Annual Report 2013

import costs, and in domestic sales prices. The Company engages in forward foreignexchange contracts to hedge this risk.The Company must undertake short-term borrowings from time to time to provideadditional working capital to facilitate crude oil imports. Long-term debt as of thefi scal year-end totaled ?489.3 billion, up ?32.5 billion, or 7.1%, year on year. Totalinterest-bearing debt increased ?121.7 billion, or 16.9%, to ?842.9 billion.In November 2012, Japan Credit Rating Agency, Ltd. (JCR) downgraded theCompany’s long-term issuer rating from BBB+ to BBB. This decision largely refl ectsJCR’s assessment that it will take some time before the Company can improve itsfi nancial structure that has deteriorated more than previously thought due in part todelays in the resumption of operations at the Chiba Refi nery, the full reversal ofdeferred tax assets, and the temporary increase in oil exploration and developmentrelatedinvestment.In December 2012, Moody’s Japan K.K. (Moody’s) decided to downgrade theCompany’s long-term issuer rating to Ba1 from Baa3. This rating action is a measureof Moody’s concern that any improvement in the Company’s balance sheet structurewill take much longer than expected, given the persistent erosion in profi tabilityattributable to the suspension of operations at the Chiba Refi nery.The Cosmo Oil Group plans strategic capital investments under its FifthConsolidated Medium-Term Management Plan. Moving forward, the Company willseek to fl exibly raise funds while monitoring market trends, and at the same timeendeavor to optimize its balance sheet, thereby reinforcing its fi nancial condition andensuring its ability to support strategic investments.Financial PositionAssetsAs of March 31, 2013, total assets amounted to ?1,743.5 billion, up ?68.4 billionfrom a year earlier. This was mainly due to a ?46.7 billion rise in current assets, to?967.1 billion. Major factors boosting current assets were increases in accountsreceivable and inventory assets, stemming from the upswing in crude oil prices duemainly to the weak yen.Liabilities and Net AssetsTotal liabilities as of the fi scal year-end stood at ?1,486.6 billion, up ?148.9 billionfrom a year earlier. This was mainly due to a ?72.3 billion rise in current liabilities, to?816.6 billion, stemming primarily from the increase in short-term loans payable, anda ?76.6 billion upswing in noncurrent liabilities, to ?669.9 billion, largely refl ectingthe higher balance of long-term loans payable.Net assets declined ?80.5 billion, to ?256.9 billion, owing mainly to the drop inretained earnings. The equity ratio was 13.2% as of the fi scal year-end.‘08 ‘09 ‘10 ‘11 ‘12Interest-bearing debt Net assets Debt-to-equity ratio0600300900(FY)(Billions of yen)‘08 ‘09 ‘10 ‘11 ‘120300200100400(FY)(Billions of yen)‘08 ‘09 ‘10 ‘11 ‘12