Japan's refiners look to invest bumper profits in energy transition
Japanese refiners reported strong earnings for April-September and lifted their annual forecasts as surging oil prices brought hefty valuation gains on inventories and boosted earnings from their upstream oil assets.
The companies said they would use the additional cash to help pay for the investment needed in cleaner energy amid a global decarbonization push.
Japan's top refiner Eneos Holdings said on Thursday its first-half net profit rose 480% to 211 B yen ($1.9 B) as the value of its inventories shot up while soaring copper prices also boosted its profit from metals.
The oil and metals giant doubled its profit forecast for the year to March 31 to 280 B yen, beating a forecast of 222 B yen based on the mean estimate from 10 analysts compiled by Refinitiv.
Earlier this week, the second biggest refiner Idemitsu Kosan and third-placed Cosmo Energy Holdings more than doubled their annual profit guidelines.
In their key refining operation, Idemitsu and Cosmo booked a profit gain as they benefited from recovering margins at home and abroad. Meanwhile, Eneos suffered a series of setbacks at its refineries which resulted in a refinery run for April-September of 61% while Idemitsu reached 73% and Cosmo's utilization was 95%.
"Higher resource prices led to a significant profit increase in upstream oil and metals assets, but the performance in our flagship energy segment was very unsatisfactory," Eneos' President Katsuyuki Ota told a news conference.
"The cash flow from the energy segment is the core source of our future investments in new businesses, so we must do better in this area," he said.
Like many other global oil companies, Eneos has been accelerating its transformation into a supplier of low-carbon energy and has decided to acquire a renewable company and invest in hydrogen projects.
"There is no time for complacency (about strong earnings) as 90% of our profit comes from fossil fuels. We'll allocate our cash to innovations to help our energy transition," Idemitsu President Shunichi Kito said.
"The oil business is the money tree. We generate cash from it and allocate the cash to renewable energy, which will enable us to make sustainable transitions," Takayuki Uematsu, Cosmo's senior executive officer, said.
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