According to the company’s website press release on November 16, 2022, Idemitsu Kosan Co., Ltd. (“Idemitsu” or the “Company”) hereby announces that its board approved its medium-term management plan for fiscal years 2023-2025 (this “Medium-term Plan”) on the date thereof, as detailed below.
Vision for 2050 and Directionality
In its revised medium-term plan announced in May 2021, Idemitsu set forth its vision for 2030 to become “Your Reliable Partner for a Brighter Future.” In formulating this Medium-term Plan, the Company saw the need to consider the future of energy and its vision from a long-term perspective. The Company therefore established a new vision for 2050. Specifically, we aim to achieve “Shaping change” by implementing initiatives towards becoming “Your Reliable Partner for a Brighter Future” until 2030, and steadily realizing results from such initiatives and engaging in “social implementation” of such results through 2040 and 2050.
Amid accelerating global trends towards carbon neutrality (CN), Idemitsu believes it likely that energy systems and social infrastructures will under drastic changes by 2050. Various challenges including nonconsecutive technological innovation will arise in the process, and a leader to provide such technologies in a manner acceptable to society will become crucial.
Idemitsu aims to fulfill its “Responsibility to support people and their daily lives” and its “Responsibility to protect the global environment” by promoting social implementation of such advances by leveraging its know-how from providing stable energy supply and its close relationships with regional societies to resolve social challenges and adapt to changes in the environment going forward.
3 Business Domains and Core Businesses towards 2050
The Company defined 3 new business domains in this Medium-term Plan and plans to engage in social implementation in all 3 domains to evolve its business portfolio.
- Energy one step ahead (stable supply of diverse, eco-friendly CN energy)
Carbon-free ammonia, carbon-free hydrogen, transition of refineries and offices to CNX centers
- Diverse resource conservation/circulation solutions (CN solutions for industrial activities and general consumers)
Electrification solutions, bio/life solutions, ICT solutions, etc.
- Smart Yorozuya (Diverse energy and mobility centers that support regional lifestyles)
Super-miniature EVs, EV recharging/maintenance, MaaS, etc.
Roadmap to Carbon Neutrality in 2050
In order to achieve a carbon neutral society in 2050, Idemitsu believes that it must coordinate its efforts with various stakeholders to establish frameworks and systems aimed at achieving CN. The Company will aim to achieve CN from its own operations (Scope 1+2) by 2050. As an interim goal, the Company aims to reduce GHG emissions by about 7.3 million tons (46%) from 2013 to 2030, thereby establishing a clear roadmap to CN by 2050.
Management Targets and Basic Policies towards 2030
The year 2030 will be positioned as a transition period to achieve a partial transition towards CN in 2050 while continuing to fulfill the Company’s current responsibility to provide a stable supply of existing energy and materials. The Company will pursue further earnings growth and capital efficiency while aiming to reduce the profit contribution of the fossil fuels business to no more than 50%.
Basic Policies for 2030
In order to achieve its vision for 2030 to become “Your Reliable Partner for a Brighter Future,” Idemitsu will engage in the following initiatives based on the 3 basic policies set forth in the previous medium-term plan.
Convert the business portfolio through ROIC-based management Aim for 7% ROIC by enhancing capital efficiency and expanding new businesses that contribute to CN
Invest ¥1 trillion yen in business structure reforms by 2030
Maximize employee growth and motivation
Establish KPIs for human capital strategy and monitor progress
Evolve the business platform
Execute DX strategy, increase the proportion of performance-based compensation, and link compensation to both financial and non-financial targets in order to promote corporate governance
Medium-term Management Plan (FY2023-2025)
This Medium-term Plan is positioned as the execution phase towards the 2030 vision of becoming “your reliable partner for a brighter future." The Company aims to maximize profit from existing businesses while creating new revenue streams during the 3-year period.
Operating + Equity Income excluding Inventory Impact
With respect to income by segment in FY2025, the Company expects a ¥30 billion increase relative to FY2022 due to cost reductions in existing businesses and restructuring efforts, despite forecasting a ¥35 billion negative impact from reduced domestic fuel demand etc.
Investment Plan (3 years)
Idemitsu will allocate funds to business structure reforms during the Medium-term Plan period to achieve a transition of its business portfolio. The Company plans to invest a total of ¥290 billion in energy one step ahead (including SAF manufacturing equipment and to establish ammonia base), diverse resource conservation/circulation solutions (including commercialization of lithium solid electrolytes), and Smart Yorozuya (including manufacturing of super-miniature EVs). The Company plans to invest a cumulative total of ¥690 billion over 3 years, including investments to strengthen the business foundation of existing operations and for maintaining operations.
Shareholder Returns Policy
As in the current medium-term plan period, Idemitsu plans to return at least 50% of cumulative net income excluding inventory impact from FY2023-2025 to shareholders. The Company plans to provide stable basic dividends of ¥120 per share.
Cash Flow Allocation (3 years)
In addition to securing net income, Idemitsu will continue to engage in asset sales to achieve ¥910 billion in cash in FY2023-2025. The Company aims to limit investments in existing businesses within the scope of depreciation expenses and to use the remaining ¥510 billion in free cash flows for business structure reforms investments and to provide shareholder returns.
Disclaimer on Forward-looking Statements
Information on performance forecasts, strategy, and management policies, etc. stated herein other than historical facts are forward-looking statements which have been prepared by Idemitsu’s management based on currently available information. Many factors with potential risks and inherent uncertainties may affect actual performance, including macroeconomic trends, crude oil prices, trends in demand for petroleum products, market conditions, foreign exchange rates, and interest rates. As a result, please be advised that actual performance may differ significantly from forecasts, etc. due to fluctuations in such factors.
