Idemitsu Q1 FY2027: Operating Profit Swings to ¥307.5bn on Oil Lag

In its first quarterly results under IFRS, Idemitsu reported revenue of ¥2,271.7 billion (+23.8% YoY) for the April–June 2026 period. Operating profit swung to a massive ¥307.4 billion, from a ¥4.0 billion loss a year earlier, while net profit attributable to owners of the parent soared 696.0% to ¥217.5 billion.

The primary driver was an extended crude-oil cost lag in the Fuel Oil segment. Deteriorating Middle East security pushed up shipping days, lengthening crude procurement lead times, so the rise in crude prices from March 2026 onward flowed through to selling prices. Although a one-off gain from step acquisition in lubricants dropped out, the High-Performance Materials segment still saw spreads widen in functional chemicals, while Resources benefited from higher condensate output in Vietnam and improved coal market conditions. Overall, operating profit rebounded from a year-ago deficit to a exceptionally high quarterly level of ¥307.4 billion.

Fuel Oil dominated earnings. External revenue and segment profit (before finance costs and income taxes, excluding interest income and forex gains/losses) are shown below. Note that functional pavement materials were reclassified from High-Performance Materials to Fuel Oil this period.

Fuel Oil: External revenue jumped +25.9% to ¥1,924.0 billion, and segment profit rocketed to ¥293.8 billion (a ¥312.6 billion swing) on the crude-oil lag and firm product margins.
Basic Chemicals: Revenue rose +14.4% to ¥112.8 billion, but profit was near break-even at ¥85 million; lower sales volumes were offset by inventory valuation gains from higher naphtha prices.
High-Performance Materials: Revenue grew +14.4% to ¥147.5 billion, but profit fell -15.6% to ¥14.5 billion, as last year's roughly ¥2 billion one-off gain from lubricants step acquisition disappeared, outweighing better spreads in functional chemicals.
Power & Renewable Energy: Revenue slipped -21.7% to ¥19.3 billion, and the segment posted a ¥1.3 billion loss (widening by ¥2.3 billion) due to planned maintenance and plant trouble at Toa Oil.
Resources: Revenue climbed +26.3% to ¥65.8 billion, with profit up +47.0% to ¥18.9 billion. Within this, oil & gas development and geothermal earned ¥11.6 billion (+119.9%), helped by higher condensate production in Vietnam, while coal profit edged down -3.3% to ¥7.4 billion, as higher prices and volumes were partly offset by costs and forex.
Other: Revenue of ¥2.0 billion, profit of ¥136 million.

Total assets climbed to ¥6,056.9 billion at quarter-end, up ¥787.7 billion from the previous fiscal year-end, mainly because inventories swelled to ¥2,137.1 billion (+¥779.2 billion) on higher crude prices and purchasing. Interest-bearing debt (current + non-current) reached ¥2,004 billion, with short-term borrowings rising ¥417.7 billion. The net D/E ratio widened to 1.17x (from 1.03x), largely driven by seasonal working-capital expansion.

The equity attributable to owners of parent stood at 27.2% (down 0.6 ppt), but total equity rose to ¥1,676.9 billion, strengthened by retained earnings. The annual dividend forecast remains ¥36 per share (interim ¥18, year-end ¥18), unchanged from the prior year. Idemitsu is actively buying back shares under a ¥30 billion program announced in November 2025, and in April 2026 it cancelled 65.52 million treasury shares, reducing both capital surplus and treasury stock by ¥75 billion each. The company aims to balance shareholder returns with financial discipline.

• Crude oil and forex volatility: Fuel Oil earnings depend heavily on the time-lag effect; a sudden drop or post-spike reversal in oil prices can cause large profit swings. USD/JPY moves directly affect import costs.
• Geopolitical risk: Middle East instability disrupts shipping routes, impacting procurement and lead times. While this boosted Q1 profits, a de-escalation could erode the lag benefit.
• Energy transition risk: Long-term decarbonization may shrink oil demand. Idemitsu is nurturing power/renewables and high-performance materials, but in the near-to-medium term, fossil fuels still dominate earnings.
• Inventory valuation risk: High inventories create exposure to a sharp crude-price decline and potential write-downs. IFRS does not change inventory costing, but fair-value measurements warrant attention.
• NSRP (Nghi Son Refinery) risk: The Vietnamese refinery carries large borrowings and completion guarantees; its utilization and margins directly impact equity-method earnings and guarantee obligations.

Idemitsu left its FY2027 forecast unchanged. It sees profit before tax and financing costs (excluding inventory effects) at ¥140 billion (down 48.6% from the prior year’s IFRS-recast figure) and net income attributable to owners of parent at ¥75 billion (down 57.4%). The steep decline reflects an expected reversal of the Q1 time-lag gain. Despite the strong first quarter, management maintains a conservative stance, though upside potential exists given the running start.

Idemitsu has voluntarily applied IFRS from this quarter, together with early adoption of IFRS 18. The change remaps the income statement, separating finance income/costs and equity-method earnings from operating profit, and introduces adjustments in pensions and leases. At transition (April 1, 2025), retained earnings decreased by ¥259.3 billion compared to JGAAP, mainly due to the removal of land revaluation surplus and cessation of goodwill amortization, with no impairment of underlying value. Year-on-year comparisons are against restated IFRS figures, ensuring consistency.