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Message from the Management

Message from the Management

Shunichi Kito, Representative Director & Chief Executive Officer

I would like to take this opportunity to express my appreciation to our shareholders and investors for their loyal support.

Introduction

On April 1, 2018, Representative Director and Chief Executive Officer Takashi Tsukioka became Chairman and Representative Director and Shunichi Kito assumed the duties of Representative Director and Chief Executive Officer. Under this new management structure, we will step up efforts toward the further development of the Idemitsu Group, and in doing so, we ask our shareholders and investors for their continued support.

Consolidated Financial Results for Fiscal 2017

In fiscal 2017, Idemitsu posted an increase in sales and profits. Idemitsu recorded consolidated net sales of ¥3,730.7 billion (up ¥540.3 billion from the previous fiscal year), operating income of ¥201.3 billion (up ¥66.1 billion), ordinary income of ¥226.3 billion (up ¥86.3 billion) and net income attributable to owners of the parent of ¥162.3 billion (up ¥74.1 billion). This marks the second consecutive year of record-high profits.

Growth in profits was driven by increased profits in the Resources segment due to higher prices for crude oil and coal; a rise in profits in the Petroleum Products segment, as margins on petroleum products in the domestic market remained at a high level throughout the year; and increased profits from equity in earnings of Showa Shell Sekiyu K.K. For further information on financial results, please refer toConsolidated Financial Results for the Fiscal Year 2017 and Presentation on Results for FY2017 on our website.

Earnings Forecast for Fiscal 2018

Regarding consolidated results for fiscal 2018, we forecast consolidated net sales of ¥3,900.0 billion (up ¥169.3 billion from fiscal 2017), operating income of ¥154.0 billion (down ¥47.3 billion), ordinary income of ¥170.0 billion (down ¥56.3 billion), and net income attributable to owners of the parent of ¥103.0 billion (down ¥59.3 billion). This forecast assumes the average price of Dubai crude oil during the year will be $65/bbl and the foreign exchange rate will be ¥110/US$1.

Despite an expected decrease in inventory impact in the Petroleum Products segment and lower profits in the Petrochemical Products segment and the Resources segment due to market factors, we expect to maintain net income attributable to owners of the parent at the ¥100.0 billion level. Meanwhile, the Ngi Son Refinery and Petrochemical Complex in Vietnam commenced product shipments in May 2018 and aims for full-capacity and stable operations in the future.

Dividends

Fiscal year-end cash dividends per share for fiscal 2017 were ¥40 in accordance with our previous forecast. For fiscal 2017, Idemitsu paid annual cash dividends per share of ¥80. The Company regards the return of profits to shareholders as an important management issue and will strive to pay stable dividends to shareholders while giving due consideration to the balance among investments, finance and business results. In view of expected solid business results, in fiscal 2018 Idemitsu plans to increase annual cash dividends per share from fiscal 2017 by ¥20 to ¥100.

Fifth Consolidated Medium-term Management Plan

Idemitsu formulated the Fifth Consolidated Medium-term Management Plan that runs from fiscal 2018 to fiscal 2020 and announced this plan in March 2018.

Under the Fifth Consolidated Medium-term Management Plan, Idemitsu has positioned 2030 as a milestone with a "more certain and more readily imaginable future." Idemitsu will build a corporate structure capable of responding flexibly to environmental changes as it works to address key issues based on the assumption that global warming and other problems will worsen as global energy demand expands. For details of the management plan, please refer to Fifth Consolidated Medium-term Management Plan (FY2018–FY2020) on our website.

As there is still no clear schedule for the business integration with Showa Shell Sekiyu K.K, this business integration is not reflected in the management plan. Nevertheless, we will work to quickly realize synergies from the alliance between the two companies.

Since its foundation, Idemitsu has been practicing the concept of "respect for human beings" in the conduct of business, and has sought to be a company that meets the high expectations of society and earns its trust. Under this philosophy, Idemitsu will continue to contribute to the development of a society that maintains harmony between the economy and the environment. In doing so, I ask Idemitsu's shareholders and investors for their continued understanding and support.


Shunichi Kito

Shunichi Kito
Representative Director & Chief Executive Officer
Idemitsu Kosan Co.,Ltd.

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