Idemitsu raises profit forecast on rising coal prices

On Tuesday, TOKYO Japan's second-biggest oil refiner Idemitsu Kosan Co increased its annual profit forecast by 70 per cent after reporting record first-quarter earnings, buoyed by higher prices of oil and thermal coal.

Like global energy companies, Idemitsu has benefited from stronger crude oil prices, which results in higher prices for refined products and increased inventory values.

Oil prices hovered above $100 per barrel in the April to June quarter after Western sanctions on Russia, a major producer, and as energy consumption returned to pre-pandemic levels.

Idemitsu predicts a net profit of record 280 billion yen $2.1 billion for the year to March 31, against its May estimate of 165 billion yen. According to a Refinitiv poll of nine analysts, it beat the mean forecast of 207 billion yen.

Yoshitaka Onuma, general manager of the finance department, told a news conference that a surging price of oil and coal and a weaker yen contributed to strong first quarter results and an upgrade of our full-year forecast.

Onuma said that Singapore's petroleum product margins led to higher earnings in exports, and that Idemitsu's export volume is expected to increase 53.5 per cent this year from a year ago, as well as higher operation rates at its refineries.

In the first quarter, run rates for refinery plants rose to 82 per cent, higher than the annual rate of 77 per cent last year.

Idemitsu lifted its annual assumption of Brent oil prices to $105.1 a barrel from its May estimate of $102.5, spot Australian thermal coal prices to $310.1 a tonne from $180, and the exchange rate to 133.6 yen per US dollar from 120 yen.

As Russian supply fell due to the Russia-Ukraine conflict, the global coal market has tightened, increasing demand for Australian coal as an alternative, Onuma said, soaring prices of natural gas in Europe has boosted demand for coal as a substitute.

He said that we don't think the tight supply situation will change anytime soon.