To Our Shareholders and Investors
I am pleased to report on our financial results for FY2011 ended March 31, 2012 and forecasts for FY2012 ending March 31, 2013.
Review on FY2011 (ended March 31, 2012)
In the crude oil market, the Dubai crude started at the $110/bbl level at the beginning of FY2011. After briefly dipping below $100/bbl amid the concerns about the Europe’s debt crisis in early October, it rose to the $120/bbl level by the end of the period against a backdrop of increasingly tense international situations concerning Iran and a global move of monetary easing. On a yearly average basis, it was about $110/bbl, an increase of about $25/bbl over the previous period.
In the foreign exchange market, the yen, trading at the ¥83/US$ level at the beginning of FY2011, reached the mid-¥85s to the dollar in April 2011 due to expectations for U.S. economy’s recovery. It hit the record high of the ¥75/US$ level in October amid deteriorating business confidence in U.S. economy and growing concerns over the Eurozone debt crisis. It continued to be traded below the ¥80/US$ level but pulled back to the ¥82/US$ level at the end of the period against a backdrop of decision by the Bank of Japan on additional monetary easing.
Under these circumstances, AOC Holdings Inc. (AOCHD) posted consolidated net sales amounting to ¥701.6 billion increased by 23% or ¥130.5 billion compared with the previous fiscal year. Despite an adverse effect of strong yen, the upstream sales stood at ¥129.3 billion up by ¥36.1 billion from a year earlier mainly due to an increase in crude oil prices. The Downstream sector’s total sales stood at ¥572.3 billion up by ¥94.3 billion yen from a year earlier mainly because of high selling prices on the market, despite a decrease in sales quantity due to a minor periodic maintenance.
Consolidated operating profit increased by 21% or ¥0.9 billion over the previous fiscal year, to ¥5.2 billion. While upstream operations posted an operating loss of ¥2.2 billion, downstream operations posted an operating profit of ¥7.5 billion reflecting an improvement in margins of some petroleum products.
Non-operating profits and losses got worse due mainly to decreased dividend income, despite contraction of foreign exchange losses in upstream operation. As a result, consolidated ordinary profit decreased by 14% or ¥0.2 billion from the previous fiscal year to ¥1.3 billion.
Eventually, AOCHD posted consolidated net profit amounting to ¥3.3 billion, due to reduction of deferred tax liabilities, which resulted from corporate tax rate reduction, and others.
We recognize returning profits to our shareholders and investors as a key issue for management. While ensuring internal reserves are built up adequately to facilitate medium- and long-term business development, our basic policy is to strive for the maintenance of stable dividends, after taking into account operating results and our funding balance. In line with this policy, we decided to pay dividends of ¥6 per share for the year ended March 31, 2012.
Consolidated business plan for FY2012
For the consolidated business plan for FY2012, we assume the Dubai crude oil price of $115 per barrel and the dollar/yen exchange rate of 80 yen to the dollar.
The basic policy of the business plan for FY2012 is as follows. In upstream operations, we will seek to bring development projects already being undertaken onto a commercial basis as early as possible and strive for an early recovery of our earnings performance through strengthening of the engineering and technical services business. In downstream operations, we will maintain stable sales of petroleum products to such core customers as Showa Shell Sekiyu K. K., TEPCO and Sumitomo Chemical, and keep steady and efficient operations of the Sodegaura Refinery.
Under the above-mentioned assumptions and policy, we expect net upstream sales for FY2012 to be ¥134.0 billion, an increase of ¥4.7 billion on a year-on-year basis, due to hikes of crude oil prices, and in downstream we expect net sales of ¥656.0 billion up ¥83.7 billion on a year-on-year basis, due to increases in prices and sales quantities of petroleum products.
While operating loss of ¥2.3 billion will be expected because of delay in development projects in upstream operation, operating profit in downstream operation will be ¥6.5 billion, a decrease of ¥1 billion on a year-on-year basis, affected by deterioration of margin for petroleum pitch due to high price of crude oil.
As a result, we expect net sales of ¥790.0 billion, operating profit of ¥4.2 billion, ordinary income of ¥1.5 billion and net profit of ¥2.2 billion for FY2012 in the consolidated basis.
As for the dividend payment for FY 2012 is concerned, we plan to pay an annual dividend of ¥6 per share based on the aforementioned basic policy of dividends.
In closing, we would like to ask for the continued support of our shareholders and investors for the future. With your kind understanding and continuous support, we can restore the group to stable growth and continue to increase our corporate value for a future to come.
May 2012
Fumio Sekiya,
President and Representing Director
