TOHO GAS CO., LTD.

Business Details

Toho Gas Co., Ltd. manufactures, sells, and sells appliances for gas in Aichi, Mie, and Gifu prefectures, while Toho Gas Network Co., Ltd. handles transportation supply and pipeline construction, Toho Gas Life Solutions Co., Ltd. handles outsourced sales to residential customers, and Mizushima Gas Co., Ltd. operates a gas business in Okayama Prefecture. This is the Group's core segment, accounting for approximately 65% of consolidated net sales, with a broad customer base spanning residential and commercial users. The structure is such that timing differences in the raw material cost adjustment system are the main driver of earnings fluctuations.

Recent Overview

Both sales and operating income declined year on year due to lower commercial sales volume and higher costs.

In FY2026 (ending March 2026), Gas segment sales were ¥426,585 million (down 0.6% year on year), and operating income was ¥19,210 million (down 6.5% year on year). Gas sales volume was 3,300 million m³ (down 1.5% year on year), mainly due to a 1.7% decrease in commercial and other sales caused by lower equipment utilization at customer sites. On the other hand, at the consolidated level, the expansion of the timing-difference gain from the raw material cost adjustment system between raw material costs and sales contributed to an increase in ordinary income, but for the Gas segment alone, increased costs such as supply and sales expenses squeezed profit. Crude oil prices averaged $71.4/barrel (down $11.0 year on year), and the exchange rate averaged ¥150.7/dollar (up ¥1.9 year on year).

Key Products

Growth Drivers

• Expansion of the timing-difference gain from the raw material cost adjustment system (the main driver of the increase in consolidated ordinary income)
• Gradual increase in the number of city gas customers (1,759 thousand at the end of FY2026 (ending March 2026), up 9 thousand from the end of the prior period)
• Capturing fuel-switching demand and proposing advanced utilization to commercial customers
• Fixed cost efficiency through DX promotion and use of advanced technology (as stated in the medium-term management plan)
• Strengthening the future business foundation through expanded investment for the next fiscal year (FY2027 (ending March 2027)) (plan of ¥87.0 billion, up 46.7% year on year)

Risks

• Risk of timing-difference losses arising from the raw material cost adjustment system (earnings can fluctuate significantly depending on crude oil prices and exchange rate trends)
• Decline in commercial and other gas sales volume (due to lower equipment utilization at customer sites; down 1.7% year on year in FY2026 (ending March 2026))
• Fluctuations in crude oil prices and exchange rates (assumptions for next fiscal year's earnings forecast: crude oil at $100/barrel, exchange rate at ¥160/dollar)
• Fluctuations in residential demand due to temperature variation (average temperature of 17.7°C, roughly the same as the prior period, but risk from hot summers, etc.)
• Long-term structural decline risk in natural gas demand as carbon neutrality policies advance
• For the next fiscal year (FY2027 (ending March 2027)), operating income is forecast to decline sharply by 40.2% year on year to ¥19,000 million

Business Details

Centered on Toho Liquefied Gas Co., Ltd. and other companies, this segment engages in LPG Sales, Equipment Sales & Pipeline Construction, as well as LNG Sales and Heat Supply Business and Coke & Petroleum Product Sales conducted by Toho Gas Co., Ltd. The main customers are residential and commercial LPG users, with the number of LPG customers at the end of FY2026 (ending March 2026) at 646 thousand. Sales were ¥96,751 million, accounting for approximately 15% of consolidated sales, making it the second-largest segment after Gas.

Recent Overview

Sales declined 4.8%, but operating income rose 18.2% as profitability improved.

In FY2026 (ending March 2026), the LPG & Other Energy segment saw sales decline to ¥96,751 million (down 4.8% year on year), while operating income increased significantly to ¥3,063 million (up 18.2% year on year). The number of LPG customers rose only slightly to 646 thousand (up 1 thousand from the end of the prior period), and sales volume was roughly flat at 473 thousand tons (down 0.2% year on year). Against a backdrop of falling crude oil prices (down $11.0 year on year to $71.4/barrel), procurement costs declined, and profitability appears to have improved by more than offsetting the decline in sales.

Key Products

Growth Drivers

• Stable maintenance of the sales base through continued growth in the number of LPG customers (646 thousand at period end)
• Reduced procurement costs amid falling crude oil prices (crude oil at $71.4/barrel in the current period, down $11.0 year on year)
• Strengthened cost competitiveness through LNG trading promotion and optimal procurement portfolio construction
• Diversification of revenue sources through various energy services such as heat supply and coke
• Business foundation that provides stable cash flow generation as a core business

Risks

• Risk that fluctuations in timing-difference gains/losses between raw material costs and sales under the raw material cost adjustment system will significantly affect profit
• Impact of crude oil price and exchange rate fluctuations on LPG and LNG procurement costs (current period: crude oil at $71.4/barrel, exchange rate at ¥150.7/dollar)
• Long-term risk of shrinking LPG demand due to population decline and progress in energy conservation
• Risk of LPG customer attrition due to accelerating energy shift toward electricity and city gas
• Risk of impairment losses (¥498 million in the prior consolidated fiscal year; no individual disclosure for the current consolidated fiscal year)

Business Details

This segment involves the sale of electricity by Toho Gas Co., Ltd. and others, mainly in Aichi, Mie, and Gifu prefectures. Electricity retail is offered to residential and commercial customers, leveraging cross-selling (multi-energy proposals) with Gas and LPG as a strength. Under the new medium-term management plan (FY2025-2027), this is positioned as a "driver of growth," aiming to improve profitability and stability through procurement diversification, participation in power generation businesses, and creation of new solutions. The ROIC target is set at 3%+alpha for FY2027.

Recent Overview

Customer numbers, sales volume, and profit all expanded, with operating income up 476.6% year on year.

In the Electricity segment for FY2026 (ending March 2026), the number of customers at period end rose to 716 thousand, up 25 thousand from the end of the prior period, and sales volume increased 2.9% year on year to 2,897 million kWh, partly due to the rise in customer numbers. Sales were ¥98,868 million (up 3.0% year on year), and operating income increased significantly to ¥1,972 million (up 476.6% year on year). The increase in tangible and intangible fixed assets expanded substantially to ¥11,512 million from ¥3,690 million in the prior period, indicating accelerating capital investment.

Key Products

Growth Drivers

• Continued increase in the number of electricity customers (716 thousand at the end of FY2026 (ending March 2026), up 25 thousand from the end of the prior period)
• Expansion of sales volume (up 2.9% year on year to 2,897 million kWh, partly due to the increase in customer numbers)
• Cross-selling effects from multi-energy proposals combining Gas and LPG
• Shift of management resources to strategic businesses under the new medium-term management plan (procurement diversification, participation in power generation business)
• More active capital investment (increase in tangible and intangible fixed assets of ¥11,512 million, more than three times the prior period)

Risks

• Risk of electricity market price fluctuations (impact of timing differences under the raw material cost adjustment system)
• Risk of rising electricity procurement costs (crude oil and LNG price and exchange rate fluctuations)
• Intensifying competition for customer acquisition with competitors (price competition in the liberalized electricity market)
• Uncertainty in sales volume due to temperature fluctuations (dependence on heating and cooling demand)
• Costs of responding to structural changes in the electricity market associated with the expansion of renewable energy

Business Details

The "Others" segment consists of a diverse range of businesses, including LNG Contract Processing, Real Estate Management & Leasing, Plant & Equipment Design/Construction and the CN\u00d7P Business, sales of housing equipment, Information Processing Services, leasing, and development and investment related to natural gas. Recorded sales, including intra-group sales, were ¥61,077 million, functioning as a complementary revenue source for the Group as a whole.

Recent Overview

Sales were roughly flat, but operating income rose 3.9% year on year, improving profitability.

In the "Others" segment for FY2026 (ending March 2026), recorded sales including intra-group amounts were ¥61,077 million (down 0.1% year on year), remaining roughly flat, while segment operating income increased to ¥5,810 million (up 3.9% year on year). Segment assets expanded to ¥140,715 million (up ¥7,883 million year on year), and capital investment also increased to ¥3,636 million (up ¥511 million year on year). Depreciation and amortization also increased to ¥2,069 million (up ¥229 million year on year), reflecting continued expansion of the business foundation.

Key Products

Growth Drivers

• Increase in orders for engineering businesses including air conditioning equipment construction
• Expansion of outsourced commercial gas and electricity sales in line with the increase in electricity customer numbers
• Continued participation in overseas natural gas development and investment businesses
• Deepening of the "regional value creation business group" under the medium-term management plan
• Expanded efforts related to carbon neutrality (e-methane production demonstration, operation of hydrogen production plants)

Risks

• The engineering business is subject to significant order fluctuation risk, and deterioration in the order environment for air conditioning equipment construction, etc., could affect performance
• The overseas natural gas development and investment business is subject to geopolitical risk, resource price fluctuations, and exchange rate fluctuations
• LNG Contract Processing is affected by LNG procurement costs and the raw material cost adjustment system
• As the segment encompasses diverse businesses, there is a risk of impairment in individual businesses
• Impairment risk in the overseas development and investment business, which carries goodwill balances, in the event of a deteriorating business environment