Idemitsu predicts first-ever loss amid price slump

OREANDA-NEWS. Japanese refiner Idemitsu is expecting to post its first-ever annual loss for the current 2014-15 fiscal year, with falling oil prices leading to huge inventory losses and a JPY27bn (\\$230mn) write-down in overseas oil and coal assets.

Idemitsu is expecting to report a JPY98bn loss for the year ending 31 March, revising its earlier forecast of a JPY30bn full-year profit. This will be its first-ever annual loss since it was listed in 2006.

The sharp fall in oil prices is expected to boost Idemitsu's inventory losses to JPY137bn during 2014-15. Idemitsu said it will also book a JPY16bn write-down on Australia's 85pc-owned 5mn t/yr Ensham thermal coal mine and a ?11bn write-down on its UK and Norwegian North Sea oil assets.

The falling oil price has hit the 2014-15 profit outlooks of Japanese refiners by slashing the value of their oil inventories at a time when their refining profitability was on recovering under the government's capacity rationalisation initiative. TonenGeneral is expecting to post a JPY14bn loss for 2014, its first loss since 2009. Showa Shell also expects a JPY9.5bn loss for 2014 compared with a 2013 profit of JPY60bn.

The 555,000 b/d Idemitsu is Japan's third-largest oil refiner by capacity and is currently in talks to merge with the 445,000 b/d Showa Shell as part of the domestic industry's consolidation efforts. Idemitsu expects its oil and gas production will hit 29,000 b/d of oil equivalent in 2014-15, up 0.7pc against a year earlier, with coal output at 11mn t and down by 2pc. Domestic oil product sales are expected to fall 1.5pc from a year earlier to around 430,000 b/d.