Japan's second-biggest oil refiner Idemitsu Kosan Co on Tuesday raised its annual profit forecast by 70% after reporting record first-quarter earnings, buoyed by higher prices of oil and thermal coal, said Hydrocarbonprocessing.
Like global energy companies, Idemitsu has benefited from stronger crude oil prices, which translate into higher prices for refined products and increased inventory values. Oil prices have hovered above USD100 per barrel in the April to June quarter on tight supplies following Western sanctions on Russia, a major producer, and as energy consumption returned to near pre-pandemic levels.
Idemitsu now predicts a net profit of record 280 billion yen (USD2.1 billion) for the year to March 31, against its May estimate of 165 billion yen. It also beat a mean forecast of 207 billion yen, according to a Refinitiv poll of nine analysts. "Surging prices of oil and coal and a weaker yen contributed to strong first-quarter results and an upgrade of our full-year forecast," Yoshitaka Onuma, general manager of the finance department, told a news conference.
Its net profit for the April-to-June first quarter nearly doubled to 245 billion yen. "Robust petroleum product margins in Singapore also led to higher earnings in exports," Onuma said, adding Idemitsu's export volume is expected to increase 53.5% this year from a year earlier, also helped by higher operation rates at its refineries.
Refinery run rates came to 82% in the first-quarter, above an annual rate of 77% last year. Idemitsu lifted its annual assumption of Brent oil prices to USD105.1 a barrel from its May estimate of USD102.5, spot Australian thermal coal prices to USD310.1 a tonne from USD180, and the yen's exchange rate to 133.6 yen per U.S. dollar from 120 yen.
"The global coal market has tightened as Russian supply has fallen amid the Russia-Ukraine conflict, boosting demand for Australian coal as an alternative," Onuma said, adding soaring prices of natural gas in Europe had also boosted coal demand as substitute.
As MRC wrote before, in early February, Idemitsu Kosan had no plan to give fresh financial aid to Vietnam's Nghi Son Refinery and Petrochemical (NSRP), which ha cut production to 80% of capacity due to a funding problem. Vietnam's largest refinery avoided a lengthy shutdown that month after a major shareholder secured short-term funding following a disagreement between shareholders about financing for crude, having earlier cut its run rate.
We remind that in October 2018, Idemitsu Kosan finalized a deal to buy out Showa Shell Sekiyu through a share swap in a deal worth about USD5.6 billion.
mrchub.com