Other % Adjustment % Total Operating Income 6,721-18,941-25,662 - Total CCS operating income 2,875 7, , % 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 Changes vs. (%) Oil Business 776, , , % Energy Solutions Business 31,715 25,331-6, % Other 2,239 2, % Total sales 810, , , % Changes vs. (%) Others: Leasing and administration of properties, construction works, sale and lease of auto accessories, etc. Showa Shell Sekiyu K.K. 7

8 Jan-Mar 2015 Earnings Performance Oil Business Quarterly operating income Energy Solutions Business Quarterly operating income OP in 1Q on CCS basis improved both QonQ and YonY. Domestic fuel margin recovery, product export expansion, product/service differentiation, and ongoing structural cost competitiveness improvement activities contributed. Inventory valuation effects depressed OP in 1Q as crude oil price fall continued through January. OP in 1Q decreased YonY. GENEX and Ohgishima Power continued stable operation. Profits decreased YonY due to electricity price decline driven by crude oil price fall, but remained in line with plan. Solar Business profits declined both QonQ and YonY due to lower panel selling prices, shipment volume decrease, and once-off Tohoku Plant start-up costs. Showa Shell Sekiyu K.K. 8

9 Ordinary Profit 1Q vs. 1Q2015 (Unit: Billion Yen) Oil Business Energy Solutions Business 1Q 1Q 2015 * CCS: Current Cost of Supply ** Including the effect of Lower of Cost or Market Value method for Oil Showa Shell Sekiyu K.K. 9

10 Oil Business Operational Performance in Jan-Mar 2015 Refinery utilization Domestic sales volume growth YonY (4 products total*) Source of Industry: Petroleum Association of Japan * 4 products: Gasoline, Kerosene, Diesel oil, A-type fuel oil Source of Industry: Statistics by METI Industry in 1Q2015 is based on flash report. Utilization of group refineries in 1Q continued at a high level. Product export levels, mainly gasoline and diesel oil, were strong, while domestic supply sufficiently secured. There was no shut-down maintenance. In 1Q, total sales volume of higher added-value 4 products, such as gasoline, kerosene, and diesel oil, grew YonY as well as exceeded Japanese industry average. We maintained maximum petrochemical production and conducted fuel exports according to economics in order to maximize profits. Showa Shell Sekiyu K.K. 10

11 Crude Oil Refined and Sales Volume, Jan-Mar 2015 Crude oil refined & utilization rate Results 2015 Results Jan-Mar Jan-Mar Crude oil refined (thousand KL) 5,848 6,083 Refinery utilization rate (%) 95.2% 95.5% Sales volume by products (Thousand KL) Results Jan-Mar 2015 Results Jan-Mar vs. (%) Gasoline 2,135 2, % Jet Fuel % Kerosene 1,151 1, % Diesel Oil 1,302 1, % Fuel Oil A % Fuel Oil C % Chemicals*(thousand MT) % Others % Total Domestic Sales 6,890 6, % Export % Grand Total 7,440 7, % [Note] The numbers for crude oil refined and utilization rate are based on Keihin, Yokkaichi, and Yamaguchi Refineries *Chemicals: Mixed xylene, benzene, propylene Showa Shell Sekiyu K.K. 11

12 Solar Business Operational Performance in Jan-Mar 2015 Quarterly panel shipment volume Panel regional allocation Panel shipment in 1Q decreased YonY. Uncertainty caused by the grid connection issues and changes in Feed-in Tariff rules dampened new domestic demand. It is expected that global demand continues to grow strongly but domestic demand growth slows down toward the future. We made good progress in capturing future pipeline in both domestic and international markets. Domestic sales focus maintained, while activities to secure overseas business and expand sales channels progressed in line with medium term business strategies. Full operation at Kunitomi Plant continued. Showa Shell Sekiyu K.K. 12

13 Major Topics in 1Q2015: Energy Solutions Sales update: rebalancing to international market and domestic commercial/residential rooftop In support of its long-term growth strategy to capture growing international demand, Solar Frontier ( SF ) has accelerated re-entry to the international market in sales and business development. For example, SF has acquired 280 MW of project pipeline in the U.S. and is concurrently working on 100 MW of pipeline in the UK. Despite domestic new project demand impact from uncertainty in grid connections and curtailment, the long term market in Japan is expected to be robust, driven by commercial and residential rooftop segments. SF will refocus on these segments offering value-added system solutions to build on its pipeline of approx. 2GW over the next five years. This rebalancing will better position SF in longer-term sustainable sales channels. Operating cash flows are expected to remain positive, however, near term profitability will be negatively impacted. Tohoku Plant Completion and Planned Cost Reduction at Kunitomi Plant SF has completed construction of its new 150 MW Tohoku Plant, at the end of March. The plant is intended to serve as a model for future overseas plants. Production costs will be approx. 30% lower than current main Kunitomi Plant costs at world-class top levels. Based on technology advances from the new plant, SF plans to make improvements at the Kunitomi Plant in 2016, to establish a highly competitive overall manufacturing base. Showa Shell Sekiyu K.K. New Power Projects on Schedule for Completion The projects to expand capacity at the existing Ohgishima LNG plant and construct a new biomass plant at Ohgimachi remain on track for completion in These new projects, totaling approx.150 MW, are expected to increase profitability of Showa Shell s power business by 50% in

14 Forecast of Results for 2015 (1) Interim forecast Previous Revised million yen forecast forecast Net sales 980,000 1,161,000 Operating Income by segment (interim) Operating income -9,000 13,000 Inventory valuation -30,000-19,000 CCS operating income 21,000 32,000 - Oil Business 18,000 34,000 - Energy Solutions Business 3,000-2,000 - Others and adjustment* - - Ordinary income -9,000 13,000 CCS ordinary income 21,000 32,000 Net income -6,000 8,000 Full year forecast Previous Revised million yen forecast forecast Net sales 2,110,000 2,350,000 Operating Income by segment (full year) Operating income 29,000 41,000 Inventory valuation -20,000-12,000 CCS operating income 49,000 53,000 - Oil Business 40,000 56,000 - Energy Solutions Business 9,000-3,000 - Others and adjustment* - - Ordinary income 29,000 41,000 CCS ordinary income 49,000 53,000 Net income 18,000 27,000 *2015 forecast for others and adjustment is included in the Oil Business. Showa Shell Sekiyu K.K. 14

15 Forecast of Results for 2015 (2) <Key factors for forecast> Oil Business: Impact by crude oil price decline through January remains. However, as crude oil bottomed out earlier than we had previously anticipated, inventory valuation losses will decrease. Assume continuously healthy domestic fuel margins, and petrochemical margins at current levels. Continue product/service differentiation strategies, structural cost competitiveness improvement, and lower refining costs. Energy Solutions Business: (Power)Despite reduced plant utilization due to planned maintenance at Ohgishima Power, stable profits are expected in line with plan. (Power)Construction work for two new power plants progress in line with plan. (Solar)Given rebalancing of our sales strategy (refer page 13), while operating cash flow remains positive, profitability will be negatively impacted. (Solar)Sales volume will increase in 2Q onwards, while average selling prices will decline due to domestic price decrease and increased overseas sales. (Solar)Start-up of Tohoku Plant is under way to verify new mass production technology which can realize world-top-class cost competitiveness. Once-off costs for the start-up will continuously occur this year. Showa Shell Sekiyu K.K. 15

16 Base Assumptions and Sensitivity Analysis Crude oil price & exchange rate (full year) Previous Revised forecast forecast Dubai crude oil price (USD/bbl) Exchange rate (Yen/USD) Inventory valuation sensitivity (only for April to December, 2015) Unit Impact to inventory valuation (billion yen) Dubai crude oil price 1 USD/bbl 1.7 Exchange rate 1 Yen/USD 0.9 * The impact would change by the timing of crude oil price fluctuation and inventory volume. * Sensitivity for Lower of Cost or Market Value method not included. Showa Shell Sekiyu K.K. 16

17 Topics Announced Today Corporate Governance Reform Showa Shell determined to reform its corporate governance system, aiming to promote its sustainable growth and improve corporate value in medium- and long-term. Aligning with the enactment of the Corporate Governance Code effective in June, it has taken steps to improve its corporate governance ahead of the oil industry. The reform consists of the following 3 items: 1) separation of supervision of management and execution of businesses, 2) definition of the role of chairperson of the board, 3) further discussion on enhancement of the governance system. Showa Shell continue to pursue effective management supervision and fast business execution as well as highly transparent and objective governance through various committees. Showa Shell Sekiyu K.K. Business Partnership with Cosmo Oil in Yokkaichi Region Showa Shell Sekiyu and Cosmo Oil Co. Ltd. agreed to start the business partnership in March 2017 between their group refineries in Yokkaichi, Mie Prefecture, to mutually enhance competitiveness through refining facility optimization. In this partnership, Cosmo Oil is to suspend one of its two crude distillation units, and Showa Shell is instead to supply oil products and semi-finished products to Cosmo Oil. This partnership will mutually enhance cost efficiency in producing high-value-added oil products, while maintaining stable supply, as well as respond to mandates in the second announcement of the Sophisticated Methods of Energy Supply Structures. In addition to the restructuring of the refining facilities, the both companies will continuously seek more opportunities for broader partnership, including off-site facility rationalization, such as product tankage. We will mutually maximize effects from this partnership to establish robust competitiveness in the international market. 17

18 Data Book Showa Shell Sekiyu K.K. 18

19 Billion yen Quarterly Trend of Ordinary Income Showa Shell Sekiyu K.K. 19

20 Billion yen Quarterly Trend of Operating Income by Business Segment Showa Shell Sekiyu K.K. 20

21 (USD/bbl) Crude Oil Price (Platt s Dubai) Showa Shell Sekiyu K.K. 21

22 (JPY/USD) Exchange Rates (JPY/USD TTM) Showa Shell Sekiyu K.K. 22

23 国内マーケットの Domestic マーケットの状況 Market (1) : 1( Regular ガソリン Gasoline ) Crude & Product price /L 2013 Regular-Gasoline (Domestic Spot Price) 2015 Spread /L Crude CIF Spread (Domestic spot price-cif) CIF of April 2015 is provisional. Showa Shell Sekiyu K.K. 23

24 Domestic Market (2) : Diesel Oil Crude & Product price /L 2013 Diesel-Oil (Domestic Spot Price) 2015 Spread /L Crude CIF Spread (Domestic spot price-cif) CIF of April 2015 is provisional. Showa Shell Sekiyu K.K. 24

25 Domestic Market (3) : Kerosene Crude & Product price /L 2013 Kerosene (Domestic Spot Price) 2015 Spread /L Crude CIF Spread (Domestic spot price-cif) CIF of April 2015 is provisional. Showa Shell Sekiyu K.K. 25

26 Global Market (1) : Diesel Oil $/bbl Spread $/ bbl 2013 Diesel-Oil (Asian Spot Price) 2015 Dubai Spread (Spot price Dubai) Showa Shell Sekiyu K.K. 26

27 Global Market (2) : Mixed Xylene $/MT Spread $/MT 2013 Mixed Xylene (Asian Spot Price) 2015 Dubai Spread (Spot price Dubai) Showa Shell Sekiyu K.K. 27

28 Showa Shell Sekiyu K.K.