OSAKA GAS CO., LTD.

Business Details

This segment covers the manufacturing, supply, and sale of city gas, sale of gas appliances, gas piping construction, sale of LNG/LPG, LNG transportation, sale of industrial gas, power generation, and electricity sales. Group companies share functional roles in operating the business: Osaka Gas Network Co., Ltd. handles the general gas pipeline business, Osaka Gas Marketing Co., Ltd. handles gas and electricity sales to residential customers, and Daigas Energy Co., Ltd. handles gas and electricity sales and energy services to commercial customers. This is the largest segment, accounting for approximately 80.8% of consolidated net sales.

Recent Overview

Despite gains from the raw material cost adjustment timing effect, operating income declined year on year due to increased power plant costs

In the Domestic Energy segment for FY2026 (ending March 2026), net sales decreased by ¥94,499 million year on year to ¥1,643,406 million, due to lower gas and LNG selling unit prices trending under the raw material cost adjustment system. Operating income decreased by ¥6,133 million year on year to ¥68,749 million, as the increase-in-profit effect from the timing lag in raw material price changes was offset by higher costs, including depreciation, associated with the start of operations of Unit 1 of the Himeji Natural Gas Power Plant. The number of gas supply contracts increased 0.9% year on year to 5,161 thousand, while gas sales volume declined for both residential and commercial customers, totaling 6,560 million m³ (down 1.4% year on year). Electricity sales volume increased 1.5% year on year to 17,238 million kWh, driven mainly by retail sales.

Key Products

Growth Drivers

• Continued expansion of electricity sales volume (17,238 million kWh for the period, up 1.5% year on year) and increase in low-voltage supply contracts (1,946 thousand, up 1.3% year on year), boosting the electricity business's profit contribution
• Strengthened power generation competitiveness through the start of operations of Units 1 and 2 of the Himeji Natural Gas Thermal Power Plant (combined capacity of approximately 1.25 million kW; Unit 1 began operations during the period)
• Continued expansion of the customer base through increased gas supply contracts (5,161 thousand, up 0.9% year on year)
• Timing lag effect under the raw material cost adjustment system: a temporary profit-boosting factor during periods of raw material price fluctuation
• Expanded appeal of environmental value and stronger customer acquisition through growing penetration of renewable energy sources

Risks

• Timing lag risk under the raw material cost adjustment system: in periods of rising raw material prices, a time lag occurs before this is reflected in selling prices, temporarily reducing profit
• Structural decline in residential gas demand: residential gas sales volume continued its downward trend, down 0.9% year on year, due to elevated temperature and water temperature levels and the spread of energy-efficient appliances
• Intensifying competition due to full liberalization of electricity and gas retail markets: fierce market competition continues, exerting ongoing pressure to increase customer acquisition costs and push down selling unit prices
• Increased depreciation and fixed costs associated with the start of operations of Units 1 and 2 of the Himeji Natural Gas Power Plant: for FY2027 (ending March 2027), a decline in profit from electricity market trading and increased costs at the power plant are expected to pressure ordinary income
• Uncertainty in the LNG procurement environment: risks associated with unstable supply-demand balances of energy resources and sharp price fluctuations are increasing
• Impairment risk: an impairment loss of ¥23,396 million was recorded on a consolidated basis for the fiscal year under review, and there is a possibility of continued impact on domestic energy assets

Business Details

This segment conducts development, investment, and energy supply related to natural gas. Its core operations are the US Freeport LNG Liquefaction Terminal Business and the US Upstream Business, alongside the Australia Gorgon and Ichthys projects and energy-related investments in Asia and India. In FY2026 (ending March 2026), growth was led by increased profits from the US Freeport LNG and US Upstream businesses, with total segment profit (operating income plus equity in earnings of affiliates) achieving high growth of ¥88,397 million, up 22.9% year on year. Segment assets stood at ¥1,083,903 million, accounting for approximately 33% of total company assets, making this a highly asset-intensive segment.

Recent Overview

Led by the US Freeport LNG and Upstream businesses, total segment profit increased significantly by 22.9% year on year

In the Overseas Energy segment for FY2026 (ending March 2026), net sales increased significantly to ¥126,960 million (up 17.8% year on year) and operating income increased to ¥67,650 million (up 25.4% year on year). The main drivers were increased profits from the US Freeport LNG Liquefaction Terminal Business and the US Upstream Business. Meanwhile, 12 companies, including Sabine Oil & Gas Corporation, were excluded from consolidation, resulting in a restructuring of the business portfolio. Investment in equity-method affiliates decreased to ¥288,300 million from ¥345,673 million in the prior fiscal year, reflecting the impact of the change in the scope of consolidation.

Key Products

Growth Drivers

• Profit contribution from stable operations and increased earnings at the US Freeport LNG Liquefaction Terminal Business
• Increased revenue and profit at the US Upstream Business (the main driver in FY2026, ending March 2026)
• Securing upstream earnings through stable operations of the Australia Gorgon and Ichthys projects
• Expansion of business in Asia through participation in the India city gas business (AG&P) and the renewable energy joint venture (Clean Max)
• Diversification of procurement sources and strengthening of the earnings base through the LNG sale and purchase agreement with ADNOC (up to approximately 800,000 tons per year)
• Increase in equity in earnings of affiliates (¥20,746 million, up 15.4% year on year), contributing to medium- to long-term profit

Risks

• Impact on earnings from fluctuations in natural gas and LNG prices (energy price risk)
• Foreign exchange fluctuation risk (impact of yen conversion of US dollar, Australian dollar, etc.)
• Increased uncertainty in the LNG procurement environment due to geopolitical risk and deterioration in international conditions (Middle East situation, etc.)
• Geological and operational risks in upstream development businesses (LNG production, natural gas development)
• Earnings stability following the restructuring of the business portfolio due to changes in the scope of consolidation (exclusion of 12 companies including Sabine Oil & Gas)
• Impact on medium- to long-term equity-method profit due to the decrease in investment in equity-method affiliates (from ¥345,673 million to ¥288,300 million)

Business Details

This segment is responsible for the Osaka Gas Group's non-energy businesses. It comprises three businesses: the Urban Development Business, involving real estate development and leasing (residential apartments, commercial facilities, etc.) led by Osaka Gas Urban Development Co., Ltd.; the Information Solutions Business, involving IT consulting and software development conducted by OGIS-RI Co., Ltd. and others; and the Materials Solutions Business, involving the manufacture and sale of fine materials, activated carbon, and carbon material products by Osaka Gas Chemicals Co., Ltd., Mizusawa Industrial Chemicals, Ltd., Jacobi Carbons AB, and others. This segment provides high-value-added products and services to corporate and individual customers both in Japan and overseas, based on the technology and know-how developed in the energy business.

Recent Overview

Increased profit at the Urban Development Business and others drove net sales up 13.2% and operating income up 30.2%

In the Life & Business Solutions segment for FY2026 (ending March 2026), net sales (including intersegment) increased significantly to ¥319,839 million (up 13.2% year on year) and segment operating income increased significantly to ¥37,447 million (up 30.2% year on year), driven by increased revenue in the Urban Development Business and the Materials Solutions Business. The Urban Development Business was the main driver of profit growth. Capital expenditure decreased significantly to ¥41,673 million from ¥60,809 million in the prior fiscal year, while segment assets expanded to ¥571,501 million.

Key Products

Growth Drivers

• Accumulation of rental income through the expansion of rental real estate assets in the Urban Development Business (the main driver of the segment's increased profit for the period)
• Expanded sales of high-value-added products (fine materials, activated carbon, etc.) in the Materials Solutions Business
• Capturing corporate demand for DX and needs for AI/cloud utilization in the Information Solutions Business
• Geographic expansion of the Information Solutions Business into Southeast Asia (the Philippines, etc.)

Risks

• Risk of declining profitability in the Information Solutions Business due to intensifying competition and rising labor costs
• Risk of fluctuations in raw material prices and intensifying competition with global rivals in the Materials Solutions Business
• Risk of declining asset value and pressure on earnings in the Urban Development Business due to deterioration in the real estate market and rising interest rates
• Impairment risk related to goodwill balances (goodwill amortization for the period was ¥542 million, up 66.8% year on year)
• Risk of declining capital efficiency and prolonged earnings recovery associated with the expansion of segment assets (¥571,501 million)