Japan Refiners Q4: Cosmo & Idemitsu Earnings

Research evidence excerpt

Japan Refiners Q4: Cosmo & Idemitsu Earnings

ls) and hydrogen-station expansion.

On renewables, Cosmo notes expansion of onshore wind and withdrawal from the third round

of offshore wind bidding, alongside validation of storage business viability and broader green

electricity sales via corporate PPAs; operationally, it points to maintaining high refinery utilization

and advancing efficiency through digitalization (platform/APM/VR).

Middle East situation: The FY3/27 outlook is heavily shaped by heightened geopolitical risk in the

Middle East, which management identifies as the key swing factor for both supply stability and

earnings volatility. The Group assumes disruption centered on the Strait of Hormuz, incorporating

temporary production constraints through July, with a gradual normalization of crude production

and procurement from late summer onward. This results in a complex earnings profile: while

elevated crude prices initially support profitability, subsequent price normalization creates a

negative time-lag effect in refining, pressuring margins. At the same time, Cosmo expects higher

procurement and logistics costs due to alternative sourcing of crude and petroleum products,

alongside volume impacts in the Oil E&P segment. The company has responded operationally by

leveraging flexible imports, domestic crude reserves, and coordination with partners to maintain

supply continuity, but explicitly acknowledges that any change in geopolitical conditions could

materially impact crude pricing, FX, logistics, and ultimately group earnings, underscoring high near-

term uncertainty.

Opportunities and risks: The most immediate risk is geopolitical - management stresses that

Middle East-driven volatility can disrupt crude/product procurement and logistics and swing