Annual Report 2013

Amid the steady decline in demand for petroleum products in Japan, you have identifi edstrengthening the retail business as a third program in efforts to regain profi tability in theretail and marketing sector. Can you elaborate further on this program? Q.08The Cosmo Oil Group has worked diligently to reform its earnings structure. In order to address the decline indemand for petroleum products, we have stepped up efforts to move away from our conventional focus on fuel oilmargins to place greater emphasis on total car life, a fi eld which is estimated at ?27 trillion. Of this total, the carcare market, which comprises components and after-sales service and excludes automobile sales and insurance,accounts for around ?10 trillion with service stations representing less than 10%. In order to lift this share, we willfocus our attention on service stations that put forward car life value propositions. By transforming our businessmodel, we will better ensure our standing as a viable going concern.Particular attention will be paid to aggressively promoting the auto-leasing activities of Cosmo B-cle Lease. Sinceadopting a nationwide development approach in April 2011, we have achieved signifi cant progress. On acumulative basis, the number of auto-leasing contracts surpassed 5,000 as of March 31, 2013, up from 3,000four months earlier. With an annual target of 10,000 vehicles in fi scal 2017, we will strive to further expand thisbusiness going forward.In addition, we will bolster ties with the AEON Group* and pursue partnerships in different sectors in order topromote the reciprocal transfer of customers while increasing our customer base. In this manner, every effort willbe made to maximize synergy effects.In January 2013, we included Sojitz Energy Corporation in our scope of consolidation as a subsidiary company,boasting annual oil marketing capabilities totaling two million kiloliters. Operations were re-launched under thenew name, Sogo Energy Corporation, in February 2013. By combining the vast procurement resources, customerbase, personnel, and know-how of Sojitz Energy Corporation with the proven brand prowess of our marketingbusiness in Japan, we are confi dent of our ability to reinforce our retail presence.The positive impact of these endeavors on ordinary income in fi scal 2017 is estimated atapproximately ?7 billion compared with fi scal 2012.*Japan’s largest shopping mall developer and operatorA.0802,0004,0006,0008,00010,000‘11 ‘12 ‘13 Target ‘17 Target(Units)1,2873,7165,00010,000The Number of Cosmo B-cle Lease Annual Contracts