Itochu Enex Q1 FY2027: Operating profit jumps 96%, net profit 2.6x

Itochu Enex announced its first-quarter FY2027 (April-June 2026) results with revenue of ¥238.847 billion (up 17.5% year-on-year), operating profit of ¥11.696 billion (up 96.0%), and net profit attributable to owners of the parent of ¥9.478 billion (up 159.5%), marking a sharp increase in both revenue and profit. The surge was mainly due to one-time gains from the sale of CS (multi-service service stations) in the Car Life business and the sale of an affiliate in the Industrial Business segment. In addition, higher selling prices for petroleum products amid rising crude oil prices and new contracts for marine fuel also boosted earnings. Meanwhile, the Power & Utilities business saw operating profit fall 26.0% to ¥1.914 billion due to narrower margins from higher procurement costs caused by rising resource prices, but the overall impact of one-time gains was so significant that quarterly net profit swelled to 2.6 times the year-earlier level.

Car Life business revenue stood at ¥149,652 million (up 5.0% YoY), with operating profit of ¥5,197 million, a dramatic turnaround from a profit of ¥1,412 million a year earlier. One-time gains from CS sales were the main driver, alongside steady petroleum sales. The number of CS locations declined by 12 from end-March to 1,484, aiding profitability. The auto dealer operation, Nissan Osaka Sales, saw new and used car sales volumes decline, but steady service revenue led to improved results. Industrial Business revenue surged 65.1% to ¥44,137 million, and operating profit jumped 148.8% to ¥3,500 million, boosted by higher product prices on rising crude and heavy oil term contracts for ocean-going vessels, plus a gain on the sale of an affiliate. Home Life Business revenue grew 13.4% to ¥19,630 million, and operating profit rose 121.8% to ¥896 million. The increase reflected pass-through of higher LP gas import costs and inventory valuation gains, though the number of direct LP gas customers slipped by about 1,000 to approximately 567,000. Power & Utilities revenue climbed 53.4% to ¥25,428 million, but operating profit fell 26.0% to ¥1,914 million. Margins were squeezed by surging resource procurement costs, while the absence of a one-time gain from solar power plants a year earlier also weighed on profits. Heat supply sales volume fell due to lower average temperatures reducing air conditioning demand.

The company left its full-year FY2027 consolidated forecasts unchanged from the initial announcement at the start of the period. No revenue forecast is disclosed, but operating profit is projected at ¥24.5 billion (up 1.5% from the previous year), pre-tax profit at ¥26.5 billion (up 1.9%), and net profit at ¥16.5 billion (up 2.8%). First-quarter progress rate versus the full-year operating profit forecast is 47.7%, but this reflects the large one-time gains in Q1, and a reversal is expected in the second half. The company aims to accumulate stable earnings across each business to achieve the full-year plan.

Total assets at end-June 2026 stood at ¥442.519 billion, down ¥10.171 billion from the previous fiscal year-end, mainly due to decreases in cash and trade receivables, along with a seasonal reduction in trade payables of ¥5.617 billion. Shareholders' equity increased on the back of net profit, lifting the equity ratio to 42.3% from 40.2% at end-March. The net debt-to-equity ratio remained at -0.07x, indicating a debt-free position in net terms. Operating cash flow was ¥4.069 billion (down ¥6.136 billion year-on-year), affected by a ¥7.565 billion outflow in working capital, but underlying operating cash flow rose to ¥11.634 billion. Investing activities consumed ¥3.321 billion, largely for property, plant and equipment, resulting in free cash flow of just ¥748 million. Financing activities saw a ¥7.35 billion outflow, including lease repayments and dividend payments. The annual dividend forecast for FY2027 is ¥68 per share (interim ¥34, year-end ¥34), up ¥2 from the previous year's ¥66, reflecting the company's commitment to shareholder returns.

Key risks identified by the company include heightened geopolitical risks, exchange rate fluctuations, and sharp swings in energy prices including crude oil. Uncertainty in the Middle East could push up resource procurement costs and pressure profitability. In the LP gas business, the customer base continues to shrink, and intensifying competition in the household energy market is a concern. Furthermore, the strong first-quarter results were heavily dependent on one-time gains, and the ability to generate sustainable profit growth remains a focus. The Power & Utilities business already faces the risk of margin compression from high resource costs, making it an urgent task to strengthen procurement strategies.