COMPANY RESEARCH AND ANALYSIS REPORT

Itochu Enex Co., Ltd.
8133
Tokyo Stock Exchange First Section

12-Oct.-2017
FISCO Ltd. Analyst

Hiroyuki Asakawa

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Posted all-time high results in 1Q FY3/18, exhibited healthy progress.........................................................

01

2. Carrying out measures from the “Moving 2018” two-year medium-term business plan that lay
the groundwork for growth in the future .....................................................................................................

01

3. Rising expectations to beat FY3/18 forecast, though the cautious stance of remainingat period-start targets for the time being is reasonable. ..............................................................................

01■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 02
1. Review of 1Q FY3/18 results. . ......................................................................................................................

02

2. Home-Life Division. . ............................... ......................................................................................................

04

3. Power & Utility Division.......................... ......................................................................................................

06

4. Life Energy & Logistics Division............. ......................................................................................................

08

5. Industrial Energy & Logistics Division. . ... ......................................................................................................

10■Progress with the medium-term business plan---------------------------------------------------------------------------- 11
1. Overview of the new medium-term business plan Moving 2018. .................................................................

11

2. Major progress in 1Q FY3/18.......................................................................................................................

14■Business outlook-------------------------------------------------------------------------------------------------------------------------------------------------------- 17■Shareholder returns ----------------------------------------------------------------------------------------------------------------------------------------------- 18■Information security------------------------------------------------------------------------------------------------------------------------------------------------ 19

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/██Summary
Reported very upbeat results in 1Q FY3/18, making healthy progress
toward FY3/18 targets and with measures from the medium-termbusiness plan
Itochu Enex Co., Ltd. <8133> (hereafter, also “the Company”) is an energy trade company that is playing a pivotal
role in the energy field for the ITOCHU Corp. <8001> group. It has a broad business scope, though mainly sells
petroleum products and liquefied petroleum (LP; propane) gas to users ranging from industrial businesses to final
consumers. Its presence is also growing in electricity sales in recent years.
1. Posted all-time high results in 1Q FY3/18, exhibited healthy progress
Itochu Enex reported sharply higher profit on higher sales in 1Q FY3/18, with ¥245,395mn in sales (+10.5% YoY)and ¥4,664mn in profit from operating activities (+100.4%). Key trends were significant improvement in income
from the Life Energy & Logistics Division (former Car-Life Division) on success with longtime efforts to enhance
management efficiency amid overall stability in fuel oil prices and healthy profit advances in the Power & Utility
Division and Home-Life Division. Itochu Enex posted all-time highs as 1Q in gross profit and following profit items.
2. Carrying out measures from the “Moving 2018” two-year medium-term business plan that lay thegroundwork for growth in the future
In the “Moving 2018: Connecting to the future” two-year medium-term business plan covering FY3/18-19, Itochu
Enex positions the two years as laying the groundwork for future growth. Activities thus far have confirmed steady
implementation of growth measures and investments (some are planned), including the announcement of businessintegration with Osaka Gas Co., Ltd. <9532> in LP gas sales, which is one of Itochu Enex’s core areas, ramp-up ofagent sales and launch of a new thermal-fired power plant in the electricity business, and operation of facilities for
GINZA SIX in the heat supply business.
3. Rising expectations to beat FY3/18 forecast, though the cautious stance of remaining at period-starttargets for the time being is reasonable
Itochu Enex is sustaining period-start FY3/18 forecast of ¥1,150,000mn in sales (+11.8% YoY) and ¥16,500mn in
profit from operating activities (-16.2%). While some observers might expect upside in FY3/18 results after 1Q, werecommend a cautious approach because 1Q has the smallest quarterly weight of the year for Itochu Enex and 1Q
advantages might disappear if earnings weaken from 2Q. We agree with a cautious stance for the time being on thebasis that precision in the full-year outlook should improve considerably at the 2Q announcement.
Key Points
Laying the groundwork in FY3/18-19 for next-generation growth; rebuilding the income base and revamping theorganizational framework• Making healthy progress in building a growth foundation in each business segment, such as business integration
for LP gas sales and entry into agent sales for electricity• Maintained period-start FY3/18 forecast but a cautious stance despite a rise in upside expectations isreasonable•

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.

12-Oct.-2017

8133 Tokyo Stock Exchange First Section

http://www.itcenex.com/english/ir/

Summary㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻿㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻼㼞㼛㼒㼕㼠㻌㼒㼞㼛㼙㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼍㼏㼠㼕㼢㼕㼠㼕㼑㼟㻌㻔㼞㼕㼓㼔㼠㻕㻝㻥㻘㻢㻣㻤

㻝㻘㻢㻜㻜㻘㻜㻜㻜㻔¥㼙㼚㻕㻞㻜㻘㻜㻜㻜

㻝㻢㻘㻟㻤㻠
㻝㻘㻞㻜㻜㻘㻜㻜㻜㻝㻢㻘㻡㻜㻜
㻝㻡㻘㻜㻜㻜

㻝㻟㻘㻝㻜㻜

㻝㻝㻘㻤㻣㻡
㻤㻜㻜㻘㻜㻜㻜

㻝㻘㻡㻜㻢㻘㻢㻜㻢㻝㻜㻘㻜㻜㻜

㻝㻘㻟㻣㻟㻘㻟㻥㻟㻝㻘㻜㻣㻝㻘㻢㻞㻥㻝㻘㻜㻞㻤㻘㻥㻟㻥㻝㻘㻝㻡㻜㻘㻜㻜㻜㻠㻜㻜㻘㻜㻜㻜

㻡㻘㻜㻜㻜

㻜

㻜
㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company's financial results██Results trends
Posted all-time high earnings in 1Q FY3/18
1. Review of 1Q FY3/18 results
The Company reported 1Q FY3/18 results with ¥245,395mn in sales (up 10.5% YoY), ¥172,458mn in revenue (up15.9%), ¥4,664mn in profit from operating activities (up 100.4%), ¥4,591mn in profit before tax (up 97.6%), and¥2,523mn in net profit attributable to the Company’s shareholders (up 134.3%). The Company achieved considerable
profit growth on sales increase, and gross profit and the profit items following it were all-time highs for 1Q.
While it is not possible to offer comparison with 1Q targets because Itochu Enex only discloses a full-year forecast,progress rates in 1Q were at 21.3% in sales and 28.3% in profit from operating activities. The latter rate is morethan twice the previous fiscal year. We think the 1Q FY3/18 results were very robust considering the seasonality of
Itochu Enex’s income (its results are skewed toward 2H).

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Results trends

Review of 1Q FY3/18 results(¥mn)
FY3/17

FY3/18Progress rate
vs. forecast

Full year (E)

10.5%

21.3%

1,150,000

15.9%

-

-

21,998

7.3%--

74,697

17,738

-2.3%

-

-

11.8%

19,6784,664

100.4%

28.3%

16,500

2,324

12.0%

19,344

4,591

97.6%

25.8%

17,800

1,077

10.4%

10,4052,523

134.3%

24.3%

10,400

1Q results

Progress rate

Full year

1Q results

Sales

222,091

21.6%

1,028,939

245,395

Revenue

148,808

21.4%

695,060

172,458

Gross profit

20,49221.9%

93,604

SG&A expenses

18,161

24.3%

Profit from operating activities

2,328

Profit before tax
Net profit attributable to theCompany’s shareholders

YoY

Source: Prepared by FISCO from the Company's financial results

In 1Q, business conditions remained generally upbeat for Itochu Enex with continuation of economic growth inJapan as seen in corporate earnings and employment conditions as well as stable crude oil pricing (Dubai monthly
average) at around $50 per barrel. While Itochu Enex had been carrying out reforms for some time aimed at attaining¥10bn in net profit attributable to the Company’s shareholders, these reforms finally paid off in FY3/17. We believe
the upbeat 1Q FY3/18 results can be explained as a combination of profitability resilience cultivated through thisprocess and upbeat business conditions.
Itochu Enex started the Moving 2018 two-year medium-term business plan with FY3/18 as the first fiscal year andis pursuing restructuring of the income base and revamping of the organizational foundation. It positions the twoyears (FY3/18-19) as a period of laying the groundwork for future growth. Conservative earnings targets stand out
in this medium-term plan. While it would be difficult to give a favorable assessment if upbeat results occurred due
to delaying in such efforts (investments), Itochu Enex took steady actions in 1Q FY3/18. Some specific examples
are expansion of heat supply business and an arrangement to integrate the LP gas sales business with Osaka Gas.
Itochu Enex achieved double-digit earnings growth (YoY) in three segments (besides the Industrial Energy & Logistics
Division) out of its four business segments. In particular, the Life Energy & Logistics Division generated an extra¥2,012mn in profit from operating activities (YoY) and contributed about 90% of the ¥2,336mn overall profit increase.
The Power & Utility Division delivered a ¥614mn YoY profit increase and provided an addition of over 25% to thetotal gain.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Results trends

Segment details are described below.
Breakdown of results by business segment(¥mn)

Home-Life Division

Revenue

YoY

21,70414.1%

11,481

15,30933.3%

Life Energy & Logistics Division

105,982

119,08112.4%

Industrial Energy & Logistics Division

13,30918,336

37.8%

Revenue before adjustment

149,786

174,430

16.5%

-978

-1,972-

148,808

172,458

15.9%

Total revenue

646

785

21.6%

Power & Utility Division

1,301

1,915

47.2%

Life Energy & Logistics Division

-271

1,741

-

Industrial Energy & Logistics Division

394

-56

-

2,070

4,385

111.8%

Home-Life Division

Profit from operating activities before adjustment

258

279

8.1%

2,328

4,664

100.4%

Home-Life Division

361

406

12.4%

Power & Utility Division

652

931

42.7%

Life Energy & Logistics Division

-376

1,013

-

Industrial Energy & Logistics Division

306

-12

-

Net profit attributable to the Company’s shareholders before adjustment

943

2,338

147.9%

Adjustment
Total profit from operating activities

Net profit
attributable to
the Company’s
shareholders

1Q results

19,014

Power & Utility Division

Adjustment

Profit fromoperatingactivities

FY3/181Q FY3/17
results

Adjustment
Net profit attributable to the Company’s shareholders

134

185

38.1%

1,077

2,523

134.3%

Source: Prepared by FISCO from the Company's financial results

LP gas sales volume rose YoY and supported a profit increase
Electricity sales and equipment sales made healthy progress too
2. Home-Life Division
The Home-Life Division booked higher sales and profits in 1Q FY3/18 with ¥21,704mn in revenue (+14.1% YoY) and¥785mn in profit from operating activities (+21.6%). While LP gas margin narrowed because of decline in the priceat period-end (vs. the period-start level), electricity and equipment sales businesses and other areas were upbeat
and boosted segment profit.

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.

12-Oct.-2017

8133 Tokyo Stock Exchange First Section

http://www.itcenex.com/english/ir/

Results trends㻝㻽㻌㼞㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻌㼕㼚㻌㼠㼔㼑㻌㻴㼛㼙㼑㻙㻸㼕㼒㼑㻌㻰㼕㼢㼕㼟㼕㼛㼚㻔¥㼙㼚㻕㻟㻞㻘㻜㻜㻜

㻿㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻼㼞㼛㼒㼕㼠㻌㼒㼞㼛㼙㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼍㼏㼠㼕㼢㼕㼠㼕㼑㼟㻌㻔㼞㼕㼓㼔㼠㻕
㻣㻤㻡

㻣㻡㻟
㻢㻠㻢

㻞㻤㻘㻜㻜㻜

㻤㻜㻜
㻣㻜㻜

㻡㻤㻠
㻞㻠㻘㻜㻜㻜

㻢㻜㻜㻞㻜㻘㻜㻜㻜

㻡㻜㻜㻟㻤㻟㻝㻢㻘㻜㻜㻜
㻝㻞㻘㻜㻜㻜

㻠㻜㻜㻞㻣㻘㻞㻝㻝
㻞㻟㻘㻢㻡㻝

㻞㻜㻘㻝㻟㻢

㻞㻣㻘㻟㻡㻥

㻤㻘㻜㻜㻜㻞㻞㻘㻤㻤㻤

㻟㻜㻜
㻞㻜㻜

㻠㻘㻜㻜㻜

㻝㻜㻜

㻜

㻜
㻝㻽㻌㻲㼅㻟㻛㻝㻠㻝㻽㻌㻲㼅㻟㻛㻝㻡㻝㻽㻌㻲㼅㻟㻛㻝㻢㻝㻽㻌㻲㼅㻟㻛㻝㻣㻝㻽㻌㻲㼅㻟㻛㻝㻤

Source: Prepared by FISCO from the Company's financial resultsThe Home-Life Division’s core business is selling LP gas (propane gas). Itochu Enex procures LP gas from Japan
Gas Energy Corporation (it owns a 20% stake in this company) and sells LP gas to about 350,000 households
through direct-sales subsidiaries. It also sells LP gas on a wholesale basis to about 1,900 distributors (LP gas sales
outlets) and covers about 1.08mn households nationwide on a combined basis. Another important target market
is automotive gas. Itochu Enex sells LP gas used in taxis that consume this fuel. Automotive gas sales account for
about 15-20% of the Company’s overall LP sales, and this is an important market.
The LP gas business had higher customer numbers than a year earlier in 1Q FY3/18, thanks to the rise in direct
sales customers during FY3/17, and this boosted sales volume (YoY) as well. For pricing, meanwhile, the averagecontract price (CP; import price denominated in US dollars) during the period was $400 per ton, exceeding theprevious year’s $325, but the average price dropped from $450 at end-March (period-start) to $385 at end-June(period-end) in 1Q.
The contract price, which is notified by top exporter Saudi Arabia, is the global benchmark price for LP gas. Whilethe contract price corresponds to raw material costs for Japan’s LP gas operators, including Itochu Enex, the raw
materials cost adjustment program absorbs fluctuations and supports a certain amount of spread. This is the mostimportant characteristic of the income structure in the LP gas business. While the average price and sales volume
influence revenue in the LP gas business, profit largely depends on sales volume because spread is supported ata certain level.
Profit increased in 1Q owing to the rise in sales volume as mentioned above. However, operators (such as Itochu
Enex) have LP gas inventories and this means that price change from period-start to period-end affects earnings.
Decline in the average price at period-end (compared to period-start) in 1Q, as mentioned above, created a negative
inventory impact (putting downward pressure on profit) and reduced the profit increase margin.

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.

12-Oct.-2017

8133 Tokyo Stock Exchange First Section

http://www.itcenex.com/english/ir/

Results trends㻯㼛㼚㼠㼞㼍㼏㼠㻌㼜㼞㼕㼏㼑㻌㼍㼚㼐㻌㻯㻵㻲㻌㼠㼞㼑㼚㼐㻌㼒㼛㼞㻌㻸㻼㻌㼓㼍㼟㻔㻐㻛㼠㼛㼚㻕

㻯㻼㻌㼜㼞㼛㼜㼍㼚㼑㻌㻔㼘㼑㼒㼠㻕㻔¥㻛㼠㼛㼚㻕

㻯㻵㻲㻌㼏㼛㼙㼜㼞㼑㼔㼑㼚㼟㼕㼢㼑㻌㼢㼍㼘㼡㼑㻌㻔㼞㼕㼓㼔㼠㻕㻢㻜㻜㻤㻜㻘㻜㻜㻜

㻡㻜㻜㻣㻜㻘㻜㻜㻜

㻠㻞㻜

㻶㼡㼘㼥

㻹㼍㼥

㻹㼍㼞㼏㼔

㻝㻣㻙㻶㼍㼚

㻺㼛㼢㼑㼙㼎㼑㼞

㻝㻢㻙㻶㼍㼚

㻿㼑㼜㼠㼑㼙㼎㼑㼞㻞㻜㻘㻜㻜㻜

㻶㼡㼘㼥

㻜

㻹㼍㼥

㻟㻜㻘㻜㻜㻜

㻹㼍㼞㼏㼔㻝㻜㻜㻺㼛㼢㼑㼙㼎㼑㼞

㻠㻣㻘㻠㻥㻟 㻠㻜㻘㻜㻜㻜㻿㼑㼜㼠㼑㼙㼎㼑㼞

㻞㻜㻜

㻶㼡㼘㼥

㻡㻜㻘㻜㻜㻜

㻹㼍㼥

㻟㻜㻜

㻹㼍㼞㼏㼔

㻢㻜㻘㻜㻜㻜

㻶㼍㼚㼡㼍㼞㼥㻙㻝㻡㻠㻜㻜

Source: Compiled by FISCO from trade statistics of the Ministry of FinanceIn the electricity business, power handled by the Power & Utility Division is sold to LP gas customer households.
Itochu Enex conducts package discount sales of LP gas, the main product in the Home-Life Division, and electricity
as its sales strategy, and this activity is a major strength. It added about 4,000 household customers during 1Q,
putting total number at 36,000 households at the end of 1Q. The plan targets 70,000 households as total volume
at the end of FY3/18 for a net increase of 36,000 households over the year. This works out to more than 9,000
households per quarter. While the 1Q result is lower than this level, we do not see reason for concern because 1Q
has the smallest quarterly weight for Itochu Enex. We think the 1Q shortfall can be sufficiently covered by the otherthree quarters.
Overseas businesses in the Home-Life Division are industrial gas sales in Indonesia (through local-entity PT. ITC ENEXINDONESIA) and LP gas sales in the Philippines (it owns a stake and participates in operation of Isla Petroleum &Gas Corporation). These businesses are both steadily growing their customer bases and are targeting continuationof expansion paths.

Steep increases in retail and wholesale electricity sales volumes
drove sharply higher sales and earnings
3. Power & Utility Division
The Power & Utility Division reported sharply higher sales and profits in 1Q FY3/18 at ¥15,309mn in revenue (+33.3%
YoY) and ¥1,915mn in profit from operating activities (+47.2%). Retail electricity sales volume to household andcorporate customers grew steadily, and wholesale electricity sales increased as well. Heat supply business expanded
supply destinations too. This segment significantly raised its overall income.

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.

12-Oct.-2017

8133 Tokyo Stock Exchange First Section

http://www.itcenex.com/english/ir/

Results trends㻝㻽㻌㼞㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻌㼕㼚㻌㼠㼔㼑㻌㻼㼛㼣㼑㼞㻌㻒㻌㼁㼠㼕㼘㼕㼠㼥㻌㻰㼕㼢㼕㼟㼕㼛㼚㻿㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻝㻡㻘㻜㻜㻜

㻼㼞㼛㼒㼕㼠㻌㼒㼞㼛㼙㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼍㼏㼠㼕㼢㼕㼠㼕㼑㼟㻌㻔㼞㼕㼓㼔㼠㻕㻝㻘㻥㻝㻡㻝㻞㻘㻜㻜㻜

㻞㻘㻜㻜㻜
㻝㻘㻢㻜㻜

㻝㻘㻞㻞㻣
㻥㻘㻜㻜㻜

㻔¥㼙㼚㻕

㻝㻘㻟㻜㻝
㻝㻘㻝㻡㻜
㻝㻘㻞㻜㻜

㻥㻟㻤
㻝㻠㻘㻢㻣㻜

㻢㻘㻜㻜㻜㻤㻜㻜㻝㻝㻘㻥㻣㻟
㻤㻘㻞㻥㻣

㻥㻘㻞㻞㻜

㻝㻜㻘㻝㻣㻥

㻟㻘㻜㻜㻜

㻠㻜㻜

㻜

㻜
㻝㻽㻌㻲㼅㻟㻛㻝㻠㻝㻽㻌㻲㼅㻟㻛㻝㻡㻝㻽㻌㻲㼅㻟㻛㻝㻢㻝㻽㻌㻲㼅㻟㻛㻝㻣㻝㻽㻌㻲㼅㻟㻛㻝㻤

Source: Prepared by FISCO from the Company's financial results

In the power generation business, total power output was lower than in the previous year due to the sale of somewind power facilities in FY3/17 and scheduled maintenance impact. Net profit, however, exceeded the previous
year with a boost from one-time profit (insurance payment income) in 1Q.
Electricity sales consist of retail and wholesale areas. For retail, Itochu Enex sells electricity through a balancing
group (BG) that it leads. BG members are its LP gas sales subsidiaries and two external companies (Tottori Citizen
Electricity Co., Ltd. and Todok Electricity Co., Ltd.). These entities leverage strong sales bases in their respective
regions in selling electricity to ordinary households and small businesses. Itochu Enex is also steadily increasing sales
by reinforcing collaboration with other segments and companies outside of the BG scheme too (details provided
below).
Wholesale sales also strengthened in 1Q. While Itochu Enex had been mainly putting effort into expansion of retailsales over the past few years, we think wholesale sales climbed because of improved wholesale profitability after
the crude oil price moved out of the very low level it had reached at one point. We think the upcoming launch ofoperations at the Sendai thermal-fired power plant, which is 50% owned by Itochu Enex, in October played a rolein expansion of total electricity sales volume (retail and wholesale) as well.

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Results trends㻱㼘㼑㼏㼠㼞㼕㼏㼕㼠㼥㻌㼟㼍㼘㼑㼟㻌㼢㼛㼘㼡㼙㼑

（㻳㼃ｈ）
㻟㻘㻡㻜㻜
㻟㻘㻜㻜㻜
㻞㻘㻡㻜㻜
㻞㻘㻜㻜㻜

㻟㻘㻝㻥㻜

㻝㻘㻡㻜㻜
㻝㻘㻜㻜㻜
㻝㻘㻢㻝㻢
㻡㻜㻜
㻢㻞㻜

㻣㻣㻝

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻝㻘㻜㻥㻣

㻝㻘㻜㻡㻡

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻜㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

Source: Prepared by FISCO from the Company's results briefing materialsIn the heat supply business, while the average temperature in 1Q was lower than a year ago and this reduced
demand, heat demand surpassed the previous year and sales expanded YoY thanks to the start of heat supply to
GINZA SIX. Earnings fell, however, because of booking disposal costs related to equipment upgrades and otherfactors.

Income improved significantly on price stability benefits
Steady progress in Car-Life Station income enhancement andbusiness model change
4. Life Energy & Logistics Division
The Life Energy & Logistics Division reported ¥119,081mn in revenue (+12.4% YoY) and ¥1,741mn in profit fromoperating activities (vs. a ¥271mn loss in the previous year) in 1Q FY3/18, posting higher sales and rebounding toan operating profit. Earnings recovered sharply with an increase of more than ¥2bn YoY thanks to price stability anda boost from closures of unprofitable Car-Life Stations (CS; Itochu Enex’s in-house term for gas stations).

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Results trends㻝㻽㻌㼞㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻌㼕㼚㻌㼠㼔㼑㻌㻸㼕㼒㼑㻌㻱㼚㼑㼞㼓㼥㻌㻒㻌㻸㼛㼓㼕㼟㼠㼕㼏㼟㻌㻰㼕㼢㼕㼟㼕㼛㼚㻔¥㼙㼚㻕㻿㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻼㼞㼛㼒㼕㼠㻌㼒㼞㼛㼙㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼍㼏㼠㼕㼢㼕㼠㼕㼑㼟㻌㻔㼞㼕㼓㼔㼠㻕㻝㻘㻣㻠㻝㻝㻤㻜㻘㻜㻜㻜

㻔¥㼙㼚㻕
㻞㻘㻜㻜㻜

㻝㻡㻜㻘㻜㻜㻜

㻝㻘㻡㻜㻜㻝㻞㻜㻘㻜㻜㻜

㻝㻘㻜㻜㻜㻥㻜㻘㻜㻜㻜

㻞㻠㻡

㻝㻣㻥

㻡㻜㻜
㻙㻞㻜㻣

㻢㻜㻘㻜㻜㻜

㻙㻠㻟㻟

㻜

㻙㻞㻣㻝

㻟㻜㻘㻜㻜㻜

㻙㻡㻜㻜㻝㻟㻠㻘㻥㻤㻤

㻝㻠㻣㻘㻜㻡㻜

㻝㻟㻡㻘㻥㻡㻞

㻝㻽㻌㻲㼅㻟㻛㻝㻠㻝㻽㻌㻲㼅㻟㻛㻝㻡㻝㻽㻌㻲㼅㻟㻛㻝㻢㻝㻝㻝㻘㻜㻡㻡

㻝㻡㻠㻘㻞㻟㻠

㻝㻣㻥㻘㻣㻤㻠

㻜㻙㻝㻘㻜㻜㻜
㻝㻽㻌㻲㼅㻟㻛㻝㻣 㻝㻽㻌㻲㼅㻟㻛㻝㻣㻙 㻝㻽㻌㻲㼅㻟㻛㻝㻤㼚㼑㼣㻙㼒㼛㼞㼙㼑㼞

Note: Life Energy & Logistics Division results from “1Q FY3/17-new” and Car-Life Division results before then
Source: Prepared by FISCO from the Company's financial results

Itochu Enex revamped its organization as part of measures advocated in the new medium-term plan and launchedthe Life Energy & Logistics Division from FY3/18. It transferred industrial fuels (fuel oil, etc.), fleet (diesel truck fuel,etc.), and AdBlue (truck fuel additive) businesses from the Energy Innovation Division to the Car-Life Division.
JXTG Holdings, Inc. <5020> emerged in the oil industry on April 1, 2017. With this reorganization of oil suppliers,
supply-demand gap in gasoline and other fuel oils disappeared and prices generally stabilized, including removalof extremely cheap retail prices for gasoline, in 1Q. In volume, meanwhile, the long-term trend of decline in fueloil demand continued, but Itochu Enex’s gasoline sales volume held firm in a flat range (YoY) and diesel truck fuelsales climbed. We attribute these outcomes to recovery in domestic economic activity and increased truck delivery
demand.
We think improvement in the gasoline supply-demand balance had a similar positive effect in industrial fuel, fleet(diesel truck fuel), and other areas because the pricing mechanism, demand drivers, and other income change
factors are fundamentally the same. Transfers of these businesses from the former Energy Innovation Division hence
contributed as an earnings lift in 1Q.
Itochu Enex continues to shutter Car-Life Stations that are unprofitable, and period-end station numbers dropped
by a net seven sites to 1,881 in 1Q. While planned closures of money-losing sites will continue, the CS business
expenses are clearly declining as a result of progress in closures from past years. This aspect aided the significant
rebound in 1Q profit.

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Results trends㻳㼍㼟㼛㼘㼕㼚㼑㻌㼜㼞㼕㼏㼑㻌㼠㼞㼑㼚㼐㻌㻔㻶㼍㼚㼡㼍㼞㼥㻌㻞㻜㻝㻟㻌㼠㼛㻌㻶㼡㼘㼥㻌㻞㻜㻝㻣㻕
㻔¥㻛㻸㻕
㻝㻤㻜㻚㻜

㻾㼑㼓㼡㼘㼍㼞㻌㼓㼍㼟㼛㼘㼕㼚㼑㻌㼣㼔㼛㼘㼑㼟㼍㼘㼑㻌㼜㼞㼕㼏㼑㻾㼑㼓㼡㼘㼍㼞㻌㼓㼍㼟㼛㼘㼕㼚㼑㻌㼞㼑㼠㼍㼕㼘㻌㼜㼞㼕㼏㼑

㻝㻣㻜㻚㻜
㻝㻢㻜㻚㻜
㻝㻡㻜㻚㻜

㻝㻠㻜㻚㻜

㻝㻟㻝㻚㻜

㻝㻟㻜㻚㻜
㻝㻞㻜㻚㻜
㻝㻝㻜㻚㻜
㻝㻜㻤㻚㻟

㻝㻜㻜㻚㻜

㻥㻜㻚㻜
㻝㻟㻙㻶㼍㼚
㻹㼍㼞㼏㼔
㻹㼍㼥
㻶㼡㼘㼥
㻿㼑㼜㼠㼑㼙㼎㼑㼞㻺㼛㼢㼑㼙㼎㼑㼞
㻝㻠㻙㻶㼍㼚
㻹㼍㼞㼏㼔
㻹㼍㼥
㻶㼡㼘㼥
㻿㼑㼜㼠㼑㼙㼎㼑㼞㻺㼛㼢㼑㼙㼎㼑㼞
㻝㻡㻙㻶㼍㼚
㻹㼍㼞㼏㼔
㻹㼍㼥
㻶㼡㼘㼥
㻿㼑㼜㼠㼑㼙㼎㼑㼞㻺㼛㼢㼑㼙㼎㼑㼞
㻝㻢㻙㻶㼍㼚
㻹㼍㼞㼏㼔
㻹㼍㼥
㻶㼡㼘㼥
㻿㼑㼜㼠㼑㼙㼎㼑㼞㻺㼛㼢㼑㼙㼎㼑㼞
㻝㻣㻙㻶㼍㼚
㻹㼍㼞㼏㼔
㻹㼍㼥
㻶㼡㼘㼥

㻤㻜㻚㻜

Source: Prepared by FISCO from Agency for Natural Resources and Energy data

Mutual customer introductions utilizing a newly deployed POS system and shared point card program are still taking
place as initiatives to enhance top-line growth in the CS-related businesses (broadly includes car-related businesses).
Itochu Enex also ramped up the Carlife Stadium service brand in FY3/17 for car-related business and began Carlife
Stadium car rental services as the first initiative in April 2017.
Nissan Osaka Sales Co., Ltd., which handles automobile sales business, significantly increased sales volume in 1Q
as a rebound from the sales setback in 1Q FY3/17 due to the impact of fuel economy data falsification at Mitsubishi
Motors Corporation <7211>. Both sales and profit improved over the previous year.

Profit declined on lower trading of oil products due to stabilization of
supply and demand
5. Industrial Energy & Logistics Division
The Industrial Energy & Logistics Division incurred an operating loss despite stronger sales, with ¥18,336mn inrevenue (+37.8% YoY) and a ¥56mn loss from operating activities (vs. a ¥394mn profit a year earlier) in 1Q FY3/18.

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Results trends㻝㻽㻌㼞㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻌㼕㼚㻌㼠㼔㼑㻌㻵㼚㼐㼡㼟㼠㼞㼕㼍㼘㻌㻱㼚㼑㼞㼓㼥㻌㻒㻌㻸㼛㼓㼕㼟㼠㼕㼏㼟㻌㻰㼕㼢㼕㼟㼕㼛㼚㻔¥㼙㼚㻕㻿㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻼㼞㼛㼒㼕㼠㻌㼒㼞㼛㼙㻌㼛㼜㼑㼞㼍㼠㼕㼚㼓㻌㼍㼏㼠㼕㼢㼕㼠㼕㼑㼟㻌㻔㼞㼕㼓㼔㼠㻕

㻔¥㼙㼚㻕

㻠㻣㻜

㻡㻜㻜

㻝㻤㻜㻘㻜㻜㻜
㻠㻜㻤㻟㻥㻠㻝㻡㻜㻘㻜㻜㻜

㻠㻜㻜㻟㻟㻜㻝㻞㻜㻘㻜㻜㻜

㻟㻜㻜㻝㻥㻠㻥㻜㻘㻜㻜㻜

㻝㻢㻜㻘㻞㻟㻟

㻞㻜㻜㻝㻡㻞㻘㻟㻜㻡

㻢㻜㻘㻜㻜㻜

㻝㻜㻜㻝㻝㻡㻘㻞㻝㻣

㻣㻤㻘㻥㻞㻣

㻟㻜㻘㻜㻜㻜

㻙㻡㻢㻜㻟㻡㻘㻣㻠㻤
㻞㻤㻘㻜㻡㻟

㻜㻝㻽㻌㻲㼅㻟㻛㻝㻠㻝㻽㻌㻲㼅㻟㻛㻝㻡㻝㻽㻌㻲㼅㻟㻛㻝㻢㻝㻽㻌㻲㼅㻟㻛㻝㻣㻙㼒㼛㼞㼙㼑㼞

㻝㻽㻌㻲㼅㻟㻛㻝㻣㻙
㼚㼑㼣

㻙㻝㻜㻜

㻝㻽㻌㻲㼅㻟㻛㻝㻤Note: Industrial Energy & Logistics Division results from “1Q FY3/17-new” and Energy Innovation Division results before then
Source: Prepared by FISCO from the Company's financial results

The Industrial Energy & Logistics Division business mainly consists of asphalt sales, marine fuel sales (domestic andoverseas), oil product trading, and terminals. It also covers other new businesses.
The division booked a loss from operating activities in 1Q because of decline in the asphalt income base in a weak
demand phase and pressure from lower oil product trading. Oil product trading business handles surplus contracts
that occur due to the supply-demand gap. Its supply-demand adjustment and removal of price gap expands income
at Itochu Enex and also meets the societal need of balanced adjustment for the overall industry. As noted above,
business opportunities for oil product trading were extremely limited in 1Q because of the absence of supply-demand
gap. Losses in oil product trading also affected earnings for the overall division.

██Progress with the medium-term business

plan

Laying the groundwork for next-generation growth in FY3/18-19
Rebuilding the income base and revamping the organizationalframework
1. Overview of the new medium-term business plan Moving 2018
(1) Overview
The Company announced its new two-year (FY3/18 and FY3/19) medium-term business plan, Moving 2018:
Connecting to the future. The concept behind the new plan is two years to lay the management foundations forthe next stage of the Company's development as expressed by the subtitle of the plan, “Connecting to the future.”

We encourage readers to review our complete legal statement on “Disclaimer” page.

11 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Progress with the medium-term business plan

Itochu Enex implemented measures from the “Moving 2016 – Sowing seeds for tomorrow” two-year medium-termbusiness plan in the two years through FY3/17. One of the main successes was lifting net profit attributable to theCompany’s shareholders above ¥10bn in FY3/17. With this threshold met, Itochu Enex set a goal of ¥20bn in net
profit attributable to the Company’s shareholders as the next stage. However, it does not expect to immediately
realize this goal and presented Moving 2018: Connecting to the future as a two-year phase of solidifying thefoundation to support realization of ¥20bn.
Concept and positioning of new medium-term business plan

Source: The Company’s medium-term business plan briefing materials

Quantitative targets in the new medium-term business plan are for profit from operating activities of ¥18.5bn, net
profit attributable to the Company’s shareholders of ¥10.8bn, and ROE of 9.1% in FY3/19, the final year of theplan. While growth appears to stall in the current medium-term business plan versus FY3/17 results, we see thisstance as a message from Itochu Enex of putting a top emphasis on ensuring that net profit attributable to theCompany’s shareholders firmly takes hold above ¥10bn through solidification measures.
We focus more on investment plans in the new medium-term business plan than on quantitative targets. The
Company plans to make ¥45bn in investments during the two years covered by the plan. On an annualizedbasis, this is roughly 70% higher than investments made in FY3/17. This is perhaps given that the Company
has designated the period covered by the plan as a time to lay the foundations for the next stage. However, we
believe it is important to note that operating cash flow over the two-year period is expected to reach ¥46,000mn
and that the Company is therefore positioned to make aggressive investments even as it maintains or strengthens
its financial position.

We encourage readers to review our complete legal statement on “Disclaimer” page.

12 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Progress with the medium-term business plan

Quantitative targets in the medium-term business plan
Moving 2018

FY3/17

FY3/18

FY3/19Profit from operating activities¥19.7bn¥16.5bn¥18.5bn

Net profit attributable to the Company’s shareholders¥10.4bn¥10.4bn¥10.8bn

10.0%

9.3%

9.1%

Over 30%

Over 30%

Over 30%

Cash flows from operating activities¥17.8bn¥22.0bn¥24.0bn

Investment plan

¥13.4bn¥45bn (over 2 years)

ROE
Dividend payout ratio

Average rate

Crude oil price$50/bblCP price$400/MT

Forex rate

¥108.4/$

Source: Prepared by FISCO from the Company's materials(2) Basic policies in the new medium-term business plan: Rebuilding the income base and revamping theorganizational framework
Fundamental policies (items being targeted) in the new medium-term business plan period are rebuilding theincome base and revamping the organizational framework.
Basic initiatives of Moving 2018: two connections

Source: The Company's medium-term business plan briefing materials

Rebuilding the income base involves measures that lead to future growth. Itochu Enex presented optimizationof assets as an initiative in the medium-term business plan. This targets replacement of business assets aimed
at raising profitability and growth potential in existing areas (oil and gas) and new areas (electric power, etc.).
Through its updates to asset composition, Itochu Enex aims to raise asset share of electricity and other new
business to over 50% and improve the ratio of fixed assets to profit from operating activities from 6.2% to 7.0%.
It is also targeting asset optimization within business segments. One example is the sale of some wind power
facilities in the electricity business. Itochu Enex is currently reviewing biomass as a new power source to replace
the sold power facilities.

We encourage readers to review our complete legal statement on “Disclaimer” page.

13 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.

12-Oct.-2017

8133 Tokyo Stock Exchange First Section

http://www.itcenex.com/english/ir/

Progress with the medium-term business plan

The Company aims to change its organizational structure from one where each product (oil, gas, electric power,etc.) is managed separately to a healthy, open-minded and strong corporate group organization. This is basedon the decision that the organizational system governing the group’s management must be reformed in orderto improve communication methods, risk management, and compliance systems. One aspect of organizational
reform is the strengthening of the skills of each and every employee by fostering human resources capable ofautonomously identifying problems, proposing solutions, and solving problems. This will involve demanding higher
quality of work from employees. The Company is also simultaneously transforming its approach to work. Under
the slogan “Enex Early Bird” the Company aims to transition to a style of work where employees complete tasks
in a relatively short amount of time.

Making healthy progress in initiatives to support a growth in its
various segment, including business integration for LP gas sales
and entry into electricity agent sales
2. Major progress in 1Q FY3/18
Refer above for quantitative targets in the new medium-term business plan. This stance has not changed from theprevious view following 1Q FY3/18.
Segment breakdown of quantitative targets in the new medium-term plan(¥mn)
FY3/17

Sales

FY3/18

FY3/19Full year

Full year(forecast)

Full year(forecast)Home-Life Division

90,76899,4009.5%

107,300

7.9%

Power & Utility Division

65,65484,30028.4%

90,8007.7%Life Energy & Logistics Division740,400

763,100

3.1%

771,800

1.1%

Industrial Energy & Logistics Division

132,100

211,700

60.3%

194,600

-8.1%
0.5%

YoY

YoY

1,028,939

1,158,500

12.6%

1,164,500

Adjustment--8,500-0-Total sales

1,028,939

1,150,000

11.8%

1,164,500

1.3%Home-Life Division

4,831

4,500

-6.9%

5,000

11.1%

Power & Utility Division

6,640

4,400

-33.7%

5,500

25.0%

5,800

5,400

-6.9%

5,600

3.7%

2,200

2,100

-4.5%

2,400

14.3%

19,564

16,400-16.2%

18,500

12.8%

114

100

-12.3%--

19,67816,500-16.2%

18,50012.1%

Total sales before adjustment

Profit from Life Energy & Logistics Division
operating Industrial Energy & Logistics Division
activities
Profit from operating activities before adjustment
Adjustment
Total profit from operating activities

Source: The Company's financial results and medium-term business plan briefing materials

This section reviews progress by business segments in 1Q FY3/18 along with outlooks and key points.
(1) Home-Life Division
A major step forward in 1Q was the agreement on integration of LP gas wholesale and retail business with Osaka
Gas (release issued on August 3, 2017). The two companies will establish joint venture ENEARC Co., Ltd. witheach owning a 50% stake. They plan to transfer shares in their LP gas sales firms with sales territories of Kanto,
Chubu, and Kansai to the new entity. Separate business activities respectively will continue in other regions,just as previously. The integration also involves the transfer of shares owned by NISSHO PETROLEUM GASCORPORATION, a subsidiary of Osaka Gas, in three LP gas sales companies to Itochu Enex. This reorganization
comes into effect on October 1, 2017.

We encourage readers to review our complete legal statement on “Disclaimer” page.

14 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Progress with the medium-term business plan

Scheme of the LP gas business integration with Osaka Gas

Source: The Company's press release

Earnings from joint venture ENEARC will be booked in investment income through the equity method. The
integration will lower sales and profit from operating activities versus previous levels because IFRS accounting
standards utilized by Itochu Enex add this income just before pretax profit. We confirmed in our contacts with
Itochu Enex that it included impact from the business integration on income in the period-start outlook.
We think the integration offers a nearly best combination for Itochu Enex. The decision takes into account a toughbusiness environment with decline in the number of households and fierce competition with other energy types. We
expect strong advantages in surviving the difficult competitive conditions from the ability to harness Osaka Gas’
name recognition and brand strength. Itochu Enex has 350,000 LP gas customers for direct sales and is actively
offering package discounts for LP gas and electricity, as explained above. The integration adds 180,000 direct
sale customers from Osaka Gas. Itochu Enex is likely to sell a variety of related products, including electricity, tothese customers. These developments should be closely watched.
(2) Power & Utility Division
In power generation, Itochu Enex sold some wind power facilities in FY3/17, but has indicated that it considers
bolstering initiatives in the biomass power business. Additionally, it begins operation of a coal thermal-fired power
plant at Sendai Power Station, which is jointly owned (50% stakes each) with The Kansai Electric Power Co., Inc.,in October 2017. This plant completed facility installations and was conducting test operation in August. It is likely
to begin commercial service in October, as planned.
Sales initiatives are occurring on the sales front with the aim of expanding the customer base. Itochu Enex formed
a balancing group (BG) to develop customers in electricity retail sales. While BG-led customer recruitment has
achieved healthy progress up to now, as explained above, it founded ENEX LIFE SERVICE Co., Ltd. in July 2016as well.
ENEX LIFE SERVICE is an organization that oversees agent sales in the electricity retail business. The BG requires
individual members to register as a power producer and supplier (PPS). Member companies each serve ascontract parties in the relationship with customers. Agent contracts, meanwhile, do not require PPS registrationand the Company is main contract party. Group firm Nissan Osaka Sales started the collaboration businessbetween cars and electricity for the purpose of selling electricity to automobile customers in 2016, becoming thefirst sales agent.

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Progress with the medium-term business plan

We are closely monitoring activities by ENEX LIFE SERVICE. Our interest is not limited to expectations for electricity
sales via an agent format. Itochu Enex positions ENEX LIFE SERVICE as a company that provides support inlife-related areas to corporate customers. In other words, it functions as a comprehensive operator of businesses
that sell life-related goods with other companies. “Collaboration business between cars and electricity” is an
example of combined sales of electricity and other products. We think it is likely to go further by handling communications and products in other areas and thus will be paying attention to trends in new goods and services.
Heat supply is another business in this division and began supplying heat to the GINZA SIX, a large-scalecommercial facility that opened in Ginza. Itochu Enex entered this market by acquiring subsidiary Tokyo Toshi
Service Co., Ltd. (TTS; it owns a 66.6% stake) from Tokyo Electric Power Company, Incorporated <9501>. The
business acquired this deal thanks to its abundant track record and strong competitiveness, including its roots.
We think capital investment for heat supply to GINZA SIX amounted to about ¥5bn. This means that Itochu Enex
took action on an important piece of the ¥45bn in investment outlays targeted in the two-year medium-termbusiness plan during 1Q.
(3) Life Energy & Logistics Division
Itochu Enex continues to exit money-losing Car-Life Stations in the CS-related business. This effort promotes
optimization of assets, which is taking place on a companywide basis, and also reduces spending and raises
profitability in the CS business as seen in 1Q results.
In the CS business, Itochu Enex is deepening its auto-related businesses, such as car rentals and purchases,
insurance, and repairs under the Carlife Stadium brand. It hopes to unify under one brand previously dispersed
services to bolster profitability and efficiency. The first initiative was the launch of Carlife Stadium car rentals in 1Q.
(4) Industrial Energy & Logistics Division
The main advance in 1Q was building a new fuel supply ship in the marine fuel sales business. This new ship isbeing deployed at Hakata Port. Itochu Enex aims to build stable marine fuel distribution operations in Japan withseven ships nationwide.
Possible new and strategic projects include launching a recycling business or participation in a bio-based jet fuelproject. We understand the Company has already made progress toward the launch of a recovered oil and fly
ash recycling business and is nearly ready to start operations as a profitable business. Regarding participation ina bio-based jet fuel project, the Company partnered with Euglena Co. Ltd. <2931> in a domestic biofuel project
which, in June 2017 received a third-party capital infusion and is now working toward starting operation of a
proof-of-concept plant in 2019. Further developments on both going forward are awaited.

We encourage readers to review our complete legal statement on “Disclaimer” page.

16 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/

Progress with the medium-term business plan██Business outlook
Maintained period-start FY3/18 forecast but a cautious stancedespite a rise in upside expectations is reasonable
The Company forecasts sales rising, but profit declining with ¥1,150,000mn in sales (up 11.8% YoY), ¥16,500mn
in profit from operating activities (down 16.2%), ¥17,800mn in profit before tax (down 8.0%), and ¥10,400mn in net
profit attributable to the Company’s shareholders (down less than 0.1%) in FY3/18. The Company did not change
from the period-start estimate.
Overview of the forecast for FY3/18(¥mn)
FY3/17

FY3/18YoY

1Q results

1H results

Full year

1Q results

Full year(forecast)% change

ChangeSales

222,091

466,313

1,028,939

245,395

1,150,000

11.8%

121,061

Revenue

148,808

309,516

695,060

172,458---

Gross profit

20,492

43,74293,604

21,998---

SG&A expenses

18,161

36,21074,697

17,738---

Profit from operating activities

2,328

7,755

19,678

4,664

16,500-16.2%-3,178

Profit before tax

2,324

7,242

19,344

4,591

17,800-8.0%-1,544

Net profit attributable to theCompany’s shareholders

1,077

3,707

10,405

2,523

10,400-0.0%-5

Source: Prepared by FISCO from the Company's financial results

As explained above, FY3/18 is a year of laying groundwork to support further growth in the future. Emphasis hence
should be placed on whether Itochu Enex steadily conducts investments toward growth, rather than nominal
earnings. Thus far, Itochu Enex has integrated the LP gas sales business, entered agent sales for retail electricity,and implemented other notable measures explained earlier in this report. We will be focusing on whether this upbeat
momentum continues or not as the most important evaluation point in FY3/18 and FY3/19.
Segment details were already covered above. Key points in the Home-Life Division are progress with LP gas
integration from 2H and trends in electricity sales customer numbers. In the Power & Utility Division, we will befocusing on ramp-up at the Sendai Power Station, which is slated to begin operations in October, and ENEX LIFESERVICE trends. Important points in the Life Energy & Logistics Division are Itochu Enex’s own measures andindustry supply-demand balance. External conditions played a major role in upbeat results for this division in 1Q. In
the Industrial Energy & Logistics Division, we intend to focus on asphalt business arriving at a demand phase andprogress in new businesses.
While 1Q results were upbeat, we think it is too early to anticipate upside in the full-year outlook. One reason is that
income scale in 1Q has the smallest quarterly weight among the four quarters due to seasonality. Extra income could
be readily eroded depending on trends in 3-4Q, the main demand quarters. The other reason is poor weather in thesummer months. This might have affected demand for air conditioners and vacation-related gasoline consumption.
We believe there is still enough time to make an assessment of FY3/18 results after seeing 2Q.

We encourage readers to review our complete legal statement on “Disclaimer” page.

17 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.

12-Oct.-2017

8133 Tokyo Stock Exchange First Section

http://www.itcenex.com/english/ir/██Shareholder returns
Projecting a flat dividend YoY at ¥32 in FY3/18
The Company utilizes dividends to compensate shareholders and has a basic policy on shareholder returns ofmaintaining a dividend payout ratio of 30%.
Itochu Enex raised the annual dividend in FY3/17 by ¥8 YoY to ¥32 (¥13.5 for the interim dividend and ¥18.5 for theperiod-end dividend) due to the steep increase in EPS to ¥92.09 (+39.3%). This worked out to a dividend payout
ratio of 34.8%.
FY3/18 calls for a flat annual dividend of ¥32 (¥16 for the interim dividend and ¥16 for the period-end dividend).
Itochu Enex stayed with the period-start estimate at the 1Q announcement. This view reflects a target of ¥92.05 in
net profit attributable to the Company’s shareholders per share, on par with the previous year. Although 1Q earnings
were very upbeat as mentioned above, we think it is still too early to raise expectations of upside in FY3/18. Thissuggests that dividend outlooks should adhere to the period-start level. We advise against excessive expectations
for a dividend increase as the 34.8% budgeted dividend payout ratio exceeds the 30% ratio target. Moreover, evenwith a modest earnings increase the payout ratio would be unlikely to drop much below 30%.

㻱㼍㼞㼚㼕㼚㼓㼟㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻔¥㻕㻱㼍㼞㼚㼕㼚㼓㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕㻝㻜㻜㻚㻜㻜

㻠㻡㻚㻞㻑㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕
㻡㻜㻚㻜㻑

㻟㻢㻚㻟㻑

㻤㻜㻚㻜㻜

㻟㻠㻚㻣㻑

㻟㻠㻚㻤㻑

㻠㻜㻚㻜㻑

㻟㻝㻚㻣㻑
㻢㻜㻚㻜㻜

㻟㻜㻚㻜㻑
㻥㻞㻚㻜㻥

㻠㻜㻚㻜㻜

㻥㻞㻚㻜㻡

㻞㻜㻚㻜㻑

㻢㻢㻚㻝㻜

㻢㻟㻚㻜㻡
㻠㻤㻚㻣㻝

㻞㻜㻚㻜㻜
㻞㻜㻚㻜㻜

㻞㻞㻚㻜㻜

㻞㻠㻚㻜㻜

㻟㻞㻚㻜㻜

㻟㻞㻚㻜㻜

㻜㻚㻜㻜

㻝㻜㻚㻜㻑
㻜㻚㻜㻑

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company's financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Itochu Enex Co., Ltd.
8133 Tokyo Stock Exchange First Section

12-Oct.-2017
http://www.itcenex.com/english/ir/██Information security
Itochu Enex has defined its own personal information protection policy for protecting the personal information ofcustomers. It built an organizational framework, implements and maintains measures, and pursues continuous
improvements. It also fosters awareness among directors, employees, and related people and actively promotes
personal information protection.
In the electricity business, the electricity supply-demand group handles personal information as part of electricity
sales. This group obtained ISO/IEC27001/JIS Q 27001 (known as ISMS*) approval, the international standard for
information security management systems, in October 2016, buttressing the safeness of information handling.
*	ISMS (Information Security Management System) is a comprehensive information security management system that
protects information assets from various threats and mitigates risks. It has international and domestic standards (ISO/IEC27001/JIS Q 27001). Satisfying these criteria and acquiring certification is usually referred to as having “acquired ISMS.”

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 19

Disclaimer
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This report was prepared at the request of its subject company using information provided
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