SHIZUOKA GAS CO.,LTD.

Business Details

The core business involves the manufacturing, supply, and sale of city gas and LNG. In addition to direct sales to residential, commercial, and industrial customers within Shizuoka Prefecture through the pipeline network, the segment also provides wholesale supply to other gas operators. The Company maintains a vertically integrated supply structure in which Shimizu LNG Co., Ltd. manufactures product gas from LNG feedstock and sells it to the Company. Overseas, the Company has entered the U.S. Shale Gas Development Business through SHIZUOKA GAS AMERICA CO., advancing its expansion into upstream operations.

Recent Overview

Net sales declined 9.1% year on year due to lower unit prices and reduced sales volume, but profit improved owing to the delivery of prepaid LNG costs.

In Q1 FY2026, net sales to external customers in the Gas segment were ¥40,080 million (versus ¥44,070 million in the same period of the previous year), a decrease mainly due to downward adjustment of gas sales unit prices under the raw material cost adjustment system and a decline in gas sales volume across all usage categories (down 1.9% in total). On the other hand, segment profit increased to ¥5,185 million (versus ¥4,861 million in the same period of the previous year). The main factor was a reduction in cost of sales resulting from the delivery in this quarter of LNG for which only costs had been prepaid in response to the sharp decline in demand in FY2021 (ended December 2021). As a subsequent event, the Company has decided to invest US$100 million in MidOceanEnergy (MOE) through a fund operated by EIG, and has announced its policy to promote expansion of the LNG business value chain from upstream to downstream.

Key Products

Growth Drivers

• Normalization of cost of sales and improved profitability from the completion of delivery of prepaid LNG costs from FY2021 (ended December 2021)
• Expansion of the domestic and overseas LNG upstream value chain through investment (US$100 million) in MidOceanEnergy (MOE) via a fund operated by EIG
• Strengthening of a stable LNG procurement base through the establishment of a strategic partnership with MOE
• Stabilization of LNG procurement through long-term contracts and reduction of raw material costs by curbing spot market procurement
• Expansion of the business base through the consolidation of Kyodo Kaihatsu Co., Ltd. and Kyowa Real Estate Co., Ltd. as subsidiaries

Risks

• Risk of downward adjustment of gas sales unit prices under the raw material cost adjustment system (affecting net sales also in Q1 FY2026)
• Risk of continued decline in gas sales volume across all usage categories (residential down 4.5%, commercial down 6.4%, industrial down 1.7%)
• Risk of rising LNG prices and spot market prices, and geopolitical risk
• Long-term risk of declining natural gas demand due to the promotion of carbon neutrality
• Risk of intensifying competition due to deregulation of the electricity and gas markets
• Foreign exchange risk and resource price fluctuation risk associated with the investment (US$100 million) in MOE
• Foreign exchange risk and resource price fluctuation risk in the U.S. Shale Gas Development Business

Business Details

This segment comprises three businesses: LPG sales, equipment sales, and piping construction conducted by Shizuoka Gas Energy Co., Ltd.; electricity sales conducted by Shizuoka Gas & Power Co., Ltd.; and On-site Energy Services handled directly by the Company (installing equipment such as cogeneration systems at customer sites to sell electricity and heat). It also includes a solar power generation business in Vietnam (an equity-method affiliate). Net sales to external customers in Q1 FY2026 (ended March 2026) were ¥7,953 million, accounting for approximately 14.8% of consolidated net sales.

Recent Overview

Net sales declined year on year, but segment profit rose 37.4%, improving profitability.

In the first quarter (January to March 2026) of the fiscal year ending December 2026, net sales to external customers in the LPG & Other Energy segment were ¥7,953 million, down 6.6% from the same period of the previous year (¥8,516 million). On the other hand, segment profit rose sharply by 37.4% year on year to ¥848 million (versus ¥617 million in the same period of the previous year), improving profitability. There has been no revision to the full-year earnings forecast; the consolidated forecast for the fiscal year ending December 2026 remains at net sales of ¥201,130 million and operating income of ¥9,620 million (down 31.6% year on year).

Key Products

Growth Drivers

• Expansion of customer base and sales volume in the LPG business through the consolidation of Fuji Kōatsu Co., Ltd. as a subsidiary
• Increase in electricity sales volume (sales to customers outside the supply-demand adjustment market are on an expanding trend)
• Enhancement of supply capacity and adjustment capability through active investment in renewable energy power sources (expansion of the Fuji Power Plant and grid-connected storage batteries)
• Expansion of On-site Energy Services, promoting the spread of cogeneration and accumulating energy service revenue
• Promotion of the electricity and renewable energy businesses as growth businesses under the Group's 2030 Vision, leveraging alliances with other companies

Risks

• Risk of earnings volatility in the electricity supply-demand adjustment market (a significant decline in revenue was experienced in the fiscal year ended December 2025)
• Risk of raw material price fluctuations in the LPG market and intensifying competition with gas and electricity
• Medium- to long-term structural risk of declining LPG demand due to the promotion of carbon neutrality
• Risk related to the recovery of renewable energy investments (capital expenditure has surged to more than three times the previous period's level)
• Risk of rising LPG procurement costs due to geopolitical risk and foreign exchange fluctuations

Business Details

This category encompasses business segments not included in the reportable segments (Gas; LPG & Other Energy), including the contracted construction and gas equipment sales business, the renovation business, the leasing business, and others. It includes Shizuoka Gas Engineering Co., Ltd., Shizuoka Gas Living Co., Ltd., Good Living Co., Ltd., Energia Shizuoka Co., Ltd. and Energia Tobu Co., Ltd., and Shizuoka Gas Credit Co., Ltd., positioned as the "lifestyle services and engineering services business" supporting regional housing and living infrastructure.

Recent Overview

Net sales increased substantially, but segment profit plunged 88% year on year.

In Q1 of the fiscal year ending December 2026, net sales to external customers in the Other segment increased substantially to ¥5,754 million (versus ¥3,489 million in the same period of the previous year), while segment profit fell sharply by 88.4% year on year to ¥21 million (versus ¥181 million in the same period of the previous year). Profitability declined markedly despite the expansion in sales scale, indicating that changes in cost structure and business mix are weighing on profit.

Key Products

Growth Drivers

• Incorporation of the housing business and expansion of sales scale through the consolidation of Good Living Co., Ltd. as a subsidiary
• Increase in orders for facility construction (gas construction, air conditioning construction, etc.)
• A Group strategy positioning the "lifestyle services and engineering services business" as a growth business, with a policy of expanding business areas through M&A
• Plans to accelerate growth through Group reorganization centered on the lifestyle services business and engineering services business from 2026

Risks

• Despite a substantial increase in net sales (up approximately 62% year on year), segment profit plunged (down 88% year on year), representing the most significant challenge of marked profitability deterioration
• The housing business (Good Living Co., Ltd.) is susceptible to rising construction costs and labor shortages
• Long-term risk of shrinking housing and renovation demand in the Shizuoka region due to population decline and the aging society with fewer children
• Risk of integration costs and organizational change risk associated with Group reorganization
• Risk of declining asset efficiency (ROA) as segment assets expand