HOKKAIDO GAS CO., LTD.

Business Details

The company manufactures, supplies, and sells City Gas mainly in Sapporo City, Otaru City, Hakodate City, Chitose City, Kitami City and other supply areas. LNG shipment and transportation is outsourced to Hokkaido LNG Co., Ltd., meter reading operations to Hokugas Service Co., Ltd., and safety/inspection operations to Hokugas Fleast Co., Ltd. and other consolidated subsidiaries and equity-method affiliates. The main products and services are City Gas and LNG Sales. This is the core segment of the Group, accounting for approximately 62% of consolidated net sales, and is responsible for the energy business centered on natural gas.

Recent Overview

Achieved significant profit growth with sales volume up 5.8% and segment profit up 19.8%.

In FY2026 (ending March 2026), Gas segment net sales were ¥108,064 million (up 3.1% year on year), and segment profit was ¥15,129 million (up 19.8% year on year). Although the selling unit price under the raw material cost adjustment system declined, this was offset by increased residential heating demand (up 6.8%) due to low temperatures and record snowfall in early spring and early winter, and increased commercial air conditioning demand (up 5.1%) due to high summer temperatures. The consolidation of Muroran Gas Co., Ltd. (during the fiscal year) expanded the supply area and customer base. On the other hand, the number of retail customers continued a slight decline, down 510 to 487,990.

Key Products

Growth Drivers

• Increase in residential Gas sales volume (expanded heating demand due to low temperatures and record snowfall, increase in installed meters mainly at rental properties)
• Expansion of commercial demand (increased air conditioning demand due to high summer temperatures, improved operating rates in commercial and industrial sectors)
• Expansion of wholesale supply to other operators (FY2026 (ending March 2026): up 6.9% year on year to 34,293 thousand m³)
• Expansion of supply area and customer base through consolidation of Muroran Gas Co., Ltd. as a subsidiary
• Capture of new demand such as LNG bunkering supply for marine fuel
• Improved operational efficiency and customer convenience through promotion of heating/cooking single-meter integration construction

Risks

• Decline in selling unit price under the raw material cost adjustment system (foreign exchange and crude oil price fluctuation risk)
• Profit pressure due to increased strategic expenses such as DX investment and smart meter introduction
• Declining trend in number of retail customers due to decrease in completed new detached houses and condominiums (FY2026 (ending March 2026): down 510 year on year to 487,990)
• Uncertainty in LNG procurement costs due to prolonged geopolitical risk and U.S. policy developments
• Risk of long-term structural change in natural gas demand due to the trend toward decarbonization
• Recording of a provision for repairs related to periodic inspection and dredging work at the Ishikari Power Plant (a decrease in profit of ¥113 million due to a change in accounting estimates)
• Seasonal fluctuation factor with sales concentrated from winter to early spring

Business Details

Hokkaido Gas Co., Ltd. generates and sells electricity with Hokkaido as its sales area. The consolidated subsidiary Hokugas Genex Co., Ltd. is responsible for the solar power generation business and sells electricity to the company, while the equity-method affiliate Tomakomai Biomass Power Generation Co., Ltd. conducts a woody biomass power generation business and supplies electricity to the company. The company has a wide range of customers, from low-voltage residential to high-voltage and wholesale, and is promoting the acquisition of residential customers through campaigns and mass PR aimed at expanding combined Gas and electricity contracts.

Recent Overview

Sales volume expanded, but profit fell 19.3% due to lower unit prices under the fuel cost adjustment system and increased repair costs

In the Electricity segment for FY2026 (ending March 2026), the number of customers increased by 662 to 257,271, and total sales volume also expanded 1.9% to 861,929 thousand kWh, due to measures to expand combined Gas and electricity contracts. On the other hand, net sales were only 28,528 million yen (down 2.1% year on year) due to a decline in the selling unit price under the fuel cost adjustment system, and segment profit fell sharply by 19.3% year on year to 2,911 million yen, compounded by increased repair costs. For the next fiscal year (FY2027, ending March 2027), a worsening of the electricity business's earnings due to a surge in wholesale electricity market prices caused by instability in the Middle East situation has been factored into earnings forecasts, and is expected to continue to be a factor pressuring profitability.

Key Products

Growth Drivers

• Expansion in the number of low-voltage residential customers through mass PR and campaigns aimed at expanding combined Gas and electricity contracts
• Increase in sales volume due to temperature effects (summer cooling and winter heating demand)
• Strengthening of in-house power sources through the use of renewable energy sources (solar and biomass)
• Positioning expansion across the entire Hokkaido region as a key strategy, promoting customer acquisition as a unified group

Risks

• Downward pressure on net sales due to declining selling unit price under the fuel cost adjustment system
• Worsening of electricity business earnings due to a surge in wholesale electricity market prices caused by instability in the Middle East situation (already factored into next fiscal year's earnings forecast)
• Cost pressure from increased repair expenses and other factors
• Declining trend in wholesale electricity sales volume (FY2026 (ending March 2026): down 3.9% year on year)
• Uncertainty in the energy environment due to geopolitical risk and the trend toward decarbonization

Business Details

This segment encompasses Liquefied Petroleum Gas (LPG) sales and simplified Gas business, heat supply (chilled/hot water), petroleum products, Gas construction, Gas Appliance Sales & Leasing, energy services, and more. The main entities responsible are consolidated subsidiaries such as Hokugas Genex Co., Ltd., Hokugas G-Plex Co., Ltd., Energy Solution Co., Ltd., and Hokkaido Heat Supply Corporation. The segment supplies LPG and simplified Gas mainly to newly developed residential areas around Sapporo City and Hakodate City, and provides comprehensive energy services through the heat supply business and construction/appliance businesses. In FY2026 (ending March 2026), external net sales were ¥39,543 million, accounting for approximately 23% of the Group's total.

Recent Overview

Both net sales and profit expanded due to acquisition of newly built rental properties and increased chilled/hot water sales

In FY2026 (ending March 2026), due to an increase in appliance sales and construction accompanying the acquisition of newly built rental properties and an increase in chilled/hot water sales volume, segment net sales (including internal transactions, total) rose 4.6% year on year to ¥41,428 million, and segment profit improved significantly, up 31.4% year on year to ¥1,398 million. Muroran Gas Co., Ltd. was consolidated as a subsidiary during the fiscal year (upgraded from an equity-method affiliate) and added to the scope of consolidation. Capital expenditure was ¥2,671 million, a decrease from the prior fiscal year (¥3,157 million).

Key Products

Growth Drivers

• Continued increase in appliance sales and construction accompanying the acquisition of newly built rental properties
• Diversification of energy-related earnings through expanded sales volume of chilled/hot water (heat supply)
• Expansion of business scale and earnings contribution through consolidation of Muroran Gas Co., Ltd. as a subsidiary
• Expansion of local production and consumption of energy through collaboration with municipalities within Hokkaido
• Continued capture of demand for simplified Gas and LPG for newly developed residential areas within Hokkaido

Risks

• Risk of stagnation in Gas appliance sales and construction due to a decrease in the number of newly built condominiums and rental properties started
• Risk of fluctuation in LPG raw material prices (impact of foreign exchange and crude oil prices)
• Seasonal fluctuation factor with sales concentrated from winter to early spring
• Long-term substitution risk for LPG and simplified Gas demand as City Gas coverage expands
• Indirect impact on segment profit from expansion of companywide cost adjustment amounts due to increased strategic expenses such as DX and smart meters

Business Details

The "Other" segment encompasses businesses not included in the three main reportable segments (Gas, Electricity, and Energy-Related), such as IT Solutions, real estate, and the insurance agency business. In FY2026 (ending March 2026), the consolidation of Hokugas Lifefront Co., Ltd. as a subsidiary and expansion of system sales resulted in significant increases in both external customer net sales and segment profit. Although the segment's share of overall Group net sales remains small at approximately 1%, profitability improved markedly.

Recent Overview

Net sales and profit both increased significantly due to consolidation of Hokugas Lifefront and expansion of system sales

In FY2026 (ending March 2026), due to the new consolidation of Hokugas Lifefront Co., Ltd. from the beginning of the fiscal year and the expansion of system sales, external customer net sales improved markedly, up 28.3% year on year to ¥1,787 million, and segment profit rose 215.3% year on year to ¥464 million. Segment assets also increased significantly to ¥5,925 million due to the consolidation. The segment profit margin reached a high level of approximately 26%.

Key Products

Growth Drivers

• Expansion of business scale and earnings contribution through consolidation of Hokugas Lifefront Co., Ltd. as a subsidiary
• Capture of demand related to IT solutions accompanying the Group's overall DX promotion (utilization of information platforms)
• Boost to segment net sales and profit through continued expansion of system sales

Risks

• Structural downward pressure on net sales and profit due to the shrinking of outsourced operations, such as the termination of the water meter reading business
• High dependence on outsourced operations within the Group, creating a risk that changes in outsourcing policy by the main segments would directly affect performance
• Risk of slowing growth if the temporary scale-expansion effect from the consolidation of Hokugas Lifefront fades
• The segment's scale remains small relative to the overall Group (external net sales ratio of approximately 1%), so its impact on Group performance is limited