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Press Release

The"5th Consolidated Medium Term Management Plan
(FY2013-FY2017)"

March 7, 2013
Cosmo Oil Co., Ltd.
Public Relations Office

Cosmo Oil Group announces the "5th Consolidated Medium Term Management Plan (FY2013-FY2017)"which succeeds the current"4th Consolidated Medium Term Management Plan" running for a period of 3 years since FY2010.

The group positions this medium term management plan as "5 years to establish a solid business foothold for further expansion" and has set the following fundamental policies:

(1)Regain profitability in the refining & marketing sector

(2)Secure stable income from investments made during the previous medium term management plan

(3)Further strengthen alliances with IPIC and Hyundai Oilbank

(4)Further enhance CSR management

The company will increase its profitability by implementing 6 programs to achieve the fundamental policies stated above, and aim to promptly recover its financial stability and resume dividends. Safe and stable refinery operation will be especially focused and measures such as hardware and management/operation improvements will be made.

The company targets to become a "Vertically Integrated Global Energy Company" in the long run, expanding the business portfolio in oil E&P, refining & marketing, petrochemicals and renewable energy.

Ⅰ.Income and Financial Targets

(1)Assumptions and Income/Financial Targets

  FY2012 (Estimate) FY2017 (Target) Change
Dubai Crude 108.20 USD/bbl 100.00 USD/bbl -8.20 USD/bbl
Foreign Exchange 78.70 JPY/USD 90.00 JPY/USD 11.30 JPY/USD
Ordinary Income 38 bn JPY 112 bn JPY 74 bn JPY
Net Income -74 bn JPY 45 bn JPY 119 bn JPY
Net Assets 253.4 bn JPY 415.5 bn JPY 162.1 bn JPY
Equity Ratio 14.2% 21.5% 7.3 points improvement
Net D/E Ratio 2.9 (times) 1.6 (times) 1.3 points improvement

Domestic demand is assumed to decline at a rate of -2.5%/yr but in consideration of the company's marketing abilities, the decline rate of -2.1%/yr have been applied for creating the above targets.

(2)Business Portfolio in Terms of Ordinary Income for FY2017

  FY2017(Target) Percentage
Oil Exploration & Production 77.5 bn JPY 69%
Petroleum 18.0 bn JPY 16%
Petrochemicals 10.0 bn JPY 9%
Renewable Energy, others 6.5 bn JPY 6%
Ordinary Income Total 112.0 bn JPY 100%

Ⅱ.6 programs to Support the Fundamental Policies

Influence on ordinary income for FY2017

(1)Further Enhancement of Safe Refinery Operation and Stable Supply

+22 bn JPY
Hardware Aspects: Investing management resources in refinery facilities
  • Execute the Chiba Refinery Revival Plan
Software Aspects: Improvement of On-Site Forces and Legal Compliance
  • Rebuild the operating process using external consultants
  • Use the PDCA cycle extensively for safe, secure operations

(2)Extensive Rationalization Focusing mainly on the Supply Division

+23 bn JPY
Effect of closing the Sakaide Refinery, Staff downsizing, Review of general and administrative expenses, etc

(3)Strengthening the Retail Business

+6 bn JPY
  • Increasing income of "Cosmo Oil Sales Corp."
  • Securing additional source of income for service stations through auto-lease business, "B-cle Lease"
  • Increasing group sales volume and synergy contribution by "Sogo Energy Corp."(former Sojitz Energy)
  • Increasing income of petroleum and car care sales through strengthening alliance with the "Aeon Group"

(4)Petrochemicals Business

+12 bn JPY
Paraxylene (PX) production from new unit at "Hyundai Cosmo Petrochemical"
Keep the refinery more competitive by shifting more toward petrochemical production

(5)Oil Exploration & Production Business

+20 bn JPY
Production from "Hail Field" by "Abu Dhabi Oil Co., Ltd."
Diversify project portfolio by making effective use of the Company's good relations with oil producing countries

(6)Renewable Energy Business

+3 bn JPY
Increase in earnings at Eco Power Co., Ltd.
Growth in the wind power generation business

Decrease in ordinary income as of FY2017 due to sales volume decline and other reasons

-12 bn JPY

Ordinary Income target of 112 bn JPY at FY2017 is a 74 bn JPY increase compared to that of 38bn JPY at FY2012.

[PDCA cycle will be strictly made in order to fully implement the above 6 programs.]

Ⅲ.Cash Balance and Investment Plans

(1)Cash Balance (FY2013 FY2017)

Cash In 370 bn JPY Income from strategic investments made during previous medium term management plan.
Investments to be made within fund in hand.
Cash Out 280 bn JPY Investment in the growing oil E&P and in refineries for safe operation.
Free Cash Flow 90 bn JPY Reduction of debt level and dividend payout to be decided by considering the income level of each fiscal year.
Others 50 bn JPY Reduction of inventory, mainly by means of closing Sakaide Refinery (- 850 KKL).

Financial stability will be sought by slimming down the B/S through debt reduction and also by divestment of selected businesses.

(2)Investment Plan (FY2013 FY2017)

  • Largest investment to be made in the highly profitable oil E&P sector (45% of total investment)
  • Refinery investments will be focused on safe operation and stable supply. Special account will be set up for fundamental change of safety and profitability of Chiba Refinery named "Chiba Refinery Revival Plan"
Oil E&P: newly obtained Hail Field, others 127 bn JPY 45%
Refining & Marketing:Renewal of units, Chiba Revival Plan,
marketing/administration, others
122 bn JPY 44%
Renewable Energy, Overseas business, Etc.: Wind power, others 31 bn JPY 11%
Total Investment during FY2013 FY2017 280 bn JPY 100%

See the Presentation Material below.

Download File PDF (262KB)

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