ENEX REPORT 2019

ENEX REPORT 2019
Itochu Enex Group Integrated Reporthttps://www.itcenex.com/english/

Itochu Enex Group Integrated Report

Published August 2019

The Best Partner forLife and Society– with Energy, with the Car, with the Home –For more than half a century, the Itochu Enex
Group has supplied petroleum, gas and other vital
forms of energy, improving people’s lives as “thebest partner for life and society.” Through a broad
lineup of services that anticipate future needs, we
endeavor to be an energy trading company that
supports local communities.

ENEX REPORT 20191

Corporate Vision

Contents

The fundamental stance, morals, and values that the Itochu Enex Group follows when carrying out business activities
are defined as follows. These concepts form the basis for business-related decision making, and are the basic
policies for the execution of the Group’s business activities and what direction the Group will move in.
1

Corporate Philosophy

2

The Best Partner for Life and Society
For more than half a century, the Itochu Enex Group hasdelivered energy to customers across Japan, chiefly in the formof petroleum products and LP gas. Regardless of the changes
to life and society, we continue to deliver the value needed byour customers as their stalwart partner. Moreover, we willcontribute to the realization of a prosperous society and life,and hope to be a company that regional customers choose.
The Group’s Corporate Philosophy embodies these ideas.

Management Team ..................................................... 44

Code of Conduct

Our History and Business Origins .............................. 4

Discussion by Three Outside Officers .............. 46

Be EthicalA Unique Business Foundation ................................... 6

Corporate Governance............................................. 48

Value Creation Model....................................................... 8

Fair and Proactive Disclosure ................................ 53

Financial and Non-Financial Highlights ............... 10

Business Execution and Internal Control ........ 54

In 1962, soon after its founding, the Company established its
Guiding Precepts. The spirit of those precepts is perpetuated in
the form of the Group’s Code of Conduct, announced in 2001.
“Be Ethical” is the corporate ethos that guides the Itochu Enex
Group in acting with reliability and sincerity in its dealings with all
stakeholders. Furthermore, it calls for all members of the Itochu Enex
Group to perform their day-to-day duties conscious of the need togg the exercise of creativity and ingenuity,
generate new value throughand the need to maintain transpa
transparency and integrity in businesses
and activities while making mean
meaningful contributions to society.
Guiding Precepts (established in 1962)1

1. Strive to incorpo
incorporate the principles of reliability anddaily duties.
sincerity in your dCorporate
Philosophy
2

Code of Conduct

Sound Business Activities

Corporate Vision ................................................................. 2(Reliability and sincerity, creativity and ingenuity,transparency and integrity)—with Energy, with the Car, with the Home—

Overview of Value Creation

Growth Strategies

Financial and Data Section

Review of Management Strategies to Date ...... 12

Financial Analysis ............................................................. 58

Summary of the New Medium-TermBusiness Plan ...................................................................... 14

11-Year Summary of Key Financial Data ............. 60
Environmental Data ........................................................ 62

through creativity and2. Streamline businessbusin
ingenuity, and alw
always keep moving forward.

Message from the President ...................................... 15

transparency and integrity as your creed, be
3. With transparenc
cordial and work to improve the well-being andprosperity of eve
everyone affiliated with the Company.

Message from the CFO ................................................ 22

Consolidated Financial Statements ....................... 64

Company Information ................................................ 132

Specific Value Creation Strategies

3

Action Guidelines
Strategy by Segment ..................................................... 24
4Home-Life Division...................................................... 25

Fields of BusinessLife & Industrial Energy Division.......................... 28
3

Action Guidelines

4

Fields of Business

Declaration of the Group
Code of Conduct

Energy for all applications, whether as a key
component of social infrastructure or as a meansof nurturing people and enriching their lives

The Company declares that all officers and employees of theCompany and its Group companies (including employees on
temporary assignments to and from the Company, contractbased employees, temporary staff, and part-time employees)
will always be conscious of the Code of Conduct’s requirement
to “Be Ethical” while engaging in their day-to-day duties as
responsible corporate citizens and members of society. Eachindividual officer and employee signs a “personal declaration”
as a promise to stakeholders, comprising their own guidelines
for conduct in performing their day-to-day duties.

To successfully be “the best partner for life and society,” asoutlined in our Corporate Philosophy, it will be necessary tofurther spread the prosperity and convenience that energy
provides throughout society and people’s lives. The Groupwants to not only provide energy that is a key component ofsocial infrastructure, but also hopes to be a source ofinspiration for our customers. The Group intends to continue
providing a variety of products and services that support theaffluence, comfort, and convenience that are suitable in thisday and age.

Power & Utility Division ............................................ 31

Editorial Policy

Enex Report 2019 is an integrated report covering financial
and non-financial information, including corporate social
responsibility (CSR) activities, prepared with reference tovarious guidelines. Its purpose is to communicate the
Itochu Enex Group’s business activities and strategies
implemented in pursuit of sustained growth.

Period Covered
April 1, 2018–March 31, 2019
Note: Includes certain activities that fall outside this period.

Organizations Covered

Foundations for Value Creation

Itochu Enex Co., Ltd. and Itochu Enex Group companies

Publication Date
August 2019

Itochu Enex Group’s Approach to
ESG Issues............................................................................ 34
Reducing Environmental Impact
Environmental Management ................................. 36

Note on Forward-Looking Statements
Forward-looking statements in this report, including
outlooks for future Group business performance, arebased on the information available at the time of
publication. Actual results may differ considerably fromprojections for various reasons, including fluctuatingexchange rates, market trends, and economic conditions.

Creating Diverse Value

2

Origin of the Company Name

Meaning of the Enex MarkIn July 2001, as it marked its 40th anniversary, Itochu Fuel Corporation
changed its name to Itochu Enex Co., Ltd.
The first “E” in “ENEX” represents the “E” in “energy,” “endconsumers” (customers) and “ecology” (the environment), while “NEX”
alludes to “next,” symbolizing the next generation and the future.

The Enex Mark was introduced in October 2005 as the new corporate
logo. The red background symbolizes the sun and the blue circle, theEarth. The letter “e” overlaps both to connect them,and it stands for “energy” and “eco,” as well as theimportance of the “end-consumer.” In this way, the logo
design expresses people-to-people communication andcommunication between people and society.

ENEX REPORT 2019

Human Resources ........................................................ 38

Please direct comments or feedback to:
Corporate Communications Office

Employees Supported
by a Variety of Programs .......................................... 41

Itochu Enex Co., Ltd.
E-mail: enex_irpr@itcenex.com
Tel: +81-3-4233-8003

Contributing to a Sustainable Society ............. 42

ENEX REPORT 20193

Our History and Business Origins

2019
2016
2014

Viewing changes in the social environment as opportunities to deploy the Group’s strengths, the Itochu Enex Grouphas boldly tackled new challenges. While embarking on changes to our business model centered on the core
petroleum and gas businesses, we have restructured our earnings foundation through means such as entering theelectric power retail business and strengthening the mobility business, which enriches community infrastructure.
Going forward, we will increase synergy among our divisions as we strive to become an energy trading company that
supports local communities.

Invested and beganparticipation in LP gas sales
business in the Philippines2012
Acquired shares of Osaka Car
Life Group Co., Ltd. to enter the
car dealership business

1998

1974

Acquired shares of Tokyo Toshi
Service Co., Ltd. and entered theheat supply business

5.6
3.9

11.0

11.6

7.5

7.1

Established Itochu Industrial
Gas Co., Ltd. and strengthened
the industrial gas business

Completed Sasebo Asphalt
Terminal and made full-scale
entry into the asphalt business

Expanded LP gas secondary
terminal facilities at Nagasaki
Oil Terminal

10.4

Acquired shares of Tainai Wind
Farm Co., Ltd. to expand companyowned energy sources

1968

1961

Enex Infrastructure Investment
Corporation listed on
infrastructure fund market

2013

5.5

3.9

Establishment of Itochu
Fuel Corporation

Net proﬁt attributable to
Itochu Enex’s shareholders* (Billions of yen)
* Referred to as net profit in some parts of this report

1961

1970

1980

1990

2000

−4.1

2010

2016

Changes in Our Businesses

External environment
and Itochu Enex
Group initiatives

1961 Founded as a fuel trading company

2010 Becoming an energy trading company

An energy trading company that supports local communities

With global warming an issue of concern worldwide, development of new energy sources also gained momentum
While Japan went through high economic growth and periods of slow growth, such as during the oilcrises and the post-bubble era, we consistently focused on the stable supply of fuel. As a result, we
expanded the number of sales companies to supply energy to a wider range of customers. We also
actively developed disaster response stations that serve as regional safety and security infrastructure.

・Rising environmental awareness due todepletion of energy resources
・Population decline
・Expansion of regional disparities
・Diversifying lifestyle needs

in Japan. We entered the electric power retail business and are working toward a low-carbon society based on thebest mix of energy.
As demand for oil falls due to the declining population, increased energy efficiency and the shift toward electric
power, we are leveraging our customer base to unify contact with local customers. We are creating various services
suited to each region, and will continue to strive to be the company of choice for communities and customers.

Petroleum・Jan. 1961 Establishment of Itochu Fuel Corporation
・May 1965 Acquired shares of Oita Kyuseki Hanbai Co., Ltd. (nowconsolidated subsidiary Kyushu Energy Co., Ltd.)・Oct. 2005 Took over business of Kokura Enterprise Co., Ltd. andcommenced operations
・Sep. 2008 Acquired petroleum sales business of Kohnan Corporation
and additional shares of Kohnan Fleet Co., Ltd. (nowconsolidated subsidiary Enex Fleet Co., Ltd.)・Jan. 2012 Invested in IP&E Palau, Inc. in the Republic of Palau・Dec. 2015 Participated in domestically produced bio jet diesel fuel trial
program led by Euglena Co., Ltd.

LP Gas・Mar. 1970 Acquired shares of Unoshima Sansuiso K.K. (nowconsolidated subsidiary Itochu Industrial Gas Co., Ltd.)・Mar. 2001 Took over city gas supply service in Nakatsu City,
Oita Prefecture
・Apr. 2007 Established Ecore Co., Ltd. through the merger of
Itochu Enex Home-Life Kyushu and Idex Gas K.K.

・Oct. 2015 Established PT. ITC Enex Indonesia
・May 2016 Invested and began participation in LP gas sales businessin the Philippines

・Oct. 2017 Established Enearc Co., Ltd.
・Oct. 2018 Merged Itochu Enex Home-Life Hokkaido Co., Ltd. andNissho Propane Sekiyu Co., Ltd.
・Apr. 2019 Established Itochu Enex Home-Life Shikoku Co., Ltd.

Electric
Power・Oct. 2010 Launched electric power retail business・Mar. 2011 Acquired shares of JEN Holdings Co., Ltd. toenter the electricity and steam supply businessfor factories

Mobility

42018 (FY)

Note: Figures are non-consolidated results through FY1998 and consolidated
results since FY1999. Figures for net profit on this page are based on
International Financial Reporting Standards (IFRS) from FY2013.

History of Itochu Enex Group・Expansion of fuel demand due to rapid
economic growth・Calls for stable energy supply in response
to 1970s oil crises
・Rising awareness of the need for disaster
preparedness measures

2017

ENEX REPORT 2019・Feb. 2015 Established Oji-Itochu Enex Power Retailing Co., Ltd., a joint
venture with Oji Green Resources Co., Ltd., a subsidiary of Oji
Holdings Corporation
・Apr. 2016 Entered home energy sales business・Feb. 2019 Enex Infrastructure Investment Corporation listed on infrastructure
fund market

・May 2014 Acquired shares of Osaka Car Life Group Co., Ltd.
to enter the car dealership business

ENEX REPORT 20195

A Unique Business Foundation
The Itochu Enex Group has built a strong and stable business foundation by supplying petroleum and gas, which areessential resources in society and daily life. Waves of change are sweeping through our operating environment.
Nevertheless, we continue to create new value by maximizing synergy with the electric power and mobility businesses.

Notes: 1. Total electric power sales of the Power & Utility Division (FY2018 wholesale and retail sales)
2. Autogas stations that supply LP gas to LP gas vehicles (taxis and buses)
3. Vehicles undergoing multiple maintenance procedures (e.g. inspection and panel work) are counted once per procedure
4. Car-Life Stations are service stations that offer multiple services, as proposed by the Itochu Enex Group
5. AdBlue is a high-grade urea solution used in selective catalytic reduction systems, which are used for detoxifying nitrogen oxides (NOx) in diesel vehicle exhaustStrengths in Electric PowerPower plants

5 plants(including 3 renewable energy plants)

Electric power supply contracts
for households and commercial
facilities

118,600

Strengths in Mobility

Districts supplied with heat in
Kanto region

Annual new car sales volume

18 districts

Approx.

(most in the industry)

New

Electricity sales1

Approx.

30,000vehiclesBusinesses

Dealership network of Nissan
Osaka Sales Co., Ltd.

4,700 GWh

117 dealerships(9th among new industry participants)

Capacity of Itochu Enex Grouppower generation facilities

Annual pre-owned car sales
volumeApprox.

25,000vehiclesAnnual number of vehicles inmaintenance service centers3

Approx.

600,000

vehiclesRelated Group Companies

183 MW• Osaka Car Life Group Co., Ltd.
• Nissan Osaka Sales Co., Ltd.

Related Group Companies• Enex Electric Power Co., Ltd.
• Enex Life Service Co., Ltd.
• Enex Asset Management Co., Ltd. .

• Tokyo Toshi Service Co., Ltd.
• Oji-Itochu Enex Power Retailing Co., Ltd

Electric Power

Mobility

Service stations offering Carlife
Stadium car rental service

Approx.

Strengths in LP Gas

LP GasAutogas stations248 stations
LP gas sales outlets

Approx.

2,700

6

ENEX REPORT 2019

Number of affiliated
Car-Life Stations4

1.5 million customers

Approx.

(of which, 550,000 are direct LP gas
supply customers)

1,760

Number of industrial energy
supply facilities

Approx.

3,500

Industrial gas filling stations

Domestic market shareof AdBlue5

Domestic market share ofasphalt sales

5 stations

28 %

20 %

(20 sales outlets)(12 storage facilities)

Related Group Companies• Itochu Enex Home-Life Hokkaido Co., Ltd.
• Itochu Enex Home-Life Nishi-Nihon Co., Ltd.
• Ecore Co., Ltd.
• Itochu Industrial Gas Co., Ltd.

Strengths in Petroleum

Petroleum

LP gas and city gas supply contracts

400• Itochu Enex Home-Life Tohoku Co., Ltd.
• Itochu Enex Home-Life Shikoku Co., Ltd.
• Enearc Co., Ltd.
• PT. ITC Enex Indonesia

Core

Businesses

Related Group Companies• Enex Fleet Co., Ltd.
• Enexauto Co., Ltd.
• Enex Petroleum Sales Higashi-Nihon Co., Ltd. • Enex Petroleum Sales Nishi-Nihon Co., Ltd.
• Kyushu Energy Co., Ltd.
• Kokura Enterprise Energy Co., Ltd.

ENEX REPORT 20197

Value Creation Model
The Itochu Enex Group is “the best partner for life and society.” Based on an accurate grasp of changes in the external
environment and in customer needs, we are building a value creation model that incorporates the Itochu Enex Group’s
core values, which center on our people. Moreover, through the “Moving” series of medium-term business plans, whichstarted in 2014, we are branching out from our core business into new businesses, and will make a further leap forward.

Core Values

External Environment

●

●

●
●

Intellectual
CapitalTechnology andexpertise

Flexible andagile corporate
cultureDecreased domestic energy demand due topopulation decline
Intensifying competition due to liberalizationof domestic energy retail markets
Rising awareness of global environmental issues
Increased frequency of large-scale natural
disasters in Japan

Financial Capital

Human Capital

Long-term issuer rating

Employees●●

Natural CapitalWind, hydro,
solar and biologicalpower sources

Synergy with
ITOCHU Corporation

ENEX REPORT 2019

Petroleum

Asphalt
AdBlue● Industrial gas● Peripheral equipment● Marine fuel● Trading in petroleum
products●

Power generation facilities,
heat supply facilities,
industrial gas production
facilities, etc.

LP Gas

Peripheral Businesses●

Manufacturing
CapitalMobility

Sales regions

Japan (all regions)and four othercountries

Sustainablebusiness model

Stable financial
foundation

Electric PowerThe Value We Offer

A society in which everyone
can lead safe andsecure lives

Social and
Relationship Capital

5,619Japan Credit Rating
Agency, Ltd.
August 29, 20198

Expansion from stable core businesses
into peripheral businesses

Localized response
capabilities suited toregional needs

Human
Resources
A+

Business Activities

People want safe and secure living
environments

Heating supply
Renewable energy● Environmental
recycling business● Overseas business

●

●

●

●

Becoming the best
partner for lifeand society
A society full of happinessand vitality

Executing the Moving Seriesof Medium-Term Business Plans

For richer and varied lifestyles
Diversification in selection criteria for
products and services
Expanding ethical consumption* market

E

S

G

Reducing
environmental
impact(with theenvironment)

Creating
diverse value(with society)Sound businessactivities(governance)

Pages 38–43

Pages 44–56* Consumption based on ethical consideration of the effect that
products and services have on the environment or society

Changing Customer Needs

Pages 36–37

ENEX REPORT 20199

Financial and Non-Financial Highlights

Financial Highlights
Profit from Operating Activities,
Net Profit Attributable to Itochu Enex’s Shareholders

ROE, ROA(Billions of yen)(%)

¥17.9 billion

19.7
17.2

16.4

10.0

(Yen, %)

(Yen)

41.0 %

45.2

9.8

36.3

7.5

13.1
10.4

Basic Earnings per Share Attributable to
Itochu Enex’s Shareholders

41.0¥11.6 billion
11.0

9.7%

Annual Dividends per Share, Dividend Payout Ratio

5.7

5.5

3.2

3.0

2016

2017

2.4

92.1

¥42

40

97.6

66.1

32

3.1%

7.5

34.8

¥102.4

48.7
22

24

1.7

2014

2015

2016

2017

2018

(FY)

Proﬁt from operating activities
Net proﬁt attributable to Itochu Enex’s shareholders

2014
ROE

2015

2018

(FY)

2014

ROA

2015

Annual dividends per share

2016

2017

2018

2014

(FY)

2015

2016

2017

2018

(FY)

Dividend payout ratio

Non-Financial Highlights
Total Shareholder Return

Cash Flows from Operating Activities,
Cash Flows from Investing Activities(%)(Billions of yen)

Consolidated Employees,
Profit from Operating Activities per Employee(Persons, millions of yen)

Employees by Gender (Non-Consolidated),
Female Representation

3.30(Persons, %)

22%

3.06

188.4
170.8

160.0

177.4％

34.3¥25.4 billion

30.3
24.2

6,034

-16.7

-20.4

2014

2015

2016

2017

2018

(FY)

2014

2015

-14.7

2016

-18.5

2017

6,096

5,958

5,619

5,613

84

87

95

410

409

415

382

(FY)

2014

2015

2016

2017

2018

2016

2017

2014

(FY)

Male

Consolidated employees
Proﬁt from operating activities per employee

2015
FemaleShareholders’ Equity, Equity-to-Total Assets Ratio

Net Interest-Bearing Debt, Net DER

Percentage of Paid Vacation Days Taken

CO2 Emissions(Billions of yen, %)(Billions of yen, times)(%)(t-CO2)

33.1
29.6

97.4

100.5

32.7%
31.5

108.5

30.3

84.0 %

0.25

2014

2015

¥122.3 billion

116.1

ENEX REPORT 2019

2016

2017

Equity-to-total assets ratio

107
375

98

2018

0.17
24.8

0.17

2018

(FY)

2014

2015

Net interest-bearing debt

0.17

36,59818,844

18.3

2016

20.1

2017

73.0

0.13 times¥15.4 billion

2018

(FY)

(FY)

Female representation

80.5

16.8

Shareholders’ equity

19

20-¥13.4 billion

2018

Cash ﬂows from operating activities
Cash ﬂows from investing activities

10

18

17

2.17

17.8

168.3

¥3.18 million

2.69

t-CO 2

26,949

46.7

2014

2015

23,466

21,457

49.3

2016

2017

2018

(FY)

2014

2015

2016

2017

2018

(FY)

Net DERENEX REPORT 201911

Review of Management Strategies to Date
The first medium-to-long-term business plan the Itochu Enex Group announced publicly was the medium-term visionin March 2004. Later, with the goal of developing the business capabilities necessary for responding flexibly todramatic changes, the Group announced and implemented a succession of medium-term plans starting with the
management strategy “Core & Synergy 2010.” Since 2014, we have carried out the “Moving” series of plans, and areaccelerating our transition from strengthening our business foundation to make the next leap forward.

Extraordinary Change

Accelerating Change and Growth
20142015−20162017−2018

Moving 2016: Sowing seeds for tomorrow

Moving 2018: Connecting to the future

Prologue to Change

2008−20102004−2008

Medium-Term Vision
Creation 20082011−2013

Core & Synergy 2013
Core & Synergy 2010

Moving 2014

Phase II: Pursuit of a New Stagethrough Reform

External
Environment

Priority
Initiatives

Basic
Policy❶ Transforming business models for
petroleum and gas

Become an integrated energy
company with three focuses:
energy, the car, and the home.

・Promotion of organizational
structure reform・Introduction of businessdivision system
・Reduction of the number of
Directors and Executive Officers
・Integration and streamlining oforganization
・Reduction of the number ofconsolidated companies

ENEX REPORT 2019

Connecting tofuture growth❷ Creating new businesses to secure
new revenue sources❸ Achieving further growth in existing
businesses through M&A activities❶ Increasing earning power❹ Improving infrastructure andnetworking in the power andutilities businesses❸ Strengthening organizational power
and key strengths❷ Sowing the seeds for long-term growth❺ Developing and sowing the seeds ofoverseas businesses

Reforming the revenue baseConnecting people andfunctions of the Group
Reforming the organizational base

❻ Strengthening the Enex DNA
・Entry into the home energy sales business・Establishment of Fuel Cell Solar &Electric Vehicle Business Department
・Start of HEMS development
・Initiatives for next-generation
Car-Life Stations
・Initiatives for overseas expansion(introduction of overseas language
training program)・Upgrading of petroleum productlogistics functions
・Expansion of power generation
facilities (startup of thermal power
and megasolar power plants)
・Start of heat supply business・Support for disaster recovery

・Shift to electric power in moves toward a low-carbon society
・Introduction of new pricing system and consolidation of refining facilities as a result of reorganization of oil companies
・Decrease in demand for petroleum products due to revision of the Strategic Energy Plan in 2010
・Reexamination of energy supply functions as part of disaster response measures

Entered petroleum product import, wholesale and direct sales
business in the Pacific region by acquiring a 25% stake in IP&E
Palau, Inc.

12

Foster Group unity to develop global
businesses horizontally and vertically,strengthen core businesses and createsynergies to double earnings.

Mobilize the wealth of networks andassets developed over our first 50
years of business to increase earnings
while strengthening and upgrading ourcore businesses, developing demandcreating businesses from the consumer’s
standpoint, and realizing sustained growthin tandem with local communities as aprovider of “best mix” energy solutions.

Acquired shares of Tokyo Toshi Service Co., Ltd. and entered
the heat supply business

Acquired shares of Tainai Wind Farm Co., Ltd. and establishedelectric power business headquarters

・Entry into car dealership business(acquired shares of Osaka Car
Life Group Co., Ltd.)・Strengthening of electricity sales(jointly established electric power sales
company with Oji Group)

・Entry into home energy sales business・Expansion into overseas markets(Indonesia, Philippines)
・Launch of Enex Early Bird working
style reforms

・Stronger collaboration with partners
in other industries
・Consolidation of Group companies
・Expansion of environmental businesses
・Reinforcement of renewable energy
business incorporating financial solutions
・Introduction of new overseas
training program

・Decreasing demand for petroleum products and LP gas in Japan・Intensifying competition due to restructuring of domestic energy industry (electric power, gas, petroleum)・Rapid economic growth in emerging countries, primarily in Asia
・Full-scale liberalization of domestic electricity and city gas retail markets

Acquired shares of Osaka Car Life Group Co., Ltd. and entered
the car dealership businessEntered LP gas sales business in the Philippines throughestablishment of Creasia Energy Holdings, Inc.

Cooperated on large-size LNG truck trial operations targetinga reduction in environmental impact

ENEX REPORT 201913

Summary of the New Medium-Term Business Plan

Message from the President

Concept
During the period of Moving 2018: Connecting to
the future, we established a structure capable ofconsistently generating net profit of ¥10 billion.
In the two years from 2019 through 2020, thefoundations we have linked together will be theMoving 2020: Horizons

We will accelerate growth bycreating new value without
being bound by existing
business models andpreconceived ideas.

springboard for a major leap forward.

Kenji Okada
Representative Director,
President and Chief Executive Ofﬁcer

Basic Policy
Promotion of Growth Strategies

1

Maintaining anddeepening therevenue baseEvolution of the Organizational Base
Make all connections closer

Deepen relationships withcustomers and communities
・ Ensure appropriate allocation ofpeople, assets and capital・ Create Group synergy
・ Make more effective use ofcustomer base1

Strengthening Groupmanagement

・ Enhance management of Group
companies
・ Bolster the risk management system
・ Execute business strategies based on
ESG and SDG perspectives

Enter overseas markets

2

Making inroads
overseas and inperipheral fields

・ Actively invest in overseas
businesses
・ Promote M&A in peripheralbusinesses
・ Form alliances with partners

Bring out potential of employees

2

Human resource
strategies for growth

・ Promote diversity
・ Develop globally competent humanresources
・ Further implement Enex Early Bird
working style reforms

Widen our fields of business

3

Creating new
businesses

・ Develop environment-related
businesses
・ Make effective use of various
management resources3

Promotinginnovation

Digital transformation and open
innovation
・ Make IT-based upgrades tobusiness infrastructure
・ Pursue efficiency in existing businesses
・ Promote new businesses
that use digital technology

Quantitative Targets
The two years of Moving 2020: Horizons will be the springboard for a major leap forward. By leveraging digitaltechnology, maintaining and strengthening core businesses, and actively investing in overseas, peripheral andnew businesses (a total of ¥60 billion over two years), we are targeting net profit of ¥12.5 billion in FY2020.
(Billions of yen)

FY2017 results

FY2018 results

FY2019 plan

FY2020 plan

Net profit

11.0

11.6

11.8

12.5

ROE

9.8％

9.7％

9.0% or higher

Dividend payout ratio

41％

41％

40% or higher

Adjusted operating
cash flows*

22.2

19.3

¥20 billion or more per year

New investments

24.4

16.4

¥60 billion (two-year total)* Cash flows from operating activities excluding changes in working capital, etc.

14

ENEX REPORT 2019

The Itochu Enex Group’s Growth Trajectory to Date

Why Must We Change?

Itochu Enex, which started off as a fuel trading company, grew and developed
based on a pioneering approach to building a robust customer base, aided byrising energy demand. The fact that we handle energy, which is an essential andconstant element in people’s daily lives, has enabled us to maintain stable
management and left us relatively insulated from economic swings compared toother industries, even in the volatile market conditions that followed the 2008
global ﬁnancial crisis. On the other hand, the reliable nature of our business has
fostered a corporate culture that favors stability over change, which could
potentially lead to stagnation in the Company’s growth. We realized that unless
we changed, we might ﬁnd ourselves in a parlous situation 10 years down theline. It is with that sense of urgency that we have been implementing boldinternal reforms.
The networks we have built with customers since our founding are ourgreatest strength. To clearly indicate the importance, signiﬁcance andfunctionality of these networks, we refer to them internally as “pipes.” A pipe
essentially connects two or more independent objects, enabling ﬂows andcreating relationships between them. We view our networks not just in thephysical sense as conduits for supplying products, but also as a means forconnecting things. In the context of our businesses, our “pipes” are thechannels and routes through which we deliver LP gas in the Home-Life Divisionor reﬁned petroleum products in the Car-Life Station business to end users,
either through sales outlets or directly from the Company. With our entry into
the electric power business, we now use our connected networks to sellelectricity to our existing petroleum and LP gas customers, and provide various

ENEX REPORT 201915

Message from the President

services in cooperation with partners that have strong customer bases in speciﬁcregions. In this way, we have been achieving a chain-like expansion of ourcustomer base by enhancing the connecting function of our networks throughtwo business structures—our core petroleum and LP gas businesses and new
businesses such as electric power.

FY2014

Enhancing the Connecting Function of Our Networks to Expand the Customer Base

An important year in our transformation into a new Itochu
Enex Group, in which we reexamined our corporate culture,and organizational structures and systems.

Achieve a chain-like expansion of our customer base by using electricity to connect us to customers
beyond the fringes of our infrastructure network, and by connecting the customers of ourelectricity-related partners in other industries to our core businesses.

Customers ofpartners inother industries

LP gas andcity gascustomers

Connect

Electricity

Electricity

Co
n

ne
ct

ct
Conne

Variousservices
related todaily life

Electricity

LP gasPhotovoltaic
power
generation
systems

Maintenanceexamination

Vehiclerentaletc.

Moving 2016: Sowing seeds for tomorrow
Refueling

Vehiclesales
etc.

In recent years, however, the energy industry in Japan has had to fare withsigniﬁcant structural change, notably restructuring among domestic oil
companies, while at the same time demand for energy, including petroleum
products, has been shrinking due to the declining birthrate, aging populationand steady adoption of energy-saving measures. Furthermore, the industry is
becoming increasingly competitive as the full-scale liberalization of theelectricity and city gas retail markets has brought many new players into themarket, including from other industries. Under the Paris Agreement, Japan istargeting a 26% reduction of greenhouse gas emissions in FY2030 compared to
the level in FY2013. Measures to achieve a low-emission energy mix, such as
introducing more renewable energy and the pursuit of further energy efﬁciency,
are accelerating. The energy industry has entered an age in which only theﬁttest companies that adapt to change will survive.
Progress of the “Moving”
Series of Medium-TermBusiness Plans

16

ENEX REPORT 2019

FY2015–FY2016

Fuel cells(ENE-FARM)

Car-Life Station customers
VehicleinspectionFHUWLƓFDWLRQ

Moving 2014

We knew that unless we changed our personnel, ﬁnancial andinformation infrastructure, merely replacing or updating the strategies
that are dependent on that infrastructure would be meaningless. With
that in mind, we embarked on a policy of making far-reaching changes
to our infrastructure, and carried out internal reforms to set the stage
for implementing future growth strategies. In business strategies, weentered the car dealership business by making Osaka Car Life Group
Co., Ltd. a subsidiary, and formed Oji-Itochu Enex Power Retailing Co.,
Ltd. through a joint venture with Oji Green Resources Co., Ltd., asubsidiary of Oji Holdings Corporation. Our program of acquisitions
also included Nissho Petroleum Gas Corporation.

Since my appointment as president in 2012, I have consistently emphasizedthat we should not accept the status quo and always work with an innovativemindset. Our choice of the word “Moving” in the titles of the Group businessplan and medium-term business plans we have implemented since April 2014
directly reﬂects the recognition that we have to start moving now for the future.
We have steadily focused on executing the strategies laid out in the “Moving”
series of plans, and our business structure has changed substantially. With ourbusiness portfolio in good shape, net proﬁt has topped ¥10 billion for threeconsecutive years. A major leap forward is ﬁnally in sight.

A staging period for the future, in which we reorganizedbusiness divisions. While urgently establishing infrastructure
ahead of full-scale liberalization of the electricity andgas retail markets, we sowed the seeds for long-term
growth, thereby reinforcing organizational resilience andkey strengths.

FY2017–FY2018

Moving 2018: Connecting to the future

We reformed our revenue base and our organizationalbase, in order to solidify the foundations of our business.
We realized results on investments in new ﬁelds and madea company listing on the infrastructure fund market.

In April 2016, we uniﬁed and expedited strategy development andbusiness expansion by reorganizing our business divisions andsubstantially consolidating related businesses. We advanced a “survival
strategy” in our core businesses, where demand was in a downward
trend, and Group companies worked together to develop new
businesses and expand into new industries, new products and new
regions. In overseas markets, the establishment of PT. ITC Enex
Indonesia, our investment and participation in an LP gas sales businessin the Philippines, and other actions positioned us for future expansion
in Japan and internationally. To bolster our organizational strength, welaunched the Enex Early Bird working style reforms in November 2016.
These reforms jump-started our efforts to maximize the potential of
our employees.

During the period of Moving 2018: Connecting to the future, we
prioritized strengthening the foundations of our business to pave theway for subsequent growth. That effort entailed business reorganizationand structural reforms with a medium-to-long-term view. We established
Enearc Co., Ltd. as a joint venture with Osaka Gas Co., Ltd. andreorganized the Group’s LP gas business. In the electric power business,after steady preparations, Enex Infrastructure Investment Corporation
was listed on the infrastructure fund market of the Tokyo Stock
Exchange in February 2019.
As part of “connecting people and functions of the Group,” werelocated the head ofﬁce in February 2019 and reshaped the ofﬁce
environment to promote active communication. This complements thenew overseas training program we had started in April 2018 to develop
globally competent human resources.

Through the initiatives of the past five years, we have delved deeper into
the Group’s corporate value, carefully considered what we should do toprepare for the future, and put our ideas into practice. Thus far, we haveemphasized “moving,” but looking forward, we intend to increase thespeed at which we move.
ENEX REPORT 201917

2

Utilizing new tools

Summary of the New Medium-Term Business Plan

Our ability to reach for new horizons and adapt tothe changing environment will be key.

Moving 2020: Horizons
Concept and Theme

1

Deepening
connections

Message from the President

In Moving 2020: Horizons (FY2019–FY2020), the foundations we linked together
in previous plans will be the springboard for a major leap forward. We will
promote growth strategies and evolve our organizational base from thefollowing three perspectives.

This means reinforcing our networks with customers and our customer base, our
key strengths. The Itochu Enex Group generates adjusted operating cash ﬂows1
of approximately ¥20 billion per year, and in FY2018, nearly 70% of that camefrom our core petroleum and LP gas businesses. By allocating these funds toinvestment in new businesses, we will be able to outline a growth vision.
Furthermore, we believe our customer base still holds untapped potential.
We will maintain this foundation, which generates stable and ongoing business,
and apply our ingenuity to gain greater advantage from it. By expeditiously
providing products and services that ﬁt social and daily needs, we will deepen
connections and create new value.

3

Expanding abroadMoving 2020: Horizons
Quantitative Targets

1. Cash flows from operating activities excluding changes in working capital, etc.

Embracing digital transformation and open innovation will be vital for making
better use of our existing customer base. For example, we will immediately
make IT-based upgrades to our customer database and optimize other toolsthat are not being fully utilized. In doing so, we will create mechanisms for
efﬁciently and effectively delivering new products and services. In distribution,
we will apply low-power, wide-area network technology to remotely monitor
customer LP gas use, streamline logistics and improve safety and security.

The industrial gas sales business in Indonesia and the LP gas sales business in
the Philippines are already growing steadily, giving us conﬁdence that ourbusiness models and knowledge hold currency in markets outside Japan,
including in the electric power business. In April 2019, we established theOverseas Business Section within the Home-Life Division to drive businessexpansion in Asia. Looking to set up new business sites in Asia beyond oursites in the Philippines and Indonesia, we will move forward by leveraging the
ITOCHU Group’s international network.

In Moving 2020: Horizons, which is aimed at rapid growth, we will apply digitaltechnology, maintain and enhance our core businesses, and actively invest inoverseas markets and peripheral ﬁelds as well as new businesses. In FY2020 weare targeting net proﬁt of ¥12.5 billion, an 8.1% increase from FY2018. Other
targets are return on equity of 9.0% or higher, a consolidated dividend payout
ratio of 40% or higher, and adjusted operating cash ﬂows of ¥20 billion or more
per year. In investments for growth, we plan to invest a total of ¥60 billion over
the two years of the plan, including business acquisitions. Of that total, we will
invest approximately ¥20 billion in maintaining and deepening the revenue baseand ¥40 billion in the creation of new businesses and development of overseas
markets and peripheral ﬁelds. More details on the growth strategies ofMoving 2020: Horizons are presented on the following pages.

Key Performance Indicators in the Moving Series

Moving 2014

(Billions of yen)

Moving 2016:
Sowing seeds for tomorrow

Moving 2018:
Connecting to the future

Moving 2020: Horizons

Moving 2020 Growth Vision
FY2014
results

FY2015
results

FY2016
results

FY2017
results

FY2018results

FY2019plan

FY2020plan

Net profit

5.5

7.5

10.4

11.0

11.6

11.8

12.5

ROE

5.7%

7.5%

10%

9.8%

9.7%

9.0% or higher

Dividend
payout ratio

45.2%

36.3%

34.8%

41.0%

41.0%

40% or higher

Adjusted
operatingcash flows

23.5

25.4

25.6

22.2

19.3

20 or more per year

Continue investment to maintain foundations❶ Deepening connections❷ Utilizing new tools❸ Expanding abroad

Maintaining and
収益基盤のdeepening the維持・深化revenue base

Making inroads
overseas and inperipheral fields

Actively develop overseas and peripheral businesses

18

ENEX REPORT 2019

Creating
new businesses

Expand into new fields
and environmental
businesses

ENEX REPORT 201919

Moving 2020: Horizons
Three Growth Strategies

1. Maintaining and deepening the revenue baseTo pursue Group synergy and make more effective use of our customer base, our focus will
be on customers and regions. In addition to trials and rollouts of new products and services
in regions where we have a solid foothold, we will strengthen our cross-selling strategies toleverage our networks with customers and our customer base. We will allocate resources toinitiatives aimed at deepening relationships with customers and regions.

2. Making inroads overseas and in peripheral fields
We will develop outside Japan by actively investing in overseas businesses and strengthening
alliances with M&A partners in peripheral ﬁelds. Areas of focus include gas (LP and industrial),
the automotive aftermarket and renewable energy. The automotive aftermarket is particularly
promising. In overseas markets, dealerships handle new car sales, but there is room for further
development of after-sale markets such as sheet metal, maintenance, used car sales andleasing, especially in Southeast Asia. This presents a good opportunity for us to apply theGroup’s business models and expertise.

3. Creating new businesses
The Environmental Business Department established in April 2019 will lead our efforts topromote environment-related businesses and expand the AdBlue sales and ﬂy ash
businesses. The ﬂy ash business recovers and processes ﬂy ash from spent fuel at the
Itochu Enex Group’s coal-ﬁred thermal power plants for reuse as a road construction
material. It is a prime example of a business that started with an idea from frontline
employees. With business operations that span a wide range of ﬁelds, we believe otherpotential new businesses will emerge from this kind of ﬂexible thinking. We will also
secure earnings by developing and acquiring renewable energy sources via Enex
Infrastructure Investment Corporation.

Moving 2020: Horizons
Evolution of theOrganizational BaseIn terms of evolution of the organizational base, we will strengthen Groupmanagement, implement human resource strategies for growth, and promote
innovation to solidify the foundation established with “Moving 2018: Connecting
to the future.” Speciﬁcally, we will build close connections between Group
companies, advance consolidated management and establish a more effective
governance system. In our human resource strategies, we will continue theoverseas training program and hiring of employees of foreign nationality, andwill also emphasize promotion of diversity and further implementation of theEnex Early Bird reforms. In promoting innovation, we will pursue efﬁciency
improvements in existing businesses and consider new businesses that make useof digital technology.
The key over these two years will be how well we adapt to changes in theexternal environment. It is not an overstatement to say that the success or failureof our next leap forward will be dependent on our personnel systems. To promoteorganic growth, it is important to give employees opportunities to develop,
such as by encouraging them to participate in new projects, and letting themlearn from setbacks. In addition, we will make information in each division evenmore open and promote cross-functional initiatives2 to build the foundation forgenerating new ideas.

In my time as president, I have noticed signs of a steady shift in corporate
culture. Nevertheless, we still have more room for change. I would like all of
our employees to recognize with urgency that we will be left behind unless webreak free from our conventional ways of viewing things, embrace bold ideas
and take on challenges without imposing unwritten rules on ourselves. I intend
to lead by example.

The Itochu Enex Group’s Vision for the FutureWith nimble and flexible management, we will become an essential
presence as “the best partner for life and society.”

Now that we are ready to make a new leap forward to signiﬁcant growth, we mustask ourselves what role we should play as an energy trading company that
supports local communities, and plan and execute business strategies based on
current social issues and the United Nations’ Sustainable Development Goals.
Japan’s aging population poses serious challenges to communities nationwide.
To truly enrich people’s lives, we will expand our customer base not just from thestandpoint of business efﬁciency, but also by creating frameworks for building
win-win relationships with local residents.
In the Itochu Enex Group, which handles everything from social infrastructure
to energy used in daily life, it is important that we not stick to a predeterminednotion of what an energy trading company should be, but practice nimble andﬂexible management that adapts to changing times. The Itochu Enex Group willcontinue in its quest to be the energy provider of choice under any conditions as“the best partner for life and society.”
August 2019

2. Cross-functional initiatives, which include sharing of the expertise and methodologies, etc. held by each division, aim tostrengthen Group-wide capabilities

Kenji Okada
Representative Director,
President and Chief Executive Ofﬁcer

20

ENEX REPORT 2019

ENEX REPORT 201921

Message from the CFO
ﬁnancial structure that will allow us to consistently generate
net proﬁt of ¥10 billion, and have obtained a long-term issuer
rating of A+ from Japan Credit Rating Agency, Ltd.

We will further evolve the Itochu
Enex Group’s strengths andfocus on creating new value.

Basic Policy and Investment Strategy of
New Medium-Term Business Plan
“Moving 2020: Horizons”

Atsushi Katsu
Director and Managing Ofﬁcer

Financial Characteristics ofItochu Enex

Results of “Moving 2018:
Connecting to the future”

The strength of the Itochu Enex Group is its solid customer
base in the energy sales business. While we have stablerevenue from our core petroleum and gas businesses, it will
prove difﬁcult to stem the decline in demand resulting fromJapan’s falling birthrate and aging population, changes inthe business landscape and other trends. Based on ourrealization that maintaining the status quo was no longer
viable, we have been implementing the “Moving” series of
medium-term business plans since FY2014. By investing
aggressively in new businesses using the cash ﬂow
generated from our core businesses, we have beentransitioning from a fuel trading company that handles
petroleum and gas to a company with integrated
capabilities across a broad range of energy products andservices, including electricity and automobiles, in addition
to petroleum and gas. We will further evolve our Groupmanagement, develop a balanced asset portfolio and build
a structure for generating synergy between our businesses.

In “Moving 2018: Connecting to the future,” we focused onreforming the revenue base and reforming the organizational
base. We optimized our businesses in a number of ways. In
the Life & Industrial Energy Division, we closed unproﬁtable
Car-Life Station outlets. In the Home-Life Division, we
integrated and strengthened the LP gas wholesale and retailbusinesses with Osaka Gas Co., Ltd. in the Tokyo–Nagoya–
Osaka corridor, and integrated and reorganized regionalsales companies. In the Power & Utility Division, which has anintegrated value chain from power source development toretail sale, we listed Enex Infrastructure Investment Corporationon the infrastructure fund market of the Tokyo Stock
Exchange, and are developing this business into a growth
driver for the Group.
Financially, we further improved our already-healthy net
debt-equity ratio (net DER) from FY2017, and we addressedGroup-wide KPIs targeting cost reductions. As a result of themeasures executed over the last two years, we now have a

Proﬁt from Operating Activities and Adjusted Operating Cash Flows, by Segment
Core businesses
7.9
5.9

7.3

6.2

5.8

5.0

4.7

7.0

2.9

5.8

3.4

6.8

8.7

9.0

6.1

5.6

5.3

4.8

5.7

3.1

2016

7.9

2017

3.6

5.0

Amount

9.2

2018

8.0

2.4
2013

3.0

1.3

2014

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ENEX REPORT 2019

Development of overseas
markets and peripheral ﬁelds

4.7
2.8

2.5
4.4

1.2

2015
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6.6
2016

2.4

4.6
2017

2.0

¥20.5
billion

2.8

2.2
2.7

2018

25.6

25.4

0.7

23.5

19.3

22.2

11.7

0.2
4.6

3.4

0.6

2014

12.7
1.1
4.9

2.4

7.2

Home-Life
Mobility Life

(Billions of yen)
0.6

0.5

5.1

2015

2016

/LIH ,QGXVWULDO(QHUJ\
Other

0.8
9.2

3.2

1.9

6.6

1.3

7.2

1.7
3.4

2017

2018

(FY)

3RZHU 8WLOLW\$GMXVWHGRSHUDWLQJFDVKŴRZV* Cash flows from operating activities, excluding working capital, etc.

From FY2018, the Company has set a consolidated
dividend payout ratio of 40% or higher, and we intend tocontinue stable shareholder returns.

Into the Future
The Itochu Enex Group aims not just to be a comprehensive
energy trading ﬁrm, but to truly be “the best partner for lifeand society.” We are committed to meeting the diverse
needs of customers by continuing to transform our businessportfolio, including development of Car-Life Stations that can
provide one-stop services to regional communities.
Our basic investor relations policy is to maintain an
ongoing dialogue with shareholders and investors, andthereby deepen their understanding of the Company. In
addition to related activities for analysts and individual
investors, we will continue to deepen that understanding at
every possible opportunity. We hope you continue to support
the Itochu Enex Group as we take on new challenges.

Moving 2020 (two-year total)

Main investments

Planned amount

Main investments planned

(FY)

6.2

2.5

0.4
6.0

Moving 2018 (two-year total)

Although there were ﬂuctuations due to special factors, generated cash ﬂows at a core business level

6.2

Investment Amount and Adjusted Operating Cash Flows*

Investment Strategy

Creation of new businesses

7.6

22

8.3

LP gas businessrestructuring-0.7 billion

2013
2014
2015
+RPH/LIHSURƓWIURPRSHUDWLQJDFWLYLWLHV/LIH ,QGXVWULDO(QHUJ\SURƓWIURPRSHUDWLQJDFWLYLWLHV+RPH/LIHDGMXVWHGRSHUDWLQJFDVKŴRZV/LIH ,QGXVWULDO(QHUJ\DGMXVWHGRSHUDWLQJFDVKŴRZVNew businesses(Billions of yen)

During the two years from FY2019 through FY2020, we willbuild on the progress we made in Moving 2018 to make afurther leap forward. However, there is still considerable
uncertainty in the external operating environment, so weneed to keep a close watch on the balance between
offensive and defensive strategies. Over these two years, wewill solidify our footing and accelerate investment in new
business areas to lay the foundation for further growth in
FY2021 and beyond.
Speciﬁcally, we will adopt digital technology, maintain andstrengthen core businesses and make proactive investments(¥60 billion over two years) in overseas expansion, peripheralﬁelds and new businesses. We are targeting net proﬁt of ¥12.5
billion and return on equity (ROE) of at least 9.0% in FY2020.
By further improving capital efﬁciency, we will enhance ourcorporate value, with a view toward ROE of 10% or higher.
Another key point is to promote innovation, the third item
under “Evolution of the Organizational Base” of the basic
policy of the plan. To that end, we will focus on improving
the infrastructure for speeding up deployment of theGroup’s total capabilities, and on developing new
businesses that utilize digital technology, primarily throughthe Digitalization Promotion Ofﬁce.
As for our investment strategy, we plan to invest ¥20
billion to maintain and deepen the revenue base, which is
critical for generating cash for new investments, and ¥40
billion in creation of new business and the development ofoverseas markets and peripheral ﬁelds. The bulk of that ¥40
billion will be invested in the Power & Utility Division, where
expansion is ongoing, and this includes investment inrenewable energy. The changes made in FY2017 will be
reﬂected in investment criteria in each business division, andwe will invest only in projects, primarily new projects, that we

expect to generate returns greater than the cost of capital.
We are aware of the need to always review our portfolio
based on capital efﬁciency. While we will expand investmentsin these two years, return on assets (ROA) remains low, so
we will continue to reassess assets carefully in order toboost efﬁciency.

2.4
(FY)

Maintaining and deepening therevenue base (CAPEX)

Total amount¥20.3
billion・Establishment and listing of infrastructure fund・Biomass power plant
・Regional reorganization and acquisitions in LP gas
・Renovation of hydroelectric power plant for feed-in
tariff scheme
・Yokohama city government building heat
supply plant・Ginza 5-chome/6-chome heat supply plant・LP gas supply facilities, Car-Life Station facilities
・Power plants, heat supply centers
・Car dealerships
・Head office relocation¥40.8 billion¥40billionEnvironment-related businessNew business areas(open innovation, etc.)

Overseasbusiness

New heat supply plants
M&A in industrial gas
M&A in LP gas¥20billionRenewable energy
development

Automotive-related
businessCore business digitalization
Electricity retail systemdevelopment

・LP gas and Car-Life Station facility renewal
・Power generation and heat supply facility renewal
・Car dealerships
・Consideration of next-generation central system¥60 billion

ENEX REPORT 201923

Strategy by Segment
The Itochu Enex Group has grown by ﬂexibly restructuring its organization and adapting to rapid changes in the external
environment. With the ultimate goal of always maintaining an optimized business portfolio, in recent years, we havecomplemented our existing petroleum and gas businesses through the launch of new businesses, including the electric power
and mobility businesses. By leveraging our customer base, we will achieve greater cooperation between divisions and create
greater value, thereby meeting customer needs as “The best partner for life and society.”Home-Life Division

Services

Business Flow
Note: Chart shows net proﬁt by segment under the new organization.
Excludes intersegment transactions.

Home-Life
Division

Power & Utility
Division

・Procurement from oil companies¥3,068¥1,970
millionProcurement

LP GasNet Profit by Segment

Filling・At ﬁlling stations, ﬁlling services
suited to the retail format,
including gas cylinder sales,
valve sales and lorry sales

Wholesale

Retail・Sales to households in eachregion of Japan by afﬁliatedsales outlets (including sales
bundled with electricity)

・Wholesale to sales sites
across Japan・Sales to households, and forcommercial and industrial use
in the Philippines・Supply for LP gas vehicles(taxis and buses) at automotive
gas stations

millionIndustrial Gas

FY2018
Breakdown of net proﬁt
by segment

・Procurement from industrial
gas producers

・Filling suited to applications
such as medical supplies andsmall gas containers
・Industrial gas ﬁlling at local
plant in Indonesia

・Sales to corporate users
・Wholesale to high-pressure
gas distributors

Main Products and Services

Main Customers

LP gas, home smart energy devices, city gas, electric power,
industrial gas, solutions for comfortable living

・ General households
・ Corporate users
・ Industrial users
・ Taxi companies
・ Distributors
・ Overseas customers

・Sales for commercial andindustrial use by local
distributors in Indonesia

Life & Industrial Energy
Division¥6,854
million(Billions of yen)

Strengths

Change in Organization of Business Divisions
Former Organization (Until March 2019)

Home-Life Division

New Organization (From April 2019)

Home-Life Division

Life & Industrial Energy Division

Life & Industrial Energy Division*
Power & Utility Division

Power & Utility Division
Mobility Life Department

24

ENEX REPORT 2019

Proﬁt from Operating Activities, Net Proﬁt

SWOT Analysis* The Mobility Life Department was dissolved and its functions were absorbed into theLife & Industrial Energy Division.

Weaknesses

S W
O T

• Customer base spanning
different regions• Overseas expansion
leveraging the ITOCHU
Group’s expertise• Need to strengthen
collaboration with otherdivisions

3.8

3.1

3.6
3.1

3.3

3.0

• Need to increase work
efficiency

Opportunities

Threats• Expanding LP gas demandin Asia• Shrinking market for LP gas inJapan• Increasing awareness ofthe need for disaster
preparedness• Competition for customers
following the full liberalization of
the domestic electricity and city
gas retail markets

20173URƓWIURPRSHUDWLQJDFWLYLWLHV

2018

2019
(plan)

2020(plan)(FY)

1HWSURƓW

• Reorganization of domestic oil
companies

ENEX REPORT 201925

Strategy by Segment

Home-Life Division

By promoting a new age of businessdevelopment that is not tied to existing
frameworks, we will demonstrate our competitive
advantage as the provider of choice.

Making the most of our various bases will be critical for
growth. By seeking ways to provide benefits to existingcustomers and boosting our earning power, and building
frameworks on top of our strong business foundation, we
will promote a new age of business development in a
rapidly changing market environment.

Kyosuke Wakamatsu
Director and Managing Officer
Chief Operating Officer, Home-Life Division

Our Strategy
In the LP gas market in Japan, household LP gas consumption
is on an irreversible downward trend, due in part to thegrowing use of high-efficiency appliances, as well as social
issues such as population decline related to the fallingbirthrate, and the aging society. Moreover, the full
liberalization of the electricity and city gas retail markets
has led to competition for customers from beyond theboundaries of the gas industry, and fierce competition
among industry rivals, especially in the Tokyo metropolitan
area. The industry is also facing structural issues, notably alabor shortage, primarily in operational departments, and alack of successors at gas operators. In the LP gas business,there is increasing social pressure to create a system that
ensures transparency in transactions, and it is essential tomaintain timely and appropriate communication withcustomers, who have a wider range of options following
the full liberalization of the city gas retail market.
In this market environment, the Itochu Enex Group
implemented a range of measures to establish a newrevenue-generating business model in “Moving 2018:
Connecting to the future.”
Reorganization of the LP gas business with Osaka Gas
Co., Ltd. in FY2017, and efforts to increase the number ofcustomers through measures such as door-to-door sales
and integration and restructuring of Group companies

proved successful. As a result we strengthened our customer
base, with the number of customers under direct LP gas
supply contracts reaching 550,000 (up 4,000 over theprevious fiscal year) and the number of customers underelectricity supply contracts growing to 80,000 (up 28,000).
In addition, we began trials of low-power, wide-area (LPWA)
network technology at our sales company in Tohoku inanticipation of a nationwide rollout. Meanwhile, in overseas
markets, we promoted business expansion in the Philippines
and Indonesia by applying expertise cultivated in theJapanese market.

Medium-to-Long-Term Value Creation Strategy
The strong point of the Home-Life Division is its solid
customer base cultivated in the LP gas business. In addition,
the division operates in a distinctive market environment
with a high barrier to entry, where customers under contract
prefer not to switch providers. This characteristic ensures a
regular source of revenue, and we have a superior B-to-C
model replete with logistics and security functions.

LP Gas Sales Volume(Thousands of tons)
17,333

16,405

16,421

16,571

16,48815,504

14,80914,693

15,394

14,414

14,202994
686 681

633

619

625

619

601

597

618

573

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (FY)Japan total

26

ENEX REPORT 2019

Focal Points of New Medium-Term Business Plan
“Moving 2020: Horizons”
In the LP gas business, we will combine new measures with
our existing strengths to become a company that generates
earnings through frameworks. Specifically, we will develop a
database that enables the identification of customer
characteristics, which will help us to provide products andservices that meet a range of customer needs and also
prevent customer turnover. Furthermore, we will enhance
productivity through the use of web-based tools andinnovations in marketing, including methods of cross-sellingand upselling. Moreover, we established the New Business
Development Section in May 2019 with the aim of producing
steady results through the use of our varied information
resources and networks. This section will work to expand ourrevenue structure by creating new fields and new businesses
in cooperation with other divisions and other companies. In
other initiatives, we will conduct a nationwide rollout of the
LPWA network we have been trialing, which will improve theefficiency of logistics and security functions. We will also
implement working style reforms.
In the industrial gas business, which is targeting steady
growth in the B-to-B field, we will evolve by embarking on a
strategy of collaboration between the Industrial Gas

HIGHLIGHT

Department, launched in July 2019, and Itochu Industrial
Gas Co., Ltd. Various business opportunities exist in areas
related to the industrial gas business. While engaging in
new business discovery, we will improve manufacturing
efficiency to achieve more efficient operations as anorganization. We will also evolve into a materials trading
company that handles a wide range of commodities,
including resource inputs, raw materials and chemicals.
In overseas business, in April 2019 we established theOverseas Business Section to shift our basic stance from“maintaining” to “expanding,” and plan to establish new
business sites, beyond our existing sites in the Philippines
and Indonesia.
Our Vision for the Future
As a result of numerous acquisitions and Groupreorganization and integration, this division is made up of
many Group companies. To make our organization evenstronger, rather than letting business stability become an
excuse for complacency, we must generate success stories
one by one at each Group company.
By doing so, we will enhance services that add
convenience for customers, and as a result remain theircompany of choice. At the same time, we will make
improvements to LP gas filling stations and other facilities tomake them bulwarks that protect the lives of customers intimes of disaster, so as to become an integral part of theircommunities.

Reorganization of the LP Gas Sales Network

The operating environment of the LP gas industry in Japan isextremely challenging as a result of softening demand. There isurgent need to raise productivity by expanding the business basewhile strengthening cost-competitiveness.
Accordingly, we established Enearc Co., Ltd. in October 2017 tointegrate and strengthen the LP gas wholesale and retail businesses;
merged Itochu Enex Home-Life Hokkaido Co., Ltd. and Nissho
Propane Sekiyu Co., Ltd. in October 2018; and established Itochu
Enex Home-Life Shikoku Co., Ltd. through the merger of the
Shikoku Branch of Itochu Enex Home-Life Nishi-Nihon Co., Ltd.,
Ehime Nissho Propane Co., Ltd. and Kochi Nissho Propane
Corporation in April 2019. We will continue to raise efficiency
through business reorganization, enabling us to deliver higherquality and more competitive products and lifestyle services.

LP gas and city gas supply contracts 1.5 million customers(of which, 550,000 are direct LP gas supply customers)

Itochu Enex Home-Life Hokkaido Co., Ltd.
Itochu Enex Home-Life Tohoku Co., Ltd.
Itochu Enex Home-Life Nishi-Nihon Co., Ltd.
Enearc Kanto Co., Ltd.
Ecore Co., Ltd.

Enearc Chubu Co., Ltd.
Enearc Kansai Co., Ltd.
Itochu Enex Home-Life Shikoku Co., Ltd.

Itochu Enex Group

ENEX REPORT 201927

Strategy by Segment

Life & Industrial Energy Division

Services

As a contributor to local communities
and industries, we will deploy ourassets to build a new business model.

Business Flow

Car-Life
Stations

Procurement

・‌ Procurement from oil companies

Asphalt

Industrial
EnergyProcurement

・‌ Procurement from oil companies

・‌ Procurement from domestic andoverseas companies

Wholesale・‌ Wholesale to sales sites
across Japan

Storage・‌ Storage at Group sites
・‌ Rental of storage tanks for
petroleum products andchemical products・‌ Storage at Group sites

Retail・‌ Sales to general consumers at
Car-Life Stations
・‌ Development of car rental
business at Car-Life Stations

・‌ Operational support for
Car-Life Stations
・‌ Operation of large-size
Car-Life Stations for trucks

Toshihisa Fuse

Director and Managing Officer
Chief Operating Officer, Life & Industrial Energy Division

Wholesale・‌ Wholesale of industrial fuels
・‌ Supply of marine fuel・
‌ Wholesale of AdBlue

・‌ Electricity retail solutions andindustrial waste management
solutions for corporate users

・‌ Recovery of fly ash discharged
from thermal power plants forsale as road material・‌ Sales across Japan, mainly toroad construction companies

Main Products and Services

Main Customers

Gasoline, kerosene, diesel oil, fuel oil, LP gas, electricity, vehicles,

・ Affiliated Car-Life Stations
・ Corporate users
・ Domestic road construction companies
・ Sea shippers
・ Public agencies

car rental, living and automotive products and services, AdBlue,asphalt, marine fuel, import/export of petroleum products, terminaltank rental, recycling of fly ash, recovery and recycling of slop

(Billions of yen)

Strengths

Weaknesses• ‌High-value-added Car-Life
Stations• ‌Need for further
development into overseas
markets and new fields

S W
O T

• ‌Expertise in environmentrelated businesses

Opportunities• ‌Increasing environmental
awareness• ‌Liberalization of electricity
and gas retail markets,
strengthening of environmental
regulations by IMO,* etc.

The Life & Industrial Energy Division is working to enhancefunctions and create value in each of its businesses to support
infrastructure for regional industries and the comfort of local
residents. In the petroleum fuels industry, the reorganizationof domestic oil companies has led to greater efficiency andindustry consolidation, so market conditions are relatively
stable. However, there is a clear structural decline in demandfor petroleum fuels due to Japan’s falling birthrate and aging
population, more efficient energy use and other trends, andwe are addressing that decline with a sense of urgency.
In “Moving 2018: Connecting to the future,” we focusedon maintaining and expanding our sales foundation in eachbusiness and region. We carried out restructuring that
included closure of unprofitable Car-Life Stations, andstrengthened our affiliated Car-Life Station network byproviding services needed by regional communities and byproposing and supplying multiple products and services. At

the end of FY2019, the Group had a total of 1,766 Car-Life
Stations, a net decrease of 46 from the end of FY2018.
In the industrial energy field, the AdBlue1 sales
business continued to grow, supported by increasing
environmental awareness, and captured the top market
share in Japan. We also have a growing presence inenvironment-related businesses, which include sales of
products that help reduce environmental impact such as
GTL2 diesel replacement fuel made from natural gas; theslop and oil recycling business, which recycles and sells
waste oil recovered from ships; and the fly ash business,3
which recycles and sells coal ash discharged from the
Itochu Enex Group’s thermal power plants.
1. AdBlue is a high-grade urea solution used in selective catalytic reduction systems,
which are used for detoxifying nitrogen oxides (NOx) in diesel vehicle exhaust
2. Gas-to-liquid (GTL) technologies convert natural gas to gasoline, kerosene, diesel
and other fuels; resultant fuels are more environmentally friendly and contain nosulfur or metals, etc.
3. The fly ash business recovers and processes fly ash (a type of coal ash discharged
from coal-fired thermal power plants), which is then reused as a roadbed material
for asphalt road surfacing and other applications

Profit from Operating Activities, Net Profit

SWOT Analysis• ‌Comprehensive proposals
of diverse products

Our Strategy

Group Gasoline Sales and Number of Service Stations
11.6

9.9

3,832

• ‌Difficulties sharing thecustomer base

5.7

2,144 2,157 2,182

2,174
2,153

335
2017
Proﬁt from operating activities

2018
Net proﬁt

3,722 3,587
3,593

6.3

Threats• ‌Falling demand for
petroleum products due
to population decline

3,993

3,982

6.8
5.5

4,266 4,317

4,079

2019
(plan)

2020(plan)

322

2,039 1,973 1,888
2,118

298

295

307

324

297

264

208

3,328 3,201

1,812 1,766

205

204

(FY)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (FY)

Directly managed Car-Life Stations
Group gasoline sales (thousand kL)
Group Car-Life Stations (including directly managed Car-Life Stations)*	The International Maritime Organization has issued new decarbonization regulations formarine fuels (lowering the allowed sulfur content from 3.5% to 0.5%), effective from 2020.

28

ENEX REPORT 2019

ENEX REPORT 201929

Strategy by Segment

We believe that the trend will be away from vertical value
chains toward business models that provide comprehensive
services, centered on platforms. Our division handles avariety of products and services, from petroleum products
to automobiles, electric power, industrial-related, andenvironmental and recycling services. The end users of our
products and services are the many customers connectedwith the Itochu Enex Group. The Life & Industrial Energy
Division’s mission is to further develop our networks andexpand our assets, and establish a new business model.
As part of our April 2019 organizational restructuring, weclarified our goals and established the new Environmental
Business Department and Strategic Development Office.
This new structure will further increase synergy andeliminate the silo mentality, enabling us to maximize our
combined strengths.
Focal Points of New Medium-Term Business Plan
“Moving 2020: Horizons”
In “Moving 2020: Horizons,” we will base our actions on thefollowing four themes.
DefenseDevelop strategic dominance to maintain ourpetroleum sales affiliate network

Provide new materials and services and promote differentiation tomaintain and solidify our existing customer base. Break fromexisting conventions to establish a new model for Car-Life Stations
as key infrastructure for local communities.

ChangeAdapt to change in the business environment
to transform into a company with strong
support from customers

Transition to a new business model for 2020 and beyond. Break theindustry mold and be a company that is supported and chosen by
local communities and customers.

Use

Establish a business model that makes effective
use of owned assets and logistics functions

Power Source
Development

Grow the automotive business (in Japan andoverseas) and enter new business areas

Create new schemes for automotive-related businesses, including
an integrated car dealership business. Focus on expanding
environment-related businesses. Build a new business model that
includes overseas markets

Our Vision for the Future
The Itochu Enex Group has laid the groundwork for crossdepartmental cooperation in developing new business
opportunities, yet there is no denying that in some cases
there may be a tendency to cling to the status quo, be
constrained by the boundaries of existing businessdomains, and define ourselves narrowly. The Life &Industrial Energy Division, which is involved in a wide rangeof business areas, must become a leader in developing new
business areas. Therefore, we will also focus on shifting themindset of employees and on developing human resources.
The two years of “Moving 2020: Horizons” will be criticalfor our transformation. It is not enough to have a sense ofurgency; we must have genuine excitement about taking on
the challenge of developing a new business model.

Production and
Procurement

・Promote development
centered on renewable energy

Reexamine our assets with the aim of maximizing their value, andexplore further value creation opportunities.

OffenseServices

Business Flow

・Procure electric power from theOji Group and outside powersources in addition to our own
power plants

Production

Facility Development

Heat Supply
Business

Medium-to-Long-Term Value Creation Strategy

Power & Utility Division

Electric
PowerLife & Industrial Energy Division

・Establishment of heat
supply plants

・Produce hot and cold water for air
conditioning in heat supply plants

Supply and Demand
Management

・Supply and demand management
as the representative of multiple
energy retailers

Wholesale andRetail・Electricity sales by alliancepartners in different industries
・Bundled sales of electricity toEnex Group’s customer base

Supply・Supply to multiple buildings ina district

Main Products and Services

Main Customers

Electricity, steam, heat supply, comprehensive energy services

・ Corporations
・ Individuals・ Electricity retailers
・ Office buildings and commercial facilities

Proﬁt from Operating Activities, Net Proﬁt

SWOT Analysis(Billions of yen)

Strengths

HIGHLIGHT

The Environmental Business Department wasestablished in April 2019 to centralize ourenvironment-related businesses, which werepreviously operated separately by different
departments. The new department will actively
work to expand environment-related businesses,
including GTL and AdBlue sales, the fly ash
business, and printed circuit board processing,as well as enter new business areas, focusing on
the themes of energy conservation and CO2
emissions reduction, air pollution prevention,and recycling and reuse.

30

ENEX REPORT 2019

S W
O T

• Integrated system frompower generation to sale

Establishment of the Environment Business Department• Network with regional
operators with establishedcustomer bases

Opportunities• Emphasis on energy
efficiency• Spread of renewable energy

AdBlue tanker

Fly ash reuse facility

Weaknesses

4.6• Need to provide high-valueadded services using digitaltechnology• Need to recruit employeeswith high level of expertise

3.3

3.1

2.7
2.2

2.0

Threats• Climate change• Intensifying market
competition due to ongoingregulatory changes• Entry of new players fromdifferent industries

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2018

2019
(plan)

2020 (FY)(plan)

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ENEX REPORT 201931

Strategy by Segment

Power & Utility Division

The division is transitioning to a new
business model to establish a uniquepresence as a provider of new services
related to electricity and heat.
Fumio Shimizu

Director and Managing Officer
Chief Operating Officer, Power & Utility Division

Our Strategy
The electricity retail market in Japan is becoming
increasingly competitive with the entry of new players fromother industries and ongoing regulatory changes in theelectricity business.
In particular, price competition in electricity sales tolarge-volume users (the high-voltage segment) is intensifying
due to the recovery of major electric power companies.
Given the outlook for the operating environment in theelectric power retail business, we expect downward pressure
on profitability in the high-voltage segment. On the other
hand, electricity sales to households and other small-volumeusers (the low-voltage segment) are expected to be stable
and there is potential for attracting customers that choose toswitch suppliers. It is imperative that we transition to a new,more sustainable business model, starting with a focus shift
to the low-voltage segment.
During the two years of “Moving 2018: Connecting to
the future,” we sharpened our regional specialization andstrengthened retail sales in ways such as partnering withcompanies that have strong customer bases in specificregions. This strategy is essential to shifting our businessportfolio away from the high-voltage segment to the lowvoltage segment, and from BtoB sales to large companies
to sales to small companies. Severe fluctuations in theelectricity wholesale market have had an adverse impact
on earnings, but we have steadily expanded the share of
low-voltage sales in our electricity sales volume, laying thefoundation for the next step.
In power generation, we are investing in renewableenergy generation facilities, and in February 2019, Enex
Infrastructure Investment Corporation was listed on theTokyo Stock Exchange’s infrastructure fund market.

Medium-to-Long-Term Value Creation Strategy
The strengths of the Power & Utility Division are its
integrated system that extends from power generation tosale, as well as the many opportunities provided by its
infrastructure to sell electricity through the Company’s
customer base at Car-Life Stations and LP gas sales outlets
across Japan. This has already led to tie-ups and cooperation
with major companies that we would otherwise have had noElectricity Sales Volume102,364■ Low-voltage:
19.5%

66,720■ High-voltage:
80.5%

18.1
40,232
22,715
19,956 19,425 19,106
14,541 15,353
4.2
3.5
3.5
3.6
2.5
231
80
2.8
3
2008

2009

2010

2011

2012

2013

Power producers and suppliers total (thousand MWh)
Share of deregulated segment (%)

32

ENEX REPORT 2019

11.7
2,431

28,173
5.2
409
2014

2,672 2,874

7.6
873
2015

2016

2017

2018 (FY)

contact with if we only handled gas or petroleum products,
which is leading to new business opportunities that include
business in other divisions. To further strengthen our
position in the low-voltage sector, the shift to which isalready under way, we will partner with businesses that havecustomer bases rooted in local areas and adopt digitaltechnology to create a framework that enables customers toswitch providers easily.

We will secure revenue from these sources, and in theinfrastructure fund market, as sponsor, we will support Enex
Infrastructure Investment Corporation’s scale expansion
through reliable, efficient management of facilities. In
overseas business, which will be a cornerstone of future
growth, we are considering entry into markets outside
Japan, primarily in Southeast Asia, through alliances withlocal partners in our area of specialization, namely solar
power generation.

Focal Points of New Medium-Term Business Plan
“Moving 2020: Horizons”
In the electricity sales business, we will deploy a sales
strategy that leverages Itochu Enex’s unique attributes bypromoting collaboration with Oji-Itochu Enex Power
Retailing Co., Ltd., Enex Life Service Co., Ltd. and otherdivisions, and achieving an optimal balance between
face-to-face and digital engagement. Through our new
Marketing Section, we plan to invest aggressively in digitaltechnology during the period of “Moving 2020: Horizons.”
Our procurement strategy will be to purchase stable,
cost-competitive electric power. In addition, in the heat
supply business, we will switch from heat supply alone tointegrated heat and electricity supply. Our goal is todevelop a comprehensive energy services business* thatcan meet diversifying customer needs.
To promote the growth of the renewable energy market,
we will develop and purchase renewable energy sources.

* Energy services business: A business that owns electric, heat source and otherfacilities, and supplies hot and cold water for air conditioning, hot water, and steam,etc. for customers when they use energy.

HIGHLIGHT

Our Vision for the Future
The business environment is expected to become evenmore challenging in the years ahead, but no matter what
conditions we face, our first consideration will be to fulfill
our mission of providing comfortable living environments bydelivering stable supplies of safe, secure, low-cost electricity
to everyone.
To this end, we aim to achieve a chain-like expansionof our customer base by using electricity to connect us tocustomers beyond the fringes of the infrastructure network
we have built, and by connecting the customers of ourelectricity-related partners in other industries to our existingcore businesses. The entire Company will work together
over the next two years to transform this division into one of
the Itochu Enex Group’s growth drivers.

Enex Infrastructure Investment Corporation Listed on Infrastructure Fund Market

In the growing financial services field, Enex Infrastructure Investment Corporation, to which our subsidiary Enex Asset Management
Co., Ltd. provides asset management services, was listed on the infrastructure fund market of the Tokyo Stock Exchange inFebruary 2019. Societal demand for expanded use of renewable energy,1 which emits virtually no carbon dioxide, has increased
in recent years from the standpoint of ensuring energy safety and security, and against the backdrop of rising environmental
consciousness. Enex Infrastructure Investment Corporation will invest in and manage renewable energy generation facilities,2primarily solar power generation facilities and related infrastructure,2and steadily expand its asset portfolio and generate stable cash flow
based on a philosophy of contributing to the environment andpromoting a sustainable society through the spread and expansionof renewable energy.
1. Renewable energy: Includes solar, wind, hydro, geothermal and biomass power.
2.	Renewable energy generation facilities: Refers to facilities stipulated in Article 2, Paragraph 3 of the
Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources byElectricity Utilities (Act No. 108 of 2011, including subsequent revisions) (excluding those that fallunder the category of real estate). Defined as real estate properties that are incidental or related torenewable energy generation facilities; any right of lease or surface rights to these properties; andany assets of these properties or assets incidental or related to these properties that are based on
the laws of a foreign country. Whenever any reference is made to the renewable energy generation
facilities that Enex Infrastructure Investment Corporation invests in, acquires and manages, the term“renewable energy generation facilities” is deemed to also include any renewable energy
generation facilities that support the assets managed by the investment corporation. Of thesefacilities, those that use solar power as their energy source are referred to as “solar power
generation facilities and related infrastructure.”

Enex Group retail sales volume (thousand MWh)

ENEX REPORT 201933

Itochu Enex Group’s Approach to ESG Issues

Process for Materiality Assessment and Promotion of Initiatives

ESG Statement of the Itochu Enex Group
Under the Corporate Philosophy, “The best partner for life and society—with Energy, with the Car, with the Home,” the Itochu
Enex Group has a mission to deliver a stable supply of energy to the benefit of all people, and seeks to always offer the value
and services that customers truly want.
The Group will continue contributing to better lifestyles and a sustainable society through businesses aligned to the newage, solutions to social issues and the fulfillment of its corporate social responsibility.
The Group is currently focused on three areas: “reducing environmental impact,” “creating diverse value” and “soundbusiness activities.” All employees and management will take ownership and act to secure a future for Itochu Enex as anenergy company that achieves sustainable growth while generating value.

Identify and understand issues

Prioritize issues

Verify selected issues are relevant

Identify social issues with reference toSDGs, international guidelines, and
FTSE indices

Select issues based on their importanceto stakeholders and the Itochu Enex
Group, and address these issues basedon order of priority

Integrate selected issues into the Group’s
ESG statement and carry out initiatives• The Itochu Enex Group’s Corporate Philosophy• Declaration of the Group Code of Conduct• Code of Conduct: Be Ethical• Medium-term business plan
“Moving 2020: Horizons”• UN Sustainable Development Goals• Objective evaluation by a third-party
organization, FTSE

Materiality Criteria
Standpoint of the Itochu Enex Group

Changes in the Itochu Enex Group’s Operating Environment
Standpoint of stakeholders

2010s

2020s

2030s

2011
• UN’s Guiding Principles on
Business and Human Rights• Gradual phase-out of palm
oil biofuel by the EU• Shutdown of coal-fired
power stations(By 2023 in France, 2025 in
the UK, and 2030 in Canada)

2018• 5th Strategic Energy Plan*“Achievement of an optimalenergy mix by 2030”
Renewable energy: 22–24%
Nuclear power: 22–20%
Fossil fuels: 56%
Energy efficiency: 35%
reduction in energy intensity• Keidanren (Japan Business
Federation) revised theCharter of Corporate
Behavior• Promotion of Society 5.0

2040s• Paris Accord(Japan’s pledge: 26%
reduction in greenhousegas emissions vs. FY2013)

2050s• Population of Japandeclines to 95 million• Ban on the sale of petroland diesel vehicles in
the UK and France• 2050 scenario of theStrategic Energy Plan
Pursue every option
in all-out efforts forenergy transition anddecarbonization

Focus ESG Issues for the Itochu Enex Group
Area

E

Global peak oil demand

Initiatives• Realizing a low-carbon society• Reducing the environmental impactof our business activities• Pursuing energy efficiency• Contributing to resource
conservation and a recycling-basedsociety• Preserving local environments

Relevant Pages

Pages 36–37

For more details, see:https://www.itcenex.com/
english/csr/activities/

S

Itochu Enex Group’s Envisioned FutureWith the stable supply of energy as the core, the Itochu Enex Group willmeet needs for decarbonization, economic efficiency and added value,
while contributing to a sustainable, smart-energy society.
Opportunities

Risks

・ Need for a stable supply of energy
・ Expansion of renewable energy supply capacity
・ Procurement and supply of clean energy
・ Infrastructure for electric vehicles
・ Commercial use of bio jet fuels in 2020
・ Future retail offering greater day-to-day convenience andsatisfaction
・ Services for aging demographics
・ Creation of working environments in which people cantake pride・ Need for climate change countermeasures
・Move toward decarbonization and a low-carbon society
・ Energy shift to electricity (accelerated adoption of electricvehicles, decrease in demand for gasoline)
・ Adoption of next-generation energy
・ Coexistence of renewable energy and fossil fuels
・ Advancement of aging population and declining birthrate・Widening disparity between income strata, generations,and regions
・Changes resulting from productivity improvements
using information technology
・Working style reforms

ENEX REPORT 2019

Reducing environmental impact(with the environment)
Under the Environmental Policy, the Itochu Enex Groupwill continue with activities to preserve and improvethe environment and contribute to a sustainable
society with the aim of achieving harmonious
coexistence with the global environment and society.

* Based on the Basic Act on
Energy Policy and approved by
Japan’s Cabinet on July 3, 201834

• Requirements in international guidelines

Creating diverse value(with society)
The Itochu Enex Group will contribute to the developmentof local communities through the stable supply ofenergy and create diverse value that meets various
social and lifestyle needs.

• Providing a stable supply of energy• Promoting lifestyle sustainability inlocal communities (responding toaging population)• Advancing value-added services• Implementing working style reforms
and utilizing diverse human resources• Making a social contribution to
local communities

Pages 38–43

For more details, see:https://www.itcenex.com/
english/csr/social/

GSound business activities(governance)
In accordance with the Code of Conduct and the
Declaration of the Group Code of Conduct, the Itochu
Enex Group will proactively disclose information whileemphasizing strict compliance, shareholder returns andmanagement transparency.

• Enhancing corporate governance• Fulfilling corporate social
responsibilities and ensuring
compliance• Conducting fair and proactive
information disclosure• Engaging in responsible
procurement and supply• Upholding industrial safety andhealth standards

Pages 44–56

For more details, see:https://www.itcenex.com/
english/corporate/
governance/

ENEX REPORT 201935

Reducing Environmental Impact
Environmental Management
Helping to Realize a Low-Carbon Society

Environmental
PolicyUnder the Corporate Philosophy, “The best partner for life and society,” the Itochu Enex
Group will provide “energy for all applications, whether as a key component of social
infrastructure or as a means of enriching people’s lives,” and will continue with thefollowing activities toward the goal of preserving and improving the environment andachieving harmonious coexistence with the global environment and society.
Kenji Okada Representative Director

2. Reducing the Environmental
Impact of Our Business Activities

1. Helping to Realize a
Low-Carbon Society(1) Promoting the advanced use offossil fuels(2) Expanding the energy solutions business(3) Implementing environmental andsocial contribution activities(1) Routine energy and resource
conservation in ofﬁce work
(2) Energy efﬁciency in facilities use(3) CO2 reductions at the transportation stage

3. Preserving Local Environments(1) Compliance with laws and regulations,environmental protocols, andindependent standards(2) Safety enhancements and upgrades

system based on the ISO 14001 international standard forenvironmental management. Through the Group-wide
implementation of the plan-do-check-act (PDCA) cycle,
Itochu Enex strives for business activities that are highly
effective in reducing environmental impact. The internal
audits required for maintaining ISO certiﬁcation are
performed by employees that meet the requirements ofGroup environmental management regulations. Furthermore,
to maintain a high standard of internal auditing, Itochu Enex
is improving the knowledge and skills of the people in chargeof audits and conducting ongoing training of Internal
Environmental Auditors. During FY2018, 24 Internal
Environmental Auditors for environmental ISO certiﬁcation
were trained within the Group.

Environmental Policy Based on the Determination of
the CEOThe Environmental Policy was formulated by top management
and consists of the eight themes grouped under the three
focal areas described above. The policy guides Group
activities that contribute to the environment and society.
Accordingly, in the quest to be an energy company that
achieves sustainable growth in harmony with the global
environment, Itochu Enex will facilitate proper Group-wide
understanding and implementation of the policy.
Promoting Effective Environmental Management under
ISO 14001
Under its CSR and compliance framework, Itochu Enex has
built and developed a functional environmental management(See page 63 for FY2018 achievements in ISO 14001-related activities.)

Organizational Framework for Environmental Management
Itochu Enex engages in activities to improve theenvironment under an organizational framework forenvironmental management structured around four divisions
and 20 Group companies (including Itochu Enex Co., Ltd.)(as of April 2019).
Internal Audit Team
Environment
Administrative Ofﬁce

Home-Life Division
Planning & Administration Department
Industrial Gas Department
Administration Department
Security System Department

President
CCO
Environmental
Management Ofﬁcer

Life & Industrial
Energy Division
Planning & Administration Department
Marine Fuels Department
International Supply & Logistics Department
Environmental Business Department
Supply Department
Administration Department
Asphalt Department
Hokkaido Branch Tohoku Branch Shutoken Branch
Kita-kanto Branch Shinetsu Branch Chubu Branch
Hokuriku Branch Kansai Branch Chugoku Branch
Shikoku Branch Kyushu Branch Okinawa Branch

Itochu Enex Home-Life Hokkaido Co., Ltd.
Itochu Enex Home-Life Tohoku Co., Ltd.
Enearc Kanto Co., Ltd.
Enearc Chubu Co., Ltd.
Enearc Kansai Co., Ltd.
Itochu Enex Home-Life Nishi-Nihon Co., Ltd. Enex Petroleum Sales Higashi-Nihon Co., Ltd.
Enex Petroleum Sales Nishi-Nihon Co., Ltd.
Itochu Enex Home-Life Shikoku Co., Ltd.
Kyushu Energy Co., Ltd.
Itochu Industrial Gas Co., Ltd.
Enex Fleet Co., Ltd.
Enexauto Co., Ltd.
Etajima Oil Terminal Co., Ltd.
Kokura Enterprise Energy Co., Ltd.

36

ENEX REPORT 2019

Management Advisory
Conference
Risk Management Committee
Environmental Information
Coordinating Committee

Power & Utility Division
Planning & Administration Department
Power & Financial Business Department
Power & Supply Management Department
Power Sales Department
Administration Department

Enex Electric Power Co., Ltd.
Hofu Energy Service Co., Ltd.
Joetsu Energy Service Co., Ltd.
JEN Tainai Wind Farm Co., Ltd.

Corporate Administration
Division

Under direct control
of President

Finance & General
Accounting Department
Human Resources &General Affairs Department
Legal & Credit
Control Department
IT Planning Department

Corporate Planning
Department
Audit Department

Thorough Implementation of Eco-Driving in
the Supply Chain
As a Known Shipper under the revised Act on the Rational
Use of Energy, Itochu Enex is working to reduce CO2
emissions from product shipping. Each year and in eachregion, with the cooperation of Isuzu Motors Sales Ltd. and
ITOCHU Corporation, Itochu Enex offers eco-driving courses
taught by experts to representatives, dispatchers, and drivers

at companies to which the Group subcontracts shipping.
These courses promote safe driving practices aimed at
reducing accidents to zero and support thorough ecodriving, covering such topics as turning off the engine when
stopped, fuel-saving driving techniques, and anger
management. They are making a positive contribution toward
CO2 emission reduction throughout the entire supply chain.
(See page 63 for FY2018 achievements in CO2 emission reduction activities in responseto the Act on the Rational Use of Energy.)

Reducing the Environmental Impact of Our Business Activities
Thermal Power Plants with Reduced Environmental Impact
State-of-the-art environmentally conscious exhaust gas
processing facilities have been installed at Sendai Power
Station Co., Ltd. and efforts to reduce environmental impact
are ongoing. Exhaust levels are managed within target limits
stricter than those mandated under the Air Pollution Control
Act. Moreover, environmental impact is reduced throughappropriate wastewater treatment, countermeasures against
noise pollution and vibrations, and indoor storage of coalwith direct vent systems to minimize the spread of particulatematter. Measurement of environmental impact is conductedmonthly with the results posted online.

Thermal power plant, Sendai Power Station Co., Ltd.

Pursuing Energy Efficiency
Group-Wide Eco-Ofﬁce Activities
The Act on the Rational Use of Energy stipulates a voluntary
1% year-on-year target for reduction in energy intensity, andthe Itochu Enex Group continues to apply this target for its
eco-ofﬁce activities in FY2019. An environmental datacollection system is used to objectively monitor the status ofinitiatives at each business location at all times, and quarterly
progress inspections support goal achievement.
Participation in the Ministry of the Environment’s“Cool Choice” Campaign
The Itochu Enex Group supports “Cool Choice,” a climatechange campaign aiming for a low-carbon society. The campaign
is led by Japan’s Ministry of the Environment. The Group
promotes energy conservation activities including wearing
light clothing in summer, heavy clothing in
winter, eco-driving, green purchasing, andturning off lighting when facilities are not in use.

Shared Consumption across Itochu Enex Group Companies
FY2018 results(vs. FY2017 results)
General power+7.8%

Motive power−1.8%

Site fuelVehicle fuelLP gas+22.3%

Kerosene+58.7%

Heavy oil

+5.3%

Gasoline+13.4%

Diesel+22.3%

Automotive gas−29.7%

Copier paper

−4.0%

Water

+5.6%

FY2019 targets−1% vs. FY2018
results(New business sites: +28 vs. FY2017)

Contributing to Resource Conservation and a Recycling-Based Society
Safety Management of Industrial Waste andPreventive Measures against Soil Contamination
Itochu Enex has deﬁned Group waste management standards
and Group waste management procedures, and ensuresthorough compliance with laws and regulations concerning
waste. Measures to assure compliance include audits by
respective departments within each division, external ISO
audits, and Group internal ISO audits, which conﬁrm required

documentation and storage locations. By identifying causes
and implementing countermeasures, the Group is able to
make improvements that prevent industrial waste accidents.
Furthermore, the Group has established soil contamination
prevention regulations to prevent contamination, etc., asdeﬁned by the Soil Contamination Countermeasures Act
and Water Pollution Prevention Act.

ENEX REPORT 201937

Creating Diverse Value
Human Resources
Basic
Policies

HIGHLIGHT

Since its founding in 1961, the Itochu Enex Group has always considered its people to be its
greatest asset. Human resources are at the center of the Group’s value creation, and are thedriving force of sustainable growth and medium- to long-term enhancement of corporate
value. Therefore, the Group believes it is essential to provide a fair, inclusive and rewarding
place to work, where every employee can feel strong and close ties. In the medium-termbusiness plan “Moving 2020: Horizons,” the Group’s human resource strategies for supporting
growth are to embrace diversity, develop globally competent human resources and promote
Enex Early Bird. The objective is to achieve sustained growth and further enhancement ofcorporate value.

Measures and Targets Implemented
1. Encouraged a shift from late-night to morningbased work
2. Meals, etc. with customers or colleagues to end
by 10:00 p.m.
3. At least 80% of paid vacation days taken
4. At least 80% of employees with a BMI of less than 25
5. At least 80% of employees being nonsmokers
6. Improve quality of communication by two rankings
7. Improve quality of meetings by two rankings
8. Improve quality of documents and materials by two rankings

38

ENEX REPORT 2019

Progress of Working Style Reforms in FY2018 (Vs. FY2017)
Percentage of paidvacation days taken

84%(FY2017: 81%)

Average overtime per month(for those not seconded
to other companies/
non-executives; excluding
hours
minutes
employees that left the(FY2017: 18 hours 52 minutes)
Company during the ﬁscal year)

18 44

Percentage of nonsmokers

67

In February 2019, Itochu Enex relocated its
head ofﬁce within Tokyo to the Kasumigaseki
Building. The ofﬁce was scaled down fromseven ﬂoors to two-and-a-half ﬂoors and newarrangements facilitate closer communication
between departments. Communication spaces
provide venues for employees to discover eachother’s strengths and create new value, andincreased face-to-face interaction is beginningto generate new business opportunities.

Relocation Concept
Connecting to the Future—Connecting People and Functions of the Group for Future Growth
1. Improved Communication
Intentionally making
connections between people
and between organizations

2. A Sense of Unity
Sharing the same space,having the same awareness

3. Working Style Reforms
Implementing Enex Early Bird

• Routes that allow circuits of
the ﬂoor, and a layout thatencourages the mingling ofpeople and information• A layout that encourages
broad, in-depth and rapid
internal collaboration• Multipurpose spaces where
people can gather fromdifferent groups, ﬂoors orfrom inside and outside theCompany• Integrated reception thatconveys a shared sense of
the unique aspects of Enex

• Ofﬁce ﬂoors that naturally
promote health• Spaces for concentrationand high productivity work,
facilitating the generation of
new concepts and value

Work-Life Balance and Support for Family
The Company has enhanced programs for accommodatingchanges in employees’ lives such as childbirth, childcare, andfamily care obligations.

Implementing Working Style Reforms and Utilizing Diverse Human Resources
Enex Early Bird
In November 2016, the Itochu Enex Group launched Enex
Early Bird, a set of working style reforms that aim to make theCompany a better company, a rewarding place to work, and acompany to be proud of in front of families and society—for
every employee.
These far-reaching reforms are based on a three-pronged
strategy of eliminating excessive working hours, promoting
employee health and improving productivity. In December
2016, Itochu Enex was certiﬁed by the Tokyo Metropolitan
Government as a company committed to working stylereforms under the Tokyo Work Style Reform Declaration. In
September 2017, Itochu Enex introduced Casual Day, withthe aim of fostering a workplace culture that encourages
ﬂexible thinking, and in April 2018, Itochu Enex established
Enex Nursery, a daycare center that assists employees inbalancing work and childcare. While implementing the new
medium-term business plan, the Itochu Enex Group will seek
to further increase its corporate value by realizing its growthstrategies. This will entail transitioning to working styles thatdeliver greater productivity, promoting the health of
employees, and respecting each employee’s lifestyle tocreate an organization in which diverse employees canperform to their potential.

Office Relocation Encouraging Greater Communication%(FY2017: 60%)

3

pt. increase

8
7

minutespt. increase

Health and Productivity Management
Through the Enex Early Bird working style reform plan, theItochu Enex Group is promoting employee health andrespecting each employee’s lifestyle to create an organizationin which diverse employees can perform to their potential.
As a result, Itochu Enex has been certiﬁed by Japan’s
Ministry of Economy, Trade and Industry as one of the Healthand Productivity Management Organization 500 every year
since FY2017. In addition, encouraging employees to leave
the ofﬁce on time and partially subsidizing expenses
associated with internal company sports activities are someof the initiatives that have earned Itochu Enex certiﬁcation asa Sports Promotion Company from the Tokyo Metropolitan
Government and as a Sports Yell Company from the JapanSports Agency, also since FY2017.

Leave and Support Programs for Pregnancy, Childbirth, andChildcare above and beyond Legal Requirements
Special pregnancy
leave

10 daysChildbirth lump-sum
grant¥300,000 for ﬁrst child, ¥500,000 for each subsequent child

Reduced working
hours

Until a child reaches ﬁfth grade of elementary school

Staggered working
hours

Rules on Childcare Leave clearly stipulate that parents may
work staggered hours when caring for young children.

Support for childcare

Opened the Enex Nursery corporate daycare facility

A Full Range of Leave Programs
Paid vacation

Special leave

Refreshment leave

20 days for all employees(Up to 20 days can be carried over from the previous year.)(During an extended absence due to illness, employees
can use any paid vacation not used in the previous
two years.)
Job transfer; marriage; death of a relative; maternity;
spouse childbirth; natural disaster and other unavoidable
causes; leave for occupational illness or injury; taking apreschool child to the hospital, for a vaccination, or for ahealth checkup; caring for a family member who requires
nursing care; jury duty; pregnancy leave
Length dependent on years of service

Supporting the Success of Women in the Workplace
and Compliance with Japan’s Act on Advancement of
Measures to Support Raising Next-Generation Children
Itochu Enex has formulated an action plan for supporting the
success of women in the workplace. By building and maintaining
an inclusive working environment that supports women, theCompany aims to ensure that all employees can make the mostof their abilities. An action plan as a general business operator
pursuant to the Act on Advancementof Measures to Support Raising
Next-Generation Children has also
been formulated, and Itochu Enex
has received certiﬁcation as a
Kurumin company that helps
employees balance theirprofessional and personal lives.

Employee Engagement Survey
With the objective of implementing improvements andreforms by ascertaining issues at the company ororganizational level, Itochu Enex conducted an employee
engagement survey to gauge attitude and satisfaction andcollect feedback on Company measures and programs.
The survey results are incorporated in personnel system
improvements, Enex Early Bird working style reforms, andmeasures to prevent employee turnover, ultimately leading to
improvements in employee motivation and productivity.
Reemployment Programs in Response to
Employees’ Motivation
Itochu Enex operates reemployment programs that enablepeople with work experience at the Company to continue toleverage their strengths.
Program for
returning to work

For selected employees who had to leave the Company
to accompany a family member on a job transfer, thisprogram provides reemployment opportunities that tap
into the knowledge and experience gathered during theirearlier employment.

Senior employment

Pursuant to the revised Act on Stabilization of Employment
of Elderly Persons, this program offers opportunities forGroup employees reaching the mandatory retirement ageof 60 to continue working until 65.

Embracing Diversity
A key element in driving innovation will be a workforce with arich diversity of viewpoints, sensitivities, intellects, career
histories, values and capabilities. To develop, maintain andfurther grow this diversity, Itochu Enex is strengthening
diversity initiatives, which will also help create a more robust
and sustainable organization and corporate culture. FY2019
marked the establishment of the Diversity Promotion Ofﬁceand the appointment of the Company’s ﬁrst female Outside
Director, steps toward incorporating more diverse views frominside and outside the Company.

ENEX REPORT 201939

Creating Diverse Value

Reemployment Program
Developing Globally Competent Human Resources
The Group is expanding its business overseas, with Asia as
the primary market. Starting from April 2018, a system wasintroduced whereby employees, mainly younger employees,
irrespective of their current business area, are posted outside
Japan at ITOCHU Corporation group companies or Itochu
Enex Group companies for hands-on experience. As well as
acquiring skills in English and other languages, trainees seek
to understand local business customs and cultures, and toaccumulate business operation know-how. The Company isthereby nurturing personnel capable of responding quickly
and ﬂexibly to future developments in business overseas.
In addition, a new system supports employees’ English
acquisition by subsidizing learning expenses. The Company
believes that developing globally competent humanresources is a key factor in achieving growth potential.

Cultivating the Next Generation of Leaders
Management training is important in cultivating the knowledge
and skills needed for a new generation of leaders andsupporting the development of personnel capable of taking
a big-picture view of the Group. Such leaders need to possesscuriosity, wide-ranging knowledge, a spirit that embraces
challenge, and sensitivity to risk, as well as the overall ability to
put these qualities to good use. Through a graduate school forworking professionals, employees are able to deepen their
management expertise by acquiring qualiﬁcations includinga Master of Business Administration degree, or as acertiﬁed public accountant.
Extensive training programs
support each individual’s
work motivation and careerdevelopment.

Promoting Hiring of Different Nationalities
Enex Fleet Co., Ltd. has hired six employees of Philippine
nationality to work in vehicle inspection and maintenance
operations in the Car-Life Station business, following theTechnical Intern Training Program supported by the Japan
International Training Cooperation Organization (JITCO) as
permitted by the Cabinet Ofﬁce since 2018. Itochu Industrial
Gas Co., Ltd. has also hired three employees of Indonesiannationality as technical interns, to work in coating operations
within the container pressure inspection process at one of thecompany’s factories. When hiring
employees of foreign nationality,
detailed support is provided in
the form of Japanese language
education and a comprehensive
training program.

Labor Practices
Since its founding in 1961, the Itochu Enex Group has
always considered its people to be its greatest asset.
Accordingly, the Group sees securing safety in operations,daily health maintenance, an inclusive workplace, and thecreation of a company that values employee input asmanagement priorities.
Securing Labor Safety
In accordance with a basic policy that states “We cannot
conduct business without safety—safety takes precedence
over all business conduct,” the Group goes beyond its legal
and regulatory compliance obligations in observing its own
work standards, including the establishment of safety manuals
and guidelines, and is actively improving systems for ensuringsafety and minimizing risk.
Taking Care of Employees in the Event of a Disaster
Itochu Enex Group establishes and maintains systems for disaster
preparedness that ensure the safety of employees. Thesesystems include autonomous frameworks for disaster readinessat respective business ofﬁces, evacuation drills, emergency foodstockpiling, the distribution of personal emergency supply kits toall employees, and the Itochu Enex Group Emergency Contact
Network for conﬁrmation of employee safety.

Returning to Work with aFresh Perspective Page 39
Risa Hada

Legal & Credit Control Department

Employees Supported bya Variety of Programs

I left the Company for a time when my husband was transferredoverseas, but returned using the reemployment program.
In my current job, I am able to put to work the knowledge
I acquired before I left, while applying the fresh perspective
I gained from my experiences away from work. My time away
allowed me to see the Company in an objective light, proving toe experience.
be a valuable

Childcare Leave
and Enex Nursery Page 39

Sports Support Program

Takahiro Otsuka

Ren Otono

Environmental Business Department

My wife and I decided we wanted to share childcare responsibilities.
After taking childcare leave for three months, I returned to work on a
reduced schedule, which allowed me to help out with our child.
During my leave period, I felt for myself how much hard work is
involved in taking care of a child. Since our child was born in the ﬁrst
three months of the year, it was difﬁcult to secure a place at a nursery,
but we were able to use Enex Nursery, which was a big hhelp to us.

Promoting Health andWorkplace Interaction Page 38
International Supply & Logistics Department

I am a member of the Running Club, which I joined for health reasonsand so that I could interact with employees in different departments
and Group companies. Through this interaction with people that I
normally have little contact with, I can enjoy new social experiences
and refresh myself mentally and physically. That also has a positiveeffect on my work.

physical and mental health, and promotion and education on
health issues. All employees also undergo stress checks that
include advice regarding mental health, lifestyle-relateddiseases and metabolic syndrome.
Subsidy Program for Thorough Physical Checkup
In addition to conducting periodic health checkups in accordance with
the Industrial Safety and Health Act, the Company mandates that
employees aged 40 and above undergo a thorough physical checkup,
with expenses borne by the Company.

Interaction with Employees: Sound Labor-Management
Relations
To ensure that each employee can work with motivation,
improve performance, and achieve personal objectives, alabor union* and labor-management council hold meetings
on a regular basis at which employees express their candid
opinions and raise issues. These are then reﬂected in the
management of the Company.
Employees also participate in Health Committee meetings
held monthly to deliberate on labor safety and sanitation
improvements, prevention of health issues, and generalpromotion of health. Through such measures, Itochu Enex isworking to create a workplace environment where diverse
human resources can leverage their respective strengths.

Working in the Philippines
as an Overseas Trainee Page 40

Enex Family Day

Ari Takeichi

Jiro Wada

Seconded to Isla Petroleum & Gas Corporation

Since April 2018, I have been working at Isla Petroleum & Gas
Corporation, an LP gas company in the Philippines. I was initiallyout of my depth getting to grips with cultural and lifestyledifferences, but now I have accepted those differences, I am
enjoying my work here. The ofﬁce environment enables women to
excel, and seeing them expressing their opinions clearly andworking hard is very inspiring.

Children Visit
Their Parents’ Workplace
Corporate Communications Office

My two children joined me on my morning commute to participate in
Family Day, an event in which employees’ children experience theirparents’ workplace. With other children, they toured the ofﬁce,
practiced exchanging business cards for the ﬁrst time, and worked
with parents to create handicrafts. When we got home, my kids were
excited to share all they had learned about Itochu Enex as an energy
company. This program gave my children a chance to feel theimportance off working life while boosting my own motiva
motivation.

* The Company’s labor union operates under a union shop system.

Health Support Ofﬁce
The Health Support Ofﬁce promotes employee healthmanagement. Two public health nurses support healthmanagement through checkups and aftercare, advice on

40

ENEX REPORT 2019

ENEX REPORT 201941

Creating Diverse ValueContributing to Communities

Contributing to a Sustainable Society
Basic
Policies

Basic Policies for the Itochu Enex Group’s Social Contribution Activities
As “The best partner for life and society,” develop an environment,
develop human resources and develop communities to be passed on to the future
・ Based on the Corporate Philosophy, “The best partner for life and society,” we contribute tosociety in business activities and as a good corporate citizen.
・ Under the theme of developing an environment, developing human resources anddeveloping communities to foster the next generation, we carry out activities to passdown a sustainable society to the future.
・ We support social contribution activities conducted by employees as citizens.
・ We proactively disclose details and results of our social contribution activities and sharethem with society.

・Total employee donations for medium-to-long-term recovery support
following the Great East Japan Earthquake :(FY2011–FY2018) ¥28,795,900
Beneﬁciaries: Iwate no Manabi Kibo Kikin, Higashi Nihon Daishinsai Miyagi
Kodomo Ikuei Kikin, Higashi Nihon Daishinsai Fukushima Kodomo Kifukin2018 Japan Floods
Employees volunteered for recovery support
Group company facilities were used for storage of relief supplies
・2018 Japan Floods: Company donations (including Group companies):¥5,030,000; Employee donations: ¥687,000
Beneﬁciary: NPO Japan Platform, Japan Red Cross Society

Social Contribution Activities

Three Themes

Environmental
Preservation

Disaster Recovery
To support recovery from the 2011 Great East Japan Earthquake
in the medium-to-long term, Itochu Enex solicits donations from
employees every month. Following the 2018 Japan Floods inJuly, Itochu Enex contributed to recovery efforts throughdonations from the Company and employees, and a numberof employees volunteered for recovery support.

Nurturing the Next
Generation

Contributing toCommunities

Under the Corporate Philosophy, “The best partner for life and society—with Energy, with the Car, with theHome,” the Itochu Enex Group works toward the realization of more afﬂuent lifestyles for all and thesustainable development of society, through business activities that create various kinds of value and activities
that contribute to society. In addition, the Group strives to contribute to the achievement of the SDGs.

Summary of Activities

Environmental Preservation
Protecting Biodiversity
In response to calls from the Tokyo Development Foundation for
Agriculture, Forestry and Fisheries, Itochu Enex has participatedin a forest improvement project in Ome, in the west of Tokyo
Prefecture, since 2010. This project involves planting cedar,
Japanese cypress and other broad leaf trees and is aimed atpromoting forest maintenance and protection of biodiversity.
Through ﬁxed-point observation and inspection of the forest,
Itochu Enex conveys the importance of biodiversity within andoutside the Company.
The population of the Japanese squirrel is on the decline
due to changes in its habitat. Itochu Enex cooperated in a
project to build squirrel bridges that help prevent road crossing
deaths. The Company is also supporting activities aimed at

Themefostering coexistence between people and wildlife in forests andmountainous areas. At the site of the project (in Tokamachi,
Niigata Prefecture), employee volunteers plant Japanesechestnut trees, which are a source of food for squirrels, anddevise ways to encourage squirrels to use the bridges.

Nurturing the
Next
Generation

The population of the Japanesesquirrel is declining

Volunteers working to protect theJapanese squirrel
Contributing toCommunities

Nurturing the Next Generation
Word and Voice Programs“Enjoy the Power of Words” is a recital event that has been
held throughout Japan since 2013 in support of people
affected by the 2011 Great East Japan Earthquake. Fostering
human connections, the event regularly features recitals byformer television announcers Motoyo Yamane and Masako
Shindo, as well as a cast of invited guests presenting a variety
of musical and expressive works. Itochu Enex will continue tohold this event in remembrance of the disaster and as a wayof nurturing an appreciation for words across generations.
Donations are collected at the event for Higashi Nihon
Daishinsai Fukushima Kodomo Kifukin, a fund to aid children
affected by the earthquake.
As cosponsor of the “Power of Voice” FY2018 lecture
series, the Company is supporting greater appreciation of the
42

ENEX REPORT 2019

Environmental
Preservation

power of the human voice. Lecturers from all walks of life
examine the voice—the source of human language—and
their insights encourage attendees to consider how children
should be educated and how society should be.

ActionDetails

Promoting healthy forests

Participation in forest improvement project in the west of Tokyo Prefecture

Project to protect the Japanese squirrel

Participation from employee volunteers in a project to build and encourage the use of bridges that
reduce road deaths of the Japanese squirrel (Niigata Prefecture)

Cleanup activities

Itochu Industrial Gas Co., Ltd. cooperates in the cleanup activities of local elementary schools(Ibaraki Prefecture)

Ultimate Frisbee classes

Held an Ultimate Frisbee course led by members of the Japanese national team at schools acrossJapan (3 times/year)

Dietary and ﬁre safety education activities

Education activities on food and ﬁre safety at kindergartens across Japan (3 times/year)

Word and voice programs• “Enjoy the Power of Words” (2 times/year)• “Power of Voice” lecture series (12 times/year)

Social education activities• Enex Family Day, a parent-child event held in summer• Mini-Sapporo workplace experience event held in Sapporo

Support for the arts

Sponsorship of Jacques Lancelot International Clarinet Competition

Recovery support• Donations for medium-to-long-term recovery support following the Great East Japan Earthquake• Donations for 2018 Japan Floods

Support for people with disabilities• Use of art by people with disabilities for calendars and gift-wrapping paper• Support for Hokkaido Guide Dog Association (Itochu Enex Home-Life Hokkaido Co., Ltd.)• Support for swimming activities for people with disabilities

Promoting social welfare

Enex Fleet Co., Ltd. invites elementary school children (including children from special needs schools)
to games of the professional basketball team it sponsors

Employee volunteer activities

Established a program to subsidize the cost of participation in volunteer activities by employees andtheir family members in order to develop human resources who are trusted by society

Charity activities• Support and participation in UN World Food Programme’s “End Hunger: Walk the World” event• Cooperation in charity walk to reduce world hunger

SocialContribution

For further details on social contribution activities,
please visit the Itochu Enex website:“Enjoy the Power of Words” event“Power of Voice” lecture series

https://www.itcenex.com/english/csr/social/

Scan the 2D code on the right with asmartphone to access a video feature
introducing Itochu Enex’s social contribution
activities. (Japanese only)

ENEX REPORT 201943

Sound Business Activities
Management Team

Notes: Shares of the Company owned as of March 31, 2019.
“Independent” indicates a Director or Audit & Supervisory Board Member registered with the Tokyo Stock
Exchange as an independent ofﬁcer.
Executive Ofﬁcers are not members of the Board of Directors or Audit & Supervisory Board.
Board of Directors meeting attendance for FY2018.
(Out of 10 times for Mr. Wakamatsu, Mr. Katsu and Mr. Sunayama, who were appointed at the general
meeting of shareholders held in June 2018)(As of August 1, 2019)

Directors
1974 Joined ITOCHU Corporation2005 Executive Officer, ITOCHU Corporation2007 Executive Vice President, Finance, Realty, Insurance & Logistics
Services Company, Chief Operating Officer, Construction &Realty Division, ITOCHU Corporation
2008 Managing Executive Officer, President, Finance, Realty,
Insurance & Logistics Services Company, ITOCHU Corporation
Member of the Board, Managing Director, ITOCHU Corporation2010 Member of the Board, Managing Executive Officer, ITOCHU
Corporation2012 Corporate Adviser, Itochu Enex Co., Ltd.
Representative Director, President and Chief Executive Officer,
Itochu Enex Co., Ltd. (to date)

Kenji Okada
Representative Director, President
andbChief Executive Officer

Atsushi Katsu

Shares of the Company owned: 106,000
Board of Directors meeting attendance: 13/13
Significant concurrent positions outside the Company:
Outside Director, Cosmos Initia Co., Ltd.

1983 Joined ITOCHU Corporation2011 Chief Administration Control Officer for ASEAN & South West
Asia Bloc, ITOCHU Corporation; Executive Vice President,
ITOCHU Singapore Pte. Ltd.
2013 Director, Dole International Holdings, Inc.
2014 Executive Officer, ITOCHU Corporation
2015 Executive Officer, ITOCHU Corporation; Director, Executive Vice
President, Dole Asia Holdings Pte. Ltd.
2016 Director, Executive Vice President, Dole Asia Holdings Pte. Ltd.
2018 Corporate Adviser, Itochu Enex Co., Ltd.
Director, Executive Officer, Chief Financial Officer, Chief
Information Officer, and Chief Operating Officer, Corporate
Administration Division, Itochu Enex Co., Ltd.
2019 Director, Managing Officer, Chief Financial Officer, Chief
Compliance Officer, Chief Information Officer, and Chief
Operating Officer, Corporate Administration Division, Itochu
Enex Co., Ltd. (to date)Director and Managing Officer
Chief Financial Officer, Chief Compliance Shares of the Company owned: 4,400
Officer, Chief Information Officer,
Board of Directors meeting attendance: 10/10
Significant concurrent positions outside the Company: None
andbChief Operating Officer,
Corporate Administration Division

Fumio Shimizu
Director and Managing Officer
Chief Operating Officer,
Power & Utility Division

1981 Joined Itochu Enex Co., Ltd.
2008 Executive Officer and Head of Branch, Kyushu Branch, Itochu
Enex Co., Ltd.
2011 Executive Officer, Deputy Chief Operating Officer, Car-Life
Division, and General Manager, Supply Administration
Department, Itochu Enex Co., Ltd.
2015 Retired from Managing Officer, Itochu Enex Co., Ltd.
Representative Director, President and Chief Executive Officer,
Itochu Enex Home-Life Hokkaido Co., Ltd.
2018 Representative Director, President and Chief Executive Officer,
Itochu Enex Home-Life Hokkaido Co., Ltd.; Representative
Director, President and Chief Executive Officer, Nissho Propane
Sekiyu Co., Ltd.
Retired from Representative Director, President and Chief
Executive Officer, Itochu Enex Home-Life Hokkaido Co., Ltd.
Retired from Representative Director, President and Chief
Executive Officer, Nissho Propane Sekiyu Co., Ltd.
Joined Itochu Enex Co., Ltd.
Executive Officer and Chief Operating Officer, Power & Utility
Division, Itochu Enex Co., Ltd.
2019 Director, Managing Officer and Chief Operating Officer, Power &Utility Division, Itochu Enex Co., Ltd. (to date)

Kyosuke Wakamatsu

1985 Joined Itochu Enex Co., Ltd.
2013 Executive Officer and General Manager, Corporate & Planning
Department, Itochu Enex Co., Ltd.
2016 Representative Director, President and Chief Executive Officer,
Itochu Enex Home-Life Tohoku Co., Ltd.
2017 Executive Officer, Deputy Chief Operating Officer, Home-Life
Division, and General Manager, Planning & Administration
Department, Itochu Enex Co., Ltd.
2018 Executive Officer, Chief Operating Officer, Home-Life Division,and General Manager, Planning & Administration Department,
Itochu Enex Co., Ltd.
Director, Managing Officer, Chief Operating Officer, Energy &Logistics Group, and Chief Operating Officer, Home-Life
Division, Itochu Enex Co., Ltd.
2019 Director, Managing Officer, and Chief Operating Officer,
Home-Life Division, Itochu Enex Co., Ltd. (to date)Director and Managing Officer
Chief Operating Officer,
Home-Life Division

Shares of the Company owned: 15,300
Board of Directors meeting attendance: 10/10
Significant concurrent positions outside the Company: None

Toshihisa Fuse
Director and Managing Officer
Chief Operating Officer,
Life & Industrial Energy Division

Seiichi Shimbo
Director (Outside, Independent)

1984 Joined ITOCHU Corporation2012 CEO and President, Isla LPG Corporation (Seconded) (Stationed
in Manila)
2014 Senior Officer for ASEAN & South West Asia Bloc (South West
Asia Area) (Stationed in New Delhi), Chief Officer for South West
Asia Area, ITOCHU Corporation; Chairman & Managing Director,
ITOCHU India Pvt. Ltd.; Manager, New Delhi Representative
Office, Manager, Calcutta Representative Office, Manager,
Madras Representative Office, ITOCHU Corporation2017 Executive Officer and Deputy Chief Operating Officer, Power &Utility Division, Itochu Enex Co., Ltd.
2018 Executive Officer and Chief Operating Officer, Life & Industrial
Energy Division, Itochu Enex Co., Ltd.
2019 Director, Managing Officer, and Chief Operating Officer, Life &Industrial Energy Division, Itochu Enex Co., Ltd. (to date)

Motoyo Yamane
Director (Outside, Independent)

Shares of the Company owned: None
Board of Directors meeting attendance: –Significant concurrent positions outside the Company:
Member of Management Council, Institute for the Culture of Travel(until April 2020)
Board Member, Characters Culture Promotion Organization (Public
Interest Incorporated Foundation)
Director, Junshin Hiroo Gakuen
Director, Picture Book Culture Promotion Association (Incorporated
Nonprofit Organization)

Audit & Supervisory Board Members

Shares of the Company owned: 200
Board of Directors meeting attendance: –Significant concurrent positions outside the Company:
Director, Osaka Car Life Group Co., Ltd.
Director, Nissan Osaka Sales Co., Ltd.
Director, Enex Fleet Co., Ltd.

1975 Joined Tokio Marine Fire Insurance Co., Ltd. (currently, Tokio
Marine & Nichido Fire Insurance Co., Ltd.)
2000 General Manager for Corporate Planning Department, Tokio
Marine Fire Insurance Co., Ltd.
2003 General Manager for 3rd Automobile Sales Department of Tokyo
Automobile Headquarter, Tokio Marine Fire Insurance Co., Ltd.
2004 Executive Officer, General Manager for 3rd Automobile Sales
Department of Tokyo Automobile Headquarter, Tokio Marine
Fire Insurance Co., Ltd.
2006 Managing Executive Officer, Tokio Marine & Nichido Fire
Insurance Co., Ltd.
2009 Senior Director, Non-life Insurance Policy-holders Protection
Corporation of Japan
2013 Outside Auditor, Tokyo Ohka Kogyo Co., Ltd.
2015 Outside Director, Itochu Enex Co., Ltd. (to date)2018 Director, Carlit Holdings Co., Ltd. (to date)

Yuji Moritsuka
Full-Time Audit & Supervisory Board
Member (Outside, Independent)

Shares of the Company owned: 8,800
Board of Directors meeting attendance: 13/13
Significant concurrent positions outside the Company:
Outside Director, Carlit Holdings Co., Ltd.

Ichiro Saeki
Director (Outside, Independent)– = Newly elected

44

ENEX REPORT 2019

Shares of the Company owned: 6,800
Board of Directors meeting attendance: 13/13
Significant concurrent positions outside the Company:
Representative Attorney, Shi-Go-Roku Law Office
Professor, Law School, Aoyama Gakuin University

Hisato Okubo
Director

1986 Joined ITOCHU Corporation2009 General Manager for Natural Gas Business Department,
ITOCHU Corporation2012 General Manager for Energy & Chemicals Planning and
Administration Department and Compliance Officer for
Energy & Chemicals Company, ITOCHU Corporation2013 Deputy Chief Operating Officer, Energy Division No. 2 andGeneral Manager for E&P Project Coordinating Department,
ITOCHU Corporation2014 Chief Operating Officer, Energy Division No. 2,
ITOCHU Corporation
2016 General Manager for Energy & Chemicals Planning and
Administration Department and CP & CITIC Business
Development Department, and Compliance Officer for Energy &Chemicals Company, ITOCHU Corporation2017 Executive Officer, Chief Operating Officer for Energy Division,
ITOCHU Corporation
Director, Itochu Enex Co., Ltd. (to date)2019 Executive Officer, Executive Vice President for Energy &Chemicals Company and Chief Operating Officer for Energy
Division, ITOCHU Corporation (to date)
Shares of the Company owned: None
Board of Directors meeting attendance: 12/13
Significant concurrent positions outside the Company:
Executive Officer, Executive Vice President for Energy & Chemicals
Company and Chief Operating Officer for Energy Division,
ITOCHU Corporation
Director, Sakhalin Oil and Gas Development Co., Ltd.

1974 Joined The Nippon Fudosan Bank, Ltd. (currently, Aozora
Bank, Ltd.)
1998 General Manager for Sendai Branch, The Nippon Credit Bank,
Ltd. (currently, Aozora Bank, Ltd.)
2000 Chief Credit Analysis Officer for Credit Analysis Division,
The Nippon Credit Bank, Ltd.
2001 Representative Director, Senior Managing Director, Aozora
Information Systems, Ltd.
2003 Representative Director and President, Aozora Information
Systems, Ltd.
2005 Senior Managing Director, Densan, Inc.
2008 Corporate Auditor, Japan Energy Network Co., Ltd. (currently,
Enex Electric Power Co., Ltd.)2012 Corporate Auditor, Tokyo Toshi Service Co., Ltd. (to date)2015 Standing Audit & Supervisory Board Member (outside),
ItochubEnex Co., Ltd. (to date)
Shares of the Company owned: 9,800
Board of Directors meeting attendance: 13/13
Significant concurrent positions outside the Company:
Audit & Supervisory Board Member of Nissan Osaka Sales Co., Ltd.,
Ecore Co., Ltd. and Kokura Enterprise Energy Co., Ltd.

1983 Joined ITOCHU Corporation2010 Chief Corporate Planning Officer & Chief Compliance Officer for
Asia Bloc, ITOCHU Corporation; Executive Vice President,
ITOCHU Singapore Pte. Ltd.
2011 Chief Administration Control Officer & Chief Compliance Officer
for ASEAN & South West Asia Bloc, ITOCHU Corporation;
Executive Vice President, ITOCHU Singapore Pte. Ltd.
2012 Director for East Asia Bloc, ITOCHU Corporation;
ManagingbDirector, ITOCHU Hong Kong Ltd.
2015 Executive Officer, Leilian Co., Ltd.
2016 Director, Chief Administration Officer, Leilian Co., Ltd.
2017 Executive Director, Chief Administrative Officer,
Leilian Co., Ltd.
2018 Standing Audit & Supervisory Board Member (outside),
ItochubEnex Co., Ltd. (to date)Toyohiro Sunayama

Shares of the Company owned: None
Board of Directors meeting attendance: 10/10
Significant concurrent positions outside the Company:
Audit & Supervisory Board Member of Tokyo Toshi Service
Co., Ltd., Enex Electric Power Co., Ltd., Enex Fleet Co., Ltd., andEnearc Co., Ltd.

Full-Time Audit & Supervisory Board
Member (Outside)

1990 Joined ITOCHU Corporation2009 Deputy Director, China Corporate Administration Division,
ITOCHU Corporation, and ITOCHU Shanghai Ltd.
2010 Deputy Director, China Corporate Administration Division,
ITOCHU Corporation, and ITOCHU (China) Holding Co., Ltd.
2014 Deputy CFO, Machinery Company; General Manager, BusinessAccounting and Control Section, ITOCHU Corporation2017 General Manager, Tax Planning & Control Department,
ITOCHU Corporation2018 Deputy General Manager, General Accounting Control Division
and General Manager, Tax Planning & Control Department,
ITOCHU Corporation
2019 CFO, Energy & Chemicals Company, ITOCHU Corporation(to date)
Audit & Supervisory Board Member, Itochu Enex Co., Ltd.
(to date)

1981 Joined Asahi & Co. (Currently, KPMG AZSA LLC)
1985 Registered as Certified Public Accountant
2002 Partner, Asahi & Co.
2004 Head of Intellectual Property Management, KPMG AZSA & Co.
2006 Board Member, KPMG AZSA & Co.
2010 Executive Board Member, KPMG AZSA & Co.
2015 Senior Partner, KPMG AZSA LLC
2017 Audit & Supervisory Board Member, Itochu Enex Co., Ltd.
(to date)
Outside Corporate Auditor, Mitsui Chemicals, Inc. (to date)

Shares of the Company owned: 3,900
Board of Directors meeting attendance: –Significant concurrent positions outside the Company: None1975 Joined The Nippon Fudosan Bank, Ltd. (currently, Aozora
Bank, Ltd.)
1991 Resigned from The Nippon Fudosan Bank, Ltd.
The Supreme Court Legal Apprentice
1993 Completed Legal Apprentice, reinstated to The Nippon Credit
Bank Ltd. (currently, Aozora Bank, Ltd.)
1995 Registered with the Daini Tokyo Bar Association as an
attorney-at-law
1999 Resigned from The Nippon Credit Bank, Ltd.
Established Saeki Law Office
2002 Visiting Professor, Faculty of Law, Teikyo University
2004 Established Shi-Go-Roku Law Office as Representative Attorney(to date)
Professor, Omiya Law School
2007 Professor, Law School, Aoyama Gakuin University (to date)2016 Outside Director, Itochu Enex Co., Ltd. (to date)1971 Joined Japan Broadcasting Corporation
1998 Member of Management Council, Institute for the Culture ofTravel (to date)2005 Head of Announcers Bureau, Japan Broadcasting Corporation2007 Resigned from Japan Broadcasting Corporation
Established “kotobano-mori” (Limited Liability Business
Partnership) (dissolved in March 2014)
Board Member, Characters Culture Promotion Organization(Incorporated Foundation)2010 Visiting Professor, Graduate School of Humanities and Sociology
andbFaculty of Letters, The University of Tokyo
2011 Part-time Lecturer, Joshibi University of Art and Design
Board Member, Characters Culture Promotion Organization(Public Interest Incorporated Foundation) (to date)2014 Director, Kuwasawa Gakuen Educational Foundation
2015 Guest Professor, Joshibi University of Art and Design2017 Director, Junshin Hiroo Gakuen (to date)Director, Picture Book Culture Promotion Association(Incorporated Nonprofit Organization) (to date)2019 Outside Director, Itochu Enex Co., Ltd. (to date)Shozo Tokuda

Shares of the Company owned: None
Board of Directors meeting attendance: 13/13
Significant concurrent positions outside the Company:
Outside Corporate Auditor, Mitsui Chemicals, Inc.

Audit & Supervisory Board Member(Outside, Independent)

Kenji Takai
Audit & Supervisory Board Member

Shares of the Company owned: None
Board of Directors meeting attendance: –Significant concurrent positions outside the Company:
CFO, Energy & Chemicals Company, ITOCHU Corporation
Audit & Supervisory Board Member, C.I. TAKIRON Corporation

Executive Officers (excluding Directors serving concurrently as Executive Ofﬁcers)
Keiichi Matsuzuka

Toshiyuki Tsuruoka

Tatsuro Utsumi

Takeo Fukushima

Shigeru Kondo

Tsukasa Motegi

Managing Officer
Deputy Chief Operating Officer,
Powerb& Utility Group

Executive Officer
Deputy Chief Operating Officer,
Life & Industrial Energy Division,
Energy & Logistics Group

Executive Officer
President, and Chief Executive
Officer, Itochu Enex Home-Life
Tohoku Co., Ltd.

Executive Officer
President, and Chief Executive
Officer, Tokyo Toshi Service Co., Ltd.

Executive Officer
President, and Chief Executive
Officer, Itochu Industrial Gas
Co.,bLtd.

Executive Officer
President, and Chief Executive
Officer, Enex Fleet Co., Ltd.

ENEX REPORT 201945

Discussion by Three
Outside Officers

Sound Business Activities“By strengthening checkand-balance functions, I willhone my sensitivity to
management issues andwork in cooperation withsenior management.”
Ichiro Saeki
Outside Director

Ichiro Saeki

Yuji Moritsuka

Seiichi Shimbo

Outside Director

Outside Audit & Supervisory Board Member (Full-Time)

Outside Director

Itochu Enex is continually enhancing its corporate governance. The Governance Committee, which was set up as an advisory
body to the Board of Directors, plays a central role in that effort. In this discussion, the Committee Chairman and two Outside
Directors talk about how governance has been strengthened and the challenges ahead.

The implementation of “growth-oriented
governance” marks a tangible evolution in
our approach to governance.
■ Shimbo As an Outside Director since 2015, I feel that the Boardof Directors has always held robust discussions, and that this is acompany with a very free and open culture. In the last few years,
the Company’s governance has also been steadily evolving as it
responds to Japan’s Corporate Governance Code, issued by the
Tokyo Stock Exchange, Inc.
■ Moritsuka During that time, the Company has been quick toaddress matters such as enhancement of disclosure, appointmentof Outside Directors, policies on determination of remuneration for
Directors, and the performance-linked stock-based remuneration plan.
■ Shimbo An evaluation of the effectiveness of the Board of
Directors is conducted annually. Many of the problem areas raised
have been improved because evaluating members are able tocandidly express their opinions, which are then reported to theGovernance Committee and the Board of Directors.
■ Saeki I became an Outside Director in 2016, the year after
Mr. Shimbo and Mr. Moritsuka’s appointments. I have also seen
very substantial improvement in the Company’s corporate
governance. The revisions to the Corporate Governance Codehave raised expectations, so although there has been no majorchange in the evaluation score, I feel that the operation of Board“Besides focusing on responding
to the Corporate Governance
Code, I will actively advise
management on how to make‘the next big leap.’”
Yuji Moritsuka
Outside Audit & Supervisory Board
Member (Full-Time)

46

ENEX REPORT 2019

meetings is making progress in every respect, and sharing andclassification of discussion topics is improving.
■ Moritsuka I agree. For example, outside officers now receive
explanations of proposals as part of advance briefings. This helps
to clear up any uncertainties ahead of time, so we can go into
meetings well-prepared, with a clear understanding of all
discussion points. This has led to transparent, fair and faster
decision-making by the Board of Directors.
■ Shimbo Dialogue between outside officers and employees isalso helpful. This year, worksite visits are among the programs thatwill give us the opportunity to hear from employees directly.
■ Moritsuka In my position as a full-time Outside Audit &Supervisory Board Member, I attend preliminary review meetings
on agenda items, make suggestions on matters to be reported to
the Board of Directors, and actively exchange information with
Outside Directors and Outside Audit & Supervisory Board
Members at the Independent Officers Council, which operates
autonomously. All of these things are helpful in identifying issues in
the Company’s governance.

The Governance Committee has achieved
improved functionality and will serve an
increasingly important role.
■ Saeki I think the mindset of senior management has alsochanged considerably as a result of having to meet therequirements of the Corporate Governance Code. There is no
denying that the new requirements felt simply like red tape at first,
but with time, I believe management has seen that they reflectchanges in social demands and the business environment, and I
sense greater understanding and enthusiasm for these initiatives.
■ Moritsuka The Governance Committee has evolved as well. In
2015, when the Governance Committee was established, it had
four members—two from outside and two from inside theCompany—and was chaired by an inside Director. However, sincelast year, the Committee has been chaired by me, an Outside

Audit & Supervisory Board Member, and has five members,
including four outside officers. The topics of discussion have alsochanged substantially.
■ Saeki Certainly, the change in the makeup of the GovernanceCommittee gives greater credibility to the Committee’s objectivity andrationality as viewed from outside the Company, and that is important.
■ Shimbo As of this year, three of the nine Directors are Outside
Directors, and one female Director has been appointed. I think thiswill transform the Company’s governance. In the GovernanceCommittee, we monitor the influence of ITOCHU Corporation (theparent company)—including the level of its representation on the
Board—to ensure that independence is maintained without
interference to the Company’s ability to make its own management
judgments. We also conduct preliminary interviews with officer
candidates to confirm that they satisfy the selection policy for
Directors and Audit & Supervisory Board Members. This role will
also become increasingly important.
■ Moritsuka In my position as Committee Chairman, I endeavor
to adopt a neutral stance as far as possible, and thereby foster an
atmosphere in which Directors can speak freely. Another point I am
focusing on is how best to express the views of the GovernanceCommittee to senior management and have them reflected inbusiness execution. President Okada himself has expressed his
appreciation of the insights given in reports from the GovernanceCommittee, and has praised the Committee’s value.
■ Shimbo In terms of the effectiveness of Board of Directors
meetings, I would like discussions about the Company’s long-term
vision to go into a little more depth. In the formulation of “Moving
2020: Horizons,” Outside Directors had more opportunities than
before for advance discussion of the plan. In the future, though,rather than limiting discussion to the Board of Directors, it would
be better to provide opportunities to exchange ideas in a freediscussion format that takes in the views of mid-level and younger
employees, in addition to those of outside officers.
■ Saeki I agree that the depth of discussion has been somewhat
insufficient.
■ Moritsuka With the long-term vision in particular, a key questionis how the Governance Committee will be involved. Group
governance is another important theme. This includes theCompany’s relationship with the parent company, and in particular,
how to ensure transparency in the selection of officers. At the sametime, if we include subsidiaries and joint venture companies, this is agroup of 5,000 people, so how does one make governance work incompanies with different cultures? The question of internal controls
also overlaps with this, and we are currently discussing that with senior
management. When considering group governance, cultivating
future managers of Group companies will also be important.

■ Shimbo Development of both management talent and globallycompetent human resources is necessary in human resource
development. While development of globally competent humanresources and young employees is proceeding smoothly, startingwith the overseas job training program, creation of a frameworkfor succession planning for promoting management talent fromwithin is an urgent issue. It is also necessary to move faster on
promoting diversity.
■ Saeki As Mr. Shimbo said, the environment for cultivating
management talent from within is not well-established yet—that ispartly because the average age of the Company’s workforce is stillrather young. I think that will gradually change, but we also have to
make efforts in that area.

Further enhancements to governance will be madeto respond to the needs of all stakeholders.
■ Saeki So that the Company can further expand its profit basethrough the execution of the medium-term business plan, I will try
to act as a check and balance in offering advice from my position
as an Outside Director on whether management decisions arereasonable and appropriate. Given Itochu Enex’s position as anenergy trading company that supports local communities, I will
also focus on how the Company should fulfill its social
responsibility, and whether ESG perspectives are being given
enough weight.
■ Shimbo Meeting the expectations of a broad range ofstakeholders will be essential in achieving sustainable growth andmaximizing corporate value. Also, I would say the Company ismaking good progress in risk management, but its plans for using
outside knowledge to minimize risk will continue to be scrutinized.
We should bear that in mind in our discussions, and connect it toenhancement of governance.
■ Moritsuka The Audit & Supervisory Board Members audit theexecution of duties by Directors from the perspective of themedium- and long-term growth of the Company. The Corporate
Governance Code states that those in this role should actively andassertively exercise authority and voice their opinions, without
limiting themselves to their own field. Our Audit & Supervisory
Board also operates based on this policy. We will voice comments
informed by diverse perspectives, and work toward the further
evolution of the Company’s governance.

“While focusing on meeting the
expectations of all stakeholders,
I will work to minimize risk
and contribute to sustainablegrowth and the maximizationof corporate value.”

Seiichi Shimbo
Outside Director

ENEX REPORT 201947

Sound Business Activities

Corporate Governance System

Corporate Governance
Basic Approachto Corporate
Governance

The Company has a Board of Directors and Audit & Supervisory
Board Members (Audit & Supervisory Board). In accordance with laws
and regulations, the Company’s Articles of Incorporation, rules of theBoard of Directors and other internal rules, the Board of Directors
makes decisions on material matters and oversees the Directors’
performance of their duties. Each Director executes his or her duties
based on the roles defined by the Board of Directors, and inaccordance with laws and regulations, the Articles of Incorporationand internal rules. To strengthen the Board of Directors’ decisionmaking and oversight functions and increase the efficiency ofbusiness execution, the Company has adopted an executive officer
system. As delegated by the Board of Directors and Representative
Directors, Executive Officers execute the duties assigned to thembased on decisions made by the Board of Directors.

Based on the Code of Conduct, “Be Ethical (Reliability and sincerity, creativity and ingenuity,transparency and integrity),” and the Declaration of the Group Code of Conduct, Itochu Enexremains committed to thorough compliance as a corporate citizen, focusing on shareholderinterests and ensuring management transparency in business management. To that end, itemphasizes proactive initiatives for information disclosure with a view to securing managerialtransparency, and endeavors to make prompt and accurate disclosure.
(For information on corporate governance basic policies, please see the Corporate Governance Report, available athttps://www.itcenex.com/english/ir/policy/governance/)

1 Board of Directors

2 Audit & Supervisory Board

3 Management Advisory Conference

Corporate Governance Structure

General Meeting of Shareholders
Appointment
and dismissal(Directors)

Consultation
and reporting

4 Governance Committee

Audits andreportingSelection and oversight

Outside Audit &Supervisory Board
Members

Composition ofBoard of Directors
and Audit &Supervisory Board3(7 inside officers,
6 outside officers)

Accounting
AuditorReportingAccounting
audits3 Management

Advisory Conference

Reporting

CFO1

5 Risk Management Committee

CCO2

6 Internal Control Committee

CIO3

7 Disclosure Committee

Audit Department
8 Outside consultant
Consultation

6

1
Meetings in FY2018: 8

The Governance Committee consists of five members, of whom four are
independent officers (two Outside Directors and two Outside Audit &Supervisory Board Members) and one is an Inside Director. As a voluntary
advisory committee to the Board of Directors, the Governance Committee was
set up to strengthen and enhance the effectiveness of management oversightand the transparency of decision-making by the Board of Directors. It examines
the methods of selecting Directors and Audit & Supervisory Board Members
and individual appointment and dismissal proposals, analyzes and evaluates themost appropriate form for the Director remuneration system (the appropriatenessof compensation-setting policies and level of compensation) and the effectivenessof the Board of Directors as a whole, and discusses governance-related proposals.
5 Risk Management Committee

Audits

InsideDirectors

Inside Audit & Supervisory
Board Member

Meetings in FY2018: 4

The Risk Management Committee leads ongoing management enhancement
and risk mitigation by identifying and analyzing risks that could have a material
impact on management, implementing countermeasures, preventing theoccurrence and materialization of risks and promoting risk awareness (including
investment reviews for cross-shareholdings and verification of the necessity ofholding such shares, etc.).
6 Internal Control Committee

Divisions and Group companies

ENEX REPORT 2019

(Audit & Supervisory
Board Members)

President & CEO

Internal audits

48

Appointment
and dismissal

2 Audit & Supervisory Board

1 Board of Directors

Meetings in FY2018: 20

For proper and agile decision-making on execution of duties, the Management
Advisory Conference has been set up as an advisory body to the CEO. At
meetings of the Management Advisory Conference, deliberations are held on
the Group’s overall management policies, business plans and other importantmatters concerning execution of duties, and consolidated management
indicators and management plans are formulated.

1. Chief Financial Officer
2. Chief Compliance Officer
3. Chief Information Officer

Appointment
and dismissal

Meetings in FY2018: 15

The Audit & Supervisory Board consists of four members in total (including threeoutside members), of whom two are full-time and two are part-time members. In
accordance with the regulations of the Audit & Supervisory Board, the standards
for audits by Audit & Supervisory Board Members, the audit policy establishedby the Audit & Supervisory Board, and the allocation of duties, Audit &Supervisory Board Members attend meetings of the Board of Directors andother important meetings, receive updates on the status of execution of duties
from Directors and others, review key documents that support decision-making,examine the business and assets of the head office and major business sites,
request sales reports from subsidiaries when necessary, and strictly audit theexecution of duties of Directors and Executive Officers. In addition, the Audit &Supervisory Board conducts activities focused on cooperation with corporate
auditors of consolidated Group companies, including establishing and holding
meetings of the Group Corporate Auditors Conference, which consists of audit
and supervisory board members of major Group companies.

3

4 Governance Committee

Meetings in FY2018: 13

The Board of Directors, consisting of nine Directors in total—six Inside Directors
and three Outside Directors—determines the fundamental management
policies of the Company and is responsible for management oversight. In
addition to the exclusive rights defined in laws and regulations, the Board
makes decisions on business execution matters that are of high quantitative or
qualitative significance. However, given the importance of prompt decisionmaking, the Board delegates decision-making on ordinary business execution
to the Directors and Executive Officers wherever possible and oversees thestatus of that execution. The Directors, as trustees appointed by shareholders
to manage the Company, have the obligation to exercise due care and loyal
fulfillment of their duties and to contribute to the sustained growth of theCompany, as well as medium-to-long-term improvement in corporate value.

Outside Directors

Meetings in FY2018: 5

To ensure that the internal control system is operating appropriately, theCompany reviews the development and implementation status of the internal
control system at the Internal Control Committee meeting every six months foreach item in the Basic Policy. The results of discussions in the Internal Control
Committee are reported to the Board of Directors, and a final assessment ismade on the development and implementation status of the internal control
system at a Board of Directors meeting. At the meeting held on April 26, 2019,
the Board of Directors evaluated the development and implementation status ofeach item enumerated in the Basic Policy for the fiscal year ended March 31,
2019, and confirmed that there were no significant deficiencies or flaws.
7 Disclosure Committee

Meetings in FY2018: 4

The Disclosure Committee consists of persons in charge of departments, andwas established for the purpose of raising the accuracy of decision-making on
disclosure. The Disclosure Committee deliberates matters concerning thedevelopment and implementation of internal controls over disclosure ofcorporate information and financial reporting.
8 Outside Consultant

The Group has established inside and outside whistleblowing contact points.
These contact points offer a prompt response to employees with concerns thatthey may have violated or be about to violate the Declaration of the Group
Code of Conduct or laws, or when they know of a violation committed by an
officer or another employee and cannot point out the violation to that person,
or when they have determined that a violation is likely to occur.

ENEX REPORT 201949

Sound Business Activities

Response to Japan’s Corporate Governance CodeReasons for Appointment of Outside Officers

The Company endorses the goal of “growth-oriented governance” called for in Japan’s Corporate Governance Code, issued by Tokyo Stock
Exchange, Inc. (TSE). The Company is taking measures aimed at ensuring sound leadership by senior managers and transparent and fair decisionmaking, and is addressing all items in the Corporate Governance Code.

Name

Evaluation of the Effectiveness of the Board of Directors
Outside Directors

Evaluation Method
Evaluation via questionnaire and individual hearings

by requiring the respondents to indicate their names. Basedon the aggregate results of the questionnaire, individualinterviews with all evaluators were held.

Subject of Evaluation
Meetings of the Board of Directors held between
April 2018 and March 2019 (a total of 13 meetings)

Outside Officers
from various perspectives. The Company sets its own criteria for
determining the independence of outside ofﬁcers, in addition to therequirements for independent ofﬁcers set forth by the TSE and othersecurities exchanges in Japan. Please see the Company’s Corporate
Governance Report for details.

In selecting outside ofﬁcer candidates, the Company seeks toenhance its corporate value by selecting individuals who haveknowledge in specialized ﬁelds such as management, law,accounting and energy, and who can be expected to contribute tooversight of the Company’s management and business execution

Ichiro Saeki

13 of 13

Appointed
June 19,2019

Finance andaccounting
Corporate
law

Reasons for Appointment

At Tokio Marine & Nichido Fire Insurance Co., Ltd., Seiichi Shimbo held the positions of General Manager for the Corporate Planning
Department, General Manager for the Third Automotive Sales Department, and Managing Executive Ofﬁcer. He has been appointed
to another term as Outside Director because of his broad knowledge and extensive experience in the ﬁnance and automobile-related
businesses and the pertinent advice that he offers to the Company’s management from an objective perspective.
The Company has determined that Seiichi Shimbo meets the criteria for independence deﬁned by ﬁnancial exchanges and by
the Company.
Ichiro Saeki has specialized knowledge in his capacity as an attorney and extensive experience with corporate legal affairs.
He also acquired broad knowledge of banking and ﬁnance during his tenure at the Nippon Fudosan Bank, Ltd. (currently,
Aozora Bank, Ltd.). He has been appointed to another term as Outside Director because the Company believes that his deep
knowledge of banking and ﬁnance will enable him to contribute to the proper oversight of the execution of the Company’sbusiness and offer advice from an objective and expert point of view.
The Company has determined that Ichiro Saeki meets the criteria for independence deﬁned by ﬁnancial exchanges and by
the Company.

Development Motoyo Yamane worked in the broadcasting industry for many years, where she was involved in the operation of organizations
and the development of human resources. She also has sat on various expert committees related to social contribution andof humancultural activities. She has been newly appointed as Outside Director because the Company believes that, based on her
resources
knowledge and various perspectives gained through her career, she will suitably provide advice to the Company’s
Diversity
management and contribute to the proper oversight of the execution of the Company’s business.
SocialThe Company has determined that Motoyo Yamane meets the criteria for independence deﬁned by ﬁnancial exchanges
contribution and by the Company.

Meeting Attendance
Name
Outside Audit & Supervisory Board Members

Outline of Implementation
A questionnaire was conducted regarding the compositionof the Board of Directors (four items), the operation of theBoard of Directors (nine items), systems supporting theBoard of Directors and dialogue with shareholders (ﬁve
items), and systems for fulﬁlling roles and duties (two items).
Free comments were allowed and transparency was ensured

The evaluation indicated that operation in FY2018 was
generally appropriate overall and that the Board of Directors
as a whole was functioning effectively. Regarding operation,
while presentations showed improvement over the previous
year, there were some indications that deliberations on broad
direction, such as medium-to-long-term corporate strategy,
etc., were areas that required improvement. The Company
will draw on these results to further improve the oversightand decision-making functions of the Board of Directors.

13 of 13

Automobilerelated
business
Corporate
management

MotoyoYamaneEvaluation Results
Evaluation of the effectiveness of the Board of Directors is
generally positive.

Evaluators
All members of the Board of Directors and Audit & Supervisory
Board as of April 2019

Area of
Expertise
Finance

Seiichi
ShimboThe Company requested all Directors and Audit & Supervisory Board Members to submit opinions about the effectiveness of the Board of
Directors for FY2018 based on each Director’s self-evaluation. After deliberations by the Governance Committee based on these opinions, theBoard of Directors met to analyze the results.

Board ofDirectors
Meeting
Attendance

Board ofDirectors
Meetings

Audit &
Supervisory
Board
Meetings

Reasons for Appointment

Yuji Moritsuka acquired broad knowledge of banking and ﬁnance during his tenure at the Nippon Fudosan Bank, Ltd.
Yuji
Moritsuka

Toyohiro
Sunayama

Shozo
Tokuda13 of 13

10 of 10*13 of 13

15 of 15

(currently, Aozora Bank, Ltd.). He also has abundant experience as a corporate auditor/audit and supervisory board member
at other companies. He has been appointed to another term as Outside Audit & Supervisory Board Member because theCompany believes that his deep knowledge of banking and ﬁnance will enable him to contribute to the proper oversight ofthe execution of the Company’s business and offer advice from an objective and expert point of view.
The Company has determined that Yuji Moritsuka meets the criteria for independence deﬁned by ﬁnancial exchanges andby the Company.

13 of 13*

Toyohiro Sunayama has many years of experience at ITOCHU Corporation, primarily in textile-related business, and corporate
planning operations overseas, etc. He has been appointed to another term as Audit & Supervisory Board Member because theCompany deemed that he can provide management advice and appropriate supervision of the execution of operations based on
his broad knowledge regarding global business management and administrative business gained through abundant experience.
Toyohiro Sunayama is not designated as an independent ofﬁcer because he does not meet criteria for independence deﬁned
by ﬁnancial exchanges and by the Company.

15 of 15

Shozo Tokuda has specialized knowledge in his capacity as a certiﬁed public accountant. He has also acquired broad knowledgeof corporate accounting. He has been appointed to another term as Outside Audit & Supervisory Board Member because theCompany believes that his deep knowledge of corporate accounting will enable him to contribute to the proper oversight of theexecution of the Company’s business and offer advice from an objective and expert point of view.
The Company has determined that Shozo Tokuda meets the criteria for independence deﬁned by ﬁnancial exchanges and by
the Company.

* Audit & Supervisory Board Member Toyohiro Sunayama was appointed at the 58th ordinary general meeting of shareholders held on June 20, 2018, and was therefore eligible toattend fewer Board of Directors and Audit & Supervisory Board meetings than other directors.

Policies and Procedures on Determination of Remuneration for Directors
Corporate Governance Enhancement Measures

2015

2016

2017

2018

2019

Establishment ofGovernance Committee

Election of two
Outside Directors

Introduction of
performance-linked
stock-based
remuneration plan

Changed structure ofGovernanceCommittee to centeron outside ofﬁcers

Election of three
Outside Directors

Election of one
Outside Director

50

ENEX REPORT 2019

(Structure)• 4 outside ofﬁcers• 1 inside ofﬁcer

Election of ﬁrst female
Outside Director

Remuneration for Directors excluding Outside Directors and Nonexecutive Directors is composed of monthly remuneration, bonuses,and performance-linked stock-based remuneration. Monthly
remuneration and bonuses are appropriately determined based on
predetermined payment standards in consideration of factors such as
short-term business performance and contributions to the Company,
and standardized amounts are set for each position. Amounts ofstock-based remuneration are determined based on consolidated

net proﬁt attributable to ltochu Enex’s shareholders for a speciﬁc
performance evaluation period. Outside Directors and Nonexecutive Directors only receive monthly remuneration, and do
not receive bonuses or stock-based remuneration. Additionally,
remuneration for Audit & Supervisory Board Members is determinedthrough deliberation of the Audit & Supervisory Board (Members),
and includes no bonuses or stock-based remuneration. Ofﬁcer
remuneration for FY2018 was as follows.
(Millions of yen)
Total remuneration, etc., by type

Total monthly remuneration

Bonus

Stock-based remuneration

Number of applicableofﬁcers

256

161

91

3

9

Audit & Supervisory
Board Members(excluding Outside
Audit & Supervisory
Board Members)

4

4

̶

̶

1

Outside officers

79

79

̶

̶

6

Total remuneration, etc.
Directors (excluding
Outside Directors)

ENEX REPORT 201951

Sound Business Activities

Performance-Linked Stock-Based Remuneration Plan
The Company provides performance-linked stock-based
remuneration to Executive Directors for the purpose of increasing
Directors’ incentive to enhance the Company’s medium- and longterm corporate value by sharing the proﬁt and risk from stock pricechanges with shareholders. In paying stock-based remuneration, theCompany has set up a trust (trust period: two years) through which it
provides a number of shares to each Director corresponding to thenumber of points calculated objectively and alloted according to therole of the Director and the level of attainment of performancetargets in the performance evaluation period.

In determining the remuneration mentioned above, net
proﬁt attributable to Itochu Enex’s shareholders is used as theevaluation indicator linked to Company-wide performance inbonuses, which are performance-linked, and in performancelinked stock-based remuneration. Its use as an indicator is basedon its simplicity, consistency with numerical indicators in the
Company’s management (or in the case of stock-based
remuneration, with quantitative targets set in the medium-termbusiness plan), trends at other companies, and other factors.

Fair and Proactive Disclosure
Basic Policy
for IR
Activities

Based on the Corporate Philosophy, the Code of Conduct and the Declaration of the Group
Code of Conduct as well as the objectives of the Corporate Governance Code issued by theTSE, the Company has established its Basic Policy for IR with the aim of establishing fair andexcellent relationships with all stakeholders, ensuring a fair market evaluation and achieving
sustainable enhancement of corporate value, while engaging in proactive investor and public
relations based on the principles of “timeliness,” “fairness,” “accuracy,” “clarity” and “continuity.”

Parent Company
As the parent company, ITOCHU Corporation owns 53.97% of thevoting rights of the Company, making it a consolidated subsidiaryof ITOCHU Corporation.
Within the Itochu Group, the Company is positioned as a corecompany with respect to domestic sales and the import/export ofpetroleum products in which Japan is the business base. As an
important business partner, the Company engages in the trade ofpetroleum products and facilitates the exchange of information
concerning conditions in domestic and international markets for
crude oil and petroleum products, conducts personnel exchanges
and carries out other business initiatives relating to electrical

power, environmental businesses, and overseas projects, etc. The
Company recognizes no business constraints by the parent
company and believes that it is able to make its own management
decisions while maintaining independence and autonomy. In addition,
Directors may hold positions concurrently and employees may beloaned among the Company, ITOCHU Corporation and theirgroup companies. This does not prevent the Company frommaking independent managerial decisions, and the independenceof the Company is ensured.

For further details on governance please visit:

Corporate Governance Reporthttps://www.itcenex.com/english/ir/policy/governance/

52

ENEX REPORT 2019

Disclosure in accordancewith the Companies Act

Business reports, consolidated andnon-consolidated ﬁnancial statements, etc.

internal systems for ensuring the appropriateness, etc. of corporate
governance, compliance and ﬁnancial reporting. For details on theinternal control system, please visit:https://www.itcenex.com/english/corporate/governance/control/

individual stocks, and judges the appropriateness of continuing
to hold or cease such cross-shareholdings from the standpointsof the likelihood of realizing the intended investment objective,
and whether holding the shares is generating economic valuethat will lead to enhancement of the Company’s corporate value.

collaborative relationships with outside specialized agencies, etc.
and the inclusion of clauses relating to the elimination of organizedcrime groups in contracts, etc.

Dialogue with Shareholders and Investors
When disclosing information to and engaging in dialogue
with shareholders, investors and others, the Company
complies with relevant laws, regulations and rules andemphasizes two-way communication, while striving to explain
its business status, management policy and other information
in a timely, fair, accurate and clear manner and on an ongoingbasis. Feedback from stakeholders, including requests andopinions, is provided to management.

Decisions, events and other information requiredby the TSE to be disclosed in a timely mannerCorporate governance reports, etc.

Elimination of Anti-Social Forces
The Company is committed to the Group-wide preclusion of any
and all relationships with anti-social forces. This policy is explicitly
set out in the Declaration of the Group Code of Conduct, andthe Company has established a system for rapid response to
unforeseen events through the ongoing maintenance of close

Securities reports, quarterly reports, internal
control reports, extraordinary reports, etc.

Timely disclosure information

Policy on Cross-Shareholding
The Company’s policy is to limit cross-shareholdings to those thathave a high likelihood of providing investment returns and that
contribute to enhancement of the Company’s corporate value, on
the condition that the purpose of holding such shares is recognized,
such as that it is likely to have future strategic commercial value.
Regarding existing cross-shareholdings, each year at a Board of
Directors’ meeting the Company veriﬁes the rationale of holding

Disclosure in accordancewith the Financial
Instruments andExchange Act

Disclosure required by
the TSEInternal Control
To comply with laws and regulations and the Articles of Incorporation,and to execute business appropriately, the Company operates aninternal control system that it works to continuously strengthen andimprove. On February 21, 2019, it revised the Basic Policy regarding
the Internal Control System, seeking to strengthen and improve its

Information Disclosure Covered by This Policy
This policy covers information disclosure and dialogue to be
conducted by the following means:

Other Information Disclosure
The Company takes care to ensure that information notcovered by the Timely Disclosure Rules of the TSE is madeavailable in an appropriate manner to all stakeholders,
including general investors.
IR-related disclosurematerials

Materials for ﬁnancial results brieﬁngs, fact
books, etc.

IR-related publications

Shareholder newsletters, integrated reports,
annual reports in English, etc.

Method of Information Disclosure
The Company discloses information covered by the Timely
Disclosure Rules, using the Timely Disclosure Network(TDnet) in accordance with the rules, as well as on the
Company’s website. The Company also ensures that
information not covered by the rules is made available togeneral investors and shareholders in an appropriate mannerbased on the objectives of the rules.
Disclosure Committee
The Company has established the Disclosure Committee forthe purpose of contributing to appropriate and ﬂexible
decision-making by the Board of Directors and Management
Advisory Conference, exhaustively and swiftly collecting
important company information in the Group, discussing
whether to disclose relevant information and the accuracy,
clarity, sufﬁciency, fairness and constructiveness of thecontent of the information and publishing information
subject to disclosure.

FY2018
Briefing for individual
investors

Held in December 2018 and March 2019(200 attendees combined total)

General meeting ofshareholders

Held on June 19, 2019 (252 attendees)

Meetings with investors

60 meetings

Handling of Insider Information
The Company adheres to the fundamental principle of notdisclosing information to any third party until disclosure ismade to the public, and takes all reasonable care inhandling information, for instance when more than one
person engages in dialogue at meetings with investors, etc.
Quiet Period
For the purpose of preventing the leakage of information
concerning ﬁnancial results and ensuring fairness in
information provision, the Company observes a quiet periodof two weeks preceding quarterly and full-year earnings
announcements and provides no comment or explanation
regarding ﬁnancial results or earnings estimates during thequiet period.
Understanding Shareholder Structure
The Company obtains information on the shareholder registerfrom the administrator of the register and information
concerning beneﬁcial shareholders, etc. from a researchcompany to understand and analyze the Company’s
shareholder structure. It uses the data for investor andshareholder relations activities.

ENEX REPORT 201953

Sound Business Activities

Business Execution and Internal Control

Basic Policy

Risk Management
Risk Management Committee
The Risk Management Committee aims to create the best
possible systems to achieve business continuity by promptly
and correctly dealing with all events and risks that may
impede the operation of the Company, so as not to damage
public conﬁdence in, or the corporate value of, the Company.
Amid an increase in various risks and their potential
seriousness, the Risk Management Committee leads ongoing
management enhancement and risk mitigation by identifying
and analyzing risks that could have a material impact onmanagement, implementing countermeasures, preventing
the materialization of risks and promoting risk awareness.
Systems for Handling Emergencies
The Company has developed an “emergency contact
network” that allows the Company, when an accident occurs
or a risk arises in the Group, to quickly obtain accurate
information and respond appropriately and, when an
earthquake, typhoon, heavy rain or other natural disasteroccurs, to quickly grasp the level of damage to the Group’s
facilities and distributors, and secure lifelines. As an
integrated contact system that connects Group companies,business divisions and the President, routes for reporting“large-scale earthquakes and natural disasters” and“incidents other than disaster” have been developed and arein operation around the clock, 365 days a year.
BCP and Disaster Response Headquarters
The Company has formulated a business continuity plan
(BCP), primarily in preparation for major natural disasters.
The BCP and Disaster Response Headquarters play a central
role in the plan. Headed by the President and with the Chief
Compliance Ofﬁcer (CCO) serving as Deputy Head, theheadquarters comprises the Chief Operating Ofﬁcers of the
Corporate Administration Division. In the event of a majordisaster, the members gather at a designated location andlead company-wide activities to respond to the situation by

unifying the chain of command, and enabling systematiccooperation. In addition, the Company has established abackup system for transferring headquarters’ functions to
the Kyushu Branch (in Fukuoka) and Chushikoku Branch(in Hiroshima).
Strengthening IT Security
The Company sees management of information security as
an important business issue.

Basic Policy for Information Management of the Group
Itochu Enex Co., Ltd. and its group companies (hereinafter collectively the“Group”) recognize appropriate management of information as an importantbusiness issue, and while protecting information assets from various threatssurrounding the Group, maintains and improves Group information
management systems via appropriate handling of information assets.
1. ComplianceOfﬁcers and employees of the Group comply with laws, regulations, andother guidelines, etc., regarding information management.
2. Management systems
To realize appropriate management of information required for businessactivities, the Group deﬁnes rules concerning information management,
establishes appropriate information management systems under the Chief
Information Ofﬁcer, and maintains systems to swiftly ascertain information
management conditions and implement information security measures.

4. Response to accidents
Should an accident occur regarding information management, thediscoverer swiftly reports the fact based on predeﬁned rules, and as
required, the Group minimizes damage through enactment of appropriate
mitigation measures. Furthermore, through analysis of the reasons that theaccident occurred, the Group establishes appropriate management
measures and measures to prevent recurrence.
For details on policies regarding measures in personal information
protection, please visit the Company’s website:
https://www.itcenex.com/english/privacy/
Revised on January 1, 2016

Toward Zero Harassment
In order to achieve zero harassment, harassment as deﬁned
under the following categories is explicitly prohibited in the
Company’s work regulations.

(1) Sexual harassment
Having a detrimental inﬂuence on other employees, etc., or damaging theworking environment through sexual speech and/or conduct.
(2) Power harassment
Utilizing power such as authority to continuously infringe on a person’s
personality and respect in excess of standard operating procedures, worsening
the employee’s working environment or causing the person to become anxious
about employment security.

ENEX REPORT 2019

Promoting Awareness of Compliance
To promote awareness of compliance, the Company periodically
prepares documents to be distributed within the Group andshared on the intranet.

ComplianceHandbooks

Guided by the Corporate Philosophy, the Company provides
commentary and works to ensure thorough recognition andawareness of the Code of Conduct, basic policies oncompliance, the Declaration of the Group Code of Conduct,
internal rules, and laws and regulations. When Group
employees are faced with difﬁcult decisions, they can refer tothis handbook, question themselves and their situation, thinkcarefully on compliance, reach an understanding, and reﬂect
the results in their actions.

Compliance
ProgramThis easy-to-understand program covers CSR and compliancepromotion activities, including objectives, systems, incident
and accident response, and whistleblowing and consulting
contact points.

Compliance
Case Studies

These case studies provide easy-to-understand examples
and response approaches for various major and minor
compliance violations, including misconduct, harassment,labor issues, complaints, legal and regulatory violations, andinformation leakage.

President
Management Advisory
Conference

CCO
Human Resources &General Affairs Department
Legal & Credit Control
Department(R&C Promotion Ofﬁce)

Risk Management
Committee(Compliance Committee)
Outside consultant
Consultation

Business groups, divisions, Group companies and compliance managers
1. CSR and compliance manager:
CSR and compliance managers of Itochu Enex are appointed by the CCO. One personfrom each division is appointed. Additionally, at Group companies for which Itochu Enex
has over 50% ownership, in principle the president of the Group company serves as CSR
and compliance manager, also supervising subsidiaries for which that Group company
has over 50% ownership.
2. CSR and compliance personnel:
CSR and compliance personnel are appointed by CSR and compliance managers,
promoting awareness regarding CSR and compliance, serving as the point of contact inthe event of trouble, accidents, misconduct or complaints, and ensuring environmental
preservation and soil contamination prevention.

Education and Training in CSR and ComplianceWith the objective of maintaining and ensuring the universal
recognition of CSR and compliance systems, the Company
holds education and training in CSR and compliance forGroup ofﬁcers and employees on an annual basis. In
particular, compliance training is held across Japan twice ayear, once each ﬁscal half.

(3) Maternity harassment and paternity harassment
Having a detrimental inﬂuence on other employees, etc., or damaging theworking environment through undue speech and/or conduct regarding matterssuch as pregnancy, childbirth, or childcare leave.
(4) Care harassment
Having a detrimental inﬂuence on other employees, etc., or damaging theworking environment through undue speech and/or conduct regarding matterssuch as family care leave.
Compliance training

54

While meeting its corporate social responsibilities, the Company is engaged in various businessactivities, mainly in the energy distribution ﬁeld. Rewarding the expectations of all its
stakeholders, which include customers/consumers, business partners, suppliers, communities,
shareholders, investors, employees and the environment, is an important management task. To
this end, under the Corporate Philosophy, “The best partner for life and society,” the Company isstriving to raise awareness of and promote social responsibility Group-wide by ensuring that all
managers and employees correctly understand and thoroughly comply with the Code of Conduct
and the Declaration of the Group Code of Conduct, which have been reﬁned over many years.

Compliance Structure
The Company has taken steps to improve its compliancesystem. Those steps include appointing a CCO, establishinga department that oversees matters concerning compliance,developing a corporate social responsibility (CSR) andcompliance program, appointing a CSR and compliancemanager1 and personnel2 in each department, providing
compliance education and training, compiling a legal andregulatory compliance manual, clarifying responses tocompliance incidents and establishing a whistleblowing
system. In addition, each Director, Executive Ofﬁcer andemployee is required to submit a written statement ofintention to comply with the Code of Conduct.

3. Awareness and education
The Group ensures that all ofﬁcers and employees are aware of the importanceof information security and implements ongoing education and training toensure thorough and appropriate management of information assets.

Protection of Human Rights
The meaning behind the Code of Conduct, “Be Ethical,”includes respect for human rights, and the Company isthorough in ensuring reliability and sincerity in its approachto protecting human rights. Furthermore, as part of its
corporate social responsibility, the Company will expand job
opportunities for people with disabilities.

ComplianceGroup Awareness Survey
In the present day, incidents relating to accounting misconduct,
embezzlement, harassment, and labor issues at various
companies, organizations, and bodies are on the rise. The Group
conducts a compliance awareness survey for ofﬁcers andemployees at Group companies to ascertain the state ofcompliance awareness and help prevent misconduct.
The results are drawn on to create new initiatives and improve
compliance training.
Whistleblowing and Consulting Contact Points
The Group has established inside and outside whistleblowing
contact points. These contact points offer a prompt responseto employees with concerns that they may have violated or
be about to violate the Declaration of the Group Code of
Conduct or laws, or when they know of a violation committed
by an ofﬁcer or another employee and cannot point out theviolation to that person, or when they have determined that a
violation is likely to occur. Through regular CSR and compliancetraining, the Group ensures that all employees are aware ofwhistleblowing contact points and the protection given towhistleblowers, and a system is in place for responding
appropriately to whistleblowing while maintaining transparency.
Additionally, the Group has made available an outside
consulting contact point for any employee or family member
associated with the Group. This consulting contact point can
ENEX REPORT 201955

Sound Business Activities

also respond to issues concerning harassment, mental health,physical health and living circumstances. A system forproviding care for mental health and consultation on otherissues is maintained through responses provided by
specialists such as clinical psychologists, health nurses andconsumer affairs advisors.

The Group ensures the effectiveness of thewhistleblowing system through regulations that clearlydeﬁne the responsibilities of the various parties that handle
reports. These regulations prohibit unfavorable treatment,
including termination of employment, as a consequence ofwhistleblowing, and mandate conﬁdentiality.

Environmental Data
The Group assures customers and suppliers of its commitment to fair business practices byengaging in commercial activities on the basis of fair and free competition, performing fairpurchasing activities, adhering to rules for commercial transactions and eschewing any
involvement in bid-rigging, cartels or other unfair practices. Furthermore, the Group seeks todevelop together with customers and suppliers by maintaining and strengthening mutual trust.

Group Policy on Procurement and Purchasing
Pursuant to the Declaration of the Group Code of Conduct,
the Group evaluates and selects suppliers while establishingongoing business partnerships in order to achieve mutual
beneﬁt through transactions. Additionally, based on theGroup’s Environmental Policy, the Group is promoting
procurement activities that show consideration forenvironmental preservation via initiatives such as the
procurement of materials with a low environmental burden.
At its ofﬁces, the Group promotes the use of products thattake the environment into account under Japan’s Act on
Promoting Green Purchasing.
Compliance with the Antimonopoly Act, Subcontract Act,and Related Laws and Regulations
To realize fair transactions, the Group has formulated its
own Antimonopoly Act Manual to ensure awareness andcompliance with Japan’s Antimonopoly Act, Subcontract Act,and related laws and regulations. This manual describes
the objectives of laws such as the Antimonopoly Act andSubcontract Act, consequences for violations, and speciﬁctypes of actions that are unacceptable. Details are also
provided on speciﬁc actions that are unacceptable and requireparticular care as part of the Group’s corporate activities.
Communication with Business Partners
To generate better results from business partnerships, theGroup engages in close communication with business
partners on a periodic and ongoing basis through channels

56

ENEX REPORT 2019

Financial Analysis
11-Year Summary of Key Financial Data

Fair Business Practices

Basic Policy

Financial and Data Section

Consolidated Financial Statements

such as the Enex Meeting, established jointly with partners,
and informal gatherings held in various locations. Additionally,
the Group issues information magazines for partners thattransact with the Home-Life Division and Car-Life Stationrelated businesses to promote understanding and sharing of
information pertaining to the Group’s business activities.
Amid signiﬁcant changes to the business environment,
dialogue with business
partners is increasingly
important for theco-creation of various
businesses, and theGroup will further
invigorate relationships
by listening to thee-STYLE for HOME
e-STYLE for LIFE
opinions and wishes of
LIFE information
ENERGY information
magazine for LP gas
magazine for stores of
its partners.
sales outlets
businesses related to CS[特集]

社 会 問 題 と LPガ ス

Responsible Advertising Activities
In all corporate communications, the Group practices
responsible advertising activities in accordance with the
Corporate Philosophy, Code of Conduct, and the Declarationof the Group Code of Conduct. In particular, the Group is
fully committed to ensuring reliability and sincerity, creativity
and ingenuity, transparency and integrity as stated in the
Code of Conduct, “Be Ethical,” and endeavors to improveunderstanding and acceptance of corporate activities
through frank and clear dialogue, thereby enhancing
corporate value.

ENEX REPORT 201957

Financial Analysis
Overview of Operating Results, Etc.
Results of Operations
During the ﬁscal year ended March 31, 2019, the tone of theJapanese economy was one of moderate recovery, driven
by favorable corporate earnings and other factors. However,
the economic outlook remained uncertain due to the risk ofa slowdown in the global economy, stemming from such
issues as the impact on the global economy of UnitedStates–China trade friction and uncertainties in overseas
economies. The Itochu Enex Group announced its two-year
medium-term business plan “Moving 2018: Connecting to
the future” in April 2017 and has advanced its businessaccordingly. As a result, for the ﬁscal year ended March 31,
2019, revenue was ¥1,007,086 million (up 35.2% year onyear), due mainly to the impact of price increases fordomestic petroleum products in the Life & Industrial Energy
Division. Proﬁt from operating activities was ¥17,851 million(up 4.1%), due mainly to higher proﬁt in petroleum producttrading in the Life & Industrial Energy Division, offsetting afall in proﬁt in the electricity retail business of the Power &Utility Division. Net proﬁt attributable to Itochu Enex’s
shareholders was ¥11,559 million (up 4.8%), setting a newrecord for the fourth consecutive year.
Results of Operations by Segment*

Home-Life Division
In the Home-Life Division during the ﬁscal year ended
March 31, 2019, the number of customers under direct LP gas
supply contracts increased by around 4,000 to approximately
551,000. Due to the impact of natural disasters and the warm
winter, sales volumes fell year on year, despite which we wereable to secure a certain level of proﬁtability.
Regarding the home energy sales business, the division
worked to expand the customer base by focusing mainly onsales of combined LP gas and electricity supply packages.
As a result, the number of supply contracts increased byaround 28,000 to approximately 81,000.
In peripheral ﬁelds other than LP gas, the solid ﬂow oforders in the industrial gas sales business and the container
inspection business led to robust revenue.
In overseas businesses, we are continuing to apply theknow-how developed in Japan at our industrial gas sales
business in Indonesia (PT. ITC Enex Indonesia) and at our LP
gas sales business in the Philippines (Isla Petroleum & Gas
Corporation) and going forward, we will continue to expand
these businesses.
As a result of these activities, revenue was ¥94,350 million(down 3.5% year on year), proﬁt from operating activities was¥3,555 million (up 13.8%), and net proﬁt attributable to Itochu
Enex’s shareholders was ¥3,068 million (down 19.2%).

Life & Industrial Energy DivisionDuring the ﬁscal year ended March 31, 2019, the Life &Industrial Energy Division worked to maintain or expand its
sales base in each business and geographical region,
58

ENEX REPORT 2019

despite an environment characterized by structural
downturn in demand for oil, and by industry reorganizations,
including consolidation of domestic oil companies. The
division is developing its business with the goal of evencloser involvement in local communities and local industries,
and is striving to further enhance functionality and create
value in each of its businesses.
In the Group’s Car-Life Station business, which has ahigh level of engagement with people in local communities,
we will use dealerships and Group companies’ Car-Life
Station outlets not only for our original energy supply
services, but also to provide other services required by local
communities, working with the operators to fulﬁll our goalof creating locations that provide lifestyle infrastructure tosuch communities. During the ﬁscal year ended March 31,
2019, the total number of Group Car-Life Stations was 1,766.
This net decrease of 46 from the end of the previous ﬁscal
year was largely due to withdrawals from unproﬁtable
Car-Life Stations. In addition, the number of dealershipsthat have introduced the Carlife Stadium car rental systembeing deployed by the Group has now reached 399, a netincrease of 29 over the end of the previous ﬁscal year.
In business related to local industries, we have taken acomprehensive approach to promoting AdBlue, thebusiness user electricity supply business, and other diverse
products and services, in addition to existing businesses.
In terms of initiatives in environment-related business,
we are moving forward with activities targeting reduced
environmental impact, such as the slop and oil recycling
business in which waste oil recovered from ships is recycled
and sold, and the ﬂy ash business, which recycles andsells coal ash discharged from the Company’s thermal
power plants.
As a result of these activities, revenue was ¥707,661 million(up 51.2% year on year), proﬁt from operating activities was¥9,153 million (up 15.3%), and net proﬁt attributable to
Itochu Enex’s shareholders was ¥6,185 million (up 17.0%).

Power & Utility Division
In the Power & Utility Division during the ﬁscal year ended
March 31, 2019, the electricity sales ﬁeld of the electric
power business recorded growth in sales to both business
users and households, resulting in year-on-year growth inelectric power retail sales volume. However, the volatility ofthe spot market and intensiﬁed price competition led to a
decline in proﬁt over the previous ﬁscal year.
In this ﬁeld, Enex Life Service Co., Ltd. will lead efforts toform alliances with companies that have strong customer
bases in certain regions and with companies in otherindustries, and promote the investigation of new value
proposals by developing electricity sales, with an additional
value-added component, to households and small
companies, while at the same time shifting away fromelectricity sales to large companies, which is an area in which
price competition has been intensifying.
In the power generation ﬁeld, total power generation

increased from the previous ﬁscal year due to the start ofoperations at a new power plant in October 2017, leading
to an increase in proﬁt year on year. Our goal is to ensure astable supply of electricity and reduce environmental impact
through a program of improvements we are carrying out
one by one at aging power generation facilities to raise
their efﬁciency.
In the ﬁnancial services ﬁeld, in February 2019, Enex
Infrastructure Investment Corporation, to which theCompany’s subsidiary Enex Asset Management Co., Ltd.
provides asset management services on consignment, listedon the Tokyo Stock Exchange Infrastructure Fund Exchange.
Enex Infrastructure Investment Corporation invests in andmanages properties such as renewable energy power
generation facilities, concentrating on solar power
generation facilities and related infrastructure, and aims tosteadily expand its portfolio and generate stable cash ﬂow.
In the heat supply business, in the absence of hightemperatures experienced during the ﬁscal year ended
March 31, 2018, demand for heat increased. The division willcontinue its efforts to develop as a comprehensive energy
services business, so as to be able to respond to theincreasingly diverse needs of customers in this ﬁeld.
As a result of these activities, revenue was ¥93,459 million(up 25.4% year on year), proﬁt from operating activities was¥2,728 million (down 41.0%), and net proﬁt attributable to
Itochu Enex’s shareholders was ¥1,970 million (down 10.9%).

Mobility Life Department
The Mobility Life Department enjoyed strong sales during
the ﬁscal year ended March 31, 2019 due to sales of popularcars such as the Note, Serena and Leaf at Osaka Car LifeGroup Co., Ltd., a subsidiary, in the car dealership business.
The Nissan Osaka Sales e-Denki initiative, implemented aspart of our efforts to strengthen the customer base, has also
been successful.
As a result of these activities, revenue was ¥111,616
million (up 7.0% year on year), proﬁt from operating activitieswas ¥2,351 million (up 15.6%), and net proﬁt attributable to
Itochu Enex’s shareholders was ¥319 million (up 63.5%).

Overview of Financial Position
Assets, Liabilities and Equity
As of March 31, 2019, total assets amounted to ¥374,373
million, a decrease of ¥8,248 million from March 31, 2018.
This decrease mainly reﬂected a decrease in trade receivablesof ¥13,376 million. Total liabilities amounted to ¥229,807
million, a decrease of ¥15,748 million, mainly due to decreases
in borrowings of ¥8,595 million and trade payables of¥5,768 million. Total equity was ¥144,566 million, an increaseof ¥7,500 million, due to factors including an increase of¥11,559 million from net proﬁt attributable to Itochu Enex’s
shareholders and a decrease of ¥5,430 million due topayment of cash dividends. We consequently ended theﬁscal year with a ratio of shareholders’ equity to total assetsof 32.7%.
Cash Flows
As of March 31, 2019, cash and cash equivalents (net cash)
totaled ¥18,725 million, down ¥3,848 million from March 31, 2018.
(Cash ﬂows from operating activities)
Operating activities provided net cash of ¥25,403 million.
Major items included proﬁt before tax of ¥19,414 million,
depreciation and amortization of ¥10,086 million, a decreasein trade payables of ¥5,788 million and income taxes paid of¥8,510 million. Net cash provided increased ¥1,164 million
year on year.
(Cash ﬂows from investing activities)
Investing activities used net cash of ¥13,410 million. Major
items included payments for purchase of property, plantand equipment and investment property, etc. of ¥12,883
million, mainly in the Power & Utility Division. Net cash useddecreased ¥5,048 million year on year.
(Cash ﬂows from ﬁnancing activities)
Financing activities used net cash of ¥15,857 million. Major
items included a decrease in interest-bearing debt of ¥10,274
million and payment of cash dividends of ¥5,430 million. Net
cash used increased ¥10,007 million year on year.

* From the ﬁscal year ended March 31, 2019, the classiﬁcation of reportablesegments has been changed to the Home-Life Division, Life & Industrial
Energy Division, Power & Utility Division and Mobility Life Department.
Furthermore, from the ﬁscal year ending March 31, 2020, the Mobility Life
Department will be integrated as part of the Life & Industrial Energy Division.

Forecast of Consolidated Financial Results for the Fiscal
Year Ending March 31, 2020
In the forecast for consolidated ﬁnancial results for the ﬁscal
year ending March 31, 2020, we project ¥1 trillion in revenue(down 0.7% year on year), ¥16,500 million in proﬁt fromoperating activities (down 7.6%), ¥19,200 million in proﬁt
before tax (down 1.1%), and ¥11,800 million in net proﬁt
attributable to Itochu Enex’s shareholders (up 2.1%). Basicearnings per share attributable to Itochu Enex’s shareholders
are projected at ¥104.54.

ENEX REPORT 201959

11-Year Summary of Key Financial Data
Japanese GAAP Japanese GAAP Japanese GAAP Japanese GAAP

Japanese GAAP

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/3

1,164,708

1,083,760

1,185,731

1,414,161

1,430,745

1,506,606

1,373,393

1,071,629

1,028,939

1,156,344

1,244,260

966,044936,841

723,645

695,060

744,767

1,007,086(Millions of yen)
Total trading transactions
Revenue
Gross proﬁt

74,45964,55764,90064,60470,054

71,59985,72089,56293,60488,822

84,210

Selling, general and administrative expenses

64,57858,46155,87355,631

56,32857,862

71,18473,226

74,69770,931

67,318Proﬁt from operating activities

9,881

6,095

9,027

8,973

13,726

11,875

13,10016,384

19,67817,153

17,851

Net proﬁt attributable to Itochu Enex’s shareholders

5,418

4,360

3,883

3,893

5,576

7,124

5,503

7,469

10,405

11,025

11,559Total assets

247,587

263,096

277,585

305,053

323,747

321,032

329,059

304,053

344,603382,621374,373

Shareholders’ equity

98,05799,011

101,088

102,050

105,970

94,14497,432

100,526

108,511116,104

122,290

Net proﬁt attributable to Itochu Enex’s shareholders

52.44

37.46

34.12

34.22

49.36

63.05

48.71

66.10

92.09

97.63

102.40Shareholders’ equity

759.66791.24805.95826.68868.69833.20862.30889.70960.37

1,028.57

1,083.37

16

16

20

16

16

20

22

24

32

40

42

ROE

6.4

4.9

4.3

4.2

5.8

7.8

5.7

7.5

10.0

9.8

9.7

ROA

2.2

1.7

1.4

1.3

1.8

2.2

1.7

2.4

3.2

3.0

3.1

Dividend payout ratio

30.5

42.7

58.6

46.8

32.4

31.7

45.2

36.3

34.8

41.0

41.0

Per share data (Yen)Annual dividends
Major financial indicators (%)

1. The ﬁgures of revenue are without consumption taxes.
2. The ﬁgures on this page are based on IFRS (International Financial Reporting Standards) from the ﬁscal year ended March 2014.
3. In accordance with the application of IFRIC 21 from the ﬁscal year ended March 2015, we have retroactively revised ﬁgures for the ﬁscal year ended March 2014.
4. The ﬁgures on this page are rounded to the nearest ¥1 million.

60

ENEX REPORT 2019

Ratings

Rating agency: Japan Credit Rating Agency, Ltd. (JCR) (As of August 29, 2019)

ObjectRatingOutlookLong-term issuer rating

A+

StableObjectMaximum amountRatingCommercial paper¥10 billion

J-1

ObjectIssue price

Issue date

Maturity date

Interest
rate

Series 14 unsecured bonds(with inter-bond pari passu clause)¥10 billion

May 22, 2012

May 22, 2022

1.202%

RatingA+

Annual Sales Volume of Major Products
FY2016FY2017FY2018Gasoline(Thousands of kiloliters)

3,587

3,328

3,201

Kerosene(Thousands of kiloliters)

1,448

1,590

1,565

Diesel oil(Thousands of kiloliters)

3,271

3,401

3,499

LP gas(Thousands of tons)

597

618

573

Electricity
(GWh)

3,190

4,674

4,781

ENEX REPORT 201961

Environmental Data
FY2018 Environmental Improvement Plan Performance and Assessment
Area

DivisionPU

PU

Helping to Realize a Low-Carbon Society

LI

Environmental target
Promoting development of
renewable energy
Promoting generation ofrenewable energy

Growing sales of AdBlue

Reducing the Environmental Impact of Our Business Activities

Rate of progress

Deliberations are ongoing toward development of biomass power generation, etc.
Measures are under way toward development of other new renewable energy power generation businesses.

80,511

56,120MWｈkL

74,75558,50093%

FY2018 ISO 14001 Activities
Covered sites

Status of progress

FY

Unit

Wind conditions at Tainai Wind Farm met
plan targets, partly because of a typhoon,
but were below the previous year.

104%

Adoption of selective catalytic reduction(SCR) trucks in Japan: 60%

LI

Promoting initiatives for slop

5,230

kL

1,224

23%

LI

Sales of recycled beads

11,824t

10,70491%

Sold to existing customers

HL

Sales of EcoJozu

9,517

Units

9,781

103%

Achieved

HL

Sales of hybrid water heaters

336

Units

233

69%

Focused on profit over sales volume

Number ofsites covered

General Motive Power City
power power total gas
Thousand kWh

LP Auto Gas
Heavy
Kerosenegas gas total
oil

Fuels
Gasoline Diesel
total

kL

Thousand m3

Vehicle
fuels
total

kL

CO2
total
t-CO2

Copier
paper

Water

Specially
Industrial managed Wastes
PRTR
wastes industrial total
wastesThousand Thousand
sheetsm3t(A4 equivalent)

t

2018

120

75

-

3

96

68

-

12

7

-

136

61

-

-

137

102

106

-

38

2017

101

65

-

1

83

63

-

7

8

-

121

48

-

-

116

85

89

-

43

2016

104

67

-

1

85

69

-

8

8

-

124

48

-

-

124

88

93

-

39

2015

124

90

-

4

96

68

-

23

8

-

129

45

-

-

122

114

106

-

43

2018

2,344

5,219

7,563

1

105

851

956

15

1,465

1,480

1,393

676

2,069

14,77019,56631

51,497

951,506

9

2017

2,175

5,313

7,488

0

86

1,211 1,297

9

1,392

1,402

1,229

553

1,781

14,30020,37429

48,828

11

48,839

9

2016

2,143

7,169

9,312

0

89

1,077 1,166

8

1,461

1,469

1,305

516

1,822

15,527

20,45541

43,846

10

43,857

9

2015

2,202

6,464

8,665

0

86

1,142 1,228

7

1,473

1,480

1,216

485

1,701

15,292

21,07733

52,55918

52,577

9

Vehicle
fuels
total

CO2
total

Copier
paper

Water

Performance

Reference: All sites
FY
Regional development businesses

Administration Planning and implementation of(General Affairs) social contribution activities

Eco-officeactivities
CA

LI

Preserving Local Environments

Periodperformance

FY targets

Despite falling short of target volume andprevious-year level, the business turned a
profit for the first time.

PU

LI

HL

HL

62

PU: Power & Utility Division LI: Life & Industrial Energy Division
HL: Home-Life Division CA: Corporate Administration Division

We are currently expanding business by developing our distributor network. We are also approaching various local
governments with the goal of expanding business (and employment), and are seeking new opportunities with local
private companies, such as Chikushi Gas Co., Ltd., for expansion into the electric power business.
(1) Walk the World 2018 conducted in Yokohama and Osaka(2) Participated in the Yumeken Cup(3) Donations for 2018 Japan flood disaster relief (¥5 million)(4) Held Family Day at workplaces(5) “Power of Words” events (Sapporo and Tokyo)(6) Ultimate Frisbee classes(7) Donated to Tokyo Colony Social Welfare Corp.
(8) Launched project to protect the Japanese squirrel

Thousand kWh

LP Auto Gas
Heavy
Kerosenegas gas totaloilkL

Thousand m3

2018

-

-

155,683 8,852

2017

-

-

2016

-

2015

-

160

887

Fuels
Gasoline Diesel
total
kL

Reductions
in general
power use

2,199

Thousand kWh

2,343

107%

7% over target, 5% higher than FY2017.

Reductions
in site fuel
use

105

Thousand m3·kL

120

114%

14% over target, 13% higher than FY2017.

Reductions
in vehicle
fuel use

2,994

kL

2,919

97%

3% lower than target, 3% improvement
over FY2017.

Reductions
in copierpaper use

20,424

19,56696%4% lower than target, 5% improvement
over FY2017.

Conducted a class for 28 people from 13 companies at the Kansai Office on October 18. Decided on
the Kyushu region as the training location for next year, and began discussions on training content asa Known Shipper.

Updating of relevant provisions• In April 2019, officially began shifting customer service safety inspection work to a digital platform(using iPads) at Enex Fleet Co., Ltd. Aiming to complete trial in first quarter of FY2019 in
preparation for introduction at other Group companies.
• Review relevant provisions under the new organization (Security System Promotion Office) asof 2019.

Strengthening internal safety management systems

1. Compliance and safety awareness of site supervisors is increasing every year, and environmental
activities are becoming well-established.
2. Collection and dissemination of information on revisions to relevant laws concerning our business;measures on lighting equipment containing PCB (transitioning to LED lighting); sharing of
information with primary divisions and business sites, including information on workplace safety andhealth regulations and ongoing monthly environmental and safety reports
3. Support for recovery from natural disasters at site facilities
4. Testing and verification of salt-, heat- and chemical-resistant paint as part of measures to protect sitefacilities and equipment

Preventing accidents through a consistent andadvanced security management system based oninternal safety standards

Shift to paperless safety inspection list using iPads

Thousand Thousand
sheetsm3t(A4 equivalent)

t

9,899

195

2,046

2,241

1,460

840

2,300

897,871

19,924427

52,920952,92944244,144 18,342 208

1,218 19,769

353

1,721

2,074

2,306

753

3,058

710,825

25,661389

50,795

11

50,80644-

365,722 18,418 221

1,085 19,724

279

1,993

2,272

2,365

709

3,074

956,000

26,922

108

49,33421

49,355

56-

215,122 44,430 158

1,142 45,730

299

7,104

7,403

2,120

681

2,801

954,000

24,085

107

57,74823

57,772

67

Notes: Conversion values (emissions coefficients for individual power companies in the case of power) for each fiscal year based on the Act on the Rational Use of Energy are used
as CO2 conversion factors.
Total figures for business sites that collect environmental data, including Group members companies, are presented for reference above.

Reports on compliance with the Act on the
Rational Use of Energy (CO2 emissions reductions)

Specified Business Operator
Known Shipper

Known Shipper

Thousandsheetst-CO2

Specially
Industrial managed Wastes
PRTR
wastes industrial total
wastesPerformance

Improving energy conservation awareness througheco-driving training for subcontractor trucking
companies and group companies

ENEX REPORT 2019

Unit

General Motive Power City
power power total gas

Implemented according to the annual plan. In the six-level (S, A–E) assessment used for inspection
evaluations, 83.8% (up 11.6 pts. from previous year) of all sites received an assessment score of “A” inthe major LP Gas Act categories. In FY2019, we will work to further upgrade and achieve a strong safety
record at sites that received scores of “B” or lower.

Working with manufacturers toward introduction in July 2019

FY

2014

2015

2016

2017

2018

FY

2014

2015

2016

2017

2018

Energy use (kL)

2,629

2,704

2,536

2,415

2,523

CO2 emissions (t-CO2)

6,475

6,658

6,051

5,802

6,143

Intensity(sales volume)

0.1968----

Shipments in ton-kilometers(thousand t-km)

794,162

415,717542,801

436,155

343,311

CO2 emissions (t-CO2)

36,59821,457

26,94923,466

18,844

Intensity(vs. shipment volume)

0.01700.01910.01840.02000.0204

Note: Intensity not indicated for FY2015 and later due to change in reporting method.

Tokyo Toshi Service’s heat supply business site was evaluated highly as a business site that contributes to global warming countermeasures◎Certified as a Near-Top-Level Facility under the Tokyo Metropolitan Government’s Cap-and-Trade Program1
FY2015: Kanda-Surugadai District Heat Supply Center, Hakozaki District Heat Supply Center, Harumi Island District Heat Supply Center
FY2017: Fuchu Nikkocho District Heat Supply Center◎Certified as low-carbon2 district heat supply business under the Tokyo Metropolitan Government’s Cap-and-Trade Program
Of 37 districts within Tokyo that received certiﬁcation during FY2019, 11 districts were operated by the Company

Ginza 2-chome/3-chome, Shinkawa, Kanda-Surugadai, Shibaura 4-chome, Ginza 5-chome/6-chome, Hakozaki, Fuchu Nikkocho, Kyobashi 2-chome,
Hachioji Asahicho, Osaki 1-chome, Harumi 1-chome◎Registered as a business making the CO2CO2 (kotsukotsu) smart declaration (premium course)3 in Chiba Prefecture
2018: Makuhari New City High-Tech Business District Heat Supply Center◎Certified as 3-star Tochigi Prefecture Eco-Keeper Operator4
2017: Make use of unused energy from substation waste heat at the Utsunomiya City Chuo District Heat Supply Center was rated highly◎Certified as a Gunma Prefecture GS (Gunma Standard) business5
2017: Use of underutilized energy from groundwater at Takasaki City Center and Castle Site District Heat Supply Center was rated highly
1. To promote countermeasures against global warming, the Tokyo Metropolitan Government has implemented a Cap-and-Trade Program for large-scale business ofﬁces. It calls
for a reduction in total greenhouse gas emissions and a transaction program for emissions quota trading.
2. Low-carbon heat certiﬁed under this system is for districts with a COC exhaust coefﬁcient (COV exhaust volume per unit of electric power or heat provision) of 0.058 t-CO2/GJ orless, and if customers procure heat in these districts, this is deemed as equivalent to a reduction in CO2.
3. As a global warming countermeasure, Chiba Prefecture registers business ofﬁces actively engaged in global warming countermeasures including energy conservation andintroduction of renewable energy as “CO2CO2 smart declaration business ofﬁces” and widely promotes these initiatives.
4. To promote autonomous global warming countermeasures by business ofﬁces, Tochigi Prefecture certiﬁes business ofﬁces that implement superior measures regarding global
warming measures during the course of business activities as “Eco-Keeper Operators.”
5. Gunma Prefecture has established a framework (environmental management system) for business operators to plan, implement, inspect and revise initiatives in order to achieve
ongoing reductions in greenhouse gas emissions. The prefectural government supports business operators that systematically implement this system, certifying and publicly
recognizing their initiatives.

ENEX REPORT 201963

Consolidated Financial Statements
1. Consolidated Statement of Financial Position
Notes
ASSETS
Current assets
Cash and cash equivalents
Trade receivables
Other current financial assets
Inventories
Income taxes receivable
Trade advances paid
Other current assets

8
9, 28, 41
10
11

Total current assets
Non-current assets
Investments accounted for by the equity
methodOther investments
Non-current financial assets other thaninvestments
Property, plant and equipment
Investment property
Goodwill
Intangible assets
Deferred tax assets
Other non-current assets

22,573
119,541
38,86028,380
–
1,690
1,725

18,725
106,165
36,03433,053
2,533
111
3,154

212,769

199,775

12, 41

26,14529,441

10, 41

3,406

4,186

10, 41

11,40011,29285,32687,59913, 16,39, 4114
15
15, 1617

Total non-current assets
Total assets

As ofMarch 31, 2018

(Millions of yen)
As ofMarch 31, 20195

10,166692
20,79810,502
1,417

9,819
521
20,091
9,913
1,736

Notes
LIABILITIES AND EQUITYCurrent liabilities
Short-term bonds and borrowings
Trade payables
Other current financial liabilities
Income taxes payable
Advances from customers
Other current liabilities

18, 41
19, 4120
28
21, 22

Total current liabilities
Non-current liabilities
Non-current bonds and borrowings
Other non-current financial liabilities
Non-current liabilities for employee benefits
Deferred tax liabilities
Provisions
Other non-current liabilities

18, 41
20
23
17
22

As of
March 31, 2018

(Millions of yen)
As ofMarch 31, 201912,432
127,4458,539
3,650
10,583
12,28011,217
121,677
7,905
3,193
9,651
11,820174,929

165,463

30,27323,335
9,820
2,185
4,757
256

22,89323,531
9,936
2,287
5,462
235

Total non-current liabilities

70,62664,344

Total liabilities

245,555

229,807

19,87818,89280,352
ሺ1,145)
ሺ1,873)

19,87818,922
86,769(1,406)(1,873)

116,104

122,290

169,852

174,598

EquityCommon stock
Capital surplus
Retained earnings
Other components of equity
Treasury stock

382,621374,373

Total shareholders’ equity
Non-controlling interests

24
24
24
25
24
38

Total equity
Total liabilities and equity

20,962

22,276

137,066

144,566

382,621374,373* See accompanying notes to consolidated financial statements.

64

ENEX REPORT 2019

ENEX REPORT 201965

2. Consolidated Statement of Comprehensive Income
Notes
Revenue
Cost of sales

28

Gross profit
Other income and expense
Selling, general and administrative expenses
Loss from tangible assets, intangible assets and goodwill
Other – net

29
30, 3132

Total other income and expense
Profit from operating activities
Financial income and costs
Interest income
Dividends received
Interest expense
Other financial income and costs – net

127

Profit before tax
Income tax expense
Net profit
Net profit attributable to:
Net profit attributable to Itochu Enex’s shareholders
Net profit attributable to non-controlling interests
Total

744,767(655,945)

1,007,086(922,876)

88,822

84,210(70,931)(1,544)806(67,318)
(241)
1,200

(71,669)(66,359)

17,153

17,851

92
296
(950)
(241)

83
66
(906)
755

(803)

(2)

493
2,326

1,565
–

19,16919,414(5,945)(5,749)13,224

13,66533

Total financial income and costs
Share of profit of investments accounted for by the equity method
Gains on business reorganization and others

Fiscal year ended
March 31, 2018

(Millions of yen)
Fiscal year ended
March 31, 201917

11,025
2,199

11,5592,106

13,224

13,665

Notes
Other comprehensive income, net of tax effectItems that will not be reclassified to profit or loss
FVTOCI financial assets
Remeasurement of net defined benefit liability
Other comprehensive income of investments accounted for by the equity
methodItems that may be reclassified to profit or loss
Exchange differences on translating foreign operations
Cash flow hedges
Other comprehensive income of investments accounted for by the equity
methodFiscal year ended
March 31, 2018

(Millions of yen)
Fiscal year ended
March 31, 2019

892
105

(108)
(175)

ሺ9)

(54)

ሺ38)
74

(10)
25

12

ሺ519)

(193)

25

505

(515)

Comprehensive income

13,72913,150Comprehensive income attributable to:Comprehensive income attributable to Itochu Enex’s shareholders
Comprehensive income attributable to non-controlling interests

11,4602,269

11,1272,023

13,72913,150Total other comprehensive income, net of tax effect

12

Total

(Yen)
Earnings per share attributable to Itochu Enex’s shareholders
Basic
DilutedTotal trading transactions(Note)

34
34

97.63
–

1,156,344

102.40–(Millions of yen)
1,244,260

Total trading transactions are presented in accordance with Japanese accounting practices. This item is not audited andvoluntarily disclosed by Itochu Enex Co., Ltd. for investors’ convenience, and is not required to be disclosed under International
Financial Reporting Standards (“IFRSs”).

* See accompanying notes to consolidated financial statements.

66

ENEX REPORT 2019

ENEX REPORT 201967

3. Consolidated Statement of Changes in Equity

4. Consolidated Statement of Cash Flows
Notes

EquityCommon stock
Balance at the beginning of the year

26

Balance at the end of the year

Balance at the end of the year
Total equity* See accompanying notes to consolidated financial statements.

19,87818,74018,892

152

23

–

7

18,892

18,92273,30011,025
ሺ75)
ሺ3,898)80,352
11,559(171)(4,971)80,352

86,769Net cash flows provided by operating activities

ሺ1,655)(1,145)

435

(432)

75

171

ሺ1,145)(1,406)

ሺ1,752)
ሺ121)(1,873)(0)24

Total shareholders’ equity
Non-controlling interests
Balance at the beginning of the year
Net profit attributable to non-controlling interests
Other comprehensive income attributable to non-controlling interests
Cash dividends paid to non-controlling interests
Changes due to additional acquisitions and sales of interests in
subsidiaries

19,87825

Balance at the end of the year
Treasury stock
Balance at the beginning of the year
Purchase and disposal of treasury stock

19,87824

Balance at the end of the year
Other components of equity
Balance at the beginning of the year
Other comprehensive income attributable to Itochu Enex’s
shareholders
Transfer to retained earnings

19,87824

Balance at the end of the year
Retained earnings
Balance at the beginning of the year
Net profit attributable to Itochu Enex’s shareholders
Transfer from other components of equity
Cash dividends paid to Itochu Enex’s shareholders

Notes
Cash flows from operating activities
Profit before tax
Depreciation and amortization
Loss from tangible assets, intangible assets and goodwill
Financial income and costs
Share of profit of investments accounted for by the equity method
Gains on business reorganization and others
Decrease (increase) in trade receivables
Increase in inventories
Increase (decrease) in trade payables
Other – net
Dividends received
Interest received
Interest expense
Income taxes paid

24

Balance at the end of the year
Capital surplus
Balance at the beginning of the year
Acquisition of subsidiary shares from non-controlling interests andothersShare-based payments

Fiscal year ended
March 31, 2018

(Millions of yen)
Fiscal year ended
March 31, 2019

ሺ1,873)(1,873)

116,104

122,290

18,966
2,199
69
ሺ615)

20,962
2,106
(83)
(459)

343

(250)

38

20,962

22,276

137,066

144,566

19,16910,824
1,544
803
ሺ493)
ሺ2,326)
ሺ25,998)
ሺ1,964)
26,522
3,461
645
92
ሺ873)
ሺ7,167)

19,414
10,086241
2(1,565)–
13,602(4,667)(5,788)
2,935
406
85
(838)
(8,510)24,23925,403

ሺ5,972)
ሺ256)
5,411
ሺ3,751)
–
ሺ598)
ሺ444)
5,675

(2,379)
(284)
103
–
22
–
(907)
752

ሺ11,887)(12,883)

2,536

1,978

ሺ2,545)136
ሺ7,000)
237

(832)
193
–
827

ሺ18,458)(13,410)

ሺ8,615)
7,323
76(3,963)(6,311)
75

–

(228)

ሺ3,898)
ሺ615)
ሺ121)

(4,971)(459)(0)

Net cash flows used in financing activities

ሺ5,850)(15,857)

Net decrease in cash and cash equivalents

ሺ69)(3,864)22,727

22,573

ሺ85)

16

22,57318,725

Cash flows from investing activities
Purchase of investments accounted for by the equity method
Purchase of investments
Proceeds from sales of investments
Acquisition of subsidiaries, net of cash acquired
Proceeds from acquisition of subsidiaries
Loss of control of subsidiaries
Payment for loans receivableCollection of loans receivable
Payments for purchase of property, plant and equipment and investment
property
Proceeds from sales of property, plant and equipment and investment
property
Purchase of intangible assets
Proceeds from sales of intangible assets
Increase in deposits paid – net
Other – net

35
35
35

Net cash flows used in investing activities
Cash flows from financing activities
Repayments of bonds and borrowings
Net increase (decrease) in short-term borrowings
Proceeds from share issuance from non-controlling interests
Payments for acquisition of interests in subsidiaries from non-controllinginterests
Cash dividends paid to Itochu Enex’s shareholders
Cash dividends paid to non-controlling interests
Purchase of treasury stock

Cash and cash equivalents at the beginning of the year

26
38

8

Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
68

ENEX REPORT 2019

Fiscal year ended
March 31, 2018

(Millions of yen)
Fiscal year ended
March 31, 2019

* See accompanying notes to consolidated financial statements.

8

ENEX REPORT 201969

Notes to Consolidated Financial Statements
1.

Reporting Entity(IFRS 15 “Revenue from Contracts with Customers”)

The Group has adopted IFRS 15, “Revenue from Contracts with Customers” (issued in May 2014) and“Clarifications to IFRS 15” (issued in April 2016) (hereinafter, “IFRS 15” collectively), from the fiscal year ended
March 31, 2019. In the adoption of IFRS 15, the Group has applied the method in which the cumulative effect of
adopting this standard is recognized at the commencement date of adoption, which is allowed as the transitional
provision.

Itochu Enex Co., Ltd. (the “Company”) is an entity located in Japan. The addresses of the Company’s registered head
office and principal offices are available on its website (URL: https://www.itcenex.com/english/). The Company’s
consolidated financial statements, the closing date of which is March 31, 2019, comprise the accounts of theCompany and its subsidiaries (the “Group”) and the Group’s equity interests in associates and joint ventures. The
Group’s principal activities are sales of petroleum products and liquefied petroleum gas (“LPG”) and the provision ofrelated services in Japan and overseas as well as supply of electricity and heat in Japan.
2.

As a result of the adoption of IFRS 15, revenue of certain transactions, which had previously been presented on a
net basis, is presented on a gross basis. Consequently, revenue and cost of sales each increased by ¥166,508
million in the consolidated statement of comprehensive income for the fiscal year ended March 31, 2019,
compared with these items where the previous accounting standard had been applied.

Basis of Consolidated Financial Statements(1)

Compliance with International Financial Reporting Standards (“IFRSs”)

Other than the above, the adoption of this standard had no significant effect on the Group.

The Group’s consolidated financial statements are prepared in accordance with IFRSs.
These consolidated financial statements were approved at the Board of Directors’ meeting of the Company heldon June 19, 2019.
(2)

(5)

The following major IFRSs or interpretations that were newly established or amended were issued by the date of
approval of the consolidated financial statements. However, these IFRSs or interpretations are not necessarily
required to be adopted on or before the fiscal year ended March 31, 2019, and the Group has not early adopted
them.

Basis of Measurement
Except for the cases (e.g., financial instruments) stated in Note 3, “Significant Accounting Policies,” the Company’s
consolidated financial statements are prepared on a historical cost basis.

(3)Standard

Title

Mandatory adoption(From fiscal years
beginning on or after)

Fiscal year
in which the Groupwill adopt standards

Summary of new or revised standards

January 1, 2019

Fiscal year ending
March 31, 2020

Principles for recognition, measurement,
presentation, and disclosure of leaseagreements for the lessee and the lessor ofleasesFunctional Currency and Presentation Currency
IFRS 16

The consolidated financial statements of the Group are presented in Japanese yen, which is the Group’s functional
currency. All financial information presented in millions of yen has been rounded to the nearest million yen.
(4)

IFRSs or Interpretations Issued, But Not Yet Adopted

With the adoption of IFRS 16, “Leases” operating leases for which the lease expenses were formerly recorded incost of sales, selling, general and administrative expenses, etc. over the lease term without recognizing assets andliabilities in the consolidated statement of financial position, are now recognized as right-of-use assets and leaseliabilities, with the depreciation expense recorded in cost of sales, selling, general and administrative expenses,
etc., and interest expense recorded as a finance cost. The main effect of the adoption of IFRS 16 on the Group’s
consolidated financial statements is that right-of-use assets and lease liabilities in the consolidated statement offinancial position at the beginning of the fiscal year ending March 31, 2020 will each increase by approximately¥40.0 billion. In addition, in the consolidated statement of cash flows, the Group estimates that cash flows fromoperating activities will increase by approximately ¥9.0 billion, and that cash flows from financing activities will
decrease by the same amount. The effect of the adoption of IFRS 16 on the consolidated statement ofcomprehensive income will be insignificant.

Changes in Accounting Policies
From the fiscal year ended March 31, 2019, the following standards have been applied in accordance withtransitional provisions.
Standard

IFRS 9 (revised in July 2014)

IFRS 15

Title

Financial Instruments

Revenue from Contracts with
Customers

Summary of new or revised standards
Limited amendments to theclassification and measurement
method for financial assets, andintroduction of the expected credit
loss impairment model
Establishment of accounting anddisclosure on revenue from contracts withcustomers

3.

Significant Accounting Policies
Accounting policies described below are applied to all of the periods presented in the consolidated financial
statements, unless otherwise specified.
(1)(IFRS 9 “Financial Instruments” (revised in July 2014))

The Group has adopted IFRS 9, “Financial Instruments” (revised in July 2014) effective from the fiscal year ended
March 31, 2019. The effect of adoption of this standard on the Group’s consolidated financial statements was
insignificant.

LeasesBasis of Consolidation
The consolidated financial statements include financial statements of the Group companies and equity interests inassociates and joint ventures.
A.

Subsidiaries
A subsidiary is an entity that is controlled by the Group. The Group controls an investee if the Group has powerover the investee, exposure, or rights, to variable returns from its involvement with the investee, and the ability
to use its power over the investee to affect the amount of the Group’s return. The acquisition date of a

70

ENEX REPORT 2019

ENEX REPORT 201971

subsidiary is the date on which the Group obtained control of the subsidiary, and the subsidiary is included in
the consolidation from the date of acquisition until the date on which the Group loses control.

assumed, and any non-controlling interest in the acquiree are measured at fair value (except for assets andliabilities that are required to be measured on a basis other than fair value, which are measured at the value
specified in IFRS 3, “Business Combinations”) at the time of acquisition. Goodwill is recognized and measured as
the excess of the aggregate of the consideration transferred, the acquisition-date fair value of the acquirer’s
previously held equity interest, and the amount of any non-controlling interest over the net of the acquisition
amounts of the identifiable assets acquired and liabilities assured. However, if the aggregate of fair values ofidentifiable assets and liabilities assumed exceeds the sum of acquisition value, the value of pre-existing equity
interest after the remeasurement, and the fair value of non-controlling interest in the acquiree, such an excess isimmediately recognized in profit as the bargain purchase gain.

In cases where the accounting policies applied by a subsidiary are different from those applied by the Group,
adjustments are made to the subsidiary’s financial statements, if necessary. Comprehensive income forsubsidiaries is attributed to owners of the parent and non-controlling interests even if this results in the noncontrolling interests having a deficit balance.
Changes in an equity interest in a subsidiary due to acquisition, sale, etc., of interests that do not result in lossof control of the subsidiary by the Group are accounted for as equity transactions.
If the Group loses control of a subsidiary, the Group derecognizes assets and liabilities of the former subsidiaryand non-controlling interests in the subsidiary, and remeasures the residual interest retained in the former
subsidiary at its fair value as of the date of the loss of control and recognizes any resulting gain or loss in profit
or loss.
B.

If the initial accounting treatment for a business combination has not been completed by the last day of the period
in which the business combination occurred, the business combination is accounted for using provisional amounts.
Retrospective adjustments to provisional amounts are made during the measurement period, which is within one
year from the acquisition date. Acquisition-related costs incurred by the acquirer to achieve the businesscombination are recognized as expenses.

Associates and Joint Ventures
An associate is an entity of which the Group has significant influence over the financial and operating policy. In
determining whether the Group has significant influence, various factors, such as holding of voting rights (theGroup is presumed to have significant influence over an investee if the Group owns 20% or more, but 50% orless of the voting rights of the investee directly or indirectly) and existence of currently exercisable voting rights,
and proportion of employees seconded from the Group to all the directors of the investee are taken into accountcomprehensively.

For a business combination where all parties to the business combination are under control of the Group before
and after the business combination (business combination under common control), carrying amounts of assets
and liabilities of the acquiree are taken over by the acquirer.
(3)

Transactions in foreign currencies are translated into the functional currency at the exchange rate at the date oftransaction or its approximate rate. Monetary assets and liabilities denominated in foreign currencies aretranslated into the functional currency at the rates of exchange prevailing at the fiscal year end. Differences arisingfrom the translation and settlement are recognized in profit or loss. However, exchange differences arising fromthe translation of financial assets measured at fair value through other comprehensive income (“FVTOCI”) andcash flow hedges are recognized in other comprehensive income.

A joint venture is a contractual arrangement whereby two or more parties including the Group have joint control
which requires unanimous consent of the parties in making important decisions on business activities. The
business of a joint venture is undertaken by an entity independent of its investors and each investor has rights
only to the net assets of the arrangement.
Investments in associates and joint ventures are initially recognized at cost and adjusted thereafter for theamount equivalent to the Group’s share of net assets of the investees. Profit or loss and other comprehensive
income recorded by the investees after the acquisition are included in the Group’s profit or loss and othercomprehensive income using the equity method and they are reflected in the investment value. For goodwill
recognized in the acquisition of associates and joint ventures, the balance is included in the carrying amount of
the investment. Dividends received from associates and joint ventures are deducted from the investment value.
In cases where the accounting policies of associates and joint ventures are different from the accounting
policies adopted by the Group, adjustments are made to the financial statements of associates and joint
ventures, if necessary, to ensure use of the Group’s policies.
If the Group loses significant influence over an associate or joint control of a joint venture and ceases to apply
the equity method, the Group recognizes a gain or loss from the sale of the equity interest in profit or loss, andremeasures the residual interest at fair value and recognizes the resulting valuation difference in profit or loss
for the fiscal year in which the significant influence or the joint control is lost.
C.

Transactions Eliminated in Consolidation
Inter-group company balances of receivables and payables and transactions, and any unrealized gains andlosses arising from inter-group company transactions are eliminated in the preparation of the consolidated
financial statements.
For unrealized gains and losses arising from transactions between the Group and associates accounted for by
the equity method, the amount equivalent to the Group’s equity interest in such gains and losses is eliminated.

(2)

Business Combinations
Business combinations are accounted for by the acquisition method. Identifiable assets acquired, liabilities

72

ENEX REPORT 2019

Foreign Currency Translation

The assets and liabilities of foreign operations are translated into Japanese yen at the rates of exchange at the
fiscal year end, while income and expenses of foreign operations are translated into Japanese yen at theexchange rate at the date of transaction or its approximate rate. The resulting exchange differences on translating
foreign operations are recognized in other comprehensive income. In cases where foreign operations are disposedof, the cumulative amount of translation adjustments related to foreign operations is recognized in profit or loss inthe period of disposition.
(4)

Financial Instruments
A.

Financial Assets Other Than Derivatives(i)

Initial Recognition and Measurement
For financial assets other than derivatives, trade receivables and other receivables are initially recognized on
the day on which they arise. All other financial assets are initially recognized on the transaction date on
which the Group becomes a party to the contract of the financial instrument.
Financial assets other than derivatives are classified into financial assets measured at amortized cost or
financial assets measured at fair value. They are classified into financial assets measured at amortized cost
if both of the following conditions are met; otherwise, they are classified into financial assets measured at fairvalue:• The purpose of holding these assets is to collect contractual cash flows.
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
For financial assets measured at fair value, investments in equity instruments, such as ordinary shares in

ENEX REPORT 201973

and then calculates the expected credit losses based on the coverage ratio, which is determined by reflecting
current conditions and projections of future economic conditions in the historical rate of credit losses calculated
for each group of receivables. If any of the following events occurs, the receivable is deemed to be in default,
and the expected credit losses are measured for individual receivables as credit-impaired financial assets. If it
is reasonably determined that all or part of a financial asset cannot be recovered, the carrying amount of theasset is directly written off.

other entities, except for equity instruments held for the purpose of obtaining gains from short-term sales,
are classified as FVTOCI financial assets in principle. Other financial assets measured at fair value areclassified as financial assets measured at fair value through profit or loss (“FVTPL financial assets”), of
which the change in fair value after acquisition is recognized in profit or loss, in principle.
Such classifications are made upon initial recognition of each asset and applied consistently without any
change.

• If payment on the receivable is more than 90 days past due

Financial assets measured at amortized cost and FVTOCI financial assets are initially recognized at fairvalue (including transaction costs that are directly attributable to the acquisition of financial assets). FVTPL
financial assets are initially recognized at fair value and transaction costs are recognized in profit or loss
when they are incurred.
(ii)

Subsequent Measurement
After initial recognition, financial assets are measured based on the classification as follows:(a)• If payment stops for reasons such as the counterparty’s bills or checks being dishonored• If the counterparty has filed for commencement of bankruptcy proceedings, civil rehabilitation proceedings,
corporate reorganization proceedings, special liquidation proceedings, or other such proceedings
D.

Financial Liabilities Other Than Derivatives(i)Financial Assets Measured at Amortized Cost

The Group initially recognizes debt securities issued by the Group on the date of issuance. All other financial
liabilities are recognized on the transaction date on which the Group becomes a party to the contract of thefinancial instrument.

Financial assets measured at amortized cost are measured at amortized cost using the effective interest
method.
(b)

Other Financial Assets

Financial liabilities other than derivatives are classified as financial liabilities measured at amortized cost.
Financial liabilities measured at amortized cost are initially measured at fair value with the transaction costs
that are directly attributable to the issue of the financial liabilities deducted from the acquisition value.

Financial assets other than those measured at amortized cost are measured at fair value. Changes in thefair value of financial assets measured at fair value are recognized in profit or loss. However, changes in
the fair value of FVTOCI financial assets are recognized in other comprehensive income. Dividends
received on the financial assets are recognized in profit or loss for the year.
(iii)

B.

(ii)

(iii)

E.

Cash and Cash Equivalents

The Group uses a simplified approach of IFRS 9, as the Group recognizes a loss allowance based on the
lifetime expected credit losses for trade receivables that result from transactions within the scope of IFRS 15
and lease receivables.
For all other financial instruments, if payment is more than 30 days past due at the end of the period or if an
event that causes credit concerns has occurred, unless there is reasonable proof to the contrary, the instrument
is judged to have a significant increase in credit risk since initial recognition, and the lifetime expected credit
losses is recognized. On the other hand, if the credit risk of the financial instrument has not significantly
increased since initial recognition, a loss allowance for the financial instrument is measured in the amount of
the 12-month expected credit losses.

Presentation of Financial Assets and Financial Liabilities
Financial assets and financial liabilities are presented on a net basis in the consolidated statement of financial
position when both of the following conditions are met; otherwise, financial assets and financial liabilities arepresented on a gross basis:• The Group has an unconditional and legally enforceable right to set off the recognized amounts.
• The Group intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Impairment of Financial Assets
The Group recognizes a loss allowance for expected credit losses related to financial assets measured atamortized cost, lease receivables, financial guarantee contracts, and other financial assets.

Derecognition

Financial liabilities are derecognized when the financial liability is extinguished, i.e. when the obligation thatwas specified in the contract is discharged due to performance of the obligation through repayment or iscanceled or lapsed.

Cash and cash equivalents consist of cash on hand, deposits, and short-term investments that are readily
convertible into cash and that are exposed to insignificant risk of change in value and due within three months
from the date of acquisition.
C.

Subsequent Measurement
After initial recognition, financial liabilities other than derivatives are measured at amortized cost using theeffective interest method. Amortization under the effective interest method and gains or losses onderecognition are recognized in profit or loss.

Derecognition

Financial assets are derecognized when the contractual rights to the cash flows from the asset expire, or
when the contractual right to receive cash flows from financial assets are transferred in transactions in which
substantially all the risks and rewards incidental to ownership of the asset are transferred to another entity.
When an FVTOCI financial asset is sold, the difference between the latest carrying amount and theconsideration received is recognized in other comprehensive income, and the balance of accumulated othercomprehensive income that has been recognized due to sales of the financial asset is transferred to retained
earnings.

Initial Recognition and Measurement

F.

Derivatives and Hedge Activities
Derivatives, including forward foreign exchange contracts, commodity futures, and interest rate swaps, areutilized to hedge currency risk, commodity price risk, and interest rate risk. These derivatives are recognized asassets or liabilities at fair value on the contract date on which the Group becomes a party to the contractual
provisions, and also remeasured at the fair value subsequently. Changes in the fair value of derivatives areaccounted for as follows depending on the intended use of the derivatives and resulting hedge effectiveness:• Derivatives that are hedging instruments to changes in fair value of recognized assets or liabilities, or of an
unrecognized firm commitment, and are deemed highly effective as a hedge, and for which, at the inceptionof the hedge, written designation of the hedge relationship and the risk management objective and strategy
for undertaking the hedge are established are designated as fair value hedges. Changes in fair value of suchderivatives are recognized in profit or loss, together with changes in the fair value of hedged items.

For expected credit losses, the Group aggregates receivables into groups based on credit risk characteristics,

74

ENEX REPORT 2019

ENEX REPORT 201975

• Derivatives that are hedging instruments to changes in future cash flows generated in association with theforecasted transactions or recognized assets or liabilities and are deemed highly effective as a hedge andfor which, at the inception of the hedge, written designation of the hedge relationship and the risk
management objective and strategy for undertaking the hedge are established are designated as cash flow
hedges. Changes in fair value of such derivatives are recognized in other comprehensive income. Thisaccounting treatment is continued until changes in future cash flows generated in association with theunrecognized forecasted transactions or already recognized assets or liabilities that are designated ashedged items are realized. The ineffective portion of the hedge is recognized in profit or loss.

(7)

Goodwill and Intangible Assets
A.

Goodwill arising from the acquisition of subsidiaries is recognized in assets at the amount of the “aggregate offair values of consideration transferred, non-controlling interests, and shareholders’ interests previously held by
the acquirer in the acquiree” exceeding the “net amount of identifiable acquired assets and assumed liabilities”
on the acquisition date. Goodwill is not amortized, but initially recognized at cost in assets, and is tested for
impairment each fiscal year. Goodwill is carried at cost, less any accumulated impairment losses in the
consolidated statement of financial position.

• Changes in fair value of derivatives other than the above are recognized in profit or loss.

Goodwill is allocated to cash-generating units (minimum units or groups of units) that are expected to contributeto obtaining cash flows considering the synergies of the business combination. Cash-generating units to which
goodwill was allocated are tested for impairment at the end of each fiscal year, or at any time when there is any
indication of impairment.

In applying the above fair value hedges and cash flow hedges, the Group assesses whether the hedge is
expected to be effective at the inception of the hedge and after the application of the hedge.
Hedge accounting is ceased when the hedge is no longer effective, in which case changes in fair value of thederivative are recognized in profit or loss.

When a subsidiary is disposed of, the amount of related goodwill is included in profit or loss for the disposal.
B.

(5)

Inventories

The period in which intangible assets, directly or indirectly, contribute to their estimated future cash flows is
considered as the useful life. If the useful life of an intangible asset is reasonably projected, the intangible asset
is amortized using the straight-line method over the estimated useful life. Intangible assets are tested for
impairment whenever there is any indication of impairment. The estimated useful lives and amortization methodof intangible assets are reviewed at each fiscal year end, and if there are any changes made to the estimateduseful lives and amortization method, such changes are applied prospectively as changes in accounting
estimates.

Inventories held for trading purposes are measured at fair value, less costs to sell, with changes in the fair value
recognized in profit or loss for the period in which the change occurred.
Property, Plant and Equipment
Property, plant and equipment are measured using the cost model and are stated at cost, less accumulated
depreciation and accumulated impairment losses. The costs of an item of property, plant and equipment comprisethe following amounts, and depreciation begins when the asset is available for use.

The estimated useful lives of major intangible assets are as follows:• Purchase price• Relationships with customers:• Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capableof operating• Brand and relationships with suppliers:

40 years• Software

5 years• Estimated costs of dismantling and removing the item and restoring the site on which it is locatedIf different material components are identifiable in an item of property, plant and equipment, each component isaccounted for as a separate item of property, plant and equipment.
Assets are depreciated using the straight-line method over their estimated useful lives. The estimated useful livesof major assets are as follows:• Buildings and structures:

2 to 50 years• Machinery and vehicles:

2 to 22 years• Vessels:

5 to 14 years

The estimated useful lives and depreciation method are reviewed at each fiscal year end, and if there are anychanges made to the estimated useful lives and depreciation method, such changes are applied prospectively aschanges in accounting estimates.

ENEX REPORT 2019

5 to 42 years

Intangible assets with indefinite useful lives and intangible assets that are not yet ready to use are notamortized, but they are tested for impairment individually or by cash-generating unit annually or whenever there
is any indication of impairment.

• Interest expense required up to the operation on borrowings for acquisition, construction, and manufacturing ofproperty, plant and equipment that meet the criteria for capitalization

76

Intangible Assets
Intangible assets are measured using the cost model and are stated at cost, less accumulated amortization andaccumulated impairment losses. Intangible assets acquired separately are measured at cost at the initialrecognition, and the costs of intangible assets acquired through business combinations are recognized at fairvalue at the date of acquisition. All expenditures on internally generated intangible assets are recognized as an
expense in the fiscal year in which they are incurred, except for development expenses that satisfy thecapitalization criteria.

Inventories held for purposes other than trading are measured at the lower of cost or net realizable value, and thecosts are determined mainly using the specific identification method or the monthly moving-average method. For
inventories with sales contracts, net realizable value is the sale value under the sales contract, less the estimatedcosts necessary to make the sale. For inventories without sales contracts, net realizable value is the estimatedselling price, less the estimated costs necessary to make the sale.

(6)

Goodwill(8)

LeasesLeases are classified as finance leases whenever substantially all the risks and rewards incidental to ownership
are transferred to the Group. Leases other than finance leases are classified as operating leases. Whether thecontract is a lease or whether the contract includes a lease is determined in consideration of economic conditionsof the transaction regardless of whether the form of the nominal contract is a lease contract.
A.

Leases as Lessee
Finance leases are capitalized at the lower of the fair value of the leased property at the inception of the leaseor the present value of the total minimum lease payments.

ENEX REPORT 201977

Total lease payments are classified into the principal portion and the interest portion of the lease obligations.
The amount of lease payments allocated to the interest portion is calculated by the interest method.

other factors. To determine the fair value, less costs to sell, the Group uses an appropriate valuation model
supported by available indicators of fair value.

A lease asset is depreciated using the straight-line method over the estimated useful life of the asset if thelease involves the transfer of ownership or the lessee has a bargain purchase option; otherwise, it isdepreciated over the shorter of the lease term or the estimated useful life.

Recognized impairment losses are allocated so that the carrying amount of each asset in the cash-generating unit
is reduced proportionally. Goodwill is first allocated so that the carrying amount of goodwill allocated to the cashgenerating unit is reduced and then the carrying amount of each asset other than goodwill in the cash-generating
unit is reduced proportionally.

Under operating leases, leased properties are not recognized as assets, and lease payments are recognized in
profit or loss on a straight-line basis over the lease term.
B.

Leases as Lessor
Under finance leases, net investment in the lease is recognized as finance receivables. Total lease payments
receivable are classified into the principal portion and the interest portion of lease receivables. The amount oflease payments receivable allocated to the interest portion is calculated using the interest method.
Under operating leases, lease payments income is recognized in income on a straight-line basis over the lease
term.

(9)

Investment Property
Investment property is land and/or buildings, among others, held to earn rentals or for capital appreciation due toan increase in real estate prices or both.
Investment property is measured using the cost model, in the same manner as property, plant and equipment, andis stated at cost, less accumulated depreciation and accumulated impairment losses.
Except for assets that are not subject to depreciation, such as land, investment property is depreciated using thestraight-line method over its estimated useful life, which is between 2 and 50 years. The estimated useful lives anddepreciation method are reviewed at each fiscal year end, and if there are any changes made to the estimateduseful lives and depreciation method, among others, such changes are applied prospectively as changes inaccounting estimates.

(10) Impairment of Non-Financial Assets

Whether there is any indication that an impairment loss recognized in prior years may have decreased or may nolonger exist is assessed. If any such indication exists, the recoverable amount of the asset or cash-generating unit
is estimated. If the recoverable amount exceeds the carrying amount of the asset or cash-generating unit, an
impairment loss is reversed up to the lower of the calculated recoverable amount or the carrying amount thatwould have been determined (net of depreciation) if no impairment loss had been recognized for the asset in prioryears. However, an impairment loss recognized for goodwill is not reversed.
Goodwill on the acquisition of investments accounted for by the equity method is included in the part of thecarrying amount of the investments with other components, and investments in the companies accounted for by
the equity method may be impaired as a single asset.
(11) Non-Current Assets Held for Sale
When the carrying amount of a non-current asset (or disposal group) is expected to be recovered principally
through a sale transaction rather than through continuing use, the asset (or disposal group) is classified as an
asset held for sale. The criteria to be classified as an asset held for sale are only met if the sale of the asset ishighly probable and the asset is available for immediate sale in its present condition. Because the sale of the asset
will be completed within one year from the day of classification, the asset is presented in current assets.
Assets held for sale are measured at the lower of carrying amount or fair value, less costs to sell. Property, plantand equipment and intangible assets classified as assets held for sale are not depreciated or amortized.
(12) Employee BenefitsA.

For defined benefit retirement plans, the net amount of the present value of defined benefit obligations and thefair value of plan assets is recognized as liabilities or assets. The present value of defined benefit obligations
and related service costs are calculated using the projected unit credit method, in principle. The discount rateused to calculate the present value of defined benefit obligations is determined by reference to market yield at
the end of the fiscal year on high-rating corporate bonds that are consistent with the estimated periods of theretirement benefit obligations, in principle.

Each fiscal year, the Group assesses whether there is any indication that a non-financial asset has been impaired.
If there is any indication that an asset has been impaired, the asset is tested for impairment. Goodwill andintangible assets with indefinite useful lives are tested for impairment at least annually, at the same time each year,
regardless of whether there is any indication of impairment. When a cash-generating unit, including goodwill, istested for impairment, an impairment test is performed first for assets other than goodwill, and then for goodwill
after necessary impairment losses are recognized for the assets other than goodwill.

Changes in the present value of defined benefit obligations for employees’ service in prior periods arising due toan amendment to the plan are recognized in profit or loss in the period in which the amendment was made.

An impairment test is performed by cash-generating unit. If cash flows from an asset are identifiable independentlyof other assets, the asset is considered its own cash-generating unit. If an asset from which cash flows are not
identifiable independently of other assets, a cash-generating unit is the smallest identifiable group of assets thatindependently generates cash flows.
Goodwill is allocated to cash-generating units (minimum units or groups of units) that are expected to contribute toobtaining cash flows considering the synergies of the business combination.
An impairment test is performed by estimating the recoverable amount of the asset by cash-generating unit andcomparing the estimated recoverable amount with the carrying amount of the cash-generating unit. The
recoverable amount is calculated at the higher of the fair value of the cash-generating unit, less costs to sell, or thevalue in use. If the carrying amount of the cash-generating unit exceeds the recoverable amount, an impairment
loss is recognized for the asset and the carrying amount is written down to the recoverable amount. In theassessment of value in use, estimated future cash flows are discounted to the present value using a pre-tax
discount rate reflecting the current market valuation on the time value of money, risks inherent in the asset, and78

ENEX REPORT 2019

Defined Benefit Retirement Plans

The Group recognizes all actuarial gains and losses arising from the Group’s defined benefit retirement plans inother comprehensive income (“defined benefit remeasurement”) and immediately reclassifies these gains andlosses to retained earnings.
B.

Defined Contribution Retirement Plans
Contributions to be made for employees’ service corresponding to each fiscal period are recognized as
expenses for the fiscal year.

C.

Multi-Employer Plans
Some subsidiaries have participated in multi-employer plans. Multi-employer plans are classified into defined
benefit retirement plans and defined contribution retirement plans in accordance with terms of each plan andthe accounting treatment for each plan type is applied. However, for multi-employer plans classified as defined

ENEX REPORT 201979

benefit retirement plans, when information sufficient to account for the plans as defined benefit retirement plans
is not available, the accounting treatment for defined contribution retirement plans is applied to them.
D.

Short-Term Employee Benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the service
rendered by employees during the fiscal period is recognized in profit or loss. For bonuses, the estimatedamount of payments is recognized as a liability when the Group has legal or constructive obligations to makesuch payments and reliable estimates of the obligations can be made.

(13) Provisions
A provision is recognized when there is a present legal or constructive obligation as a result of past events, when it
is probable that an outflow of resources embodying economic benefits will result from the settlement of theobligation, and when a reliable estimate of the obligation can be made. The amount recognized as a provision isthe best estimate of the expenditure required to settle the present obligation (future cash flows), taking into
account risks and uncertainty related to the obligation at the end of the fiscal year. When the time value of money
for the provisions is material, the amount of the provisions is measured at the present value calculated bydiscounting estimated future cash flows at a pre-tax discount rate, reflecting risks inherent in the liabilities.
Unwinding of the discount reflecting the passage of time is recognized as a financial cost.
Major provisions are provisions for asset retirement obligations, which are recognized and measured by estimating
asset retirement obligations individually and specifically taking into account the status of each property based on
expected usable years, etc., determined in light of past records of restoration and useful lives of inside fixtures in
offices and other places, in preparation for obligations for restoration of rental offices, buildings and stores andremoval of harmful materials related to non-current assets. An outflow of economic benefits in the future is
expected to be principally in a period after one year from the end of each fiscal year.

and other goods. For the sale of these products, the Group considers that a performance obligation is satisfied
when the customer is deemed to obtain control of the product in light of contractual terms and conditions.
Specifically, the Group recognizes revenue on the date when the goods are shipped or delivered to the customer
or when the customer performs an inspection of the delivered goods. In addition, revenue is recognized at theamount of consideration promised in the contract with the customer less discounts, rebates, returned goods, etc.
As the amount of consideration for performance obligations is mainly received within one year of satisfaction of
performance obligations, it is not adjusted for the effects of significant financing components.
When identifying the performance obligations, and determining whether the Group is involved in transactions as aparty to the transaction, or whether the Group is involved as an agent, the Group considers factors such aswhether or not the Group has the primary responsibility for providing the product or service to the customer,
whether or not the Group bears the inventory risk, and whether or not the Group has discretion in establishing
selling price. For a transaction in which the Group is involved as a party to the transaction, the Group presents
revenue at the gross amount of consideration received from the customer. For a transaction in which the Group is
involved as an agent, the Group presents revenue at a net amount calculated by deducting the cost of sales fromthe gross amount of consideration received from the customer.
(16) Government Grants
Proceeds from government grants are recognized at fair value when there is reasonable assurance that theconditions attached to them will be complied with, and that the grant will be received. Grants for expenses incurred
are recorded as revenue in the fiscal year in which the expenses are incurred. For grants for acquisition of assets,
the amount is deducted from the cost of the assets.
(17) Financial Income and Costs(14) Equity
A.

Common Stock and Capital Surplus
Equity instruments issued by the Company are recorded in equity and capital surplus. Transaction costs directly
attributable to the issuance are deducted from capital surplus.

B.

Treasury Stock
When treasury stock is acquired, the treasury stock is recognized at cost and presented separately as an itemin equity. Transaction costs directly attributable to the acquisition are deducted from equity.
When treasury stock is sold, consideration received is recognized as an increase in equity.

(15) Revenue
The Group has recognized revenue based on the following five-step approach.
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The Group is engaged in the sale of LPG, gasoline, kerosene, diesel oil, fuel oil, asphalt, electricity, automobiles,

80

ENEX REPORT 2019

Financial income consists of interest income, dividends received, gains on changes in fair value and sale of
FVTPL financial assets, and gains on changes in fair value of derivatives. Interest income is recognized using theeffective interest method when it arises. Dividends received are recognized when the Group’s right to receive thepayment is established.
Financial costs consist of interest expense, losses on changes in fair value and sale of FVTPL financial assets,
impairment losses of financial assets measured at cost other than trade receivables, and losses on changes in fairvalue of derivatives. Interest expense is recognized using the effective interest method when incurred.
(18) Income Taxes
Income taxes, which comprise current taxes and deferred taxes, are recognized in profit or loss, except for taxes
arising from items that are recorded directly in equity or accumulated other comprehensive income and taxes
arising from the initial recognition of business combinations.
Current taxes are measured at the amount that is expected to be paid to, or refunded from, the taxation authorities.
In calculating the amount of taxes, the Group applies tax rates and tax laws that have been enacted or
substantively enacted by the end of the fiscal year in countries where the Group operates business activities andhas taxable profit or tax loss.
Deferred taxes are calculated based on the temporary differences between the tax basis of an asset or liability andits carrying amount at the fiscal year end. Deferred tax assets are recognized for deductible temporary differences,carryforward of unused tax credits, and unused tax losses to the extent that it is probable that future taxable profit
will be available against which they can be utilized. Deferred tax liabilities are, in principle, recognized for taxable
temporary differences.
The deferred tax assets or liabilities are not recognized for the following temporary differences:

ENEX REPORT 201981• Temporary differences from the initial recognition of goodwill• Estimates of Income Taxes• Temporary differences from the initial recognition of assets and liabilities arising from transactions (excluding
business combination transactions) that affect neither accounting profit nor taxable profit

In calculation of income taxes, estimates and judgments are required for various factors, including interpretation oftax regulations and history of past tax examinations. Therefore, the carrying amount of income taxes may differ fromthe actual amount of tax payment.

Deferred tax liabilities for taxable temporary differences associated with investments in subsidiaries, associates,and joint ventures are not recognized if the Group is able to control the timing of the reversal of the temporary
differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax
assets for deductible temporary differences arising from investments in subsidiaries and associates are recognized
only to the extent it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which temporary differences can be used.

Deferred tax assets are recognized to the extent it is probable that taxable profit will be available against which
deductible temporary differences can be used. As the timing when taxable profit is earned and the amount thereof
may be affected by changes in uncertain future economic conditions, there is a risk that the amount recognized insubsequent fiscal years may change significantly if the actual timing and amounts differ from the estimates.
The content and amount related to income taxes are discussed in Note 17, “Deferred Taxes and Income Taxes”.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period in which
the asset is realized or the liability is settled, based on a tax rate (and tax laws) that has been enacted or
substantively enacted by the end of the fiscal year.

• Measurement of Defined Benefit Obligations in Defined Benefit Retirement Plans
Defined benefit obligations are computed based on actuarial calculations, and assumptions used in those actuarial
calculations include estimates of discount rates, employee turnover, mortality rates, salary increase rates, etc. Theseassumptions are determined with all available information, such as market trends of interest rate fluctuations judged
comprehensively. These assumptions may be affected by economic conditions and revisions of laws and regulations,and there is a risk that such effects may cause significant changes in the measurement of defined benefit obligations
in subsequent fiscal years.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets against
current tax liabilities and the taxes are levied by the same taxation authority on the same taxable entity.
(19) Earnings per Share

Details on measurement of defined benefit obligations in defined benefit retirement plans and the amounts are
discussed in Note 23, “Employee Benefits”.

Basic earnings per share are calculated by dividing profit or loss attributable to Itochu Enex’s shareholders by theweighted-average number of ordinary shares outstanding during the period.

• Measurement of Provisions
4.

Use of Estimates and Judgments

The Group records asset retirement obligations as a provision in the consolidated statement of financial position. The
amount recorded is the present value calculated by discounting the best estimate of expenditures required to settle
the obligations, which takes into account risks and uncertainty as of the end of the fiscal year, at a pre-tax discountrate, reflecting risks inherent in the liabilities.

In the preparation of the consolidated financial statements, management uses estimates and judgments. Estimatesand judgments made by the management have an impact on the amounts of assets and liabilities as of the reporting
date and disclosure of contingent liabilities, and the amounts reported as revenue and expenses.

Although the amount of expenditures required to settle the obligations is calculated comprehensively taking into
account future possible outcomes, this amount may be affected by unpredictable events or changes in situation. If theactual amount of payment differs from the estimate, or if there is any significant change in the discount rate fordiscounting the estimated expenditure due to changes in economic conditions and other factors, the amountrecognized in subsequent fiscal years may be affected significantly.

Major items in which the carrying amounts of assets, liabilities, revenue, and expenses are affected by judgments
made in application of the accounting policies are as follows.
• Indication of impairment for property, plant and equipment, goodwill, intangible assets, etc. (refer to Note 3,“Significant Accounting Policies (10) Impairment of Non-Financial Assets”)• Recognition and presentation of revenue (refer to Note 3, “Significant Accounting Policies (15) Revenue”)
Assumptions used in accounting estimates may differ from actual figures because these assumptions are set basedon past experience and appropriately collected, available information. Estimates and assumptions are reviewed bymanagement on an ongoing basis. Effects of these reviews of estimates and assumptions are recognized in the
period in which the estimates and assumptions are reviewed and subsequent periods.
Information on uncertainty of assumptions and estimates that have a risk of resulting in significant adjustments in thenext fiscal year is as follows.
• Impairment of Non-Financial Assets
Impairment tests of non-financial assets are performed based on many assumptions and estimates, such asassumptions for measurement of fair value, less costs to sell, in the calculation of the recoverable amount or
estimated future cash flows of cash-generating units as bases for calculation of value in use and discount rate. Thereis a risk that changes in uncertain future economic conditions may result in significant adjustments to the amount of
impairment losses.
The content and amount related to impairment of non-financial assets are discussed in Note 31, “Impairment Loss”.

The amount of recognized asset retirement obligations is discussed in Note 22, “Provisions”.
5.

Segment Information(1)

Outline of Reportable Segments
The reportable segments of the Group are components of the Group for which separate financial information isavailable. These segments are periodically evaluated by the Board of Directors in deciding how to allocate
management resources and in assessing performance.
The Group is organized into business divisions, consolidating related businesses. Each business division plans
strategies for each category of target customers and markets and develops business activities. The Group has
four reportable segments that correspond to the business divisions, namely the “Home-Life Division,” “Life &Industrial Energy Division,” “Power & Utility Division,” and “Mobility Life Department.”
The Home-Life Division is engaged in the sale of LPG, kerosene, town gas (Nakatsu City, Oita Prefecture andKanto region), industrial gas, electricity, household equipment, smart energy equipment, and residential lithium-ion
electricity storage systems, as well as in a pressure resistance inspection business for gas containers and the saleof welding materials.
The Life & Industrial Energy Division is engaged in the provision of gasoline, kerosene, diesel oil, fuel oil, LNG,

82

ENEX REPORT 2019

ENEX REPORT 201983

For the fiscal year ended March 31, 2018

electricity, automobile-related product services, car rental, high-grade urea solution “AdBlue,” credit card business,
asphalt, and logistics functions for oil storage facilities, etc., as well as in the import/export and domestic
supply/demand adjustment trading of petroleum products, and the sale of slop and recycled oil.
The Power & Utility Division is engaged in the sale of electricity (coal-fired, natural gas-fired, wind, hydropower,
and photovoltaic power) and steam, as well as in providing district heating services, comprehensive energy
services, electricity/heat supply services, electric power supply/demand management services, and asset
management business.
The Mobility Life Department is engaged in the car dealer business, the next-generation biodiesel manufacturing
project in the United States, and the Euglena domestic bio jet fuel demonstration project.
In the fiscal year ended March 31, 2019, the now former Life Energy & Logistics Division and Industrial Energy &Logistics Division were integrated to form the newly established Life & Industrial Energy Division, while the MobilityLife Department was newly established.
In line with this, the classification of reportable segments has been changed from the previous Home-Life Division,
Power & Utility Division, Life Energy & Logistics Division, and Industrial Energy & Logistics Division to the HomeLife Division, Life & Industrial Energy Division, Power & Utility Division, and Mobility Life Department from the fiscal
year ended March 31, 2019.
Furthermore, in conjunction with the absorption-type merger of TOHOKU TANKU SHOUKAI CO., LTD., which wasa subsidiary of the Company, by ITOCHU ENEX HOME-LIFE TOHOKU CO., LTD., a subsidiary of the Company,
the Group reviewed the management classification and changed the method to include the business of TOHOKUTANKU SHOUKAI CO., LTD., which was previously included in the Life Energy & Logistics Division (Life &Industrial Energy Division after the above change), in the Home-Life Division.
Due to the change in segments, segment information for the previous fiscal year has been adjusted based on theclassification of reportable segments after the change.

(Millions of yen)
Reportable segments
Home-Life

Life &
Industrial
EnergyPower &
Utility

Mobility Life

Total

97,811

468,145

74,541

104,270

336

4,363

5,899

㸫

98,147472,508

80,440104,270

Adjustment

Consolidated

744,767–

744,767

10,598(10,598)–

755,365(10,598)

744,767

Revenue
Revenue from external customers
Intersegment revenue
Total revenue
Gross profit

25,077

36,841

8,891

18,01388,822–

88,822

Selling, general and administrative expenses(22,042)(28,643)(4,328)(16,347)(71,360)

429(70,931)

Loss from tangible assets, intangible assets andgoodwill

(143)

(733)

(288)

200

(964)

(580)

(1,544)

Other profit (loss)

232

471

351

167

1,221

(415)

806

Profit from operating activities

3,123

7,936

4,626

2,034

17,719(566)

17,153Financial income and costs

164

(138)

(316)

(403)

(693)

(110)

(803)

Share of profit (loss) of investments accounted
for by the equity method

540

133

(180)

–

493

–

493

Gains on business reorganization and others

2,326

–

–

–

2,326

–

2,326

Profit before tax

6,154

7,930

4,130

1,631

19,845(676)

19,169Net profit attributable to Itochu Enex’s
shareholders

3,798

5,288

2,210

195

11,491(466)

11,025

Depreciation and amortization(3,291)(2,184)(3,468)(1,372)(10,315)(509)(10,824)

Impairment loss

(173)

(669)

(13)

–

(855)

(574)

(1,429)Total assets

66,842

145,10980,18963,896

356,036

26,585

382,621

Investments accounted for by the equity method

17,699

510

7,936

–

26,145–

26,145

Capital expenditures

4,258

2,848

6,014

618

13,738694

14,432

109,161

863,31078,560105,313

1,156,344–

1,156,344

Other items(2)

Information on Reportable Segments
The accounting method for the reportable segments is generally the same as the method described in Note 3,“Significant Accounting Policies”.

Total trading transactions(Note)

84

ENEX REPORT 2019

Intersegment transactions have been decided by reference to the market price.
The adjustment of negative ¥466 million to net profit attributable to Itochu Enex’s shareholders represents corporate profit notallocated to reportable segments.
The adjustment of ¥26,585 million to total assets represents corporate assets not allocated to reportable segments.
Total trading transactions are unaudited items voluntarily disclosed by the Company and represent the amount of sales inaccordance with Japanese accounting practices.

ENEX REPORT 2019

85

(3)

For the fiscal year ended March 31, 2019
(Millions of yen)This information is omitted because the classification of products and services is the same as the classification ofreportable segments.

Reportable segments
Life &
Industrial
EnergyPower &
Utility

94,350707,661

93,459111,616

1,007,086–

1,007,086

365

9,414

5,969

–

15,748(15,748)–

94,715717,075

99,428111,616

1,022,834(15,748)

1,007,086

Gross profit

22,397

36,108

7,134

18,571

84,210–84,210

Selling, general and administrative expenses(18,927)(27,791)(4,662)(16,006)(67,386)

68(67,318)

Loss from tangible assets, intangible assets andgoodwill

(172)

(202)

324

(179)

(229)

(12)

(241)

Other profit (loss)

257

1,037

(67)

(35)

1,192

8

1,200

Profit from operating activities

3,555

9,153

2,728

2,351

17,78764

17,851

Financial income and costs

(24)

(121)

516

(260)

111

(113)

(2)

Share of profit (loss) of investments accounted
for by the equity method

1,251

139

175

–

1,565

–

1,565

Profit before tax

4,782

9,171

3,419

2,091

19,463(49)

19,414

Net profit attributable to Itochu Enex’s
shareholders

3,068

6,185

1,970

319

11,542

17

11,559Home-Life

Mobility Life

Total

Adjustment

Consolidated(4)

Revenue
Revenue from external customers
Intersegment revenue
Total revenue

Geographic Information
This information is omitted because revenue from external customers in Japan accounts for a large percentage ofthe revenue recorded in the consolidated statement of comprehensive income for the fiscal years ended March 31,2018 and 2019.

(5)

Major Customers Information
This information is omitted because there is no major external customer from which revenue accounts for 10% ormore of the revenue recorded in the consolidated statement of comprehensive income for the fiscal years ended
March 31, 2018 and 2019.

6.

Business Combinations
For the fiscal year ended March 31, 2018
There were no significant business combinations during the fiscal year ended March 31, 2018.
For the fiscal year ended March 31, 2019

Other items
Depreciation and amortization(2,698)(1,990)(3,494)(1,377)(9,559)

(527)

(251)

(216)

–

(171)

(638)

–

(638)

Total assets

137,606

82,43951,798337,427

36,946374,373

Investments accounted for by the equity method

18,774555

10,112–29,441–

29,441

Capital expenditures

3,259

1,743

6,660

758

12,420

1,295

13,715

105,112

931,798

96,935

110,415

1,244,260–

1,244,260

Total trading transactions

There were no significant business combinations during the fiscal year ended March 31, 2019.

(10,086)

65,584

Impairment loss

(Note)

Products and Services Information

Intersegment transactions have been decided by reference to the market price.
The adjustment of negative ¥17 million to net profit attributable to Itochu Enex’s shareholders represents corporate profit notallocated to reportable segments.
The adjustment of ¥36,946 million to total assets represents corporate assets not allocated to reportable segments.
Total trading transactions are unaudited items voluntarily disclosed by the Company and represent the amount of sales inaccordance with Japanese accounting practices.

7.

Loss of Control of SubsidiariesFor the fiscal year ended March 31, 2018
(Reorganization and Integration of the Liquefied Petroleum Gas (LPG) Wholesale and Retail Business)
On October 1, 2017, the Company and OSAKA GAS established a joint-venture company with each company owning
a 50% stake. The joint venture was formed through respective exchanges of shares whereby the former OSAKA GAS
subsidiary NISSHO PETROLEUM GAS CORPORATION (“Nissho LP”), which was designated as the wholly owningparent company for the share exchanges, exchanged its shares for the shares of each of the three former
subsidiaries of the Company – ITOCHU ENEX HOME-LIFE KANTO CO., LTD. (“HOME-LIFE KANTO”), ITOCHUENEX HOME-LIFE CHUBU CO., LTD. (“HOME-LIFE CHUBU”) and ITOCHU ENEX HOME-LIFE KANSAI CO., LTD.
(“HOME-LIFE KANSAI”), and one former subsidiary of OSAKA GAS – Osaka Gas LPG Co., Ltd., which were
designated as the wholly owned subsidiary companies for the share exchanges. The merged company, Nissho LP,
was renamed “ENEARC” on the same day.
In addition, as part of the reorganization and integration, effective the same day, the Company acquired all NisshoLP-owned shares in Nissho Propane Sekiyu Co., Ltd., Ehime Nissho Propane Co., Ltd., and Kochi Nissho Propane
Corporation, making them subsidiaries of the Company.
The Company has determined that ENEARC meets the conditions for a joint venture. As such, the company istreated as an equity-method affiliate for accounting purposes.
As a result of the share exchange used to establish ENEARC, the Company has lost management control of HOMELIFE KANTO, HOME-LIFE CHUBU and HOME-LIFE KANSAI. This has resulted in a gain of ¥2,326 million (including
a gain of ¥1,163 million from a fair value remeasurement of the Company’s remaining stakes in the three companies
as of the date management control was lost), which has been recognized as “Gains on business reorganization andothers.”86

ENEX REPORT 2019

ENEX REPORT 201987

The components of non-current financial assets other than investments are shown below:

Other income and expenses associated with the business reorganization and integration are shown below.
(Millions of yen)Classification
Selling, general and administrative expenses
Share of loss of investments accounted for by the equity method

Fiscal year ended March 31, 2018
(302)
(848)

As of March 31, 2018
Non-current financial assets other than investments
Non-current loans receivable
Non-current lease receivables
Guarantee deposits
Other
Allowance for credit losses

2,326
(75)

Gains on business reorganization and others
Income tax expense

1,101

Total

Total

For the fiscal year ended March 31, 2019
There was no significant loss of control during the fiscal year ended March 31, 2019.

11.


8.

Trade Receivables

Total

The components of trade receivables are shown below:
As of March 31, 201810.

(Millions of yen)
As of March 31, 2019

113,043
7,022
(524)

100,489
6,001
(325)

119,541

106,165

Securities and Other Financial Assets

As of March 31, 2018

Total

88

ENEX REPORT 2019

28,30575

32,98865

28,38033,053The carrying amount of inventories recorded at fair value, less cost to sell, on a recurring basis as of March 31, 2018and 2019 was ¥2,344 million and ¥7,984 million, respectively. The fair value is measured based on the amountobtained from a pricing service agency that was principally evaluated by the market approach and classified as Level 2.
Investments Accounted for by the Equity Method
In the Group, all investments in associates and joint ventures are accounted for by the equity method. There is no
investment in associates and joint ventures for which stock quotations have been published.

1,108
14,531
1,570
20,0001,651

427
13,760224
20,0001,623(1)38,86036,034

Associates

8,072

8,457

Joint ventures

18,073

20,984

Investments in Associates and Joint Ventures

26,14529,441

Total carrying amounts of investments in associates and joint ventures in the consolidated statement of financial
position as of March 31, 2018 and 2019 are shown below:
As of March 31, 2018

Total
As of March 31, 2018

Total

(Millions of yen)
As of March 31, 2019

For the fiscal year ended March 31, 2019, the amount of inventories written down to net realizable value was ¥3
million, compared with ¥11 million for the fiscal year ended March 31, 2018. These amounts written down are
included in cost of sales in the consolidated statement of comprehensive income.

(Millions of yen)
As of March 31, 2019

The components of other investments are shown below:

Other investments
FVTPL financial assets
FVTOCI financial assets

11,292For the fiscal year ended March 31, 2019, the amount of inventories expensed as cost of sales was ¥905,017 million,
compared with ¥638,227 million for the fiscal year ended March 31, 2018.

12.

The components of other current financial assets are shown below:

Other current financial assets
Short-term loans receivable
Other accounts receivable
Derivative assets
Deposits paid
Other

11,400

As of March 31, 2018
Merchandise and finished goods
Raw materials

Total

998
2,500
6,248
2,203
(657)

Inventories

Cash and cash equivalents as of March 31, 2018 and 2019 were composed of cash and deposits.

Trade receivables
Trade receivables
Trade notes receivable
Allowance for credit losses

345
2,471
6,913
2,216
(545)

The components of inventories are shown below:

Cash and Cash Equivalents

9.

(Millions of yen)
As of March 31, 2019

(Millions of yen)
As of March 31, 2019

(Millions of yen)
As of March 31, 2019

289
3,117

1,044
3,142

3,406

4,186

ENEX REPORT 2019

89

(2)

(4)

Breakdown of Comprehensive Income from Associates and Joint Ventures
For investments in associates and joint ventures, the amounts of corresponding share of comprehensive income
recorded in the fiscal years ended March 31, 2018 and 2019 are shown below:
A.

Profit or Loss
(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018
Associates

350

597

Joint ventures

143

968

493

1,565

Total

B.

(Millions of yen)
Fiscal year ended
March 31, 2019

Associates

(61)

106

Joint ventures

(467)

(353)

(528)

(247)

Total

In summarized financial information on the statement of income and the statement of comprehensive income of
ENEARC Co., Ltd. for the fiscal year ended March 31, 2018, amounts arising during the period since the said
company became a joint venture due to the reorganization and integration of the LPG wholesale and retailbusiness (from October 1, 2017 to March 31, 2018) are presented. For details on the reorganization andintegration of the liquefied petroleum gas (LPG) wholesale and retail business, please refer to Note 7, “Loss ofControl of Subsidiaries”.
JAPAN GAS ENERGY CORPORATIONAs of March 31, 2018

(Millions of yen)
Fiscal year ended
March 31, 2019

Associates

289

703

Joint ventures

(324)

615

(35)

1,318

Total

37,95532,545

Non-current assets

3,942

3,958

Current liabilities

27,17921,027124

126

14,594

15,350Non-current liabilities
EquityFiscal year ended
March 31, 2018
Revenue
Net profit (loss)
Other comprehensive income
Comprehensive income
Dividends received by the Group

157,400

151,978

1,774

1,201

(13)

(2)

1,761

1,199

51

89

(Millions of yen)

Details of major associates and joint ventures are as follows:

As of March 31, 2018

As of March 31, 2018
Major business

Location

Percentage ofequity held(%)

AssociateJAPAN GAS ENERGY CORPORATION

Sale of LPG products

Minato-ku, Tokyo

20.0

Joint venture

ENEARC Co., Ltd.

Sale of LPG products

Minato-ku, Tokyo

50.0

Location

Percentage ofequity held

As of March 31, 2019
Name

(Millions of yen)
Fiscal year ended
March 31, 2019

ENEARC Co., Ltd.

Major Associates and Joint Ventures

Name(Millions of yen)
As of March 31, 2019

Current assets

Total Comprehensive Income
Fiscal year ended
March 31, 2018(3)

Summarized financial information of major associates and joint ventures accounted for by the equity method isshown below.

Other Comprehensive Income
Fiscal year ended
March 31, 2018

C.

Summarized Financial Information of Major Associates and Joint Ventures

Major business(%)
AssociateJAPAN GAS ENERGY CORPORATION

Sale of LPG products

Minato-ku, Tokyo

20.0

Joint venture

ENEARC Co., Ltd.

Sale of LPG products

Chiyoda-ku, Tokyo

50.0

As of March 31, 2019

Current assets

15,32413,009Non-current assets

24,36525,951

Current liabilities

16,01014,628Non-current liabilities

6,597

5,866

Equity17,082

18,466

Cash and cash equivalents included in the current assets above as of March 31, 2018 and 2019 are ¥3,951 millionand ¥2,183 million, respectively. Financial liabilities (excluding trade and other payables, and provisions) included incurrent liabilities as of March 31, 2018 and 2019 are ¥6,750 million and ¥7,129 million, respectively, and financial
liabilities (excluding trade and other payables, and provisions) included in non-current liabilities as of March 31, 2018and 2019 are ¥4,662 million and ¥3,712 million, respectively.

ENEARC Co., Ltd. moved its head office to Chiyoda-ku, Tokyo on February 18, 2019.

90

ENEX REPORT 2019

ENEX REPORT 201991

(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018
Revenue

32,69356,519Depreciation and amortization(1,295)(2,464)

Financial income

8

19

Financial costs

(15)

(27)

1

668

1,217

1,488

Other comprehensive loss

(22)

(104)

Comprehensive income

1,195

1,384

–

–

Income tax expense
Net profit (loss)

Dividends received by the Group(5)

Reconciliation Between Carrying Amounts and Summarized Financial Information of Major Associates and Joint
Ventures
JAPAN GAS ENERGY CORPORATIONAs of March 31, 2018

(Millions of yen)
As of March 31, 2019

Property, Plant and Equipment

Changes in acquisition cost, accumulated depreciation, and accumulated impairment loss of property, plant andequipment are shown below:[Acquisition Cost](Millions of yen)
Buildings andstructures

Machinery,equipment
and vehicles

Vessels

17,70740,06364,617

1,335

12,691

4,373

140,786

Acquisition

–

1,408

1,311

143

1,227

6,775

10,864

Reclassification

22

1,771

3,844

415

317

(6,525)(156)

Acquisition throughbusiness combinations

1,889

558

488

–

23

79

3,037

Decrease due to disposal
and change in the scopeof consolidation(3,548)(3,535)(9,284)–(3,886)(54)(20,307)

8

26

1,608

–

1,044

(358)

2,328

16,07840,29162,584

1,893

11,416

4,290

136,552Land
As of April 1, 2017

Other
As of March 31, 2018

Constructionin progress

Other

Total

Net assets

14,594

15,350Acquisition

84

934

1,534

–

1,046

9,157

12,755The Group’s share of net assets

2,919

3,070

Reclassification

25

1,188

3,944

–

656

(8,341)(2,528)Acquisition throughbusiness combinations

39

132

89

–

14

–

274

Decrease due to disposal
and change in the scopeof consolidation

(290)

(791)

(3,825)–(1,043)–(5,949)

85

965

837

–

(48)

(713)

1,126

16,021

42,71965,163

1,893

12,041

4,393

142,230

Goodwill and consolidation adjustments
Carrying amounts of the Group’s equity interest in JAPAN GAS ENERGYCORPORATION

–

–

2,919

3,070

ENEARC Co., Ltd.
(Millions of yen)
As of March 31, 2018
Net assets

92

13.

17,082As of March 31, 2019

As of March 31, 201918,466

The Group’s share of net assets

8,541

9,233

Goodwill and consolidation adjustments

2,220

2,220

Carrying amounts of the Group’s equity interest in ENEARC Co., Ltd.

10,761

11,453

ENEX REPORT 2019

Other

ENEX REPORT 2019

93

14.

[Accumulated Depreciation and Accumulated Impairment Loss](Millions of yen)Land
As of April 1, 2017

Buildings andstructures

Machinery,equipment
and vehicles(14,680)(30,533)(191)

Vessels

Constructionin progress

Other

(495)

(7,299)Depreciation–(1,777)(5,067)(152)(1,652)

Impairment loss

(52)

(529)

(143)

–

Reclassification

–

129

–

–

Decrease due to disposal
and change in the scopeof consolidation

104

Other

2,173

8,075

–

–

(401)

(424)

(139)

(15,085)(28,092)(650)

Depreciation–(1,601)(4,945)(164)

Impairment loss

(83)

(133)

(67)

–

Reclassification

–

158

673

Decrease due to disposal
and change in the scopeof consolidation

–

583

Other

(20)

As of March 31, 2019(242)

As of March 31, 2018

(3)

–

Total
(53,198)–(8,648)

(272)

–

(996)

–

–

129

2,182

–

(219)

12,534

Changes in acquisition cost, accumulated depreciation, and accumulated impairment loss of investment property are
shown below:[Acquisition Cost]

Balance at the beginning of the year–

Expenditure after acquisition

351

Reclassification

156

165

(4,268)(1,965)158

239

22,006

20,815(7,260)–(51,226)

Other(1,334)–(8,044)

Balance at the end of the year

(43)

–

(326)

–

㸫

–

831

2,921

–

955

–

4,459

(280)

(47)

–

22

–

(325)

(16,358)(29,557)(814)(7,660)–(54,631)

Machinery,equipment
and vehicles

Vessels

Constructionin progress

Other

Total

[Accumulated Depreciation and Accumulated Impairment Loss]

15,93925,20634,492

1,243

4,156

4,290

85,326

As of March 31, 201915,77926,36135,606

1,079

4,381

4,393

87,599Carrying amounts of finance lease assets (net of accumulated depreciation and accumulated impairment loss)
included in property, plant and equipment are shown below:(Millions of yen)

(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018(13,583)(11,840)

Depreciation

(245)

(242)

Impairment loss

(397)

(134)

Reclassification

(129)

(158)

Decrease due to disposal and change in the scope of consolidation

2,514

1,480

–

(101)

(11,840)(10,995)

Balance at the beginning of the year

Other
Balance at the end of the year

As of March 31, 2018

22,006370

Decrease due to disposal and change in the scope of consolidation

Buildings andstructures

25,56940

Acquisition(1,047)(Millions of yen)

(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018–

[Carrying Amount]
Land

Investment Property

The rental income from investment property for the fiscal years ended March 31, 2018 and 2019 was ¥3,061 millionand ¥2,836 million, respectively, which was included in revenue in the consolidated statement of comprehensive
income. The direct operating expenses incurred incidental to rental income were ¥1,460 million and ¥1,278 million,
respectively, which were included in cost of sales in the consolidated statement of comprehensive income.
[Carrying Amount and Fair Value]

Buildings andstructures

Machinery,equipment andvehiclesAs of March 31, 2018

6,737

1,740

86

1,463

10,026

As of March 31, 2018

10,166

10,129As of March 31, 2019

6,792

2,295

72

999

10,158

As of March 31, 2019

9,819

9,941

Vessels

Other

Total

Carrying amount(Millions of yen)
Fair value

The depreciation expense of property, plant and equipment is included in cost of sales and selling, general andadministrative expenses in the consolidated statement of comprehensive income.

The Group has rental facilities for selling petroleum products, such as gas stations, and rental storage facilities for
petroleum products throughout Japan.

Expenditures related to property, plant and equipment under construction are presented as construction in progressin the above table.

Fair value of the above investment property is classified into Level 3. The fair value is calculated based on theamount measured using the sales comparison method and the discounted cash flow method, taking into account themarket conditions adjustment, area-specific value, and other factors computed by the Group.

The balance of property, plant and equipment includes property, plant and equipment of which disposal throughtransfer, sale, etc. is restricted in association with bank loans of ¥12,535 million and ¥11,547 million as of March 31,2018 and 2019, respectively.
There were no borrowing costs capitalized in the fiscal years ended March 31, 2018 and 2019.
For the commitments for acquisition of property, plant and equipment, please refer to Note 39, “Commitments”.

94

ENEX REPORT 2019

ENEX REPORT 2019

95

15.

[Carrying Amount]

Goodwill and Intangible Assets(Millions of yen)

Changes in acquisition cost, accumulated amortization, and accumulated impairment loss of goodwill and intangible
assets are shown below:[Acquisition Cost](Millions of yen)
Relationships withcustomers

Brand andrelationships with
suppliers

562

12,814

11,0693,819

28,264

–

1,568

–

869

2,437

Acquisition through businesscombinations

171

288

–

12

471

Decrease due to disposal
and change in the scope of
consolidation–(4,062)–(620)(4,682)

Other

(41)

69

–

(42)

(14)

As of March 31, 2018

692

10,677

11,0694,038

26,476

Acquisition

–

230

–

721

951

Acquisition through businesscombinations

–

–

–

1

1

Decrease due to disposal
and change in the scope of
consolidation

–

(457)

–

(487)

(944)

Other

–

98

–

148

246

692

10,548

11,0694,421

26,730Goodwill
As of April 1, 2017
Acquisition

As of March 31, 2019

Other

Total

[Accumulated Amortization and Accumulated Impairment Loss](Millions of yen)
Relationships withcustomers

Brand andrelationships with
suppliers(29)(1,960)(785)(1,319)(4,093)

Amortization–(1,068)

(276)

(586)

(1,930)

Impairment loss

–

–

–

(3)

(3)

Decrease due to disposal
and change in the scope of
consolidation

–

448

–

547

995

Other

29

4

–

12

45

As of March 31, 2018–

(2,576)(1,061)(1,349)(4,986)

Amortization

–

(826)

(277)

(697)

(1,800)

Impairment loss

(171)

–

–

–

(171)

Decrease due to disposal
and change in the scope of
consolidation

–

405

–

349

754

Other

–

70

–

15

85

(171)

(2,927)(1,338)(1,682)(6,118)Goodwill
As of April 1, 2017

As of March 31, 201996

ENEX REPORT 2019

Other

Total

Goodwill

Relationships withcustomers

Brand andrelationships with
suppliers

Other

Total

As of March 31, 2018

692

8,101

10,0082,689

21,490

As of March 31, 2019

521

7,621

9,731

2,739

20,612Carrying amounts of finance lease assets (net of accumulated amortization and accumulated impairment loss)
included in intangible assets are shown below:(Millions of yen)
Software
As of March 31, 20182

As of March 31, 20191

The amortization expense of intangible assets is included in cost of sales and selling, general and administrative
expenses in the consolidated statement of comprehensive income.
Of the above intangible assets, significant assets are relationships with customers recognized in the businesscombination with TOKYO TOSHI SERVICE COMPANY (as of March 31, 2018: ¥3,222 million, and March 31, 2019:¥3,100 million) and brand and relationships with suppliers recognized in the business combination with Osaka Car
Life Group Co., Ltd. (as of March 31, 2018: ¥10,008 million, and March 31, 2019: ¥9,731 million). The remaining
amortization periods of these intangible assets as of March 31, 2018 and 2019, are 21 to 36 years and 20 to 35 years,
respectively, for relationships with customers, and 36 years and 35 years, respectively, for brand and relationships
with suppliers.
There were no intangible assets pledged as collateral as of March 31, 2018 and 2019.
Impairment Test for Goodwill
In performing an impairment test for goodwill, the Group allocates goodwill to the LPG sales business and the
Mobility Life Department and calculates the recoverable amount of the LPG sales business and the Mobility Life
Department, which are cash-generating units, based on value in use.
The Group calculates value in use by discounting estimated future cash flows based on the latest business plan
approved by the Board of Directors to the present value.
The Group uses a pre-tax discount rate reflecting the current market valuation of the time value of money, risks
inherent in the asset, and other factors as the discount rate (as of March 31, 2018: 3.6%, and March 31, 2019: 4.4%).
The Group considers that significant impairment is unlikely to arise in the cash-generating unit even if the discountrate used in the above impairment test changes within a reasonably predictable range.

ENEX REPORT 2019

97

16.

(2)

Leases(1)

Finance Leases

LesseeA.

Lessor
The total future minimum lease payments receivable under finance leases and the present value thereof as ofMarch 31, 2018 and 2019 are shown below:

Finance Leases
The total future minimum lease payments under finance leases and the present value thereof as of March 31,2018 and 2019 are shown below:(Millions of yen)

Present value of
total future minimum lease payments

Total future minimum lease payments
As ofMarch 31, 2018

As ofMarch 31, 2019

As ofMarch 31, 2018

As ofMarch 31, 2019

As ofMarch 31, 2018

As ofMarch 31, 2019

As ofMarch 31, 2018

As ofMarch 31, 2019

Not later than 1 year

486

587

472

571

Not later than 1 year

1,887

2,085

1,706

1,869

1,368

1,627

1,333

1,587

Later than 1 year and not later
than 5 years

Later than 1 year and not later
than 5 years

5,332

5,749

4,760

5,049

Later than 5 years

1,139

913

1,139

913

Later than 5 years

4,503

4,613

4,099

4,223

Total

2,993

3,126

2,944

3,071

Total

11,722

12,447

10,565

11,141

Less: Unearned financial income

(49)

(55)

Less: Accrued financial costs(1,157)(1,306)

Present value of total future
minimum lease payments

2,944

3,071

10,565

11,141

Present value of total future
minimum lease payments
receivable

The total of future minimum sublease payments expected to be received under noncancelable subleases as ofMarch 31, 2018 and 2019 were ¥676 million and ¥1,030 million, respectively.
Lease agreements do not have any contingent rent payable, renewal or purchase options, escalation clauses,
and restrictions imposed by the lease agreements (such as those concerning dividends, additional debt, andfurther leasing).
B.

17.
(1)

Deferred Taxes and Income Taxes
Deferred Taxes
The details of changes in deferred tax assets and liabilities are shown below:(Millions of yen)
As ofApril 1, 2017

Operating Leases
The total future minimum lease payments under noncancelable operating leases as of March 31, 2018 and2019 are shown below:

Amount recognizedin otherAmount recognizedcomprehensive
in profit or loss
incomeOther(Note)

As ofMarch 31, 2018

Not later than 1 year

1,807

948

Later than 1 year and not later than 5 years

3,720

4,130

Deferred tax assets:
Non-current assets
Securities
Post-employment benefits
Tax loss carryforwards
Other

Later than 5 years

1,874

1,090

Total deferred tax assets

16,791

(833)

(475)

644

16,127

7,401

6,168

Deferred tax liabilities:
Non-current assets
Other(6,722)
(671)

(337)
(80)

–
–

–
–

(7,059)(751)

Total deferred tax liabilities(7,393)

(417)

–

–

(7,810)As ofMarch 31, 2018

Total

(Millions of yen)
As ofMarch 31, 2019

As of March 31, 2018 and 2019, lease payments recognized as expenses under cancelable or noncancelable
operating leases were ¥12,453 million and ¥11,982 million, respectively.
Lease agreements do not have any contingent rent payable, renewal or purchase options, escalation clauses,
and restrictions imposed by the lease agreements (such as those concerning dividends, additional debt, andfurther leasing).

98

Present value of
total future minimum lease payments

Total future minimum lease payments(Millions of yen)

ENEX REPORT 2019

(Note)

7,920
139
3,006
287
5,439

(168)
291
(137)
(8)
(811)

–
(390)
(55)
–
(30)

329
–
217
–
98

8,081
40
3,031
279
4,696

The “Other” column represents the amount of deferred tax assets and deferred tax liabilities recognized due to acquisition ofsubsidiaries through business combinations and other amounts.

ENEX REPORT 201999

(Millions of yen)
As ofMarch 31, 2018

Amount recognizedin otherAmount recognizedcomprehensive
in profit or loss
incomeOther(Note)

Income Tax Expense
Current tax expense and the components of deferred tax expense are shown below:

As ofMarch 31, 2019

8,081
40
3,031
279
4,696

(786)
(86)
(258)
(11)
79

–
46
94
–
(10)

–
–
–
–
155

7,295
0
2,867
268
4,920

Total deferred tax assets

16,127(1,062)130

155

15,350

Deferred tax liabilities:
Non-current assets
Other(7,059)
(751)

1,176
(1,037)

–
–

–
(53)

(5,883)(1,841)

Total deferred tax liabilities(7,810)

139

–

(53)

(7,724)Current tax expense
Deferred tax expense
Recognition and reversal of temporary differences(5,080)
(865)

(923)

Total deferred tax expense

(865)

(923)

(5,945)(5,749)

Income tax expense

The reconciliation between the effective statutory tax rate and the effective tax rate for income tax expenses
recognized in the consolidated statement of comprehensive income is shown below:
Fiscal year ended
March 31, 2018

Deferred tax assets and liabilities in the consolidated statement of financial position are shown below:
As of March 31, 2018
10,502
2,185(Millions of yen)
As of March 31, 2019
9,913
2,287

In recognizing deferred tax assets, the Group assesses recoverability, taking into account expected future taxable
profits and tax planning. As a result of the assessment of recoverability, deferred tax assets have not beenrecognized for some deductible temporary differences and unused tax loss carryforwards.
Deductible temporary differences for which no deferred tax asset is recognized and unused tax loss carryforwards
are shown below:
As of March 31, 2018
Deductible temporary differences
Unused tax loss carryforwards
Total

2,299
1,955

4,715

4,254

The amounts of unused tax loss carryforwards for which deferred tax assets are not recognized by expiration are
shown below:

First year
Second year
Third year
Fourth year
Fifth year or later
Total

100

ENEX REPORT 2019

(Millions of yen)
As of March 31, 2019

–
–
–
49
2,450

–
–
–
–
1,955

2,499

1,955

Fiscal year ended
March 31, 2019

Effective statutory tax rate

30.9%

30.6%

Effect of expenses not deductible permanently
Other

1.3
(1.2)

1.4
(2.4)

Effective income tax rate after application of tax-effect accounting

31.0

29.6

18.

Bonds and Borrowings

The components of bonds and borrowings are shown below:(Millions of yen)

(Millions of yen)
As of March 31, 2019

2,216
2,499

As of March 31, 2018

(4,826)The Company is subject principally to corporate income taxes, inhabitant taxes, and business taxes. The effective
statutory tax rates based on these taxes were 30.9% for the fiscal year ended March 31, 2018, and 30.6% for the
fiscal year ended March 31, 2019. However, foreign subsidiaries are subject to income taxes and other taxes intheir respective locations.

The “Other” column represents the amount of deferred tax assets and deferred tax liabilities recognized due to acquisition ofsubsidiaries through business combinations and other amounts.

Deferred tax assets
Deferred tax liabilities(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018

Deferred tax assets:
Non-current assets
Securities
Post-employment benefits
Tax loss carryforwards
Other(Note)(2)

Average interest
rate(%)(Note 1)As ofMarch 31, 2018

As ofMarch 31, 2019

Short-term borrowings
Current portion of non-current borrowings
Current portion of bonds payable (Note 2)

10,317
2,115
–

4,022
2,195
5,000

1.108
1.220
(Note 2)

Non-current borrowings (excluding current portion)

15,302

12,912

1.655

Bonds payable (excluding current portion)(Note 2)

14,971

9,981(Note 2)42,705

34,110–12,43230,273

11,21722,89342,705

34,110

Total
Current liabilities
Non-current liabilities
Total(Notes)Repayment date–––
September 2020–
October 2037
(Note 2)–

1. The average interest rate is based on each agreed-upon interest rate or weighted-average interest rate for the closing balance.

ENEX REPORT 2019101

2. Summary of issuing conditions of bonds is shown below:(Millions of yen)
EntityBond

Date of issue

As ofMarch 31,
2018

As of
March 31,2019

Interest rate(%)

Collateral

Other Current Liabilities

The components of other current liabilities are shown below:

Maturity date
As of March 31, 2018

ITOCHU Enex
Co., Ltd.

Series 13
Unsecured Bonds

May 22, 2012

4,996

5,000

0.736

Unsecured

May 22, 2019

ITOCHU Enex
Co., Ltd.

Series 14
Unsecured Bonds

May 22, 2012

9,975

9,981

1.202

Unsecured

May 20, 2022––

14,971

14,981

–

–

–

Total

21.

Short-term obligations on employee benefits
Current provisions (Note)
Accrued expenses
Other
Total
(Note)

19.

22.
As of March 31, 2018

Trade payables
Notes payable
Other payables
Total(Millions of yen)
As of March 31, 2019

120,531
113
6,801

115,009
34
6,634

127,445

121,677

Other Financial Liabilities

The components of other current financial liabilities are shown below:
As of March 31, 2018
Lease obligations
Other payables (Non-operating)
Deposits received
Derivative liabilities
Other
Total

(Millions of yen)
As of March 31, 2019

1,706
2,178
2,371
1,447
837

1,869
2,596
3,064
303
73

8,539

7,905

7,471
9
2,800
1,540

12,28011,820For details of current provisions, please refer to Note 22, “Provisions”.

As of March 31, 2018
Long-term lease obligations
Guarantee deposits received
Derivative liabilities
Total

ENEX REPORT 2019

Provisions

The components of changes in provisions are shown below:(Millions of yen)
Provision for asset
retirement obligations

Other

Total

As of April 1, 2017
Increase during the year
Amount used during the year (utilization)
Increase due to passage of time
Other

5,083
212
(298)
95
(337)

6
2
(6)
–
42

5,089
214
(304)
95
(295)

As of March 31, 2018
Increase during the year
Amount used during the year (utilization)
Increase due to passage of time
Other

4,755
493
(208)
56
340

44
–
(2)
–
(7)

4,799
493
(210)
56
333

As of March 31, 2019

5,436

35

5,471

The components of provisions by current and non-current classification are shown below:
As of March 31, 2018

The components of other non-current financial liabilities are shown below:

102

7,378
42
3,000
1,860

Trade Payables

The components of trade payables are shown below:

20.

(Millions of yen)
As of March 31, 2019

(Millions of yen)
As of March 31, 2019

8,859
13,805671

9,273
13,622636

23,33523,531

Current liabilities (Note)
Non-current liabilities
Total(Note)(Millions of yen)
As of March 31, 2019

42
4,757

9
5,462

4,799

5,471

Provisions classified into current liabilities are included in other current liabilities.

Provision for asset retirement obligations mostly relates to restoration obligations for rental offices, buildings, andstores and removal of harmful materials related to non-current assets. An outflow of economic benefits in the future is
expected principally in a period after one year from the end of each fiscal year, but the timing may be affected by afuture business plan and other factors.

ENEX REPORT 2019

103

23.

Changes in fair value of plan assets are shown below:

Employee Benefits(1)

Post-Employment BenefitsA.

Outline of Post-Employment Benefit Plans Adopted
The Company and some subsidiaries have defined benefit retirement plans, lump-sum retirement benefits, anddefined contribution retirement pension plans, which cover almost all of their employees. The amount ofpension benefits provided under defined benefit retirement plans is set based on service years of eligible
employees. Extra retirement payments may be made upon an employee’s normal retirement or termination
before the prescribed retirement date.
Under defined contribution retirement plans, the responsibility of the Company and some subsidiaries is limited
to making contributions at the amount specified in the rules on retirement allowance that has been establishedfor each company.
Nissan Osaka Sales Co., Ltd., a subsidiary, has participated in “Zenkoku Nissan Jidosha Hambai Kigyo
Pension Fund”, which is a multi-employer plan. This plan differs from a single employer plan in the following
respects:- Assets contributed by the employer to the multi-employer plan may be used for benefits to employees of theother member employers. The amount of contributions is calculated by multiplying standard pay of plan
members by a fixed rate.
- If some employers suspend contributions, other member employers may be required to make additional
contributions for unfunded liabilities.
- If the multi-employer plan is wound up or a member employer withdraws from the multi-employer plan, themember employer may be required to make contributions for unfunded liabilities as special contributions inwinding up or withdrawal contributions.

B.

Balance at the beginning of the year

8,909

48

47

870
111
(340)

(491)
205
(720)

Balance at the end of the year

8,909

7,950

The Company and certain subsidiaries will make contributions of ¥229 million in the fiscal year ending March 31,
2020.
The effect of change in the asset ceiling is shown below:(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018
Balance at the beginning of the year

–

(493)

Change in the effect of limiting a net defined benefit asset to theasset ceiling

(493)

493

Balance at the end of the year

(493)

–

The composition of the Group’s plan assets by asset category as of March 31, 2018 and 2019 is shown below:(Millions of yen)
As of March 31, 2018
Level 1
(Active market)

Changes in present value of defined benefit obligations are shown below:
Fiscal year ended
March 31, 2018

(Millions of yen)
Fiscal year ended
March 31, 201917,73817,716

895
94

647
83

Service cost
Interest expense
Remeasurement
Changes in demographic assumptions
Changes in financial assumptions
Benefits paid
Effect of business combinations and disposals

172
39(1,340)
118

104
169
(1,236)–

Balance at the end of the year

17,716

17,483(Note)

8,220

Interest income
Remeasurement
Return on plan assets
Contributions by the employer
Benefits paid

Defined Benefit Retirement Plans

Balance at the beginning of the year

(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018

Cash and cash equivalents
Stock trusts
Bond trusts
General accounts
Other
Total

Service cost is recognized in profit or loss (cost of sales or selling, general and administrative expenses). Interests on
net amount of present value of defined benefit obligations and fair value of plan assets are recognized in profit or loss
(interest income or interest expense).

Level 2
(No active market)

Total

0
–
–
–
–

–
3,353
4,450
324
782

0
3,353
4,450
324
782

0

8,909

8,909
(Millions of yen)

As of March 31, 2019
Level 1
(Active market)
Cash and cash equivalents
Stock trusts
Bond trusts
General accounts
Other
Total

Level 2
(No active market)

Total

10
–
–
–
–

–
2,747
3,966
1
1,226

10
2,747
3,966
1
1,226

10

7,940

7,950

In managing plan assets, the Group aims to secure return on assets necessary to ensure payment of future
pension benefits in the long term only with acceptable risks. To this end, the Group formulates the optimal
portfolio in consideration of past performance in addition to projection of return on assets subject to investment,
and manages investment performance based on this portfolio.

104

ENEX REPORT 2019

ENEX REPORT 2019105

For assets classified into Level 1 (there is an active market), fair value is estimated based on quoted prices in
active markets. For assets classified into Level 2 (there is no active market), which mainly consist of investment
trusts in domestic and foreign stocks and bonds, fair value is estimated using valuations provided by the plantrustee. Additionally, as part of plan assets, there are general accounts that are composed of stocks and bonds
with quoted market prices in active markets. Other includes funds of hedge funds and real estate investment
trusts.

24.
(1)Common Stock, Capital Surplus, and Retained Earnings
Common Stock
The number of shares authorized, the number of shares issued, and the number of shares of treasury stock of theCompany are as follows.
All the shares issued by the Company are non-par value ordinary shares. All shares issued are fully paid.

Information on maturity analysis of defined benefit obligations is as follows:

Fiscal year ended
March 31, 2018

Defined benefit obligations are calculated by discounting the amount of benefits that are deemed to have been
incurred to date, over the remaining service period up to the time of payment. Because the timing of payment
affects the amounts of defined benefit obligations and service cost, International Accounting Standard 19,“Employee Benefits” requires an entity to disclose information on the timing of incurrence of benefits. The
Group believes that disclosure of weighted duration of defined benefit obligations that represents the average
period taking into account benefit amount, timing, and discount is useful information to meet this requirement.
The Company’s weighted duration of defined benefit obligations was 13 years in the fiscal year ended March 31,
2018, and 13 years in the fiscal year ended March 31, 2019.

Number of shares authorized
Number of shares issued
Balance at the beginning of the year

Fiscal year ended
March 31, 2018
Discount rate

0.5 – 0.6%

Fiscal year ended
March 31, 2019

In the assumption of actuarial calculation described above, the calculation for defined benefit retirement plans issusceptible to the effects of the assumption of discount rate. If the discount rate had changed by 0.25% as ofMarch 31, 2019, the effect on defined benefit obligations would be ¥400 million, which was calculated
supposing that only the discount rate changes without any change in actuarial assumptions other than the
discount rate.
Since this calculation is an estimation based on the assumptions, the actual calculation may be affected bychanges in other variables.
C.

Defined Contribution Plans
Expenses related to contributions required for defined contribution pension plans were ¥686 million and ¥663
million for the fiscal years ended March 31, 2018 and 2019, respectively.

D.

Extra Retirement Payments
The Company made extra retirement payments of ¥305 million and ¥79 million for the fiscal years ended March
31, 2018 and 2019, respectively.

(2)

Employee Benefits Expense
Total employee benefits expense included in cost of sales and selling, general and administrative expenses in the
consolidated statement of comprehensive income for the fiscal years ended March 31, 2018 and 2019 was¥45,442 million and ¥43,442 million, respectively.

(2)116,881,106

Increase (decrease) during the year
Balance at the end of the year

116,881,106

116,881,106

3,892,374
109,761
4,002,135


4,002,135
327
4,002,462(Note)

0.4 – 0.5%

387,250,000

116,881,106–

Number of shares of treasury stock
Balance at the beginning of the year
Increase during the year
Balance at the end of the year

The assumption of defined benefit obligations is shown below:

387,250,000(Shares)
Fiscal year ended
March 31, 2019

㸫The balance of the number of shares of treasury stock at the end of the fiscal year ended March 31, 2018 and 2019
includes 109,300 shares of the Company owned by the stock distribution trust for directors.

Capital Surplus and Retained Earnings
The Companies Act of Japan provides that upon payment of dividends of surplus, an amount equal to 10% of thereserves, which decrease due to the dividends paid, must be appropriated as capital reserve (in case of dividends
of capital surplus) or as retained earnings reserve (in case of dividends of retained earnings) until the total
aggregate amount of capital reserve and retained earnings reserve equals 25% of the common stock.
The Companies Act imposes a certain restriction on the amount available for distribution in association withdividends of surplus or acquisition of treasury stock. The amount available for distribution is determined based onretained earnings, among others, in the Company’s separate financial statements calculated in accordance withJapanese Generally Accepted Accounting Principles (“GAAP”). The Company’s amount available for distributionwas ¥65,451 million as of March 31, 2019 (however, this amount available for distribution may change due tosubsequent acquisition of treasury stock and other factors).
Under the Companies Act, in addition to year-end dividends, dividends of surplus can be paid at any time during
the fiscal year by resolution of the General Meeting of Shareholders. The Companies Act provides that companies
meeting certain requirements (setup of Audit & Supervisory Board of corporate auditors and appointment of an
accounting auditor in addition to the board of directors, and the term of office for directors limited to one year) may
determine dividends of surplus (excluding dividends in kind) by resolution of the board of directors if the articles ofincorporation specify so. The Companies Act also provides that companies with a board of directors may pay
dividends of surplus (only cash dividends) by resolution of the board of directors only once during a business year,
if the articles of incorporation specify so.
Moreover, companies are allowed to dispose of treasury stock by resolution of the board of directors, or acquire
treasury stock if the articles of incorporation specify so. However, acquisition of treasury stock is limited to theextent the above amount is available for distribution.

106

ENEX REPORT 2019

ENEX REPORT 2019

107

25.
(1)

(2)

Other Components of Equity and Other Comprehensive Income

The details of each item of other comprehensive income and their related tax effects (including non-controllinginterests) are shown below:

Other Components of Equity
Changes in each item of other components of equity are shown below:
Classification

Other Comprehensive Income(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018

Classification

FVTOCI financial assets
Balance at the beginning of the year
Increase (decrease) during the year
Reclassification to retained earnings

(487)
883
110

506
(160)
77

FVTOCI financial assets
Amount arising during the year

Balance at the end of the year

506

423

–
35
(35)

–
(94)
94

Remeasurement of net defined benefit liability
Amount arising during the year––

Remeasurement of net defined benefit liability
Balance at the beginning of the year
Increase (decrease) during the year
Reclassification to retained earnings
Balance at the end of the year
Exchange differences on translating foreign operations
Balance at the beginning of the year
Increase (decrease) during the year

Increase (decrease) during the year31
20

Balance at the end of the year
Cash flow hedges
Balance at the beginning of the year
Decrease during the year31

51

(1,404)(278)(1,682)(198)

Balance at the end of the year

(1,682)(1,880)(1,655)435
75(1,145)(432)
171

Balance at the end of the year

(1,145)(1,406)

Tax effects

Net of tax
effects

Before tax
effects

Tax effects

Net of tax
effects

1,282

(390)

892

(154)

46

(108)

1,282

(390)

892

(154)

46

(108)

160

(55)

105

(269)

94

(175)

160

(55)

105

(269)

94

(175)

Exchange differences on translating foreign
operations
Amount arising during the year

(38)

–

(38)

(10)

–

(10)

(38)

–

(38)

(10)

–

(10)

(30)
134

8
(38)

(22)
96

(89)
124

25
(35)

(64)
89

104

(30)

74

35

(10)

25

(630)
102

–
–

(630)
102

(377)
130

–
–

(377)
130

(528)

–

(528)

(247)

–

(247)

980

(475)

505

(645)

130

(515)

Cash flow hedges
Amount arising during the year
Reclassification adjustments to profit
Decrease during the year

Other components of equity
Balance at the beginning of the year
Increase (decrease) during the year
Reclassification to retained earnings

Before tax
effects

Increase (decrease) during the year

Decrease during the year
236
(205)

(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018

Other comprehensive income of investments
accounted for by the equity method
Amount arising during the year
Reclassification adjustments to profit
Decrease during the year
Total other comprehensive income

26.

Dividends

The Company pays an interim dividend and year-end dividend annually, with the former determined by the Board of
Directors and the latter by the General Meeting of Shareholders.
Dividends paid for the fiscal years ended March 31, 2018 and 2019 are shown below:
For the fiscal year ended March 31, 2018
(1)

108

ENEX REPORT 2019

Dividends Paid
Resolution

Class ofsharesTotal dividends(Millions of yen)

Dividends per
share
(Yen)

Record date

Effective dateOrdinary General Meeting of
Shareholders held on June 21,
2017

Ordinaryshares

2,090

18.5

March 31, 2017

June 22, 2017

Board of Directors’ meeting heldon October 31, 2017

Ordinaryshares1,808

16September 30, 2017

December 4, 2017

ENEX REPORT 2019

109

(2)

risks of changes in market conditions, and interest rate and exchange fluctuations, but does not enter into suchtransactions for speculative purposes.

Dividends Whose Record Date Is in the Current Fiscal Year, But Whose Effective Date Falls in the next
Fiscal Year
Resolution

Class ofsharesOrdinary General Meeting of
Shareholders held on June 20,
2018

OrdinarysharesTotal dividends(Millions of
yen)
2,712

(3)

Source ofdividends

Dividends per
share
(Yen)

Record date

Effective date

Retainedearnings

24

March 31, 2018

June 21, 2018

The Group grants credit to many customers in various trading transactions and bears credit risks.
In line with the rules on credit management, the Group manages due dates and balances of trade receivables andloans by business partner, and pursues early identification or reduction of uncollectible receivables due todeteriorated financial conditions. The Group is not overly exposed to credit risks by concentration on a specificcounterparty.

For the fiscal year ended March 31, 2019(1)

Credit Risk Management

In utilizing derivatives, since the Group has transactions only with exchange members or banks with good credit
standing, the Group believes there to be few credit risks.

Dividends Paid
Resolution

Class ofsharesTotal dividends(Millions of yen)

Dividends per
share
(Yen)

Record date

Effective dateOrdinary General Meeting of
Shareholders held on June 20,
2018

Ordinaryshares2,712

24March 31, 2018

June 21, 2018

Board of Directors’ meeting heldon October 31, 2018

Ordinaryshares2,260

20September 30, 2018

December 4, 2018

When collateral held and other credit enhancements are not taken into account, the Group’s maximum exposure
to credit risks is the carrying amount after impairment of financial assets presented in the consolidated financial
statements.
Collateral held as security is mainly real estate and business security deposits.
The carrying amounts of financial assets for which loss allowances are recognized are as follows.
(Millions of yen)

(2)

Dividends Whose Record Date Is in the Current Fiscal Year, But Whose Effective Date Falls in the next
Fiscal Year
Resolution

Class ofsharesOrdinary General Meeting of
Shareholders held on June 19,
2019

Ordinaryshares27.
(1)

Total dividends(Millions of
yen)
2,486

Source ofdividends

Dividends per
share
(Yen)

Record date

Effective date

Retainedearnings

22

March 31, 2019

June 20, 2019



As of March 31, 2018
As of March 31, 2019

Financial assetsthat are notcredit-impaired

Credit-impaired
financial assets

58,157
57,799

319
289

1,439
1,267

Capital Management(2)

Financial Risk Management Policy
In the course of management activities, the Group is exposed to financial risks (such as credit risks, liquidity risks,currency risks, interest rate risks, and market price risks) and performs risk management in accordance withcertain policies to avoid or reduce these risks.
In accordance with the Group’s policy, its fund management is limited to short-term deposits, etc., and the Groupdepends on bank loans, among others, for raising funds. The Group utilizes derivatives for the purpose of hedging

110

ENEX REPORT 2019

Total

169,301
154,275(Millions of yen)

The Group conducts capital management to continue sustainable growth and maximize corporate value.

There is no significant capital restriction that applies to the Company (excluding general provisions of theCompanies Act and other laws and regulations).

Trade
receivables, etc.
(excluding creditimpaired
receivables)
109,387
94,921The Group recognizes loss allowances after considering the recoverability of financial assets based on the
counterparty’s credit standing. Changes in loss allowances during the fiscal year ended March 31, 2019 are as
follows.

Financial Instruments

To achieve sustainable growth, the Group recognizes that it is essential to secure sufficient financing capacity tomake agile investment in businesses when an opportunity for such investments for business growth (such as
acquisition of external resources) arises in the future. Therefore, the Group aims to ensure financial health andflexibility for future investment in businesses and maintain the capital structure with balanced return andinvestment.

Measured at an amount equivalent to the lifetime
expected credit losses

Measured at an
amountequivalent to the
12-month
expected credit
losses

As of March 31, 2018
Increase during the year
Decrease during the year
(Utilization)
Decrease during the year
(Reversal)
Other increase
As of March 31, 2019

Measured at an amount equivalent to the lifetime
expected credit losses

Measured at an
amountequivalent to the
12-month
expected credit
lossesFinancial assetsthat are notcredit-impaired

Credit-impaired
financial assets

24
22

228
1

750
62

Trade
receivables, etc.
(excluding creditimpaired
receivables)
67
57

(2)

–

(15)

(7)

(24)

(18)

(38)

(104)

(52)

(212)

–
26

–
191

7
700

–
65

7
982

Total

1,069
142

In the fiscal year ended March 31, 2019, there were no significant changes in the carrying amounts of financial
assets that would have a material impact on loss allowances.

ENEX REPORT 2019

111

(4)

Liquidity Risk Management

B.

The Group manages liquidity risks by formulating a funding plan based on the annual business plan, and by
conducting periodic assessment and collection of information on situations of liquidity in hand and interest-bearing
debts and timely monitoring of cash flows. Through these means, the Group strives to ensure agility in financing to
respond to changes in the financial situation and reduce funding costs while diversifying funding sources andfinancing methods.
A.

Derivative Financial Liabilities
The results of liquidity analysis of derivatives are shown below:(Millions of yen)

As of March 31, 2018
Interest rate derivatives
Currency derivatives
Commodity derivatives

Non-Derivative Financial Liabilities
Carrying amounts of non-derivative financial liabilities by maturity are shown below:
As of March 31, 2018

Total
(Millions of yen)

Carrying amountContractual cashflows

Not later than
1 yearLater than 1 year
and not later than
5 years

Trade payables
Short-term bonds andborrowings
Short-term borrowings
Current portion of
non-current borrowings
Non-current bonds andborrowings
Non-current
borrowings
Bonds payable

127,445

127,445

127,445––

10,317

10,317

10,317

–

–

2,115

2,115

2,115

–

–

15,302

15,433

–

8,985

6,448

14,971

15,000–15,000–

Total

170,150

170,310

139,877

23,985

6,448

As of March 31, 2019
Interest rate derivatives
Currency derivatives
Commodity derivatives

Later than
5 years

As of March 31, 2019

Total

(5)

Not later than
1 yearLater than 1 year
and not later than
5 years

Later than 5 years

–
127
1,320

–
–
–

671
–
–

671
127
1,320

1,447

–

671

2,118

–
17
286

–
–
–

636
–
–

636
17
286

303

–

636

939

Total

Market Risk Management
The Group is exposed to market risks arising from fluctuations in foreign exchange rates, interest rates, commodity
markets, and equity prices. As per its policy, the Group minimizes risks arising from fluctuations in foreignexchange rates, interest rates, and other factors by building a management structure through establishment ofbalance limits, using various derivatives and others.
For execution and management of derivative transactions, in accordance with the internal rules that provide
transaction authority, limit amounts, etc., departments engaged in such transactions rigorously manage and reporton the transactions conducted according to their authority. In addition, a system of effective internal checking has
been developed by setting up a transaction control department.

(Millions of yen)
Carrying amountContractual cashflows

Not later than
1 yearLater than 1 year
and not later than
5 years

Trade payables
Short-term bonds andborrowings
Short-term borrowings
Current portion ofbonds payable
Current portion of
non-current borrowings
Non-current bonds andborrowings
Non-current
borrowings
Bonds payable

121,677

121,677

121,677

–

–

4,022
5,000

4,022
5,000

4,022
5,000

–
–

–
–

2,195

2,195

2,195

–

–

12,912

13,031

–

8,143

4,888

9,981

10,000–10,000–Total

155,787

155,925

132,894

18,143

4,888

Market risks that the Group assumes are shown below:

Later than
5 years••••

Currency risks
Interest rate risks
Commodity price risks
Price risks of equity instruments

A.

Currency Risk Management
Because the Group is engaged in import and export transactions, which are exposed to exchange fluctuation
risks for transactions denominated in foreign currencies, the Group strives to reduce such exchange fluctuation
risks through hedging transactions utilizing derivatives, including forward foreign exchange contracts.
The Group’s exposure to currency risks (net amount) as of March 31, 2018 and 2019 is shown below:
Short-term foreign exchange balance(Millions of yen)[Thousands of U.S. dollars]

As of March 31, 2018(89)[(840)]Longt-term foreign exchange balance(Millions of yen)[Thousands of U.S. dollars]–[–](Notes)112

ENEX REPORT 2019

As of March 31, 2019(118)[(1,059)]–[–]

1. The foreign exchange balance is the amount in foreign currencies for which exchange fluctuation risks are nothedged with forward foreign exchange contracts, etc., in terms of receivables and payables in foreign currencies inimport and export transactions and firm commitments in foreign currencies. The foreign exchange balance that is due

ENEX REPORT 2019113

for settlement within one year is classified as short-term foreign exchange balance, while the foreign exchangebalance that is due for settlement due after one year is classified as long-term foreign exchange balance, if any.
2. Positive figures represent a receivable position, while negative figures (figures in parentheses), if any, represent apayable position.

Commodity Price Sensitivity Analysis
The table below shows the Group’s sensitivity analysis to fluctuations of quoted prices of crude oil andpetroleum products.
The sensitivity analysis presents the effects on profit before tax in the consolidated statement ofcomprehensive income of a 1% increase in crude oil prices. This analysis assumes that other variablefactors remain constant.

Foreign Currency Sensitivity Analysis
Foreign currency sensitivity analysis shows the effect on profit before tax in the Group’s consolidated
statement of comprehensive income of 1% appreciation of the Japanese yen to the Company’s short-termand long-term foreign exchange balances as of the end of each fiscal year. However, this analysis assumes
that other variable factors (such as balances and interest rates) remain constant.

B.

Profit before tax(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018
Profit before tax
U.S. dollar

Fiscal year ended
March 31, 2018

1

D.

Interest Rate Risk Management

The Group’s sensitivity analysis of risks of fluctuations in prices of equity instruments is as follows. Thissensitivity shows the effects on other comprehensive income (before tax effects) of a 10% decrease in pricesof listed stocks as of the end of each fiscal year. The sensitivity assumes that other variable factors remain
constant.

The table below shows the effect on the Group’s profit before tax of gains or losses arising from instruments
affected by interest rate fluctuations, if the interest rate increases 1% in the fiscal years ended March 31,2018 and 2019. This analysis is calculated by multiplying the net balance of floating-rate financial
instruments held by the Group as of March 31, 2018 and 2019, by 1% with no future changes in thebalances, effects of foreign exchange fluctuations, effect of diversified timing of rollover, and repricing ofvariable-rate borrowings taken into account. The analysis assumes that all other variables remain constant.

Profit before tax

C.

(90)

(17)

Commodity Price Risk Management
The Group principally deals with petroleum products and is exposed to commodity price risks arising fromfluctuations in crude oil prices, quoted prices of petroleum products, and other prices. The Group strives toreduce commodity price risks using derivatives (such as commodity futures contracts and commodity swaps) as
hedging instruments to commodity price risks caused by price fluctuation.

Management of Price Risks of Equity Instruments

Sensitivity Analysis of Equity Instruments to Price Risks

Interest Rate Sensitivity Analysis(Millions of yen)
Fiscal year ended
March 31, 2019126

The Group has no equity instruments held for short-term trading purposes and does not actively trade theseinvestments.

The Group is exposed to interest rate fluctuation risks in raising and managing funds accompanying investment
activities and operating transactions. In addition, fixed-rate debt obligations are exposed to risks of fluctuations
in fair value due to fluctuations in interest rates. The Group works to quantify interest rate risks to appropriately
control volatility in profit or loss due to interest rate fluctuations. Specifically, the Group strives to reduce interest
rate risks by conducting hedging transactions through interest rate swaps.

Fiscal year ended
March 31, 201887

The Group holds shares of third parties with which the Group has business relationships for the purpose ofsmoothly implementing its business strategy, and is exposed to risks of fluctuations in prices of equity
instruments. The Group periodically assesses current market prices and financial conditions of issuers andcontinuously reviews its holding.

1

In calculation of sensitivity, interest-bearing debts with a variable interest condition, interest-bearing debts
that have a fixed interest condition but actually have a variable interest condition through interest rate swaps,
and cash and cash equivalents are deemed as instruments affected by interest rate fluctuations.

(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018
Other comprehensive income(6)(Millions of yen)
Fiscal year ended
March 31, 2019

(255)

(255)

Fair Value of Financial Instruments
A.

Method of Fair Value Measurement
Fair values of major financial assets and financial liabilities are determined as follows. In measurement of fairvalue of financial instruments, market prices are used when available. For financial instruments of which market
prices are unavailable, the fair value is measured by discounting future cash flows or by other appropriate
valuation methods.
Cash and cash equivalents
The fair value approximates the carrying amount because the remaining period to maturity is short.
Trade receivables, trade payables, and other current financial assets (deposits paid)
The fair value approximates the carrying amount because it is settled in a short time.
Other current financial assets (securities) and other investments
The fair value of marketable securities is based on quoted prices on the stock exchange. The fair value of
non-marketable securities is principally measured by the net asset approach, whereby the fair value iscalculated by referring to the fair values of assets and liabilities held by the investee company.

114

ENEX REPORT 2019

ENEX REPORT 2019115

Non-current financial assets other than investments (non-current loans receivable) and other current financial
assets (current portion of non-current loans receivable)

Financial assets and financial liabilities recognized at fair value in the consolidated statement of financial
position that are classified into levels in the fair value hierarchy are shown below:(Millions of yen)

The fair value of non-current loans receivable is measured by discounting future cash flows using interest
rates offered for loans or credit with the same remaining maturities and the same terms to borrowers or
customers with similar credit ratings.
Other current financial assets (derivatives), other current financial liabilities (derivatives), and other non-current
financial liabilities (derivatives)
The fair value of a derivative is measured based on the market price, the price presented by counterparty
financial institutions, etc.
Bonds and borrowings
Except for cases where the carrying amount is virtually equal to the fair value, fair value of bonds andborrowings is measured by discounting future cash flows using interest rates offered for borrowings with thesame remaining maturities and terms.
B.

Financial Instruments Measured at Amortized Cost
Fair values of financial instruments measured at amortized cost are shown below:(Millions of yen)
As of March 31, 2019

As of March 31, 2018
Carrying amountFinancial assets measured at amortized cost:Non-current financial assets other than investments(non-current loans receivable) and other current
financial assets (current portion of non-current loans
receivable)
Financial liabilities measured at amortized cost:
Bonds and borrowings

C.

Fair value

Carrying amount

Level 2

Level 3

Total

–

–

–

–

–
2,554

–
–

289
563

289
3,117

27
2,581

1,543
1,543

–
852

1,570
4,976

203

1,244

–

1,447

–

671

–

671

203

1,915

–

2,118

Liabilities:
Other current financial liabilities (derivatives)
Derivatives not designated as hedges
Other non-current financial liabilities(derivatives)
Derivatives designated as hedges
Total(Millions of yen)
As of March 31, 2019408

42,705413

43,733

1,232

34,1101,233

35,142

Hierarchy of Fair Value Measurement Recognized in the Consolidated Statement of Financial Position

The following shows levels in the fair value hierarchy:
Level 1— Quoted prices in active markets for identical assets or liabilities
Level 2— Inputs other than quoted market prices that are observable for the asset or liability, either
directly or indirectly
Level 3— Unobservable inputs for the asset or liability
The level in the fair value hierarchy used for fair value measurement is determined based on the lowest level
input that is significant to the fair value measurement.
Transfers between levels in the fair value hierarchy are recognized on the date on which an event or change inthe situation resulting in the transfers arises.

ENEX REPORT 2019

Level 1
Assets:Other current financial assets (securities)
FVTPL financial assets
Other investments
FVTPL financial assets
FVTOCI financial assets
Other current financial assets (derivatives)
Derivatives not designated as hedges
Total

Fair value

IFRS 7, “Financial Instruments: Disclosure”, requires an entity to classify fair value measurements using the fairvalue hierarchy reflecting significance of inputs used for measurement of fair value.

116

As of March 31, 2018

Level 1
Assets:Other current financial assets (securities)
FVTPL financial assets
Other investments
FVTPL financial assets
FVTOCI financial assets
Other current financial assets (derivatives)
Derivatives not designated as hedges
Total
Liabilities:
Other current financial liabilities (derivatives)
Derivatives not designated as hedges
Other non-current financial liabilities(derivatives)
Derivatives designated as hedges
Total

Level 2

Level 3

Total

–

–

–

–

–
2,551

–
–

1,044
591

1,044
3,142

10
2,561

214
214

–
1,635

224
4,410

25

278

–

303

–

636

–

636

25

914

–

939

There were no transfers between Level 1, Level 2, and Level 3 in the fiscal years ended March 31, 2018 and2019.

ENEX REPORT 2019117

2018 and 2019 are shown below:

The components of changes in financial instruments classified into Level 3 of fair value hierarchy are shown
below:(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018
FVTPL

FVTOCIFVTPL

FVTOCI

Balance at the beginning of the year

269

586

289

563

Total gains or losses (realized/unrealized)
Other comprehensive income
Purchase
Sale
Redemption/other

–
271
–
(251)

13
–
–
(36)

–
–
–
755

10
49
(1)
(30)

Balance at the end of the year

289

563

1,044

591

Gains or losses recognized in other comprehensive income in the consolidated statement of comprehensive
income are presented as “FVTOCI financial assets”. There were no gains or losses recognized in profit.

(Millions of yen)
Fiscal year ended March 31, 2018
Fair value at date of sale
5,418

C.

Dividends Received

Investments derecognized during the year
Investments held at the end of the year
Total

296

The fair values of major FVTOCI financial instruments are shown below:
As of March 31, 2018
(Millions of yen)Amount

MAEDA ROAD CONSTRUCTION Co., Ltd.
JXTG Holdings, Inc.
KOHNAN SHOJI CO., LTD.
Tonami Holdings Co., Ltd.
HACHI-BAN CO., LTD.

1,286
500
206
156
126

As of March 31, 2019
(Millions of yen)
Stock
MAEDA ROAD CONSTRUCTION Co., Ltd.
JXTG Holdings, Inc.
KOHNAN SHOJI CO., LTD.
Enex Infrastructure Investment Corporation.
Tonami Holdings Co., Ltd.

B.

66

Derivatives and Hedges
A cash flow hedge is a hedge of the exposure to variability in future cash flows arising in association with theforecasted transactions or already recognized assets or liabilities. Changes in fair value of derivatives
designated as a cash flow hedge are recognized in other comprehensive income. This accounting treatment
continues until changes in future cash flows arising in association with the unrecognized forecasted
transactions or already recognized assets or liabilities that are designated as a hedged item are recognized ingains or losses. The ineffective portion of the hedge is recognized in profit or loss.

Fair Value of FVTOCI Financial Instruments

Stock(Millions of yen)
Fiscal year ended
March 31, 2019
264

Cash flow hedges

The Group classifies all equity instruments other than those accounted for by the equity method as FVTOCI
financial instruments. These equity instruments are held for the purpose of maintaining and strengthening
business relationships with investees.
A.

Accumulated gains (losses)(68)

Fiscal year ended
March 31, 2018
211
85

(8)

FVTOCI Financial Assets

Fair value at date of sale64

Accumulated gains or losses (net of taxes) in other comprehensive income that were transferred to retained
earnings as a result of the above are negative ¥110 million and negative ¥77 million for the fiscal years ended
March 31, 2018 and 2019, respectively.

For financial instruments classified into Level 3, no significant increase or decrease in the fair value is expected
if one or more of the unobservable inputs are changed to reasonably possible alternative assumptions.
(7)

Accumulated gains (losses)(160)

Fiscal year ended March 31, 2019

Amount
1,285
395
223
201
156

In accordance with its policy, the Group has a floating rate position for long-term funds raised to satisfy fundmanagement. These floating rate positions are hedged as the Group enters into interest rate swaps to hedge
the risks of fluctuations in cash flows arising from future changes in interest rates. The interest rate swaps aredesignated as cash flow hedges.
In applying hedge accounting, as a general rule, the Group tries to match notional amounts, periods (maturities)
and fundamental figures of interest rates of hedging instruments and hedged items to maintain theeffectiveness of hedging relationships over the hedge period. Hedge effectiveness also continues to beassessed after the application of hedge accounting. If an ineffective portion arises, the Group analyzes thecause for the ineffective portion. In the fiscal years ended March 31, 2018 and 2019, the amounts included in
profit or loss in association with the ineffective portion of hedging and the portion excluded from the assessmentof hedge effectiveness were not significant.
As of March 31, 2019, the notional amount balance for interest rate swaps as hedging instruments was ¥8,870
million, and the period when the cash flows are expected to occur and when they are expected to affect profit orloss is 13 years. The average of interest rates hedged with the interest rate swaps is 1.8%.

Derecognition of FVTOCI Financial Assets
Some FVTOCI financial assets were sold or disposed of due to review of business relationships with investees,
etc. FVTOCI financial assets derecognized due to sale or disposal during the fiscal years ended March 31,

118

ENEX REPORT 2019

ENEX REPORT 2019119As of March 31, 2018 and 2019, effects of hedging instruments designated as hedges on the Group’s
consolidated statement of financial position are as follows:(Millions of yen)For financial assets and financial liabilities recognized for the same counterparties, the components of amounts
offset and not offset in the consolidated statement of financial position by type of financial instruments as of March
31, 2018 and 2019 are shown below:

As of March 31, 2018
Notional
amountCarrying amount
Derivative assets

Line item in the
consolidated statement offinancial position

Derivative
liabilities

Change in fair value usedas the basis for recognitionof the ineffective portion

As of March 31, 2018
(Millions of yen)
Total amountof financial
assetsTotal amountof financial
liabilities
offsetNet amount offinancial assets
presented in the
consolidated
statement offinancial position

Financial assets:
Trade receivables

8,521

2,143

6,378

2,929

–

3,449

Total

8,521

2,143

6,378

2,929

–

3,449

Total amountof financial
liabilities

Total amountof financial
assets offset

Net amount offinancial liabilities
presented in the
consolidated
statement offinancial position

Amount offinancialliabilities that
do not meetrequirementsfor offsetting

Amount ofcollateralprovided

Net amount

6,933

2,143

4,790

2,929

–

1,861

6,933

2,143

4,790

2,929

–

1,861

Total amountof financial
assetsTotal amountof financial
liabilities
offsetNet amount offinancial assets
presented in the
consolidated
statement offinancial position

Amount offinancialassets that do
not meetrequirementsfor offsetting

Amount ofcollateral
received

Net amountFinancial assets:
Trade receivables

3,648

621

3,027

2,915

–

112

Total

3,648

621

3,027

2,915

–

112

Total amountof financial
liabilities

Total amountof financial
assets offset

Net amount offinancial liabilities
presented in the
consolidated
statement offinancial position

Amount offinancialliabilities that
do not meetrequirementsfor offsetting

Amount ofcollateralprovided

Net amount

4,401

621

3,780

2,915

–

865

4,401

621

3,780

2,915

–

865

Cash flow hedges
Interest rate risks
Interest rate swaps

9,735

–

671

Other non-current financial
liabilities–(Millions of yen)
As of March 31, 2019
Notional
amountCarrying amount
Derivative assets

Line item in the
consolidated statement offinancial position

Derivative
liabilities

Change in fair value usedas the basis for recognitionof the ineffective portion

Interest rate risks
8,870

–

636

Other non-current financial
liabilities–

As of March 31, 2018 and 2019, effects of hedged items designated as hedges on the Group’s consolidated
statement of financial position are as follows:(Millions of yen)
As of March 31, 2018
Change in fair value used as the basis forrecognition of the ineffective portion

Financial liabilities:
Trade payables
Total(Millions of yen)

Balance recorded as other components of equity

–

(483)

(Millions of yen)
As of March 31, 2019
Change in fair value used as the basis forrecognition of the ineffective portion(Millions of yen)

Balance recorded as other components of equity

Cash flow hedges
Interest rate risks
Borrowing at a floating
rate

(9)

–

(458)

Offsetting of Financial Assets and Financial Liabilities
Some financial assets and financial liabilities are offset and the net amount is presented in the consolidated
statement of financial position since the Group has a legally enforceable right to set off the recognized amounts
and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

120

ENEX REPORT 2019

Net amount

As of March 31, 2019

Cash flow hedges
Interest rate risks
Borrowing at a floatingrate

Amount ofcollateral
received(Millions of yen)

Cash flow hedges
Interest rate swaps

Amount offinancialassets that do
not meetrequirementsfor offsetting

Financial liabilities:
Trade payables
Total

ENEX REPORT 2019

121

28.

Revenue(3) Transaction Price Allocated to Remaining Performance Obligations(1) Disaggregation of Revenue

The Group has no individual transactions with contract terms in excess of one year. Therefore, the Group applies apractical expedient that provides an exemption from disclosure of information regarding remaining performanceobligations. The Group’s contracts with customers have no significant consideration that is not included in thetransaction price.

The disaggregation of revenue recognized from contracts with external customers is as follows.
Fiscal year ended March 31, 2019
(Millions of yen)(4) Assets Recognized from the Costs to Obtain or Fulfill Contracts with Customers

Total

The Group has no assets recognized from the costs to obtain or fulfill contracts with customers. The Group applies apractical expedient that permits the incremental costs of obtaining a contract to be expensed as incurred if theamortization period of the asset would be one year or less.

Reportable segments
Home-Life

Revenue from sales ofmerchandise
Other
Revenue recognized fromcontracts with customers
Revenue recognized fromother sources
Total(Note)

Life &
Industrial
EnergyPower &
Utility

Mobility Life

92,542

700,385

93,35486,079972,360

1,466

5,256

105

25,411

32,23894,008705,641

93,459111,490

1,004,598

342

2,020

0

126

2,488

94,350707,661

93,459111,616

1,007,086

29.

The components of selling, general and administrative expenses are shown below:
Fiscal year ended
March 31, 2018
Personnel expense
Rent expense
Depreciation and amortization
Commission fee
Traveling expense
Taxes and dues
Other

Revenue recognized from other sources includes lease income based on IAS 17 and profit and loss on derivativetransactions based on IFRS 9.

(2) Contract Balances
The balances of receivables from contracts with customers, contract assets, and contract liabilities at the beginningand end of the period are as follows.
Fiscal year ended
March 31, 2018
Receivables from contracts with customers
Contract assets
Contract liabilities

107,043–
10,587(Millions of yen)
Fiscal year ended
March 31, 201992,317–
9,659

Selling, General and Administrative Expenses

Total

30.

(Millions of yen)
Fiscal year ended
March 31, 2019(36,766)(9,546)(5,492)(6,861)(1,459)(1,577)(9,230)(34,558)(9,035)(4,865)(6,798)(1,582)(1,577)(8,903)(70,931)(67,318)

Profit or Loss from Tangible Assets, Intangible Assets, and Goodwill

The components of profit or loss from tangible assets, intangible assets, and goodwill are shown below:
Fiscal year ended
March 31, 2018
Gain on sales
Loss on sales
Loss on disposal
Impairment loss
Other

Contract liabilities are mainly related to advances received from customers. The amount of revenues recognized in
the fiscal year ended March 31, 2019 that was included in the balance of contract liabilities at the beginning of the
fiscal year is ¥10,587 million. The decrease in the balance of contract liabilities in the fiscal year ended March 31,
2019 is primarily the result of satisfaction of performance obligations. The amount of revenue recognized in the fiscal
year ended March 31, 2019 from performance obligations satisfied (or partially satisfied) in past fiscal years was not
significant.

Total(Note)

31.

(Millions of yen)
Fiscal year ended
March 31, 2019

985
(374)
(718)
(1,429)
(8)

976
(113)
(458)
(638)
(8)

(1,544)(241)

For impairment loss of non-current assets, please refer to Note 31, “Impairment Loss”.

Impairment Loss

The components of impairment loss are as follows.
Impairment loss was recognized in loss from tangible assets, intangible assets, and goodwill in the consolidated
statement of comprehensive income.

122

ENEX REPORT 2019

ENEX REPORT 2019123

Fiscal year ended
March 31, 2018
Property, plant and equipment
Buildings and structures
Machinery, equipment and vehicles
Land
Other
Intangible assets
Goodwill
Other
Investment property
Other
Total

(Millions of yen)
Fiscal year ended
March 31, 2019

(529)
(143)
(52)
(272)

(133)
(67)
(83)
(43)

–
(3)
(397)
(33)

(171)
–
(134)
(7)

(1,429)

(638)

33.

The components of financial income and financial costs are shown below:
Fiscal year ended
March 31, 2018
Interest income
Financial assets measured at amortized cost
Other

71
12

Subtotal

92

83

296

66

Subtotal

296

66

(863)
(87)

(838)
(68)

Subtotal

(950)

(906)

(241)

755

Subtotal

(241)

755

Total

(803)

(2)

Interest expense
Financial liabilities measured at amortized cost
Other
Other financial income (costs)
FVTPL financial assets

In the fiscal years ended March 31, 2018 and 2019, there was no individually significant impairment loss.
Major impairment losses in the fiscal years ended March 31, 2018 and 2019 are on property, plant and equipment
belonging to the Life & Industrial Energy Division. These impairment losses were incurred due to reduction of thecarrying amount of the assets to the recoverable amount, as a result of decreased profitability caused by changes inthe business environment and other factors.
34.

(Millions of yen)
Fiscal year ended
March 31, 201982
10

Dividends received
FVTOCI financial assets

Items of the Group’s property, plant and equipment are grouped in the smallest unit for which independent cash flows
can be identified.

The recoverable amount of these assets was measured based on fair value less costs of disposal.

Financial Income and Costs

Earnings per Share

Basic earnings per share for the fiscal years ended March 31, 2018 and 2019 were calculated as follows:
32.

Other Profit or Loss

Fiscal year ended
March 31, 2018

The components of other – net of other income and expenses are shown below:
Fiscal year ended
March 31, 2018
Insurance claim income
Commission fee
Compensation income for expropriation
Compensation income received
Foreign exchange gain (Note)
Other

–
194
367
269
–
1,176

1,147
130
–
45
194
817

2,006

2,333

–
(31)
(1,169)

(531)
(1)
(601)

Total expenses(1,200)(1,133)

Total

806

1,200

Total income
Loss on disaster
Foreign exchange losses (Note)
Other(Note)

124(Millions of yen)
Fiscal year ended
March 31, 2019

Net profit attributable to Itochu Enex’s shareholders(Millions of yen)
Weighted-average number of ordinary shares outstanding(Thousands of shares)
Basic earnings per share attributable to Itochu Enex’s shareholders(Yen)(Note)

Fiscal year ended
March 31, 201911,025

11,559112,921112,879

97.63

102.40

Diluted earnings per share attributable to Itochu Enex’s shareholders are not presented because there were no potentiallydilutive shares.

Gain or loss on valuation of foreign currency derivatives is included in foreign exchange gain or loss. In addition to the above,in the fiscal years ended March 31, 2018 and 2019, net gain or loss on valuation of commodity-related derivatives wasrecognized at ¥246 million and negative ¥332 million, respectively, in revenue and cost of sales.

ENEX REPORT 2019

ENEX REPORT 2019

125

35.

Cash Flow Information

Fiscal year ended
March 31, 2018

Supplementary information about cash flows is shown below.
(1)Components of assets at time of acquisition of control
Current assets
Non-current assets
Components of liabilities at time of acquisition of control
Current liabilities
Non-current liabilities

Changes in Liabilities Arising from Financing Activities
Changes in liabilities arising from financing activities are shown below:
As of March 31, 2018
(Millions of yen)
Liabilities held tohedge noncurrent
borrowings

Short-termborrowings

Non-current
borrowings(Note)

Balance as of April 1, 2017

1,667

24,392

14,961

10,696776

Cash flows from financing activities

7,323(7,041)–(1,574)–

Change occurring due to acquisition ofcontrol of subsidiaries

1,360

164

–

–

–

Change occurring due to loss of control ofsubsidiaries

–

(110)

–

(420)

–

Foreign exchange translation differences

(33)

–

–

–

–

Change in fair value

–

–

–

–

(105)

Interest expense

–

12

10

–

–

Increase in new contracts
Balance as of March 31, 2018
(Note)

Bonds payable(Note)

Lease
obligations(Note)

–

–

–

1,863

–

17,417

14,971

10,565

671

Consideration paid
Cash and cash equivalents included in assets at time of acquisition ofcontrol(3)

10,317

17,417

14,971

10,565

671

Cash flows from financing activities(6,311)(2,321)–(1,642)–

Change occurring due to acquisition ofcontrol of subsidiaries

26

–

–

–

–

Foreign exchange translation differences

(10)

–

–

–

–

Lease
obligations(Note)

Change in fair value

–

–

–

–

(34)

Interest expense

–

11

10

–

–

Increase in new contracts

–

–

–

2,218

–

4,022

15,107

14,981

11,141

637(Note)(2)Components of assets at time of loss of control
Current assets
Non-current assets
Components of liabilities at time of loss of control
Current liabilities
Non-current liabilities(Millions of yen)
Liabilities held tohedge noncurrent
borrowings

Balance as of April 1, 2018

Balance as of March 31, 2019

(6)

645

28

(3,751)

22

The major components of assets and liabilities related to companies that ceased to be subsidiaries following theshare exchange at the time of loss of control and cash and cash equivalents in the assets at the time of loss ofcontrol are shown below:

As of March 31, 2019Non-current
borrowings(Note)

The amounts include current portion of non-current borrowings, current portion of bonds payable, and current portion of leaseliabilities.

Acquisition of Subsidiaries

273
33(Millions of yen)
Fiscal year ended
March 31, 2019

(4,396)

Fiscal year ended
March 31, 2018

Short-termborrowings

58
267

Loss of Control of Subsidiaries

The amounts include current portion of non-current borrowings and current portion of lease liabilities.

Bonds payable(Note)(3,082)(937)
Fiscal year ended
March 31, 2018

Net proceeds (payment) from acquisition of subsidiaries

10,317

2,808
4,587

(Millions of yen)
Fiscal year ended
March 31, 2019

5,105
11,721––(8,134)(1,195)––

Fiscal year ended
March 31, 2018
Cash and cash equivalents included in assets at time of loss of control

36.

(Millions of yen)
Fiscal year ended
March 31, 2019

(598)

(Millions of yen)
Fiscal year ended
March 31, 2019–

Non-Cash Transactions

Significant Non-Cash Transactions
The amount of assets acquired under finance leases is ¥2,415 million and ¥2,386 million for the fiscal years ended
March 31, 2018 and 2019, respectively.

The major components of assets and liabilities related to companies that newly became subsidiaries at the time ofacquisition of control and reconciliation between consideration paid and net payment from the acquisition are
shown below:

126

ENEX REPORT 2019

ENEX REPORT 2019

127

37.

38.

Related Parties(1)

The Company’s parent is ITOCHU Corporation, which is located in Japan.

Compensation for Key Management Personnel

The status of major subsidiaries as of March 31, 2019 is shown below:

Compensation for key management personnel of the Group is shown below:(Millions of yen)
Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018
Short-term compensation
Share-based payment
Total

(2)

351
3

335
3

354

338

In the fiscal year ended March 31, 2019, there were no individual subsidiaries with material non-controlling interests.
Company name

ITOCHU ENEX HOME-LIFE HOKKAIDO CO., LTD.

Transactions with the parent, associates, and other companies owned by the parent and the balance ofreceivables from and payables to them are shown below:(Millions of yen)
Relationship with related party

Transaction
amountUnsettled balance

Associate

N-REIF1 Investment Limited Partnership

Investments in investment limited
partnerships

5,216

–

Subsidiary ofparent

ITOCHU Treasury Corporation

Cash transactions

7,000

20,000100.0

ITOCHU ENEX HOME-LIFE TOHOKU CO., LTD.

Miyagino-ku, Sendai City, Miyagi

100.0

ITOCHU ENEX HOME-LIFE NISHI-NIHON CO., LTD.

Naka-ku, Hiroshima City, Hiroshima

100.0

ECORE CO., LTD.

Hakata-ku, Fukuoka City, Fukuoka

51.0

Itochu Industrial Gas Co., Ltd.

Chiyoda-ku, Tokyo

100.0

ENEX FLEET CO., LTD.

Yodogawa-ku, Osaka City, Osaka

100.0

KOKURA ENTERPRISE ENERGY CO., LTD.

Kokurakita-ku, Kitakyushu City,
Fukuoka

100.0

KYUSHU ENERGY CO., LTD.

Oita City, Oita

75.0

Chiyoda-ku, Tokyo

60.0

Enex Electric Power Co., Ltd.

Chiyoda-ku, Tokyo

100.0

TOKYO TOSHI SERVICE COMPANY

Chuo-ku, Tokyo

66.6

ENEX LIFE SERVICE CO., LTD.

Chiyoda-ku, Tokyo

100.0

Nishi-ku, Osaka City, Osaka

52.0

Oji-Itochu Enex power retailing Co., Ltd.

Mobility Life Department(Millions of yen)Name

Chuo-ku, Sapporo City, Hokkaido

Power & Utility Division

For the fiscal year ended March 31, 2019
Category

Percentage of voting
rights owned(%)

Life & Industrial Energy Division

For the fiscal year ended March 31, 2018
Name

LocationHome-Life Division

Transactions with the Parent, Associates, and Other Companies Owned by the Parent

Category

Parent, Subsidiaries, and Associates

Relationship with related party

Associate

N-REIF1 Investment Limited Partnership

Investments in investment limited
partnerships

Subsidiary ofparent

ITOCHU Treasury Corporation

Cash transactions

Transaction
amountOsaka Car Life Group Co., Ltd.
36 other companies

Unsettled balance

2,308

–

–

20,00039.

Commitments

Contractual commitments for acquisition of property, plant and equipment are shown below:
As of March 31, 2018

There is no balance of collateral and guarantee transactions, and no allowance for credit losses was recognized
for the receivables from associates and other companies owned by the parent.

Acquisition of property, plant and equipment
Total

40.

(Millions of yen)
As of March 31, 201912,766

9,755

12,766

9,755

Contingent Liabilities

The Group provides various forms of guarantees for general business partners. When a guaranteed entity defaults,
payment obligations are assumed by the Group. The Group’s total amount and actual amount of guarantees provided
for general business partners as of March 31, 2018 and 2019 are as follows:
The total amount of guarantees is the total amount of maximum payment limits under guarantee contracts withguaranteed entities and the maximum amount at which payment obligations may arise to the Group. The actual
amount of guarantees is based on the total amount of debts recognized by guaranteed entities within the maximum
payment limits, and is the amount that is deemed as the amount of actual risks taken after deduction of re-guarantees
given by a third party to the Group, etc.

128

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ENEX REPORT 2019129

As of March 31, 2018

(Millions of yen)
As of March 31, 2019

Financial guarantees
Total amount of guarantees
Actual amount of guarantees
Guarantees for other transactions (Note)
Total amount of guarantees
Actual amount of guarantees

–
–

5,395
26

184
135

110
96

Total
Total amount of guarantees
Actual amount of guarantees

184
135

5,505
122

(Note)

Financial guarantees include guarantees on loan receivables to associates. Guarantees for other transactions include
guarantees on operating transactions and guarantees on the balance of leasing agreements.

For guarantees provided by the Group for general business partners, those with the longest guarantee period will
expire on March 31, 2025.
Currently there is no litigation, arbitration, or other legal proceedings that may have a significant impact on theGroup’s financial position or operating results. However, the Group gives no guarantee that there is no possibility thatsuch significant lawsuits or other legal proceedings may be filed with regard to the Group’s operating activities inJapan and overseas in the future that may have a negative impact on the Group’s financial position and operating
results.
41.

Collateral

The components of assets pledged as collateral and their corresponding debts are shown below:
As of March 31, 2018
Assets pledged as collateral
Trade receivables
Investments accounted for by the equity method
Other investments
Non-current financial assets other than investments
Property, plant and equipment
Total
Corresponding debts
Short-term bonds and borrowings
Trade payables
Non-current bonds and borrowings
Total(Millions of yen)
As of March 31, 2019

95
2,312
16
1,469
12,535

115
2,326
17
1,307
11,547

16,427

15,312

967
257
8,852


904
331
7,773

10,076

9,008

In addition to the above, other investments pledged as substitute for brokerage margin payments for commodity
futures transactions as of March 31, 2018 and 2019 were ¥1,772 million and ¥1,668 million, respectively.
42.

Events after the Reporting Period

No items to report.

130

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ENEX REPORT 2019131

Company Information(As of March 31, 2019)

Stock Information

Corporate Overview (As of March 31, 2019)

Shares and Shareholders
Authorized shares
Shares issued and outstanding
Shareholders
Shares per trading unit...........................................................................................................

.....................................................

................................................................................................................................

.......................................................................................

387,250 thousand
116,881 thousand
8,509
100

General Meeting of Shareholders
Ordinary general meeting of shareholders Annually in June
For ordinary general meeting of shareholders: March 31 of each year
Basis dates
For year-end dividends: March 31 of each year
For interim dividends: September 30 of each year
Shareholder registry administrator
Stock Transfer Agency Business Planning Dept., Sumitomo Mitsui Trust Bank, Ltd.

Company nameItochu Enex Co., Ltd.

Head office address

3-2-5, Kasumigaseki, Chiyoda-ku,
Tokyo 100-6028, Japan

Established

January 28, 1961

Paid-in capital¥19,877.67 million

Main sites

Kita-Nihon, Higashi-Nihon,
Chubu, Kansai, Chushikoku,
Kyushu.....

........................................................................................................................................

.......................................

Organization Chart (As of August 1, 2019)
General Meeting of
Shareholders

Board of Directors

Audit & Supervisory
Board
Audit & Supervisory
Board Members
CFO

President

CCO
CIO(Other sales sites are located across Japan.)

Subsidiaries

49

Affiliates (equity method applied) 21
Number of employees

Itochu Enex Home-Life Hokkaido Co., Ltd.

Home-Life Division
Planning & Administration
Department

Itochu Enex Home-Life Tohoku Co., Ltd.

Industrial Gas
Department

Itochu Enex Home-Life Nishi-Nihon Co., Ltd.

Security System
Department

Itochu Enex Home-Life Shikoku Co., Ltd.

Administration
Department

641 (non-consolidated basis, including 186
seconded to subsidiaries)

Principal Shareholders

Shareholding Ratio by Owner

Name

SharesStake(thousand)(%)

ITOCHU Corporation

60,978

53.97

Japan Trustee Services Bank, Ltd.
(trust account)

5,326

4.71

The Master Trust Bank of Japan, Ltd.
(trust account)

4,538

4.02

Enex Fund

3,040

2.69

Financial instruments broker

10.49%
Individual

JXTG Holdings, Inc.

2,010

1.78

15.75%

Nippon Life Insurance Company

1,542

1.36

Itochu Enex Employee Shareholding
Association

1,115

0.99

MAEDA ROAD CONSTRUCTION
Co., Ltd.

957

0.85

Tokyo (first section; stock name: ENEX)

Securities code

8133

PT. ITC Enex Indonesia
Life & Industrial
Energy Division

Main financial institutions Sumitomo Mitsui Trust Bank, Ltd.;
Sumitomo Mitsui Banking Corp.;
Resona Bank, Ltd.;
Mizuho Bank, Ltd.;MUFG Bank, Ltd.

Planning & Administration
Department

Enex Fleet Co., Ltd.
Enexauto Co., Ltd.

Hokkaido Branch
Tohoku Branch
Shutoken Branch

Enex Petroleum Sales Higashi-Nihon Co. Ltd.

Kita-kanto Branch
Shinetsu Branch
Chubu Branch

1.81

1.41

56.48%

Foreign

2,041

1,588

Other domestic

0.48%

Japan Trustee Services Bank, Ltd.
(trust account 9)

GOVERNMENT OF NORWAY

Itochu Industrial Gas Co., Ltd.

5,619 (consolidated basis)
Stock exchange listing

Ecore Co., Ltd.
Enearc Co., Ltd.

Hokuriku Branch
Kansai BranchMore detailed company information is available via our website.
https://www.itcenex.com/english/

Chugoku Branch

Enex Petroleum Sales Nishi-Nihon Co., Ltd.

Shikoku Branch
Kyushu BranchBanking

Kyushu Energy Co., Ltd.

Okinawa Branch

16.80%

Supply Department
Asphalt Department
Marine Fuels Department
International Supply &Logistics Department

Kokura Enterprise Energy Co., Ltd.

Environmental Business
Department

Note: Excluding treasury stock (3,893 thousand shares)$XWRPRELOH%XVLQHVV2IƓFH

Osaka Car Life Group Co., Ltd.

Administration Department

Share Price (Selected as a constituent of the FY2019 JPX-Nikkei Mid and Small Cap Index.)

Visit our website to view TV commercials. (Japanese Only)
https://www.itcenex.com/corporate/commercial/

150%

Power &
Utility Division

Planning & Administration
Department
Power & Supply
Management Department

120%

Enex Electric Power Co., Ltd.
Tokyo Toshi Service Co., Ltd.
Enex Life Service Co., Ltd.

Power Sales Department

Oji-Itochu Enex Power Retailing Co., Ltd.

Power & Financial
Business Department

Enex Asset Management Co., Ltd.

Administration Department
Corporate Administration
Division

Finance & General
Accounting Department
Legal & Credit
Control Department

90%

Human Resources &General Affairs Department
IT Planning Department
Itochu Enex

Corporate Planning
Department
Audit Department

60%
April 1,
2015

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ENEX REPORT 2019

April 1,
2016

April 1,2017

April 1,2018

April 1,2019

ENEX REPORT 2019133