Itochu Enex / 8133

R Itochu Enex / 8133

COVERAGE INITIATED ON: 2015.01.27 LAST UPDATE: 2020.10.30

Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg.

Research Coverage Report by Shared Research Inc. Itochu Enex / 8133 R LAST UPDATE: 2020.10.30 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

INDEX

How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the business section later in the report.

Executive summary ------3 Key financial data ------5 Recent updates ------6 Highlights ------6 Trends and outlook ------7 Quarterly trends and results ------7 Company forecast for FY03/21 (out May 15, 2020) ------11 Business, market and value chain ------18 Performance trends ------18 Management strategy ------19 Business overview ------21 Segments ------21 Overseas businesses ------37 Strengths and weaknesses ------39 Historical performance and financial statements ------41 Historical performance ------41 Income statement ------52 ROE, ROA, ROIC ------52 Balance sheet ------53 Cash flow statement ------56 Other information ------57 History ------57 News and topics ------58 Top management ------58 Dividend policy ------59 Major shareholders ------59 Employees ------60 Company profile ------61

02/62 Itochu Enex / 8133 R LAST UPDATE: 2020.10.30 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Executive summary

Business overview

Itochu Enex is one of the top fuel trading houses in Japan. It sells LP gas, gasoline, kerosene, diesel oil, fuel oil, asphalt, and ◤ other petroleum products to LP gas distributors, service stations, and corporate users. Its main supplier is JXTG Holdings (TSE1: 5020, hereinafter ENEOS), but it also sources products from other petroleum and LP gas refineries. Parent company ITOCHU Corporation (TSE1: 8001) owns 52.1% of Itochu Enex.

In FY03/20, the Home-Life Division (LP gas sales) accounted for 14.5% of operating profit, the Car-Life Division (mainly auto ◤ fuel sales to service stations) for 42.8%, the Industrial Business Division (mainly industrial fuel sales) for 14.6%, and the Power and Utility Division for 30.2%. Petroleum product sales to service stations and the electric power business are the biggest contributors to profit lines.

Domestic demand for LP gas and petroleum products continues to decline. There are many underlying reasons, including the ◤ shrinking population of Japan, the flow of people into cities, economic stagnation, improved fuel consumption and energy conservation, increasing use of air conditioners, and switching to city gas. However, Itochu Enex is mitigating the decline in sales volume and increasing its market share by leveraging its marketing prowess to grow its network of Car-Life Stations and capture new customers and by focusing on niche markets other operators are abandoning.

Starting with the creation of JX Energy in 2010 through the merger of Nippon Oil and Japan Energy, there has been a rapid ◤ succession of major restructuring moves among petroleum refineries in recent years. Such restructuring has left just three major refineries, resolving excessive competition in the petroleum industry. This has led to an improved supply and demand balance and better margins on petroleum products. In addition, the company’s expansion of its imported asphalt sales business, enhanced competitiveness of its fleet services business, and entry into the Nissan car dealership business in Osaka all contributed to profit growth in the petroleum-related businesses, and the Car-Life Division’s operating profit grew from JPY2.4bn in FY03/14 to JPY8.2bn in FY03/20.

Itochu Enex entered the electric power business in 2010 and has expanded its in-house power generation capacity through a ◤ series of acquisitions of highly cost-competitive generating facilities from materials manufacturers. The company leveraged its sales network (cultivated in the industrial fuel and service stations businesses) covering both corporate and residential customers to expand its electricity sales, and sales volume increased more than tenfold between FY03/14 (231,000MWh) and FY03/17 (2,431,000MWh). As a result, the Power and Utility Division’s operating profit grew from JPY2.4bn in FY03/14 to JPY5.8bn in FY03/20.

According to Moving 2020, its medium-term plan covering FY03/20 and FY03/21, Itochu Enex is targeting JPY11.0bn in profit ◤ attributable to owners of the parent in FY03/21 (reduced from JPY12.5bn on May 15, 2020, to take into account the impact of the COVID-19 pandemic). Growth strategies include overseas development centered on Southeast Asia, pursuance of M&A deals in peripheral business areas, realization of partnerships and alliances, and promotion of environment-related businesses.

Earnings trends

In FY03/20, Itochu Enex recorded sales revenue of JPY897.4bn (-10.9% YoY), operating profit of JPY19.3bn (+7.9% YoY), pre- ◤ tax profit of JPY20.0bn (+2.9% YoY), and profit attributable to owners of the parent of JPY12.1bn (+4.3% YoY). The dividend was JPY44 per share (+JPY2 per share YoY). The main reason for the increase in operating profit was an improved margin on electricity due to a relatively high arm’s length procurement ratio in the Power and Utility Division.

For FY03/21, the company forecasts sales revenue of JPY710.0bn (-20.9% YoY), operating profit of JPY16.0bn (-16.9% YoY), ◤ pre-tax profit of JPY16.7bn (-16.4% YoY), profit attributable to owners of the parent of JPY11.0bn (-8.8% YoY), and a dividend

03/62 Itochu Enex / 8133 R LAST UPDATE: 2020.10.30 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

of JPY44 per share (flat YoY). In FY03/21, it expects solid sales of household fuels and electricity and fuels for the logistics industry, as well as robust international trading of petroleum products. However, it also anticipates profit decline due to lower LP gas prices and the resulting impact on inventories, lower demand for commercial and industrial use fuels, falling demand for gasoline, and a drop in the number of vehicles sold.

Strengths and weaknesses

Shared Research thinks the main strengths of Itochu Enex are its bargaining power based on volume procurement and sales capacity, strong ability to develop new businesses, and large energy business portfolio encompassing petroleum, LP gas, and electricity. Weaknesses include a low direct sales ratio in its LP gas businesses, weakness in north of the Kanto region, and a late start in the biomass-fueled power generation business.

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Key financial data

Income statement (IFRS) FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Init. Est. Sales 1,430,746 1,506,606 1,373,393 1,071,629 1,028,939 1,156,344 1,244,260 1,104,548 YoY - 5.3% -8.8% -22.0% -4.0% 12.4% 7.6% -11.2% Sales revenue 864,589 966,044 936,841 723,645 695,060 744,767 1,007,086 897,427 710,000 YoY - 11.7% -3.0% -22.8% -4.0% 7.2% 35.2% -10.9% Gross profit 69,666 71,599 85,720 89,562 93,604 88,822 84,210 86,418 YoY - 2.8% 19.7% 4.5% 4.5% -5.1% -5.2% 2.6% GPM 4.9% 4.8% 6.2% 8.4% 9.1% 7.7% 6.8% 7.8% Other income (expenses) -56,928 -59,724 -72,620 -73,178 -73,926 -71,669 -66,359 -67,161 SG&A expenses -55,668 -57,862 -71,184 -73,226 -74,697 -70,931 -67,318 -68,858 YoY - 4.9% 21.6% 0.8% 1.0% -3.1% -7.4% 1.2% SG&A expenses YoY 3.9% 23.0% 2.9% 2.0% -5.0% -5.1% 2.3% Profit from operating activities 12,738 11,875 13,100 16,384 19,678 17,153 17,851 19,257 16,000 YoY - -6.8% 10.3% 25.1% 20.1% -12.8% 4.1% 7.9% GPM 0.9% 0.8% 1.0% 1.5% 1.9% 1.5% 1.4% 2.1% Financial income (expenses) -476 -456 -581 -708 -834 -803 -2 -1,047 Equity in earnings (losses) of affiliates -28 528 -357 -672 500 493 1,565 1,768 Gains (losses) from sale of shares in affiliat es - 1,897 -7 - - 2,326 - - Pre-tax profit 12,234 13,844 12,155 15,004 19,344 19,169 19,414 19,978 16,700 YoY - 13.2% -12.2% 23.4% 28.9% -0.9% 1.3% 2.9% Pre-tax profit margin 0.9% 0.9% 0.9% 1.4% 1.9% 1.7% 1.6% 2.2% Income tax expenses -4,840 -5,794 -5,626 -6,040 -6,599 -5,945 -5,749 -5,793 Profit 7,393 8,050 6,529 8,964 12,745 13,224 13,665 14,185 Profit attrib. to non-controlling interests -923 -925 -1,026 -1,495 -2,340 -2,199 -2,106 -2,129 Profit attributable to owners of the parent 6,471 7,124 5,503 7,469 10,405 11,025 11,559 12,056 11,000 YoY - 10.1% -22.8% 35.7% 39.3% 6.0% 4.8% 4.3% Profit margin 0.5% 0.5% 0.4% 0.7% 1.0% 1.0% 0.9% 1.3% Per share data (JPY) (IFRS) FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 Shares outstanding (year-end; '000) 112,992 112,991 112,990 112,989 116,881 116,881 116,881 116,881 - Book value per share 791 833 862 890 960 1,029 1,083 1,137 - EPS 57.3 63.1 48.7 66.1 92.1 97.6 102.4 106.8 97.5 Dividend per share 16.0 20.0 22.0 24.0 32.0 40.0 42.0 44.0 44.0 Payout ratio 27.9% 31.7% 45.2% 36.3% 34.7% 41.0% 41.0% 41.2% 45.2% Balance sheet (IFRS) FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 Current assets 189,196 188,193 157,708 137,865 178,127 212,769 199,775 161,240 - Cash and cash equivalents 18,062 14,251 16,184 20,824 22,727 22,573 18,725 19,243 - Accounts receivable–trade 136,578 140,289 98,449 71,968 94,759 119,541 106,165 86,911 - Inventory assets 18,134 18,655 27,794 25,160 27,155 28,380 33,053 24,263 - Other 16,422 14,999 15,281 19,913 33,486 42,275 41,832 30,823 - Noncurrent assets 126,697 132,839 171,351 166,188 166,476 169,852 174,598 226,417 - Equity method investments 6,032 5,927 10,551 8,786 11,749 26,145 29,441 31,583 - Other investments 8,925 7,349 8,924 8,029 7,461 3,406 4,186 3,860 - Tangible fixed assets 57,655 66,988 88,836 88,311 87,588 85,326 87,599 132,870 - Investments in real estate 15,632 14,236 14,369 13,262 11,986 10,166 9,819 13,147 - Goodwill - 229 108 588 533 692 521 521 - Intangible assets (excl. goodwill) 10,999 10,280 23,474 24,329 23,638 20,798 20,091 20,005 - Other non-current financial assets 27,454 27,830 25,089 22,883 23,521 23,319 22,941 24,431 - Total assets 315,893 321,032 329,059 304,053 344,603 382,621 374,373 387,657 -

Current liabilities 161,738 159,201 149,443 111,997 143,751 174,929 165,463 133,224 - Short-term bonds and debt 14,745 11,499 14,208 5,299 9,318 12,432 11,217 7,024 - Accounts payable–trade 124,046 125,655 104,564 80,745 101,902 127,445 121,677 83,936 - Accrued income tax 3,994 4,021 2,489 3,351 5,258 3,650 3,193 4,172 - Other current liabilities 18,952 18,025 28,182 22,602 27,273 31,402 29,376 38,092 - Noncurrent liabilities 56,501 58,268 66,669 74,894 73,375 70,626 64,344 102,549 - Long-term bonds and debt 26,158 27,099 26,746 32,366 31,702 30,273 22,893 18,156 - Retirement benefit liabilities 7,005 7,042 9,350 10,127 9,761 9,820 9,936 10,335 - Other noncurrent liabilities 23,338 24,127 30,573 32,401 31,912 30,533 31,515 74,058 - Total liabilities 218,238 217,469 216,112 191,823 217,126 245,555 229,807 235,773 - Total equity 97,655 103,563 112,947 117,162 127,477 137,066 144,566 151,884 - Equity attributable to owners of parent 89,425 94,144 97,432 100,526 108,511 116,104 122,290 128,333 - Capital stock 19,878 19,878 19,878 19,878 19,878 19,878 19,878 19,878 - Capital surplus 18,737 18,737 18,743 18,740 18,740 18,892 18,922 18,934 - Retained earnings 54,087 59,378 62,223 66,024 73,300 80,352 86,769 92,761 - Other capital components -1,527 -2,098 -1,661 -2,364 -1,655 -1,145 -1,406 -1,370 - Treasury stock -1,750 -1,750 -1,751 -1,752 -1,752 -1,873 -1,873 -1,870 - Non-controlling interests 8,231 9,419 15,515 16,636 18,966 20,962 22,276 23,551 - Total liabilities and equity 315,893 321,032 329,059 304,053 344,603 382,621 374,373 387,657 - Cash flow statement (IFRS) FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 Cash flows from operating activities 22,754 17,530 34,336 30,322 17,831 24,239 25,403 28,106 - Cash flows from investing activities -24,930 -12,556 -20,410 -16,673 -14,712 -18,458 -13,410 -1,411 - Cash flows from financing activities 4,759 -8,859 -12,115 -9,059 -1,195 -5,850 -15,857 -26,196 - Financial ratios (IFRS) FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 Bonds and loans payable 40,904 38,599 40,954 37,665 41,020 42,705 34,110 25,180 Net cash -22,842 -24,348 -24,770 -16,841 -18,293 -20,132 -15,385 -5,937 ROA (pre-tax profit based) 4.1% 4.3% 3.7% 4.7% 6.0% 5.3% 5.1% 5.2% ROE 7.5% 7.8% 5.7% 7.5% 10.0% 9.8% 9.7% 9.6% Equity ratio 28.3% 29.3% 29.6% 33.1% 31.5% 30.3% 32.7% 33.1% Source: Shared Research based on company data

05/62 Itochu Enex / 8133 R LAST UPDATE: 2020.10.30 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

Recent updates

Highlights

On October 30, 2020, Itochu Enex Co., Ltd. announced 1H FY03/21 earnings results; see the results section for details.

On September 2, 2020, Shared Research updated the report following interviews with the company.

On July 31, 2020, the company announced Q1 FY03/21 earnings results; see the results section for details.

For previous releases and developments, please refer to the News and topics section.

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Trends and outlook

Quarterly trends and results

Cumulative FY03/19 FY03/20 FY03/21 FY03/21 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 % of Es t . FY Es t . Sales revenue 226,301 475,378 750,618 1,007,086 220,216 439,099 671,116 897,427 148,181 319,536 45.0% 710,000 YoY 31.2% 34.9% 38.0% 35.2% -2.7% -7.6% -10.6% -10.9% -32.7% -27.2% -20.9% Sales 288,762 606,834 931,822 1,244,260 274,365 548,143 826,528 1,104,548 182,121 395,248 YoY 17.7% 19.5% 14.5% 7.6% -5.0% -9.7% -11.3% -11.2% -33.6% -27.9% Gross profit 20,098 41,333 62,167 84,210 20,671 42,281 63,689 86,418 20,357 42,121 YoY -8.6% -6.5% -4.6% -5.2% 2.9% 2.3% 2.4% 2.6% -1.5% -0.4% Gross profit margin 7.0% 6.8% 6.7% 6.8% 7.5% 7.7% 7.7% 7.8% 11.2% 10.7% SG&A expenses 16,238 32,524 49,059 67,318 16,476 33,044 49,884 68,858 15,870 31,947 YoY -8.5% -8.1% -5.6% -5.1% 1.5% 1.6% 1.7% 2.3% -3.7% -3.3% SG&A ratio 5.6% 5.4% 5.3% 5.4% 6.0% 6.0% 6.0% 6.2% 8.7% 8.1% Operating profit 3,938 8,884 13,267 17,851 4,312 9,527 15,219 19,257 4,447 10,163 63.5% 16,000 YoY -15.6% -5.7% -7.2% 4.1% 9.5% 7.2% 14.7% 7.9% 3.1% 6.7% -16.9% Operating profit margin 1.4% 1.5% 1.4% 1.4% 1.6% 1.7% 1.8% 1.7% 2.4% 2.6% Pretax profit 4,494 9,392 13,566 19,414 4,787 9,681 15,852 19,978 5,252 10,472 62.7% 16,700 YoY -2.1% 13.4% -13.6% 1.3% 6.5% 3.1% 16.9% 2.9% 9.7% 8.2% -16.4% Pretax profit margin 1.6% 1.5% 1.5% 1.6% 1.7% 1.8% 1.9% 1.8% 2.9% 2.6% Profit attrib. to owners of the parent 2,544 5,447 7,812 11,559 2,701 5,184 9,282 12,056 3,578 6,234 56.7% 11,000 YoY 0.8% 37.2% -15.8% 4.8% 6.2% -4.8% 18.8% 4.3% 32.5% 20.3% -8.8% Profit margin 0.9% 0.9% 0.8% 0.9% 1.0% 0.9% 1.1% 1.1% 2.0% 1.6% Quarterly FY03/19 FY03/20 FY03/21 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Sales revenue 226,301 249,077 275,240 256,468 220,216 218,883 232,017 226,311 148,181 171,355 YoY 31.2% 38.4% 43.6% 27.8% -2.7% -12.1% -15.7% -11.8% -32.7% -21.7% Sales 288,762 318,072 324,988 312,438 274,365 273,778 278,385 278,020 182,121 213,127 YoY 17.7% 21.1% 6.2% -8.7% -5.0% -13.9% -14.3% -11.0% -33.6% -22.2% Gross profit 20,098 21,235 20,834 22,043 20,671 21,610 21,408 22,729 20,357 21,764 YoY -8.6% -4.3% -0.6% -6.9% 2.9% 1.8% 2.8% 3.1% -1.5% 0.7% Gross profit margin 7.0% 6.7% 6.4% 7.1% 7.5% 7.9% 7.7% 8.2% 11.2% 10.2% SG&A expenses 16,238 16,286 16,535 18,259 16,476 16,568 16,840 18,974 15,870 16,077 YoY -8.5% -7.7% -0.3% -3.7% 1.5% 1.7% 1.8% 3.9% -3.7% -3.0% SG&A ratio 5.6% 5.1% 5.1% 5.8% 6.0% 6.1% 6.0% 6.8% 8.7% 7.5% Operating profit 3,938 4,946 4,383 4,584 4,312 5,215 5,692 4,038 4,447 5,716 YoY -15.6% 4.0% -10.1% 60.6% 9.5% 5.4% 29.9% -11.9% 3.1% 9.6% Operating profit margin 1.4% 1.6% 1.3% 1.5% 1.6% 1.9% 2.0% 1.5% 2.4% 2.7% Pretax profit 4,494 4,898 4,174 5,848 4,787 4,894 6,171 4,126 5,252 5,220 YoY -2.1% 32.7% -43.7% 68.2% 6.5% -0.1% 47.8% -29.4% 9.7% 6.7% Pretax profit margin 1.6% 1.5% 1.3% 1.9% 1.7% 1.8% 2.2% 1.5% 2.9% 2.4% Profit attrib. to owners of the parent 2,544 2,903 2,365 3,747 2,701 2,483 4,098 2,774 3,578 2,656 YoY 0.8% 100.8% -55.5% 114.5% 6.2% -14.5% 73.3% -26.0% 32.5% 7.0% Profit margin 0.9% 0.9% 0.7% 1.2% 1.0% 0.9% 1.5% 1.0% 2.0% 1.2% Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

1H FY03/21 results Overview

Itochu Enex reported sales revenue of JPY319.5bn (-27.2% YoY). The decline was caused chiefly by a drop in sales volume of ▷ domestic petroleum products and lower sales prices accompanying a decline in crude oil prices. Operating profit was JPY10.2bn (+6.7% YoY). The increase was mainly due to solid household LP gas and electricity sales ▷ volume on demand caused by more people staying home due to the COVID-19 pandemic and reductions in operating and business costs in petroleum product import/export operations in light of fluctuations in the price of crude oil. Profit attributable to owners of the parent was JPY6.2bn (+20.3% YoY). ▷ In the Home-Life Division, sales revenue was JPY30.2bn (-JPY6.4bn YoY). The decline was caused chiefly by lower sales prices ▷ accompanying reduced LP gas import prices and a decline in LP gas and industrial gas sales volume due to a slump in economic activity. Operating profit was JPY39mn (-93.7% YoY) and profit attributable to owners of the parent was JPY15mn (- 93.3% YoY). The decline was caused primarily by the impact on inventory of falling LP gas import prices and a drop in LP gas and industrial gas sales volume. In the Car-Life Division, sales revenue was JPY183.9bn (-28.1% YoY). The decline was caused chiefly by a drop in selling prices ▷ of domestic petroleum products due to lower crude oil prices, along with a decrease in sales volume. Operating profit was

07/62 Itochu Enex / 8133 R LAST UPDATE: 2020.10.30 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Coverage

JPY3.4mn (-27.5% YoY), and profit attributable to owners of the parent was JPY1.9bn (-22.7% YoY). This was mainly due to lower petroleum product sales volume and declines in unit sales and revenue from services in the car dealership business. In the Industrial Business Division, sales revenue was JPY68.5bn (-28.2% YoY). The drop was caused chiefly by a decline in sales ▷ volume for industrial petroleum products and a decrease in sales prices accompanying falling crude oil prices. Operating profit was JPY2.8bn (+178.9% YoY), and net income attributable to owners of the parent was JPY2.3bn (+233.5% YoY). This jump was caused chiefly by reductions in operating and business costs in petroleum product import/export operations in light of fluctuations in the price of crude oil. In the Power and Utility Division, sales revenue was JPY37.0bn (-28.2% YoY). The decline was mainly due to a drop in ▷ electricity sales volume in the electric power business. Operating profit was JPY3.4bn (+17.0% YoY), and profit attributable to owners of the parent was JPY1.7bn (+5.4% YoY). This rise was chiefly due to the completion of regular repairs conducted on a large scale in FY03/20 in the power generation business and subsequent improvement in operation rates. Cash flows: Operating activities provided net cash of JPY22.1bn (versus JPY7.1bn in 1H FY03/20) on improvement in working ▷ capital and profit attributable to owners of the parent. Investing activities provided net cash of JPY5.9bn (versus net cash of JPY7.2bn used in 1H FY03/20) since the round of acquisitions of subsidiaries conducted in FY03/20 has run its course. As a result, free cash flows stood at a net inflow of JPY28.0bn (versus a net outflow of JPY102mn in 1H FY03/20).

Overview of results by segment

Cumulative FY03/19 FY03/20 FY03/21 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Sales 288,762 606,834 931,822 1,244,260 274,365 548,143 826,528 1,104,548 182,121 395,248 YoY 17.7% 19.5% 14.5% 7.6% -5.0% -9.7% -11.3% -11.2% -33.6% -27.9% Home-Life 24,565 44,959 74,413 105,112 22,393 40,344 66,372 98,328 17,183 32,982 YoY 3.1% 1.6% -0.1% -3.7% -8.8% -10.3% -10.8% -6.5% -23.3% -18.2% Car-Life 611,316 813,267 133,323 533,750 706,719 90,367 203,568 YoY ------12.7% -13.1% -32.2% - Industrial Business 175,654 228,946 93,643 152,970 206,332 54,017 115,356 YoY ------12.9% -9.9% -42.3% - Power & Utility 18,476 48,262 70,439 96,935 25,006 52,943 73,436 93,169 20,554 43,342 YoY 25.9% 42.0% 29.1% 23.4% 35.3% 9.7% 4.3% -3.9% -17.8% -18.1% Operating profit 3,938 8,884 13,267 17,851 4,312 9,527 15,219 19,257 4,447 10,163 YoY -15.6% -5.7% -7.2% 4.1% 9.5% 7.2% 14.7% 7.9% 3.1% 6.7% Home-Life 775 1,151 2,050 3,555 555 618 1,204 2,799 57 39 YoY 1.8% 39.7% 36.0% 13.8% -28.4% -46.3% -41.3% -21.3% -89.7% -93.7% Car-Life 6,385 9,230 1,928 6,438 8,239 910 3,392 YoY ------0.8% -10.7% -52.8% - Industrial Business 1,973 2,449 256 1,866 2,810 1,730 2,800 YoY ------5.4% 14.7% 575.8% - Power & Utility 1,459 2,614 2,102 2,728 1,351 2,913 5,221 5,825 1,472 3,409 YoY -23.8% -32.6% -56.5% -41.0% -7.4% 11.4% 148.4% 113.5% 9.0% 17.0% Quarterly FY03/19 FY03/20 FY03/21 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Sales 288,762 318,072 324,988 312,438 274,365 273,778 278,385 278,020 182,121 213,127 YoY 17.7% 21.1% 6.2% -8.7% -5.0% -13.9% -14.3% -11.0% -33.6% -22.2% Home-Life 24,565 20,394 29,454 30,699 22,393 17,951 26,028 31,956 17,183 15,799 YoY 3.1% -0.1% -2.5% -11.5% -8.8% -12.0% -11.6% 4.1% -23.3% -12.0% Car-Life - - - 201,951 133,323 -133,323 - 172,969 90,367 113,201 YoY ------14.4% -32.2% - Industrial Business - - - 53,292 93,643 -93,643 - 53,362 54,017 61,339 YoY ------0.1% -42.3% - Power & Utility 18,476 29,786 22,177 26,496 25,006 27,937 20,493 19,733 20,554 22,788 YoY 25.9% 54.2% 7.9% 10.3% 35.3% -6.2% -7.6% -25.5% -17.8% -18.4% Operating profit 3,938 4,946 4,383 4,584 4,312 5,215 5,692 4,038 4,447 5,716 YoY -15.6% 4.0% -10.1% 60.6% 9.5% 5.4% 29.9% -11.9% 3.1% 9.6% Home-Life 775 376 899 1,505 555 63 586 1,595 57 -18 YoY 1.8% 496.8% 31.6% -6.9% -28.4% -83.2% -34.8% 6.0% -89.7% - Car-Life - - - 2,845 1,928 -1,928 - 1,801 910 2,482 YoY ------36.7% -52.8% - Industrial Business - - - 476 256 -256 - 944 1,730 1,070 YoY ------98.3% 575.8% - Power & Utility 1,459 1,155 -512 626 1,351 1,562 2,308 604 1,472 1,937 YoY -23.8% -41.1% - - -7.4% 35.2% - -3.5% 9.0% 24.0% Source: Shared Research based on company data Note: From FY03/20, the Mobility Life Division has been absorbed by the Life and Industrial Energy Division (in this table, segment figures for FY03/19 have not been retroactively adjusted).

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Home-Life Division

Home-Life FY03/19 FY03/20 FY03/21 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 LP gas direct sales customers - - - - 553 551 552 551 550 549 Business Elect ricit y ret ail cust omers - - - - 86 91 95 93 96 100 met rics LP gas sales volume ('000 tons) 146 100 148 154 120 108 141 156 108 93 Industrial gas ('000 tons) 21 21 21 17 19 19 20 16 16 16 Gross profit 5.6 4.8 5.6 6.4 5.3 4.6 5.4 6.7 4.6 4.6 SG&A expenses -4.6 -4.6 -4.8 -4.9 -4.8 -4.7 -4.8 -5.1 -4.6 -4.5 Profit and Operating expenses 0.8 0.4 0.9 1.5 0.6 0.0 0.6 1.6 0.1 -0.1 loss Equity-method earnings 0.4 0.1 0.0 0.8 0.3 -0.2 0.2 0.5 0.2 0.0 Profit 0.5 0.3 0.5 1.8 0.5 -0.3 0.6 1.3 0.2 -0.2 Itochu Enex Home Life Nishi-Nihon 0.2 0.1 0.2 0.4 0.2 0.1 0.1 0.3 0.2 0.1 Affiliat e Ecore 0.2 0.1 0.1 0.3 0.2 0.1 0.1 0.3 0.2 0.0 earnings Eneark 0.3 0.0 0.0 0.4 0.3 0.0 0.1 0.5 0.3 -0.1 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY15mn (-93.3% YoY). The drop was caused primarily by the impact on ▷ inventory of falling LP gas import prices and a decline in LP gas and industrial gas sales volume. The number of LP gas direct sales customers fell by about 2,000 from end-FY03/20 to about 549,000 as the company sold ▷ some of its commercial rights. LP gas sales volume was about 201,000 tons (-12% YoY). Household LP gas sales increased YoY on demand caused by more ▷ people staying home, but business, industrial, and auto gas demand fell YoY as factory operation rates declined. In the residential electricity sales business, the number of customer households rose by about 7,000 from end-FY03/20 to ▷ about 100,000. Industrial gas sales volume was about 32,000 tons (-15% YoY). ▷

Car-Life Division

Car-Life FY03/19 FY03/20 FY03/21 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Gasoline sales volume ('000 kl) - - - 663 711 748 563 578 377 453 T o Car Life St at ions - - - 537 - - 499 455 - - To others - - - 126 - - 64 123 - - Business Kerosene ('000 kl) 145 120 273 442 196 133 161 277 57 24 met rics Diesel oil ('000 kl) 859 934 332 697 776 815 375 666 470 493 New cars ('000 units) 6 8 7 9 6 8 5 8 5 6 Pre-owned cars ('000 units) 7 5 6 7 6 7 5 6 5 5 Gross profit - - - 13.0 11.3 - - 12.9 10.4 - SG&A expenses - - - -71.4 -9.5 - - -71.6 -9.4 - Profit and Operating expenses - - - 2.8 1.9 - - 1.8 0.9 - loss Equity-method earnings - - - 0.0 0.0 - - 0.0 0.0 - Profit - - - 1.7 1.0 - - 1.1 0.6 - Affiliat e Enex Fleet 0.3 0.2 0.5 0.2 0.3 0.5 0.3 0.4 0.6 0.7 earnings Osaka Car Life Group 0.1 0.1 0.3 0.4 0.2 0.3 0.0 0.1 -0.1 0.3 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY1.9bn (-22.7% YoY). Petroleum product sales volume fell due to factors such ▷ as the COVID-19 epidemic, and unit sales and revenue from services declined in the car dealership business. Petroleum product sales volume declined YoY on lower auto fuel consumption caused by the COVID-19 pandemic. Gasoline ▷ sales volume fell about 15% YoY and diesel oil sales volume fell about 7% YoY. In automobile-related business, unit sales dropped YoY in the car dealership business mainly as a result of shortened business ▷ hours to prevent the spread of COVID-19. Revenue from services also fell YoY.

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Industrial Business Division

Industrial Business FY03/19 FY03/20 FY03/21 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Gasoline sales volume ('000 kl) - - - 34 241 241 - 34 176 179 Kerosene ('000 kl) - - - 85 142 98 - 76 75 47 Business Diesel oil ('000 kl) - - - 149 280 278 - 149 266 250 met rics Heavy fuel oil ('000 kl) 563 518 385 453 484 489 385 486 539 524 Asphalt ('000 tons) 69 85 96 120 70 94 109 97 72 67 Gross profit - - - 1.1 1.4 1.8 - 1.6 2.7 2.1 SG&A expenses - - - -0.6 -1.2 -1.1 - -0.7 -1.0 -1.0 Profit and Operating expenses - - - 0.5 0.3 0.7 - 0.9 1.7 1.1 loss Equity-method earnings - - - 0.0 0.0 0.0 - 0.0 0.0 0.0 Profit - - - 0.3 0.2 0.5 - 0.7 1.5 0.8 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY2.3bn (+233.5% YoY). This jump was caused chiefly by reductions in ▷ operating and business costs in petroleum product import/export operations in light of fluctuations in the price of crude oil. In the industrial petroleum product and auto fuel card businesses, sales volume fell YoY on lower factory operation rates and ▷ less card use for commercial vehicles. In the asphalt sales business, sales volume was down 15% YoY. ▷

Power and Utility Division

Power and Ut ilit y FY03/19 FY03/20 FY03/21 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Elect ricit y (GW h) 625 733 561 775 577 667 566 577 509 587 - High volt age (GW h) - - 517 636 486 565 451 446 384 453 Business - Low voltage (GWh) - - 44 138 92 100 116 131 125 134 met rics Steam ('000 tons) 162 149 137 163 150 146 104 106 125 125 Heat quantity ('000 J) 280 548 223 264 256 514 230 258 237 518 Gross profit 2.5 2.4 0.7 1.5 2.6 2.9 2.6 1.5 2.6 3.1 SG&A expenses -1.2 -1.1 -1.1 -1.3 -1.2 -1.1 -1.3 -1.2 -1.2 -1.1 Profit and Operating expenses 1.5 1.1 -0.5 0.6 1.4 1.5 2.3 0.6 1.5 1.9 loss Equity-method earnings 0.2 0.1 0.0 -0.1 0.4 0.1 0.5 -0.2 0.3 -0.1 Profit 0.8 0.6 -0.4 1.0 0.9 0.8 1.7 0.1 1.1 0.6 Enex Electric Power Group 0.2 0.1 0.1 0.6 0.0 0.1 0.5 0.4 0.5 0.1 Affiliat e Enex Life Service 0.0 0.0 0.1 0.1 0.1 0.0 0.1 0.1 0.1 0.1 earnings Tokyo Toshi Service - - 0.1 -0.1 0.2 0.5 0.2 -0.1 0.3 0.6 Oji-It ochu Enex Pow er Ret ailing - - -0.1 0.0 0.2 0.1 0.3 0.2 0.2 0.2 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY1.7bn (+5.4% YoY). This rise was chiefly due to the completion of regular ▷ repairs conducted on a large scale in FY03/20 in the power generation business and subsequent improvement in operation rates. In the electricity business, residential electricity consumption increased as more people stayed home. There was an increase in ▷ low-voltage contracts centered on residential electricity, helping low-voltage sales volume reach 259GWh (+34% YoY). However, there was a substantial decline in large, high-voltage contracts, so high-voltage sales volume was down 20% YoY to 837GWh. Total electricity sales volume fell 12% YoY to 1,096GWh. In the heat supply business, heat demand was down 2% YoY due to temperatures being higher than the previous year. ▷

For details on previous results, please refer to the Historical performance section.

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Company forecast for FY03/21 (out May 15, 2020)

FY03/19 FY03/20 FY03/21 (JPYmn) 1H Act. 2H Act. FY A ct . 1H Act. 2H Act. FY A ct . 1H Act. 2H Est. FY Est . Sales 606,834 637,426 1,244,260 548,143 556,405 1,104,548 395,248 Sales revenue (IFRS) 1,007,086 439,099 560,901 1,000,000 319,536 390,464 710,000 Gross profit 41,333 42,877 84,210 42,281 44,137 86,418 42,121 Gross profit margin 6.8% 6.7% 6.8% 7.7% 7.9% 7.8% 10.7% SG&A expenses -32,524 -34,794 -67,318 33,044 35,814 68,858 31,947 SG&A rat io -5.4% -5.5% -5.4% 6.0% 6.4% 6.2% 8.1% Operating profit 8,884 8,967 17,851 9,527 9,730 19,257 10,163 5,837 16,000 Operating profit margin 1.5% 1.4% 1.4% 1.7% 1.7% 1.7% 2.6% Pre-tax profit 9,392 10,022 19,414 9,681 10,297 19,978 10,472 6,228 16,700 Pre-tax profit margin 1.5% 1.6% 1.6% 1.8% 1.9% 1.8% 2.6% Profit attributable to owners of the parent 5,447 6,112 11,559 5,184 6,872 12,056 6,234 4,766 11,000 Profit margin 0.9% 1.0% 0.9% 0.9% 1.2% 1.1% 1.6% Source: Shared Research based on company data.

FY03/21 forecast

Sales revenue: JPY710.0bn (-20.9% YoY) ▷ Operating profit: JPY16.0bn (-16.9% YoY) ▷ Pre-tax profit: JPY16.7bn (-16.4% YoY) ▷ Profit attributable to owners of the parent: JPY11.0bn (-8.8% YoY) ▷ DPS: JPY44 (unchanged YoY) ▷ Main positive/negative factors: The company expects solid sales of household fuels and electricity and fuels for the logistics ▷ industry, but in April–June 2020 it expects earnings to fall on lower demand for industrial fuels and gasoline and falling automobile sales. The figures assume the petroleum products selling prices and forex rates as of the date of the earnings forecast announcement (May 15, 2020).

Dividend policy: The company’s policy is to pay stable dividends with a consolidated dividend payout ratio of at least 40%. ▷

Forecast by segment (profit attributable to owners of the parent)

Home-Life Division: JPY2.6bn (+JPY400mn YoY). The company expects little impact on household LP gas, but expects lower ▷ demand for industrial gas as customers curtail facilities operation in response to the COVID-19 pandemic.

Car-Life Division: JPY2.8bn (about -JPY1.2bn YoY). The company expects a significant impact from slowing car sales. In the ▷ petroleum business, the company expects lower gasoline demand because of the COVID-19 pandemic, but diesel oil sales for the logistics industry to be solid, for a minor overall impact.

Industrial Business Division: JPY2.4bn (about -JPY100mn YoY). The company expects lower demand for marine fuel due to the ▷ COVID-19 pandemic and growth in sales of environmental products, for little overall impact.

Power and Utility Division: JPY3.5bn (unchanged YoY). The company expects an impact from delayed new customer ▷ acquisition in electricity sales following the suspension of sales visits in response to the COVID-19 pandemic.

Other: Loss of JPY300mn (about JPY200mn wider YoY). ▷

Investment

Plans to spend JPY20.0bn over the year. ▷

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Breakdown: Spending to maintain and enhance revenue base, JPY7.0bn (-JPY2.8bn YoY); creating new businesses, JPY13.0bn ▷ (+JPY500mn YoY)

The company plans to execute carefully selected projects and may limit the investment amount depending on the business ▷ environment.

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Medium-term plan (two years through FY03/21): Moving 2020

On April 26, 2019, the company also provided an outline of its new medium-term business plan, Moving 2020, which covers FY03/20 and FY03/21.

Reflections on previous medium-term plan, notes on new medium-term plan The previous medium-term plan, which was aimed at solidifying the business foundation, was completed in FY03/19. Profit attributable to owners of the parent exceeded JPY10.0bn and reached record highs for three consecutive years from FY03/17, coming in at JPY10.4bn in FY03/17, JPY11.0bn in FY03/18, and JPY11.6bn in FY03/19. In light of this, Itochu Enex believes that the organization base is now firmly established, and targets JPY12.5bn in FY03/21 under the new medium-term plan.

Snapshot of past five years (initiatives to reach JPY10.0bn in profit attributable to owners of the parent)

(JPYbn) Listed Enex Infrastructure Investment Corp. Future Acquired shares of Osaka Car Life Group Built Sendai power station Established a power supply JV with Oji group 20.0 Joined aviation biofuel project 20.0 Acquired shares of Tainai WF (wind power) Established ENEARC and Acquired shares of a Moving 2020 Acquired shares of Ing Energy (LPG) transferred LPG business Philippines LPG supplier 15.0 12.5 10.4 11.8 Acquired shares of 11.0 11.6 TTS (heat supply) 10.0 4.2 5.7 6.3 7.1 7.5 5.5 6.8 6.5 0.0 1.2 5.5 1.6 1.1 2.5 0.0 5.0 1.6 2.2 0.0 3.3 3.1 2.4 2.0 3.4 2.0 6.5 1.7 2.8 1.5 2.2 2.8 3.8 3.1 3.0 3.3 0.0 0.9 0.8 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21

Home-Life Power and Utility Car-Life Energy Innovation Life and Industrial Energy Source: Shared Research based on company data

In FY03/19, the final year of the previous medium-term plan, Itochu Enex achieved profit attributable to owners of the parent of JPY11.6bn and ROE of 9.7%, both exceeding the targets of JPY11.3bn and 9.0% or higher, respectively. However, operating profit of JPY17.9bn fell short of the JPY18.7bn target. This was attributable to the establishment of joint venture ENEARC with Osaka Gas (TSE1: 9532) and the conversion of subsidiaries into equity-method affiliates in October 2017. While these moves boosted bottom-line earnings, they served as negatives on sales and operating profit. If these special factors are discounted, however, the company would effectively have achieved its targets across the board. As well, we note the squeeze on profit margins, stemming from intensified competition in high-voltage electricity sales in the Power and Utility Division, which negatively impacted earnings. All told, consolidated earnings appear to have been well-managed during the previous medium- term plan.

Targets under “Moving 2020”

(JPYbn) Next stage 20.0 20.0 Leverage organizational base to deliver growth 15.0 Rebuild business base 12.5 11.6 11.8 10.4 11.0 10.0 7.5 6.5 7.1 5.5 5.0

0.0 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 Moving 2014 Moving 2016 Moving 2018 Moving 2020

Source: Shared Research based on company data

Overview of new medium-term plan “Moving 2020”

Title: Moving 2020 ◤ Period: Two-year period covering FY03/20 and FY03/21 ◤

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Basic policy ◤ Promote growth strategies (1) Maintain and enhance revenue base: Pursue group synergies, make increased use of customer base Focus on customer base and regions. In addition to trial runs and rollouts of new products and services in regions where it has a strong foothold such as in Kansai and western Japan, the company will leverage its networks and customer base to strengthen its cross-selling strategy of products and services. (2) Develop overseas and peripheral markets: Make aggressive investments overseas, use M&A to enter peripheral business areas Aggressively develop overseas businesses through forging partnerships and alliances. Focus areas include gas (industrial, LP), the automotive aftermarket, and renewable energy. (3) Create new businesses: Move into environment-related businesses Established environmental business department in April 2019. Promote sales expansion of AdBlue and spur renewable energy business through the use of Enex Infrastructure Investment Corporation.

Enhance organizational foundation (1) Strengthen group management: Improve management oversight at consolidated group level, create more effective governance structure (2) Use personnel strategy to support growth: Promote diversity, train globally oriented employees (3) Promote innovation: Pursue efficiency gains at existing businesses, increase use of digital technology

Quantitative targets for FY03/21 (revised May 15, 2020) ◤ (1) Profit attributable to owners of the parent: JPY11.0bn (2) Return on Equity: — (3) Dividend payout ratio on consolidated earnings: 40% or higher (4) Total capital spending during two-year period: JPY43.0bn (JPY20.0bn in FY03/21)

Of the JPY20.0bn to be invested in FY03/21, JPY13.0bn will go toward creating new businesses and JPY7.0bn toward maintaining or strengthening the company’s earnings base (capex). Itochu Enex plans to be very cautious in selecting investment targets.

Of particular note are investment in digital technologies for core operations and systems for electricity retail sales (e.g., systematization of sales operations such as fee collection) and environmental-related businesses (e.g., overseas marketing of AdBlue). In the automotive-related business, the company focuses on the overseas automotive aftermarket (e.g., body repair, maintenance). In the development of renewable energy, it looks to promote the development of solar projects, with an eye to eventually selling these assets off to Enex Infrastructure Investment Corporation. The new medium-term plan appears more aggressive than the previous one, not only in terms of the amount of investment, but also in terms of its plans to expand overseas, conduct M&A, and utilize its infrastructure fund.

Home-Life Division

('000 tons) LP gas sales volume: Itochu Enex (right axis) YoY (JPYbn) Operating profit OPM (right axis) 6% 625 640 6.0 6% 619 619 618 5.3% 4% 620 601 597 5.0 5% 2% 3.5% 600 4.0% 4.0% 0% 1.0% 580 4.0 3.5% 4% 3.4% -2% -1.0% -0.7% 548 560 -2.2% -4.2% 2.9% 2.8% -4% -2.9% 3.0 2.6% 3% 525 540 -6% 5.0 4.8 4.4 520 2.0 2% -8% 3.4 3.6 2.9 3.1 -10% -11.3% 500 2.8 1.0 1% -12% 480 -14% 460 0.0 0% FY03/13 FY03/15 FY03/17 FY03/19 FY03/13 FY03/15 FY03/17 FY03/19 IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS Source: Shared Research based on company data

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In the Home-Life Division, Itochu Enex focuses on strengthening the industrial gas business and expanding operations overseas. The company plans to establish an industrial gas department in July 2019. While wholly owned subsidiary Itochu Industrial Gas (which handles oxygen, nitrogen, and argon gas) will specialize in offering its expertise in inspections and other areas, the industrial gas department at Itochu Enex will support sales efforts. Not only will the company look to increase its customer base through M&A in the LP gas business, it also plans to consider acquisitions and other strategies in the industrial gas business.

In the industrial gas business, sales are particularly solid for carbon dioxide and hydrogen gas. While the market size in Japan for industrial gas is only around JPY500bn, the company sees ample room for growth in the hydrogen gas market over the medium term, and it aims to aggressively develop this business. It also plans to bolster efforts to receive orders for gas container pressure- resistance tests.

Itochu Enex has established business sites in the Philippines and Indonesia in light of the growth prospects of overseas markets, and it now looks to expand the number of overseas business sites. In addition to introducing new commercial materials to the Philippines and Indonesia, the company looks to invest in local gas retailers, so that it can deploy the business model it established in Japan to overseas markets as well. It also plans to streamline its logistics and security operations.

FY03/21 targets Itochu Enex achieved a segment profit of JPY3.1bn in FY03/19, but targets a more modest JPY2.6bn in FY03/21 (although the initial target was JPY3.0bn).

Power and Utility Division

(JPYmn) 140,000 10% Operating profit 122,898 Power retail sales ('000 MWh) 9% 6,640 120,000 7,000 OPM (right axis) 12% Liberalized power market ('000 MWh) 10.2% 102,364 8% 10.1% 5,825 6,000 10% 100,000 Market share（right axis) 7% 5,000 7.8% 4,626 6% 4,439 8% 80,000 6.5% 66,720 4,000 5.9% 6.3% 5% 3,010 6% 60,000 3,000 2,728 3.6% 4% 2,359 40,232 1,815 4% 40,000 2.2% 2.2% 3% 2,000 2.8% 28,175 19,245 19,106 22,715 22,7151.5% 2.6% 2% 1,000 2% 20,000 1.0% 1.0% 0.4% 1% 0.0%3 80 231 231 409 873 2,431 2,672 2,694 2,387 0 0% - 0% FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/11 FY03/13 FY03/15 FY03/17 FY03/19 IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS Source: Shared Research based on company data

Market conditions deteriorated rapidly in FY03/18 during the previous medium-term plan, as major power companies waged a price war, resulting in slimmer margins on large-volume, high-voltage electricity sales and weak earnings. In FY03/17, the segment’s operating profit accounted for over 1/3 of consolidated operating profit, but depressed margins combined with a decreased share of the new power market undermined its strategy of actively pursuing scale expansion.

Margins on high-voltage electricity are considerably lower than low-voltage electricity. Under the current medium-term plan, Itochu Enex aims to raise the sales weighting of low-voltage electricity from 11% in FY03/19 to 22% in FY03/20 and 35% in FY03/21. Even though the sales weighting of low-voltage electricity was only 11% in FY03/19, it contributed 44% of gross profit.

In FY03/19, the number of retail low-voltage electricity customers (via the Home-Life Division) increased 50% YoY to 81,000 customers. The company plans to accelerate the shift to low-voltage electricity sales, especially to households and small retailers.

Meanwhile, the company plans to stabilize profits in the Power and Utility Division through capital gains on sales of renewable energy projects to Enex Infrastructure Investment Corporation. The current medium-term plan factors in these capital gains.

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Enex Infrastructure Investment Corporation announced on its website that it has obtained preferential negotiation rights on the acquisition of three wind farms and three hydroelectric power plants from Itochu Enex. Progress on this front will bear watching, as it will have a significant impact on the company’s earnings and whether it will achieve its targets under the current medium-term plan.

FY03/21 targets Itochu Enex plans to expand FY03/21 segment profit to JPY3.5bn (from JPY2.0bn in FY03/18; initial target for FY03/21 was JPY3.8bn). Unlike the Home-Life Division and petroleum products business, where income is stable, the Power and Utility Division is affected by changes in market conditions. The company explains that decisions on the sale of assets to Enex Infrastructure Investment Corporations will be made based on an objective analysis by an internal investment committee. Achieving the FY03/21 profit target will likely hinge on the above-mentioned shift to low-voltage electricity sales and the sale of renewable energy projects to the infrastructure fund.

Life and Industrial Energy Division

Car-Life Operating profit Life and Industrial Energy Operating profit OPM (right axis) Pretax profit margin (right axis) 12,000 1.6% 5,000 4,510 1.6% 11,049 4,194 4,169 1.4% 3,892 1.4% 10,000 9,153 4,000 1.2% 8,093 7,936 1.2% 8,000 1.2% 1.0% 3,000 1.0% 2,428 1.0% 0.8% 6,000 0.9% 0.8% 0.8% 2,000 0.8% 0.8% 0.6% 0.7% 0.7% 0.6% 4,000 0.4% 0.4% 1,000 2,000 0.4% 0.2% 0.2% 0 0.0% 0 0.0% FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/17 FY03/18 FY03/19 FY03/20 IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS

Source: Shared Research based on company date Note: FY03/20 figures are totals for the Car-Life and Industrial Business Divisions.

The Life and Industrial Energy Division, like the Home-Life Division, has generated a steady stream of income as one of the company’s core operations, aided by efforts to close unprofitable service stations and streamline operations. Owing to the reclassification of business segments, the former Mobility Life Division will be grouped under the Life and Industrial Energy Division starting in FY03/21, and this will likely boost the segment’s profits. The company adopts a fourfold strategy for this division; namely, to “protect” its current network of retail affiliates, to “adapt” to changes in the market, to “leverage” its proprietary assets and logistics functions, and to “expand” aggressively into the automotive business in Japan and overseas.

Itochu Enex intends to aggressively expand its operations overseas. While the current medium-term plan’s investment strategy entails the strengthening of its automotive-related business, the company’s focus is on tapping demand in the overseas automotive aftermarket for body repair, painting, and other services. In our view, the company could benefit handsomely if it draws on resources of ITOCHU Corporation (TSE1: 8001), which has the largest presence in the automotive industry among the five major trading houses in Japan.

In April 2019, the company established an environmental business department, as part of its strategy to facilitate the expansion of its environmental business overseas. While sales of AdBlue (a high-grade urea solution used to detoxify diesel vehicle exhaust emissions) have increased in Japan, helped in part by their growing adoption at the company’s service stations nationwide, the company now looks to expand sales overseas. At the same time, it looks to strengthen its recycling operations, particularly through the recycling of fly ash (a waste byproduct the company collects from the coal-fired Sendai Power Station). The department will also manage Japan’s first biofuel project, which is being conducted jointly with euglena Co., Ltd. (TSE1: 2931) that completed the construction of a biofuels test plant in October 2018.

Targets for FY03/21 Itochu Enex targets FY03/21 segment profit of JPY6.3bn (down 7.4% from JPY6.8bn in FY03/18). The company does not target profit growth, as it looks to focus instead on rationalizing existing operations specifically through the closure of unprofitable service stations, limiting upside to profit.

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Historical forecast accuracy Results vs. Estimates FY03/10 FY03/11 FY03/12 (*) FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) JGAAP JGAAP JGAAP JGAAP JGAAP IFRS IFRS IFRS IFRS IFRS IFRS Sales Init. Est. (a) 1,180,000 1,120,000 1,269,000 1,380,000 1,550,000 1,600,000 1,350,000 1,060,000 1,150,000 1,250,000 1,000,000 Est. as of 1H (b) 1,000,000 1,120,000 1,269,000 1,380,000 1,550,000 1,600,000 1,350,000 1,060,000 1,150,000 1,250,000 1,000,000 Results (c) 1,083,761 1,185,731 1,414,161 1,430,746 1,506,606 1,373,393 1,071,629 1,028,939 1,156,344 1,244,260 1,104,548 Diff. (c)/(a)-1 -8.2% 5.9% 11.4% 3.7% -2.8% -14.2% -20.6% -2.9% 0.6% -0.5% 10.5% Diff. (c)/(b)-1 8.4% 5.9% 11.4% 3.7% -2.8% -14.2% -20.6% -2.9% 0.6% -0.5% 10.5% Operating profit Init. Est. (a) 10,200 9,800 9,300 11,600 13,600 13,800 16,800 17,500 16,500 18,700 16,500 Est. as of 1H (b) 7,400 9,800 9,300 11,600 13,600 13,800 16,800 17,500 16,500 18,700 16,500 Results (c) 6,096 9,028 8,973 13,726 13,439 13,100 16,384 19,678 17,153 17,851 19,257 Diff. (c)/(a)-1 -40.2% -7.9% -3.5% 18.3% -1.2% -5.1% -2.5% 12.4% 4.0% -4.5% 16.7% Diff. (c)/(b)-1 -17.6% -7.9% -3.5% 18.3% -1.2% -5.1% -2.5% 12.4% 4.0% -4.5% 16.7% Recurring profit Init. Est. (a) 10,200 10,200 9,500 11,300 13,100 Est. as of 1H (b) 7,600 10,200 9,500 11,300 13,100 Results (c) 7,006 9,621 9,470 12,963 13,940 Diff. (c)/(a)-1 -31.3% -5.7% -0.3% 14.7% 6.4% Diff. (c)/(b)-1 -7.8% -5.7% -0.3% 14.7% 6.4% Pre-tax profit Init. Est. (a) 13,800 15,200 17,000 17,800 18,500 19,200 Est. as of 1H (b) 13,800 15,200 17,000 17,800 18,500 19,200 Results (c) 12,155 15,004 19,344 19,169 19,414 19,978 Diff. (c)/(a)-1 -11.9% -1.3% 13.8% 7.7% 4.9% 4.1% Diff. (c)/(b)-1 -11.9% -1.3% 13.8% 7.7% 4.9% 4.1% Profit Init. Est. (a) 5,500 3,800 4,000 5,200 5,800 7,600 8,200 10,000 10,400 11,300 11,800 Est. as of 1H (b) 4,300 3,800 4,000 5,200 5,800 7,600 8,200 10,000 10,400 11,300 11,800 Results (c) 4,360 3,884 3,893 5,577 7,403 5,503 7,469 10,405 11,025 11,559 12,056 Diff. (c)/(a)-1 -20.7% 2.2% -2.7% 7.2% 27.6% -27.6% -8.9% 4.1% 6.0% 2.3% 2.2% Diff. (c)/(b)-1 1.4% 2.2% -2.7% 7.2% 27.6% -27.6% -8.9% 4.1% 6.0% 2.3% 2.2% Source: Shared Research based on company data Initial estimates for FY03/12 as of Q1

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Business, market and value chain

Performance trends

Operating profit over last 16 years The following table shows the company’s operating profit by business area since FY03/05. Itochu Enex has three key business areas: petroleum-related businesses (Car-Life Division and Industrial Business Division), LP gas-related businesses (Home-Life Division), and electricity-related businesses (Power and Utility Division).

Profit growth phase The period from FY03/13 to FY03/17 was a profit growth phase, with operating profit expanding from JPY9.0bn to JPY19.7bn.

One reason for the profit growth was expanded profit in petroleum-related businesses. There was a rapid succession of major restructuring moves among petroleum refineries. Nippon Oil and Japan Energy merged in 2010 to become JX Energy, JX Energy and TonenGeneral Sekiyu in 2017 to become ENEOS, and Idemitsu Kosan and Showa Shell Sekiyu in 2019 to become the new Idemitsu Kosan. This had the effect of resolving excessive competition in the petroleum industry, leading to an improved supply and demand balance and better margins on petroleum products. In addition, Itochu Enex’s expansion of its imported asphalt sales business, the enhanced competitiveness of its fleet services business, and entry into the Nissan car dealership business in Osaka all contributed to profit growth in the petroleum-related businesses.

Another reason for the profit growth was expanded profit in the electricity-related businesses. Itochu Enex entered and expanded the electric power business, acquiring power plants at the Hofu factory of the old Kanebo in 2004 and at the Nihongi factory of Nippon Soda (TSE1: 4041) and the Amagasaki factory of Daicel (TSE1: 4202) in 2006. Electricity sales volume increased tenfold between FY03/14 (231,000 MWh) and FY03/17 (2,431,000 MWh). Operating profit in the Power and Utility Division grew from JPY2.4bn in FY03/14 to JPY6.6bn in FY03/17.

Profit maturation phase From FY03/17 onward, operating profit has remained between JPY17.0bn and JPY20.0bn.

Profit in the petroleum-related businesses continued to grow, with contributions from an improved supply and demand balance following restructuring in the refinery industry, expansion of the imported asphalt sales business, the enhanced competitiveness of the fleet services business, improved sales of marine fuel, and entry into the Nissan car dealership business in Osaka.

However, profit in the electricity-related businesses seems to have peaked. Sales volume grew only slightly from 2,431,000 MWh in FY03/17 to 2,579,000 MWh in FY03/20. Profitability deteriorated and profit growth stalled on fiercer competition caused in part by the resumption of nuclear power plants operation, advances in energy conservation, and stagnation in industries that ordinarily consume substantial electricity volume.

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Operating profit by business area

(JPYmn) Oil LP gas Power and Utility 19,678 20,000 19,257 17,851 17,153 16,384 6,640 2,728 5,825 15,000 13,726 4,626 13,100 4,439 11,875 3,555 4,467 3,010 2,799 9,881 2,359 3,278 10,000 9,027 8,973 3,367 4,831 7,934 7,700 1,987 6,826 6,824 2,883 6,095 3,689 3,723 2,042 2,365 5,020 1,441 1,390 11,568 5,000 10,633 3,394 9,259 8,578 9,249 7,894 7,207 8,207 5,892 5,385 5,434 5,335 5,338 5,250 4,496 2,701 0 FY03/05 FY03/06 FY03/07 FY03/08 FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20

Source: Shared Research based on company data

Management strategy

Agilely selling the products that will contribute most to earnings in response to changes in the business environment It is Shared Research’s understanding that the company’s basic strategy is to leverage its strong procurement capacity—based on being one of the top domestic energy handlers in terms of volume—to realize a flexible management structure that allows it to agilely sell the products that will contribute most to earnings in response to changes in the business environment.

Procurement of high-volume, cheap, and stable supply of petroleum products from major petroleum refineries Since Itochu Enex was established in 1961, ENEOS (Nippon Mining and Kyodo Petroleum at the time) has been the company’s major supplier, and each has been the other’s largest trading partner. Later, Itochu Enex also expanded its business relationship with Idemitsu Kosan, Cosmo Oil, and others. Establishing close ties with these major petroleum refineries has been the basis of the company’s management approach, since the source of its competitiveness is its bargaining power to procure a high-volume, inexpensive, and stable supply of petroleum products from the refineries.

Promotion of quantitative expansion strategy during period of rapid economic growth The period of rapid economic growth shortly after the founding of Itochu Enex was also a period of rapid expansion in the petroleum product and LP gas markets. The company promoted a quantitative expansion strategy leveraging its balance sheet to the full extent possible, including by shouldering the investment for building service stations for distributors, supporting promotional spending, and shoring up distributors whose performance deteriorated.

Expansion of trading business and private brand network following the end of the Japanese economic bubble The bursting of the Japanese asset price bubble in the early 1990s compelled Itochu Enex to make a course correction in its expansion strategy. Nevertheless, it expanded its petroleum spot trading business to take advantage of the intense competition caused by excessive refining facility capacity and a plethora of petroleum refineries. In addition, it worked to maintain or even expand its trading network by establishing its own service station brands (Chu Boy and carenex) and inviting refinery-affiliated service stations—which were having disadvantageous terms pressed upon them by the refineries—to its distributor network.

Accelerated restructuring of petroleum refinery industry and entry into the electric power business In the 2000s, petroleum refineries began drastic industry restructuring in the face of deteriorating profit structures caused by the issue of excessive refining facilities. The biggest change was the establishment of JX Energy (now ENEOS) through the merger of Nippon Oil and Japan Energy in 2010. Thereafter, the scrapping of excessive facilities accelerated, and in 2019 Idemitsu Kosan and Showa Shell Sekiyu merged, essentially leaving just the big three refineries: ENEOS, Idemitsu Kosan, and Cosmo Oil.

As a result, the trading business peaked at Itochu Enex, but the profitability of the business of selling fuel to affiliated service stations improved on a better supply and demand balance for petroleum products. The company used the resultant cash flows to invest in a large-scale thermal power plant and enter the electric power business, targeting large customers in the high-voltage market. Then in 2016, it gained a tailwind for expanding the business when the small-customer, low-voltage (retail) market was deregulated.

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Establishment of a new growth strategy model as the electric power business peaks From 2017 onward, even as new large-scale thermal power plants were constructed and nuclear power plants in western Japan resumed operations, energy conservation efforts made advances and electricity demand for manufacturing declined on industry stagnation. As a result, there was a more relaxed electricity supply and demand balance and a sense that the electric power business had peaked. In response, Itochu Enex entered the auto sales business, invested in an energy infrastructure fund, and began targeting overseas expansion to prepare for the establishment of a new growth strategy model.

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Business overview Supply chain The company’s mainstay products are energy-related. It sells fuels such as LP gas and petroleum products (including gasoline, diesel oil, kerosene, fuel oil, and asphalt) and electricity to retailers and final consumers.

For LP gas, Itochu Enex has a wholesale channel targeting distributors and a direct sales (retail) channel targeting ordinary ▷ households and restaurants, as well as hospitals and factories (Home-Life Division).

In terms of petroleum products, in the Car-Life Division, it wholesales gasoline, diesel oil, and kerosene to affiliated service ▷ stations (Car-Life Stations), including fleet service stations serving member shipping companies through its fleet service station business. In the Industrial Business Division, it sells diesel oil to shipping and bus companies and fuel oil to factories and shipping lines.

In the Power and Utility Division, the company sells electricity sourced from its own power plants, in arm’s length transactions ▷ from the former general electricity utility companies (power companies) and independent power generation companies, or from the Japan Electric Power Exchange (JEPX). Sales categories include low-voltage electricity for ordinary households and stores and high-voltage and extra high-voltage electricity for government offices, office buildings, hospitals, and factories. The

company’s procurement policy calls for sourcing mainly from its own plants and also from the Japan Electric Power Exchange (JEPX) when its own power generation is inadequate.

The following chart shows the company’s supply chain for petroleum products and LP gas. The bulk of its customer base is in B2B and B2B2C businesses , handled through its wholesale operations.

Oil producing countries

Primary dealers (refineries)

Group service Asphalt tank LPG tank stations LNG Tank Gasoline Kerosene Diesel oil Fuel oil LNG Selling network Asphalt (Domestic service stations / LP gas sales bases)

Plants and offices Ships Restaurants Individuals Households

Source: Shared Research based on company data

Segments

Itochu Enex has four segments: the Home-Life Division, which handles LP gas, the Car-Life Division, which focuses on fuel sales to Car-Life Stations (service stations), the Industrial Business Division, which handles industrial fuel, and the Power and Utility Division, which handles electricity.

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Sales (left), operating profit (center, IFRS), and profit attributable to owners of the parent (right, IFRS) by business (FY03/20)

(JPYmn) (JPYmn) (JPYmn) Home-Life 98,328 Home-Life Home-Life 9% 2,799 10% 2,113 Car-Life 17% Industrial Business 8,239 Car-Life 29% 206,332 4,584 Industrial Business 19% Industrial Business 38% 1,977 Car-Life 11,049 16% 706,719 Power and Utility 40% 64% 93,169 8% Power and Utility 5,825 Power and Utility 21% 3,537 29%

Source: Shared Research based on company data

Home-Life Division

Home-Life Division earnings

Overview The Home-Life Division engages in wholesale and retail LP gas operations. Itochu Enex has a 20% stake in Japan Gas Energy Corporation, an importer and primary dealer formed in 2009 with the merger of Japan Energy, Nissho Iwai LP Gas, and the LP gas business of Itochu Enex. ITOCHU Corporation is also involved in LP gas procurement. The Home-Life Division engages in the entire LP gas supply chain, from procurement and distribution to wholesale and retail.

Home-Life Division supply chain

LNG suppliers Import Domestic purification

Primary dealers Primary terminal

JGE

Secondary terminal Enex-owned gas terminal（1）

Wholesalers

City gas LPG gas stations（tertiary terminal） Gas stations 41 locations 42

Itochu Enex group

Enex Home-Life group Retailers Retailers 7 companies Approx. 1,600

Households Businesses, restaurants, Approx. 1mn factories, others

Source: Shared Research based on company data

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Business structure Itochu Enex buys LP gas from Japan Gas Energy, an importer and primary dealer; sells it to retailers or subsidiaries; and the retailers or subsidiaries in turn sell it to individual households, or to restaurants, factories, hospitals, hotels, and other places of business.

Industry structure There are four major LP gas importers and primary dealers (including Japan Gas Energy), 1,100 wholesalers (including Itochu Enex), and 21,000 retailers (including Itochu Enex).

LP gas importers and primary dealers are usually petroleum refineries or the subsidiaries of general trading houses. Because of ▷ the large number that previously existed, excessive competition weighed on margins and caused fragile profit structures. In the 2000s, alliances and mergers resulted in the creation of four major importers and primary dealers (ENEOS Globe, Japan Gas Energy, Gyxis, and Astomos Energy).

Four major importers and primary dealers: ENEOS Globe is a joint venture by Nippon Oil & Gas and Mitsui Marubeni Liquefied Gas. Japan Gas Energy is a joint venture by Nissho LP Gas and the LP gas divisions of Japan Energy and Itochu Enex. Gyxis is a joint venture by the LP gas divisions of Cosmo Oil, Sumitomo Corporation, Showa Shell Sekiyu, and TonenGeneral Sekiyu. Astomos Energy is a joint venture by the LP gas divisions of Idemitsu Kosan and Mitsubishi Corporation.

There are major wholesalers like Iwatani Corporation (also a gas importer and primary dealer), Mitsuuroko, Shinanen, and San- ▷ ai Oil, but also influential operators in each region that are actively promoting commercial rights acquisition and sales visits, accelerating growth of the high-margin retail business.

There are some 21,000 retail distributors nationwide, many of them operating on a small scale. In recent years, wholesalers’ ▷ retail divisions have been expanding their market shares, rapidly increasing their customer counts through commercial rights acquisition.

In general, in the LP gas supply chain, the order by margin level is retail wholesale importer and primary dealer. In April ▷ ＞＞ 2020, gross margins were JPY13.5 per cubic meter (cbm) for importers and primary dealers, JPY129.8 per cbm for wholesalers,

and JPY550.8 per cbm for retailers. The reason the margin is low for importers and primary dealers is that their facilities are usually concentrated, their handling volumes are massive, and they are competing in a sphere where it is hard to stand out from peers. On the other hand, the margin is high for retailers because many are small, with low sales volume and poor equipment efficiency, and competition is relatively relaxed. Wholesalers with delivery systems in place for small numbers of gas

cylinders—especially in light of the difficulty retail operators are having in finding successors—have been working to acquire commercial rights* to secure high retail margins.

*Commercial rights acquisition is a business practice particular to the LP gas industry. In recent year, although door-to-door sales activities to increase the number of retail contracts have become more common, the industry did not traditionally make direct approaches to consumers. Typically, when a new residence is built, a retailer approaches the construction company or contractor, who then refers the client (person who ordered the construction) to the retailer, and a new LP gas contract is concluded. In the case of pre-owned homes or rentals, the new resident usually just automatically chooses the LP gas retailer that already serviced the residence. For this reason, “commercial rights” exist in a practical sense despite having no legal basis, and they are bought and sold between LP gas companies.

LP gas retailers are increasingly selling their commercial rights and closing their businesses due to declines in customer count ▷ caused by a shrinking population and the flow of people into cities; reduced consumption caused by climatic warming and an aging population; the rising costs of delivery, safety management, and information systems; and the large sums offered by wholesalers for commercial rights acquisition.

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Business structure of a typical LP gas company

Wholesalers Retailers Itochu Enex Sales 100.0% 100.0% 100.0% GPM 12.0% 47.7% 24.4% OPM 4.0% 8.1% 3.9%

Costs 100.0% 100.0% Personnel 27.1% 45.5% Security 0.9% 4.8% Transport 7.6% 5.9% Depreciation 3.2% 4.8% Other 61.3% 39.0% Source: Shared Research based on data from LP Gas Distribution Center

Demand of LP gas

('000 MT) Household and businesses Industrial Chemical raw materials City gas Automotive Power

15 2.4 2.7 2.4 2.4 2.3 2.0 2.4 2.2 2.0 1.8 2.0 2.8 2.6 2.4 2.5 2.2 2.3 2.2 2.4 2.5 2.7 2.4 1.7 1.7 4.1 4.1 4.0 3.9 3.8 3.9 3.9 3.5 1.9 2.1 1.9 1.7 2.0 5.1 4.3 4.2 4.2 4.2 3.9 3.9 2.1 4.2 4.3 3.0 2.7 2.8 3.0 10 4.1 4.1 2.9 2.7 2.8 2.8 2.8 2.8 2.7

5 9.7 8.5 8.7 8.8 8.9 8.9 9.3 9.4 9.2 9.6 9.5 9.5 9.6 9.7 9.0 8.7 8.9 8.6 7.5 7.5 7.9 8.2 8.2 8.3 8.0 7.9 7.6 7.6 7.7 7.3

0 FY03/90 FY03/94 FY03/98 FY03/02 FY03/06 FY03/10 FY03/14 FY03/18 Source: Shared Research based on data from the Japan LP Gas Association

Customer base There are some 24mn users of LP gas in Japan, which is about 44% of all gas users, if city gas users (about 29mn) are included. In its retail operations, Itochu Enex sells LP gas directly to some 550,000 customers, including about 250,000 customers at equity- method affiliate ENEARC. Including another 530,000 customers served by the group’s about 1,900 retailers through its wholesale operations, this means a total customer base of 1.08mn.

Regional characteristics Itochu Enex, which has historically had many customers in western Japan, estimates that it is the biggest player in Kyushu with about 20% of the market. Customers in Kyushu are served by subsidiary ECORE Co., Ltd., which is 51% owned by Itochu Enex and the rest by Shin-Idemitsu Co., Ltd.

Others City gas business Subsidiary ECORE provides city (piped) gas in the city of Nakatsu, Oita Prefecture (38,879 households at end-May 2017). Itochu Enex acquired the business from the city in 2001 and turned it into a profitable operation. In 2013, Itochu Enex transferred the operations to ECORE. This business appears to contribute little to earnings.

The company was able to enter the small-lot city gas business following deregulation in April 2017. However, as part of its new city gas business, its only distributor so far is CD Energy Direct (an electric and gas sales company funded equally by Chubu Electric Power [TSE1: 9502] and Osaka Gas [TSE1: 9532]) under its equity-method affiliate ENEARC Kanto.

Since it has no unloading facility of its own for liquefied natural gas, it will be difficult to generate an adequate return from the new city gas business. Itochu Enex recognizes this, and may not expand the business further.

Auto gas station business The company has a network of LP gas stations for taxi cabs. There were 39 service stations as of May 2015: 8 in Kanto, 4 in Chubu, 9 in Kansai, 8 in Chugoku/Shikoku, and 10 in Kyushu/Okinawa. The company has greater reach in western Japan, as in the case of LP gas operations.

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Earnings analysis Sales Shared Research looks at the segment’s sales in terms of sales volume and price. The former is affected by temperature, new demand captured, population within serviced areas, and economic trends. The latter is affected by crude oil prices, contract prices with gas-producing countries, exchange rates, and revision of wholesale and retail prices.

Operating profit Shared Research sees increases or decreases in the segment’s operating profit as the result of increases or decreases in sales volume and fluctuations in margins. Margin fluctuations are determined primarily by large changes in volume and the status of competition. Increased competition tends to lead to price wars that weigh on margins.

Short-term earnings are affected by changes in the value of inventory depending on cost, insurance, and freight (CIF) prices (influenced by the contract price and forex rates). Earnings are directly correlated to CIF prices.

CIF prices: Cost, insurance and freight prices. Japan imports most of its LP gas. The price is determined based on free on board (FOB) price, which is in turn based on the producing country’s contract price. The FOB price also reflects the exchange rate and costs, insurance, and freight (CIF) charges.

Wholesale and retail prices: Determined by adding to CIF prices various costs that occur during distribution (such as transport costs and costs of operating storage facilities). Retail prices respond to market prices only moderately.

Effect of contract price fluctuations The following diagram shows the impact contract price fluctuations on gross profit. For example, when inventory levels are relatively high at the beginning of the period a drop in contract price will push down the value of suppliers’ inventories (calculated on a moving average basis), which will in turn bring down the unit sales price and gross profit. Because equity- method affiliate Japan Gas Energy (Itochu Enex stake: 20%) accounts for inventory using the lower of cost or market value, a drop in contract prices will have a large impact on the carrying value of its mandatory 50-day reserve, hurting Itochu Enex at the non- operating profit level and depressing pre-tax profit.

Impact of changes in market conditions (top = price rising; bottom = price falling)

Margin P/L impact Inventory impact

Purchase Sales Inventory carried Inventory carried (value) Moving average inventory (value) (value) forward (value) forward (value) Selling price Selling Inventory carried forward (unit price) Moving average price average Moving

Inventory carried Purchase Purchase Inventory carried Moving average inventory (volume) forward (volume) (volume) (volume) forward (volume)

P/L impact Inventory impact Inventory carried Purchase Value of inventory

Moving average inventory (value) price Selling

forward (value) (value) Inventory carried carried forward Margin forward (unit price) Moving average price average Moving

Inventory carried Purchase Purchase Inventory carried Average inventory forward (volume) (volume) (volume) forward Source: Shared Research based on company data

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Expanding market share Itochu Enex is expanding its market share through acquisitions of commercial rights. Such businesses include operations acquired from Nichibei Shokai in 2001. (This business had annual sales of JPY1.3bn when bought.) The company also bought a business from Takigawa Sangyo in 2005. (This business had annual sales of JPY2.4bn in FY12/14.) In 2007, Itochu Enex formed a joint venture with IDEX Gas, a wholly owned subsidiary of Shin-Idemitsu. (IDEX Gas had sales of JPY13.2bn in FY03/06.) In 2009, the company bought a 20% stake in Japan Gas Energy, an importer and primary dealer, and sold an LP gas wholesale business that uses tanker vehicles. (This business had sales of JPY27.6bn in FY03/08.) In 2013, the company acquired shares in Ing Energy, then in 2015 acquired the shares of Nissho Petroleum Gas Company (22.5% from Sojitz Corp; major shareholders Osaka Gas with 52.5% and Itochu Corp. with 25.0%). The company has a number of alliances designed to make its product distribution more efficient.

Joint ventures In 2007, Itochu Enex subsidiary Itochu Enex Home-Life Kyushu and Shin-Idemitsu subsidiary Idex Gas, which sells petroleum products mostly in Kyushu, established ECORE Co., Ltd., as a joint venture (51% owned by Itochu Enex and 49% by Shin- Idemtisu) to sell LP gas in Kyushu. ECORE is aggressively pursuing acquisitions, rapidly expanding its business scale. It acquired Oita Kyuseki Hanbai’s LP gas business and Gas Mates (Taketa, Oita Prefecture) in 2008, Napoli Auto Gas (Kagoshima Prefecture) in 2009, Toyosu Propane (Tagawa, Fukuoka Prefecture) in 2010, Kumamoto Gas (Koshi, Kumamoto) in 2015, Kariba Gas (Kumamoto, Kumamoto Prefecture) in 2016, and Kyonen Unyu (Fukuoka, Fukuoka Prefecture) in 2018.

In 2017, Osaka Gas and Itochu Enex established equity-method affiliate ENEARC (each company owns 50%) to conduct wholesale and retail LP gas business in the Kanto, Chubu, and Kansai regions. The equity-method share of ENEARC’s customers attributable to Itochu Enex is about 250,000, which represents about 45% of the group total of 550,000.

Sales of gas-related equipment The company wants to expand sales of LP gas-related equipment and increase revenue from home renovation services. The contributions of these operations to overall sales and profits are still low. In recent years, the company has been putting more emphasis on photovoltaic power generation systems, ENEFARM residential fuel cells, and other alternative energy equipment, in addition to gas stoves, water heaters, and home renovation services. In Q1 FY03/15, gas-burning equipment and renovation services comprised 40% and 30%, respectively, of the company’s non-gas sales. Photovoltaic power generation systems and other alternative energy-related equipment comprised another 30%.

Car-Life Division

Earnings performance

Car-Life Operating profit Life and Industrial Energy Operating profit OPM (right axis) Pretax profit margin (right axis) 12,000 1.6% 5,000 4,510 1.6% 11,049 4,194 4,169 1.4% 3,892 1.4% 10,000 9,153 4,000 1.2% 8,093 7,936 1.2% 8,000 1.2% 1.0% 3,000 1.0% 2,428 1.0% 0.8% 6,000 0.9% 0.8% 0.8% 0.8% 2,000 0.8% 0.6% 0.7% 0.7% 0.6% 4,000 0.4% 0.4% 1,000 0.4% 2,000 0.2% 0.2% 0 0.0% 0 0.0% FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/17 FY03/18 FY03/19 FY03/20 IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS

Source: Shared Research based on company data Note: FY03/20 figures are totals for the Car-Life and Industrial Business Divisions.

Overview In the Car-Life Division, Itochu Enex primarily procures gasoline, diesel oil, and other petroleum products from refineries and wholesales them to 1,704 affiliated Car-Life Stations* nationwide (as of end-March 2020). It also retails petroleum products at

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190 directly operated Car-Life Stations. It has a market share of about 6%. The sale of petroleum products has been the company’s mainstay business since its founding in 1961. *Car-Life Station is the name Itochu Enex uses for its own distinctive service stations.

Business structure Itochu Enex procures fuel (gasoline, diesel oil, kerosene) from petroleum refineries (largest supplier is ENEOS, followed by Idemitsu Kosan and Cosmo Oil) for sale to affiliated or directly run service stations. Through these service stations, in addition to the sale of petroleum products, the company also derives earnings from non-oil businesses like oil and tire changes, car washing, car inspection, and auto rentals and leasing operations.

Industry structure The industry comprises three major refineries (ENEOS, Idemitsu Kosan, and Cosmo Oil), a large number of trading houses of fuels (in addition to Itochu Enex, there are JA, Usami, Mitsubishi Corporation Energy, Marubeni Energy, San-ai Oil, Kamei, and others), and retailers. Most of the retailers are service stations that sell auto fuels, and there were 30,070 of these service stations nationwide, both affiliated and independent, at end-March 2019.

The number of service stations has fallen to almost half the peak of 60,421 in FY1994. In 2016, when the major refineries promoted reorganization, the number fell YoY by 866, representing an average of 2.4 service station closures per day. With the weeding out of many small, independent service stations, the market share held by service stations affiliated with refineries and those affiliated with trading companies is rising.

The operating environment for service stations is tough because demand for fuel is declining amid greater use of more fuel- efficient vehicles like light vehicles and hybrids. Also, the number of registered vehicles is sluggish.

Major distribution channels for gasoline

Stores directly operated by Users （1.3mn kl） Importers and refineries 11.9mn kl Subsidiaries of 10.6mn kl refineries refineries （）

52.6mn kl Refineries' Trading companies service stations （1.0mn kl） 7.1mn kl Affiliated service stations （3.1mn kl）

Automotive uses Others （3.1mn kl）

Stores directly operated Stores directly operated by refineries by general distributors （23.3mn kl） 10,000 kl General distributors 30.9mn kl Non-automotive uses Retailer （4.6mn kl） National Federation of Distributors Agricultural Cooperative Other （3.0mn kl） 70,000 kl Associations 2.6mn kl

Source: Shared Research based on company data, KK Sekiyu Tsushinsha

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Service stations in Japan, Itochu Enex service stations

70,000 Service stations: Itochu Enex Service stations: Japan total Itochu Enex market share (right axis) 7% 6.0% 6.1% 6.1% 6.1% 6.0% 5.7% 5.9% 5.9% 60,000 56,444 5.5% 6% 55,153 53,704 5.3% 52,592 51,294 5.2% 50,067 48,672 4.9% 50,000 47,584 5% 45,792 44,057 42,090 4.5% 4.8% 40,357 38,777 4.4% 37,743 40,000 4.2% 4.4% 36,349 34,706 4% 4.0% 33,510 32,333 3.7% 3.9% 31,467 30,747 30,070 30,000 3%

20,000 2%

10,000 1% 2,057 2,084 2,121 2,132 2,178 2,148 2,157 2,189 2,179 2,174 2,153 2,144 2,157 2,182 2,118 2,039 1,973 1,888 1,812 1,766 1,704 0 0% FY03/99 FY03/01 FY03/03 FY03/05 FY03/07 FY03/09 FY03/11 FY03/13 FY03/15 FY03/17 FY03/19 Source: Shared Research based on data from the Agency for Natural Resources and Energy

Domestic gasoline demand and company gasoline sales volume

Gas sales volume: Japan total Gasoline sales volume: Itochu Enex total Itochu Enex market share (right axis) 70,000 9% 59,830 60,561 61,476 61,421 60,552 58,372 58,821 59,064 57,497 57,464 58,159 8% 60,000 57,209 56,207 55,419 53,525 53,112 52,653 51,151 7.5% 7.7% 50,625 49,107 7% 50,000 7.1% 7.2% 6.8% 6.8% 7.0% 6.8% 6.7% 6.5% 6% 6.1% 6.0% 40,000 5% 5.2% 5.3% 30,000 4.5% 4.6% 4.7% 4% 4.1% 4.2% 4.3% 3% 20,000 2% 10,000 4,317 2,407 2,467 2,557 2,730 2,829 2,889 3,162 3,606 3,832 4,079 3,982 4,266 3,993 3,593 3,722 3,587 3,328 3,034 2,600 1% 0 0% ('000 kl) FY03/01 FY03/03 FY03/05 FY03/07 FY03/09 FY03/11 FY03/13 FY03/15 FY03/17 FY03/19 Source: Shared Research based on company data, Agency for Natural Resources and Energy

Domestic sales of gasoline, kerosene, diesel oil

10% Gasoline (right axis) Kerosene (right axis) Diesel oil (right axis) Gasoline YoY Kerosene YoY Diesel oil YoY 70

5% 60

0% 50

-5% 40

-10% 30

-15% 20

-20% 10

-25% 0 FY03/01 FY03/03 FY03/05 FY03/07 FY03/09 FY03/11 FY03/13 FY03/15 FY03/17 FY03/19 (mn kl) Source: Shared Research based on Agency for Natural Resources and Energy

Customer base, regional characteristics Many Itochu Enex affiliated service stations (Car-Life Stations), as with the Home-Life Division, are located in western Japan. The company is by far the largest operator of service stations among those affiliated with trading houses of fuels. Mitsubishi Shoji Sekiyu, the second-largest operator, has about 1,000 services stations. Marubeni Energy Corp, a subsidiary of Marubeni Corporation owned 33.4% by Idemitsu Kosan, is number three with some 600 stations.

Fleet service stations In the Car-Life Division, Itochu Enex has a fleet service station business, which targets large trucks. Fleet stations have larger footprints than ordinary stations, and the main product sold is diesel oil rather than gasoline. Typical customers are shipping companies. Sales initiatives include the adoption of an effective reward point system targeting truck drivers and the provision of comfortable rest facilities.

This business was added to the group when Itochu Enex acquired the former Kohnan Fleet Corp in 2008 (at that time, owned 80% by Kohnan Co. Ltd. and 20% by Itochu Enex) and made it a wholly owned subsidiary (now Enex Fleet). In FY03/20, profit

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generated by Enex Fleet increased YoY by JPY300mn to reach JPY1.5bn. Enex Fleet has about 230 service stations, with about 140 directly managed stations and 90 affiliated stations.

Automobile sales (Nissan Motors dealership) In May 2014, Itochu Enex turned Osaka Car Life Group, an authorized Nissan Motors (TSE1: 7201) dealership, into a consolidated subsidiary (51.95% owned by Itochu Enex and 46.75% by Nissan Network Holdings, a subsidiary of Nissan Motors), thus adding the automobile dealership business to its portfolio. Osaka Car Life Group is a holding company that has under its umbrella Nissan Osaka Sales, the largest Nissan Motors affiliated dealership in Japan in terms of sales and the only one operating in Osaka Prefecture.

Between one and two thirds of Car-Life Station profit comes not from petroleum products, but from other products or services, such as sheet metal and car washing. Similarly, about two thirds of profit at Nissan Osaka Sales comes not from new car sales, but from maintenance and other services.

Industrial Business Division Overview In the Industrial Business Division, Itochu Enex mainly provides a range of petroleum products to large business users. For example, it sells industrial fuel to factories, marine fuel to shipping companies, and asphalt to road paving companies. The division specializes in the B2B market for petroleum products.

Industrial fuel sales The company sells diesel oil for trucks to shipping companies throughout Japan and industrial fuel such as A fuel oil and LP gas to factories. It also sells C fuel oil to shipping companies as fuel for large marine vessels. In addition, it sells imported asphalt to road paving companies and manufacturers of asphalt composites.

Itochu Enex also conducts transactions for the adjustment of supply and demand. It conducts spot trading to supplement market supply during regular repairs at refineries and to capture surplus accompanying decreased demand. However, the volume of spot trading has trended downward due to a tighter petroleum product supply and demand balance following major restructuring of petroleum refineries in the 2010s.

In the case of industrial fuel, there is substantial handling volume and a large number of distributors and users are sensitive to price, making it difficult to maintain profitability. Domestic demand for diesel oil has diminished on logistics streamlining; demand for kerosene has declined on increased use of air conditioners and gas heating; there has been a hollowing out of metals and other materials manufacturing and a shift to city gas as fuel; and factory demand has declined due to energy conservation measures. All of this has resulted in an ongoing slump in the industrial fuel business. The substantial decline in fuel oil sales in FY03/16 was the result of falling demand and reduction in low-margin transactions.

However, despite a downward trend in sales volumes of diesel oil and kerosene, the mainstay products of the industrial fuel business, the company’s market share is slowly rising, reflecting Itochu Enex’s good understanding of user trends and its strong sales capacity.

As with the sale of asphalt and marine fuel, the company’s strategy is to benefit from being a profitable survivor in this area as excess competition falls away.

Restructuring of petroleum products business in ITOCHU group: In FY03/09, Itochu Enex took over the petroleum trading business of ITOCHU Corporation and the petroleum product logistics business of Itochu Petroleum (wholly owned subsidiary of ITOCHU Corporation). The former involves domestic trading in petroleum products and import/export operations using Japan as a base. The latter involves the export of marine fuel, domestic sales of lubricating oil, and tanker operation and chartering. As a result of this restructuring within the ITOCHU group, all of the group’s petroleum product business in Japan, except for business targeting electric power companies, is now handled by Itochu Enex.

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Marine fuel In recent years, the company is putting greater focus on sales of marine fuel. It is currently capable of supplying fuel through ports in Kitakyushu, Hakata, and Oita, among others. Accompanying a recent modal shift, ferries and roll-on/roll-off (RORO) ships have increased their services, giving C fuel oil a tailwind as a marine fuel.

Asphalt sales As more and more refineries halt asphalt production because demand is declining, Itochu Enex is benefiting from being a profitable survivor in the asphalt market. In recent years, petroleum refineries have enhanced their ability to break down heavy oil, and they have reduced their production of low-margin asphalt in favor of high-margin gasoline and other light oils. For this reason, refineries’ asphalt sales volume has dropped sharply, tightening the domestic supply and causing margins to improve.

Despite this trend, Itochu Enex has implemented a strategy of expanding its asphalt sales business, increasing its domestic market share to around 20% in recent years as a result. The company has a total of 12 asphalt supply stations nationwide with a combined capacity of 43,800 MT and three marine tankers for carrying asphalt with a combined capacity 4,300 MT (the Black Dragon, Great Crane, and Angel Blue) (all figures as of FY03/16).

Suppliers are mainly overseas petroleum refineries. Buyers are road paving companies and manufacturers of asphalt composites.

Asphalt sales volume (thousand MT) and estimated market share of Itochu Enex

2,500 Asphalt sales volume: Itochu Enex Asphalt sales volume: Japan total Itochu Enex market share (right axis) 25%

1,953 23% 2,000 1,859 1,820 21% 22% 20% 21% 20% 20% 20% 1,608 19% 19% 19% 1,484 1,421 1,433 1,438 1,476 1,456 18% 1,500 1,297 16% 15% 1,264 1,266 15% 11% 1,150 1,192 1,138 1,101 1,045 1,075 1,027 976 998 13% 13% 959 931 899 937 1,000 11% 848 838 10% 10% 11% 10% 10% 9% 9% 8% 9% 8% 7% 7% 500 276 5% 177 180 185 236 197 174 223 208 204 209 203 111 155 102 167 116 124 148 118 102 159 115 138 148 150 167 154 0 0% 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H 1H ('000 MT) FY03/06 FY03/07 FY03/08 FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 Source: Shared Research, based on data from the Ministry of Land, Infrastructure, Transport and Tourism

Environment-related businesses AdBlue AdBlue is a high-grade urea solution used to detoxify diesel vehicle exhaust emissions, and Itochu Enex is the top domestic supplier. The company sells diesel oil for shipping company trucks and delivers the diesel oil by tank truck directly to the storage tanks of those shipping companies. This allows it to promote AdBlue at the same time, but it also sells AdBlue at its fleet service stations.

Gas to Liquids (GTL) GLT is a refinery process for turning natural gas into a diesel oil alternative. As the resultant fuel contains no sulfur or metals, exhaust gas is cleaner and more environmentally friendly.

Slop and recycled oil Itochu Enex processes waste oil collected from marine vessels, and sells it as recycled oil, which also contributes to the reduction of industrial waste.

Fly ash Fly ash is one type of coal ash from coal-fired thermal plants. Itochu Enex collects and processes it for reuse as a roadbed material for asphalt pavement construction work.

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Power and Utility Division

Power and Utility earnings performances

140,000 (JPYmn) 10% Operating profit 122,898 Power retail sales ('000 MWh) 9% 6,640 120,000 7,000 OPM (right axis) 12% Liberalized power market ('000 MWh) 10.2% 102,364 8% 10.1% 5,825 6,000 10% 100,000 Market share（right axis) 7% 5,000 7.8% 4,626 6% 4,439 8% 80,000 6.5% 66,720 4,000 5.9% 6.3% 5% 3,010 6% 60,000 3,000 2,728 3.6% 4% 2,359 40,232 1,815 4% 40,000 2.2% 2.2% 3% 2,000 2.8% 28,175 19,245 19,106 22,715 22,7151.5% 2.6% 2% 1,000 2% 20,000 1.0% 1.0% 0.4% 1% 0.0%3 80 231 231 409 873 2,431 2,672 2,694 2,387 0 0% - 0% FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/11 FY03/13 FY03/15 FY03/17 FY03/19 IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS Source: Shared Research based on company data

Overview Electricity and heat supply businesses The Power and Utility Division comprises electricity and heat supply. Major subsidiaries include ENEX Electric Power Co., Ltd. (wholly owned), Oji-Itochu Enex Power Retailing Co., Ltd. (60% owned), Enex Life Service Co., Ltd. (wholly owned), and Tokyo Toshi Service Company (TTS; 66.6% owned).

Bolstering power operations in light of deregulation for new business opportunities In 2010, Itochu Enex submitted a notice of commencement of a power producer and supplier (PPS) business and launched electric power retail operations. In March 2011, it turned JEN Holdings, operating power generation facilities for clients in their plant premises, into a subsidiary to strengthen its power operations.

The company is actively bolstering power operations in light of deregulation of electricity retail in April 2016 (electricity system reform). It operates its own abundant power sources, adjusts supply and demand, and has customers such as large-lot users and, eventually, individual households. It is therefore developing a full range of power operations, from generation to supply adjustments to sales.

Distribution channels for new power producers and suppliers (PPS)

Power Supply Wholesale Transmission Retail

Extra-high High voltage Own power voltage ≧50kW ≧2,000kW supply Current deregulation Private companies of power power of

≧50kW Public institutions High voltage (PPS) voltage High Wholesale Other companies' power supply PPS area management companies

Future PPS (retail) Offices and stores deregulation JEPX Expanded Planned for Houses and

2016 voltage Low JEPX Transmission departments appartments

Dec. 2014 Planned for 2015 S C dt Source: Shared Research based on company data

Electricity business Expanding both power generation and wholesale/retail The electricity business consists of two operations: Power Generation and Wholesale & Retail. The company generates power near or within the premises of clients’ factories. The company also builds power plants and engages in wholesale and retail operations. The company, which sells electricity, plans to form a venture with Oji Holdings in 2015 (Oji-Itochu Enex Power

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Retailing Co., Ltd) and another venture with Kansai Electric Power (Sendai Power Station, slated for launch in October 2017) as part of the company’s strategy to form alliances with other companies and use their power sources.

ENEX Electric Power (company overseeing electric power generation) ENEX Electric Power is an intermediate holding company responsible for power generation operations, and it sells electricity to Itochu Enex. It became a wholly owned subsidiary of Itochu Enex in 2011. Under its umbrella, it has a range of subsidiaries generating electricity via thermal, water power, wind power, and solar power plants.

ENEX Electric Power was previously known as JEN, established in 2002. The company buys power generation facilities located in clients’ manufacturing plants and provides electricity. JEN acquired a power plant from Kanebo’s Hofu factory in Yamaguchi Prefecture in 2004, a facility from the Nihongi factory of Nippon Soda Co., Ltd. (TSE1: 4041) in Niigata Prefecture in 2006, and a hydroelectric power plant from the same company in 2008. JEN also purchased a power plant located inside the Amagasaki factory of Daicel Corporation (TSE1: 4202) in 2006. In 2011, JEN acquired CEF Kusu Wind Farm in Oita Prefecture.

Retail alliance with the Oji Group Itochu Enex and the Oji Group formed an alliance and in April 2015 established Oji-Itochu Enex Power Retailing (OJEX; Itochu Enex: 60%, Oji Green Resources Co., Ltd.: 40%) to conduct electricity retailing with a focus on high-voltage users. The joint venture company sources electricity primarily from Itochu Enex and Oji Group power plants.

Coal-fired thermal generation business in Sendai In October 2017, as a joint venture with Kansai Electric Power Company (TSE1: 9503), Itochu Enex established Sendai Power Station (Sendai, Miyagi), a coal-fired thermal plant with a generating capacity of 112,000kW. The plant consumes 320,000 tons of coal per year. Since the Tohoku region uses a 50Hz frequency, the same as Kanto, the plant is useful for marketing in the metropolitan area. Since coal is the cheapest of the fossil fuels, the plant also contributes to strengthening the competitiveness of Itochu Enex’s electricity procurement cost.

However, in September 2017, a request was made to the Sendai district court for a provisional disposition to suspend operation, and the case is ongoing. In the unlikely event that the court prohibits operation and there seems to be no prospect of a resolution, Itochu Enex may book an impairment loss against the amount it invested in the project.

Tokushima biomass-fueled power generation business in cooperation with Oji Group Itochu Enex will operate a biomass-fueled power generation business jointly with the Oji Group, for the purpose of which they established the joint company Oji Green Energy Tokushima Co. Ltd., with a subsidiary of Oji Holdings having an 80% share and Itochu Enex subsidiary ENEX Electric Power the remaining 20%. The joint company will construct a 75,000kW biomass-fueled power plant to be located at the Tomioka Mill of Oji Paper Co., Ltd. in Anan, Tokushima. The plant will be fueled with wood chips and other biomass and is scheduled to begin operating in September 2022. Projected capex is about JPY23.0bn. The plant will generate about 520mn kWh per year, resulting in sales of about JPY13.0bn. The business will make use of the Feed-in Tariff Program for Renewable Energy (FIT program).

Comprehensive partnership with Kyushu Electric Power for retail electric power business In February 2020, Itochu Enex entered a comprehensive partnership with Kyushu Electric Power (TSE1: 9508) regarding the retail electric power business. From April 2020, the two companies will work together to sell electricity to high-voltage and extra high- voltage customers.

Shared Research conjectures that Itochu Enex wants to further stabilize its electricity procurement via this comprehensive partnership. Since electricity cannot be stockpiled, there tends to be a good deal of volatility in supply and demand. A high degree of dependence on the Japan Electric Power Exchange (JPEX) can soften that volatility and permit relatively cheap spot purchasing, but the spot price tends to soar when the supply becomes tight. In an extreme case, there is even a risk of this leading to a management crisis.

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Under the comprehensive partnership, Itochu Enex will conclude an agreement with Kyushu Electric Power allowing it to procure high-voltage electricity on a predetermined scale at a stable price, likely with the aim of stabilizing its earnings and expenses.

Power generation facilities (as of end-March 2019)

JEN Tainai Wind Farm Co., Ltd. Tainai, Niigata Wind 20MW Sendai Power Station Sendai, Miyagi Coal fired 112MW

Hofu Energy Service Co., Ltd. Hofu, Yamaguchi Coal fired 79.6MW Joetsu Energy Service Co., Ltd. Joetsu, Niigata Hydro 8.5MW LNG 22.8MW

Minami Awaji Solar Farm Co., Ltd. Minami Awaji, Hyogo Photovoltaic 9.5MW

Source: Shared Research based on company data

JEPX wholesale prices (FY03/19 data divided by hours on the right)

(JPY/kWh) Average spot price (JPY/kWh) (JPY/kWh) Avg. contract volume (right axis) Avg. spot price (MWh) 20 12 20,000 18 11 16 15,000 14 10 12 9 10 10,000 8 8 7 6 5,000 4 6 2 0 5 0 Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr- Apr-

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 0:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 Source: Shared Research based on JEPX

Itochu Enex electricity sales volume (wholesale and retail; on-grid only)

(GWh) Itochu Enex OJEX Itochu Enex's share of PPS (right axis) 300 6%

250 5%

200 4%

150 3%

100 2%

50 1%

0 0% Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Source: Shared Research based on Ministry of Economy, Trade and Industry data

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PPS retail sales volume (extra high-voltage and high-voltage)

(GWh) PPS retail power sales (extra high-voltage and high-voltage) 14,000 PPS as % of total power reception (extra high-voltage and high-voltage; right axis) 35% 12,000 30% 10,000 25% 8,000 20% 6,000 15% 4,000 10% 2,000 5% 0 0% Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19

PPS sales (low-voltage)

(GWh) PPS retail power sales (low-voltage) PPS as % of total power reception (low-voltage; right axis)

5,000 4,574 4,302 4,2244,163 4,121 15% 4,000 3,535 3,495 3,359 3,4453,396 2,966 3,105 3,063 2,972 3,116 2,855 2,788 3,000 2,580 2,441 2,3412,482 10% 2,133 2,112 1,858 1,9411,982 2,000 1,753 1,697 1,286 1,258 1,429 1,476 1,191 1,219 1,100 881 1,007 5% 1,000 570 658 599 677 247 388 20 172 0 0% Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019

Source: Shared Research based on Ministry of Economy, Trade and Industry data

Spot prices and electricity usage in Tokyo Electric Power service area

28 TEPCO service area power usage ('000 kWh, right axis) DA-24(JPY/kWh) 12,000

24 10,000 20 8,000 16 6,000 12 4,000 8

4 2,000

0 0 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Source: Shared Research based on JEPX data

Earnings analysis Sales Sales and profit in the electric power business seems to be affected by sales volume (depending on business conditions and temperature); the prices of crude oil, liquefied natural gas, coal, and other fuels; Japan Electric Power Exchange (JEPX) prices; and the ratio of wholesale to retail.

Heat supply business Itochu Enex started a heat supply business by acquiring a stake in Tokyo Toshi Service Company (TTS) from Tokyo Electric Power in May 2012. It now owns 66.6% of TTS, which reported sales of JPY12.0bn in FY03/18.

Business overview TTS operates a heat supply business that provides cold and hot water produced at its heat supply centers. The water is piped through local conduits for use in air conditioners of multiple buildings within one area. This system is energy efficient and uses electricity available at night. The company had 18 supply centers as of May 2017.

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TTS also promotes the utilization of untapped energy. The company uses exhaust heat (from factories, garbage incineration facilities, transformer substations, and subway stations), geothermal heat, and energy generated as a result of temperature differences in river water, treated sewage water and groundwater to power heat pumps. (For example, water treated at sewage facilities is colder in the summer and warmer in the winter than outside temperatures.) Of the 18 supply centers mentioned, 5 use this system.

Earnings TTS has stable earnings. Profit is affected by weather and temperature. Earnings rise when the use of air conditioners or heaters increases (during hot summers and cold winters). The company benefits particularly when air conditioner use rises in the summer. TTS uses electricity available at night so costs will decline if an increase in power sources, such as nuclear reactors, causes a fall in nighttime electricity rates.

The effect of energy efficiency measures

Individual heat source systems 100.0%

Down General heat supply systems 90.1% 9.9% 10%

Down TTS average 66.2% 33.8% 34%

High-v olume heat-storage lay er and efficient heat pump Down Harum i Island District 58.6% 41.4% 41%

Using unused energy (treated sewage) Down Makuhari High-tech and Business 56.8% 43.2% 43% District Source: Shared Research based on company data, Ministry of Economy, Trade and Industry

Full deregulation of electricity retail market (2016) Integrated system for development, electric power generation, supply adjustment, and sales In 2010, Itochu Enex submitted a notice of commencement of a power producer and supplier (PPS) business and launched electric power retail operations. In March 2011, it turned JEN Holdings, which operates power generation facilities for clients in their plant premises, into a subsidiary, and thereafter enhanced JEN’s wind power generation business.

The aim is to create a prime PPS (PPPS) encompassing the entire supply chain from upstream to downstream. The company already possesses its own power sources, adjusts supply, and sells electricity. Hereafter it aims, through strategic partnerships, to further strengthen all elements of the supply chain, from development and generation to supply adjustment and sales. The company’s ability to systematically integrate these various elements is one of its strengths.

Targeting a JPY7.5tn market using its baseload power as a weapon With the removal in 2016 of the earlier limitation to contracts of 50kW or greater, deregulation of the electricity retail market was completed. Based on the 2012 earnings results of the 10 biggest power companies, the Agency for Natural Resources and Energy estimated the size of the market at JPY7.5tn.

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Process until deregulation of the electricity retail market

）～～～ kW March 2000 April 2004 April 2005 2016～ Voltage Contracted （【For industrial use】 Large plants 【For industrial use】 Large plants 【For industrial use】 Large plants 【For industrial use】 Large plants 【For business use】 Department stores 【For business use】 Dep. stores 【For business use】 Department stores Office buildings Office buildings 【For business use】 Department stores Office buildings Electricity 26% 【High-voltage A】 Midsize plants Office buildings 【High-voltage B】 Midsize plants 【High-voltage B】 Midsize plants 【>500kW for business use】 Supermarkets 【High-voltage for business use】 Supermarkets Deregulated Midsize buildings 【High-voltage for business use】 Supermarkets Extra high-voltage Electricity Midsize buildings Midsize buildings 40% 【High-voltage A】 Small plants 【High-voltage A】 Small plants 2,000kW (20,000V) 【Voltage B】【Low-voltage】 Convenience stores Electricity Midsize plants 【For businesses】 60% Offices Deregulated Lights Households Electricity 9% Supermarkets （As of March, 2013）【】 Midsize buildings

500kW 【Voltage A】【Voltage A】

High-voltage Small plants Electricity 19% Small plants 【For business use】 Deregulated Electricity 9% Electricity 9% <500kW Electricity 14% 100%

50kW 【Low-voltage】 Convenience stores 【Low-voltage】 Convenience stores 【Low-voltage】 Convenience stores (6,000V) Offices Offices Offices Electricity 5% Electricity 5% Electricity 5% （As of March, 2013） Deregulated 【Lights】 Households 【Lights】 Households 【Lights】 Households

Low-voltage Electricity 35% Electricity 31% （As of March, 2013 ）

Source: Shared Research based on data from the Ministry of Economy, Trade and Industry

Characteristics of each power source Type Power source Characteristics Base load Nuclear, coal, hydroelectric, Lowest cost; stable operations day and night geothermal Middle load Natural gas, LP gas Second lowest cost; output can be adjusted depending on demand Peak load Petroleum, pump-stage High operating costs; easy to adjust output hydroelectric

Renewable Solar High costs; unstable supply; needs improvement; can be an emergency backup energy Wind power Costs comparable to thermal power generation if facilities are large enough Geothermal Low-cost means of supplementing baseload sources; development takes time and is costly Hydroelectric Generally plants are a baseload source; pump-storage plants can easily adjust output; both are peak-load power source Biomass Potential stable source of power; materials vary and ca be costly Source: Shared Research based on data from the Ministry of Economy, Trade and Industry

Leveraging the customer bases of existing businesses (potential electricity customers) To expand the electric power business, procurement and sales capacity are as important as electric power generation. Itochu Enex plans to further leverage a combination of in-house generation, in-house procurement, procurement from the market (JEPX), and, depending on circumstances, use of continuous backup system.

Continuous backup system is a system based on the Guidelines for Proper Electric Power Trade from the Ministry of Economy, Trade and Industry, in which a power producer and supplier (PPS), when it does not have adequate electricity output to meet user demand, may continuously supplement its supply via wholesale from a power company. When a PPS expands its output, it may accept backup from a power company up to a fixed percentage of the power company’s baseload power capacity. Prior to full deregulation that fixed percentage was 30%. After deregulation, the percentage remained the same for high-voltage and extra high-voltage, but was reduced to 10% for low-voltage.

Leveraging the capacity of the ITOCHU group Itochu Enex has stated an intention to increase its baseload power, to which end it is important to secure customers who on balance need a stable supply of electricity both day and night. Here, the ITOCHU group as a whole can be a strong ally. Itochu Enex seems to be aiming to leverage the group’s and the management team’s sales abilities to capture nighttime users such as warehousing companies.

Nurturing user PPSs and creating a balancing group The creation of a balancing group (representative PPS system) is important as a measure to enable adjustment of the supply and demand balance and reduction of imbalance fees. Creating a balancing group that links PPSs together makes it possible to reduce the risk that an imbalance will occur as they achieve a same-time/same-amount arrangement across the group. Especially by coordinating with user PPSs from other business areas within the ITOCHU group or from other groups, Itochu Enex will be able to improve its services and earnings capacity.

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The advantages to a user PPS of joining a balancing group are that they can outsource troublesome specialist operations related to supply and demand, avoid investment in power receiving costs, seek economies of scale and reduce imbalance, reduce procurement costs, and concentrate on their main business. The greatest merit to Itochu Enex in creating a balancing group is that it will allow it to concentrate on sales activities.

Balancing group and user PPSs

Low-voltage retail balancing group Imbalance fees Power

Power supply Power supply Power Conventional sales Itochu Enex （high-voltage power: BtoB）

Power supply Power price, etc. Companies, corporations, Supply and demand Procurement ministries, municipalities, etc.

Power supply Power price, etc.

User PPSs （Itochu Enex） User PPSs (partners outside of the group)

LPG Petroleum Distribution, City gas Residential Telecoms Automobile Municipalities ・・・・・・Business business insurance

Customers (low-voltage: BtoC [Itochu Enex], BtoBtoC [outside partners] from April 2016)

Source: Shared Research based on Ministry of Economy, Trade and Industry

Countering risk However, there are obvious risks to the supply and demand balance. Disruption could be caused by the resumption of nuclear reactors, a sudden increase in the number of power plants, or even growth in solar-power generation causing an electricity surplus during the daytime. Ordinarily, the daytime provides an opportunity to make money due to high demand, but if solar- power generation were to disrupt the supply and demand balance, it could cause prices to drop. In an extreme case, there is even a risk it could result in a negative spread.

Itochu Enex is naturally taking some risk into account, and is using alliances and financing methods to spread out and reduce the risks it faces.

Overseas businesses

Since domestic businesses have begun to mature, Itochu Enex in recent years has been turning its eyes toward overseas markets.

Thailand Bangkok representative office In December 2019, the company established a representative office in Bangkok, Thailand, to gather information and conduct market research into solar-power generation and LP gas businesses in Thailand and neighboring countries. Then, in April 2020, it established two companies in Thailand, ITC ENEX Southeast Asia and ITC C ENEX (Thailand). It plans to leverage the business expertise the group has cultivated in Japan to provide value-added services that are beneficial in terms of not just cost, but environmental friendliness and disaster prevention.

The Philippines LP gas In April 2016, joint venture Creasia Energy Holdings (60% owned by ITOCHU Corporation; 40% owned by Itochu Enex) acquired 40% of Philippines-based LP gas distributor IP&G and began importing, wholesaling, and retailing LP gas in the Philippines. IP&G supplies households and commercial customers (including shopping malls, fast food restaurants, and hotel

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restaurants), and also actively promotes sales to industrial users including Japanese manufacturers operating in the Philippines. The company plans to apply its experience cultivated in Japan in the LP gas business to this overseas market.

Auto-related business The company has concluded an AdBlue sales agreement with Japanese truck manufacturers in the Philippines. It is also investigating other auto-related businesses.

Indonesia Industrial gas PT. ITC ENEX INDONESIA (PT. ENEX) built an industrial gas filling station in Karawang International Industrial City on the outskirts of Jakarta, and in September 2016 began filling tanks and selling carbon dioxide, oxygen, and other gases for industrial use to Japanese companies doing business in the region.

Vietnam Car-Life business The group established ENEXFLEET VIETNAM COMPANY LIMITED and began operating a Car-Life business in Vietnam. The established company plans to take advantage of Enex Fleet’s expertise in car washing to operate car washing facilities at large commercial complexes. Thereafter, it plans to consider alliances with other companies as it aims to expand business operations.

Palau Petroleum products import and sales In January 2012, Itochu Enex acquired 25% of IP&E Palau, Inc., which imports and sells petroleum products in the Pacific region. IP&E Palau’s operations appear to be relatively stable.

The US Guam and Saipan project Itochu Enex has assigned a director to IP&E Holdings, LLC, which has partnered with Itochu Petroleum Co., Pte Ltd, a wholly owned subsidiary of ITOCHU Corporation. It plans to use expertise cultivated in Japan in overseas markets.

Next-generation biodiesel business Starting in May 2013, ITOCHU Corporation and Itochu Enex have been participating in a next-generation biodiesel fuel project established by Flint Hills Resources Renewable LLC and Benefuel Inc. to produce 50mn gallons per year (about 190,000kl per year, equal to about 5% of US production volume) of low-cost biodiesel fuel using inedible feedstocks.

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Strengths and weaknesses Strengths Bargaining power based on volume procurement and sales capacity: Itochu Enex is one of the top fuel trading houses ◤ in Japan, selling 2,746,000kl of gasoline, 3,279,000kl of diesel oil, and 525,000 tons of LP gas (as of FY03/20). Competitors include JA (ZEN-NOH) and Mitsubishi Corporation Energy. Itochu Enex has a sales capacity backed by 1,704 Car-Life Stations nationwide and 551,000 direct sales customers of the LP gas business, making volume procurement possible. This gives it the bargaining power with petroleum and LP gas refineries to gain stable supplies of petroleum products and LP gas at lower cost than its competitors. This procurement capacity in turn creates a variety of business opportunities. In recent years, Itochu Enex is steadily expanding its domestic shares of various markets, including diesel oil, kerosene, and LP gas.

Strong ability to develop new businesses: Itochu Enex entered the electric power business in earnest in 2010. After only ◤ about 10 years, in FY03/20, the Power and Utility Division generated sales revenue of JPY90.5bn and operating profit of JPY5.8bn. Underlying the rapid succession of investment in power plants and swift sales network expansion were the company’s strong earning capacity, its ability to gather information from a large number of corporate customers of its petroleum businesses, selling power to the 551,000 households that are customers of the LP gas business, a highly skilled personnel, and agile decision-making by the management team. A corporate culture that keeps its businesses from disengaging with each other and a personnel strategy that includes active mid-career hiring also contribute to improving the company’s business development ability.

Large energy business portfolio encompassing petroleum, LP gas, and electricity: Itochu Enex has three key energy ◤ business areas: petroleum-related, LP gas-related, and electricity-related. The businesses making the smallest contribution to profit are the LP gas-related businesses, but even those generate over JPY2.0bn in operating profit. Itochu Enex is the only fuel trading house that has grown all three of these business areas on such a large scale. It was the customer networks it had cultivated through the petroleum-related and LP gas-related businesses that enabled it to grow the electricity-related businesses to the degree it has. Now, using these three energy business areas as a foundation, Itochu Enex is working to expand its mobility-related, environment-related, and overseas businesses.

Weaknesses

Low direct sales growth in LP gas businesses: The LP gas-related businesses have two sales channels: direct sales and ◤ wholesale. Currently the company has about 1mn LP gas customers, of which there are 551,000 direct sales customers, so the direct sales (retail) ratio is about 50%. In the LP gas supply chain, the retail margin is about four times that of the wholesale margin, so increasing the ratio of direct sales is the key to improving the profitability of the LP gas businesses, but currently the growth of direct sales has stalled, due partly to costly commercial rights acquisition. In LP gas distribution, competitors include Nippon Gas (TSE1: 8174) and TOKAI Holdings (TSE1: 3167), the sales volume for both of which goes almost entirely toward direct sales (retail). In FY03/20, OPM was 8.7% for Nippon Gas and 6.3% for TOKAI Holdings (gas business), whereas it was just 3.1% for the Home-Life Division at Itochu Enex.

Weakness north of Kanto region: Although the company does have operations nationwide, there is a much lower ◤ concentration north of the Kanto region than in western Japan. Considering that the company was founded to wholesale products produced at the Mizushima refinery of Nippon Mining (now ENEOS), it seems natural enough that its core business area would extend from Kyushu north to the Kansai region, but Kanto has the bulk of Japan’s economic activity and its population continues to grow, the company’s weak presence in the Kanto region and areas north of Kanto is a management issue that needs to be addressed.

Late start in biomass-fueled power generation business: With a more relaxed electricity supply and demand balance ◤ and stricter environmental regulation in recent years, it is becoming ever harder to build any new natural gas-fired or coal- fired thermal plants. At the same time, as a renewable energy option, biomass-fueled power plants can serve as baseload power plants that normally operate at full power, so they are seen as a potential stable revenue source based on the FIT program. However, compared with major listed independent electric power business operators, Itochu Enex got a late start in developing biomass-fueled generation. Independent PPS erex Co., Ltd. (TSE1: 9517) has already invested in four biomass- fueled power plants and has equity ownership in 145MW of electricity output. Furthermore, erex is proceeding with

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preparations to develop new plants in Okinawa, Sakaide, and elsewhere. Renewable energy PPS Renova Inc. (TSE1: 9519) has also invested in four biomass-fueled power plants scheduled to launch from 2021 onward, with planned equity ownership in 300MW of output. Renova is also preparing to develop plants in Sendai and elsewhere. Itochu Enex, on the other hand, has invested only in the biomass-fueled power generation project in Tokushima led by Oji Group (planned equity ownership in 15MW of output; scheduled to begin operation in September 2022).

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Historical performance and financial statements

Historical performance Q1 FY03/21 results Overview

Itochu Enex reported sales revenue of JPY148.2bn (-32.7% YoY). The decline was caused chiefly by a drop in sales volume of ▷ domestic petroleum products and lower sales prices accompanying a drop in crude oil prices. Operating profit was JPY4.4bn (+3.1% YoY). The increase was mainly due to solid household LP gas and electricity sales ▷ volume on demand caused by more people staying home due to the COVID-19 pandemic and reductions in operating and business costs in petroleum product import/export operations in light of fluctuations in the price of crude oil. Profit attributable to owners of the parent was JPY3.6bn (+32.5% YoY). ▷ In the Home-Life Division, sales revenue was JPY15.8bn (-JPY4.1bn YoY). The decline was caused chiefly by lower sales prices ▷ accompanying reduced LP gas import prices and a decline in LP gas and industrial gas sales volume due to a slump in economic activity. Operating profit was JPY57mn (-89.7% YoY) and profit attributable to owners of the parent was JPY173mn (- 65.5% YoY). The decline was caused primarily by the impact on inventory of falling LP gas import prices and a drop in LP gas

and industrial gas sales volume. In the Car-Life Division, sales revenue was JPY81.9bn (-35.0% YoY). The decline was caused chiefly by a drop in selling prices of ▷ domestic petroleum products due to lower crude oil prices, along with a decrease in sales volume. Operating profit was

JPY910mn (-52.8% YoY) and profit attributable to owners of the parent was JPY633mn (-39.3% YoY). This was mainly due to lower petroleum product sales volume and declines in unit sales and revenue from services in the car dealership business. In the Industrial Business Division, sales revenue was JPY32.3bn (-35.5% YoY). The drop was caused chiefly by a decline in sales ▷ volume for industrial petroleum products and a drop in sales prices accompanying falling crude oil prices. Operating profit was JPY1.7bn (+575.8% YoY), and net income attributable to owners of the parent was JPY1.5bn (+705.8% YoY). This jump was

caused chiefly by reductions in operating and business costs in petroleum product import/export operations in light of fluctuations in the price of crude oil. In the Power and Utility Division, sales revenue was JPY18.3bn (-24.8% YoY). The decline was mainly due to a drop in sales ▷ volume in the wholesale electric power business. Operating profit was JPY1.5bn (+9.0% YoY), and profit attributable to owners

of the parent was JPY1.1bn (+24.1% YoY). This rise was chiefly due to the completion of regular repairs conducted on a large scale in FY03/20 in the power generation business and subsequent improvement in operation rates. Cash flows: Cash flows from operating activities were JPY16.3bn (versus -JPY4.1bn in Q1 FY03/20) on improvement in working ▷ capital and profit attributable to owners of the parent. Cash flows from investing activities were JPY8.5bn (versus -JPY196mn in Q1 FY03/20) since the round of acquisitions of subsidiaries conducted in FY03/20 has run its course. As a result, free cash flows were JPY24.8bn (versus -JPY4.3bn in Q1 FY03/20).

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Overview of results by segment

Cumulative FY03/19 FY03/20 FY03/21 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 288,762 606,834 931,822 1,244,260 274,365 548,143 826,528 1,104,548 182,121 YoY 17.7% 19.5% 14.5% 7.6% -5.0% -9.7% -11.3% -11.2% -33.6% Home-Life 24,565 44,959 74,413 105,112 22,393 40,344 66,372 98,328 17,183 YoY 3.1% 1.6% -0.1% -3.7% -8.8% -10.3% -10.8% -6.5% -23.3% Car-Life 611,316 813,267 133,323 533,750 706,719 90,367 YoY ------12.7% -13.1% -32.2% Industrial Business 175,654 228,946 93,643 152,970 206,332 54,017 YoY ------12.9% -9.9% -42.3% Power & Utility 18,476 48,262 70,439 96,935 25,006 52,943 73,436 93,169 20,554 YoY 25.9% 42.0% 29.1% 23.4% 35.3% 9.7% 4.3% -3.9% -17.8% Operating profit 3,938 8,884 13,267 17,851 4,312 9,527 15,219 19,257 4,447 YoY -15.6% -5.7% -7.2% 4.1% 9.5% 7.2% 14.7% 7.9% 3.1% Home-Life 775 1,151 2,050 3,555 555 618 1,204 2,799 57 YoY 1.8% 39.7% 36.0% 13.8% -28.4% -46.3% -41.3% -21.3% -89.7% Car-Life 6,385 9,230 1,928 6,438 8,239 910 YoY ------0.8% -10.7% -52.8% Industrial Business 1,973 2,449 256 1,866 2,810 1,730 YoY ------5.4% 14.7% 575.8% Power & Utility 1,459 2,614 2,102 2,728 1,351 2,913 5,221 5,825 1,472 YoY -23.8% -32.6% -56.5% -41.0% -7.4% 11.4% 148.4% 113.5% 9.0% Quarterly FY03/19 FY03/20 FY03/21 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 288,762 318,072 324,988 312,438 274,365 273,778 278,385 278,020 182,121 YoY 17.7% 21.1% 6.2% -8.7% -5.0% -13.9% -14.3% -11.0% -33.6% Home-Life 24,565 20,394 29,454 30,699 22,393 17,951 26,028 31,956 17,183 YoY 3.1% -0.1% -2.5% -11.5% -8.8% -12.0% -11.6% 4.1% -23.3% Car-Life - - - 201,951 133,323 -133,323 - 172,969 90,367 YoY ------14.4% -32.2% Industrial Business - - - 53,292 93,643 -93,643 - 53,362 54,017 YoY ------0.1% -42.3% Power & Utility 18,476 29,786 22,177 26,496 25,006 27,937 20,493 19,733 20,554 YoY 25.9% 54.2% 7.9% 10.3% 35.3% -6.2% -7.6% -25.5% -17.8% Operating profit 3,938 4,946 4,383 4,584 4,312 5,215 5,692 4,038 4,447 YoY -15.6% 4.0% -10.1% 60.6% 9.5% 5.4% 29.9% -11.9% 3.1% Home-Life 775 376 899 1,505 555 63 586 1,595 57 YoY 1.8% 496.8% 31.6% -6.9% -28.4% -83.2% -34.8% 6.0% -89.7% Car-Life - - - 2,845 1,928 -1,928 - 1,801 910 YoY ------36.7% -52.8% Industrial Business - - - 476 256 -256 - 944 1,730 YoY ------98.3% 575.8% Power & Utility 1,459 1,155 -512 626 1,351 1,562 2,308 604 1,472 YoY -23.8% -41.1% - - -7.4% 35.2% - -3.5% 9.0% Source: Shared Research based on company data Note: From FY03/20, the Mobility Life Division has been absorbed by the Life and Industrial Energy Division (in this table, segment figures for FY03/19 have not been retroactively adjusted).

Home-Life Division

Home-Life FY03/19 FY03/20 FY03/21 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 LP gas direct sales customers - - - - 553 551 552 551 550 Business Elect ricit y ret ail cust omers - - - - 86 91 95 93 96 met rics LP gas sales volume ('000 tons) 146 100 148 154 120 108 141 156 108 Industrial gas ('000 tons) 21 21 21 17 19 19 20 16 16 Gross profit 5.6 4.8 5.6 6.4 5.3 4.6 5.4 6.7 4.6 SG&A expenses -4.6 -4.6 -4.8 -4.9 -4.8 -4.7 -4.8 -5.1 -4.6 Profit and Operating expenses 0.8 0.4 0.9 1.5 0.6 0.0 0.6 1.6 0.1 loss Equity-method earnings 0.4 0.1 0.0 0.8 0.3 -0.2 0.2 0.5 0.2 Profit 0.5 0.3 0.5 1.8 0.5 -0.3 0.6 1.3 0.2 Itochu Enex Home Life Nishi-Nihon 0.2 0.1 0.2 0.4 0.2 0.1 0.1 0.3 0.2 Affiliat e Ecore 0.2 0.1 0.1 0.3 0.2 0.1 0.1 0.3 0.2 earnings Eneark 0.3 0.0 0.0 0.4 0.3 0.0 0.1 0.5 0.3 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY173mn (-65.5% YoY). The drop was caused primarily by the impact on ▷ inventory of falling LP gas import prices and a decline in LP gas and industrial gas sales volume in the commercial and industrial use fields. The number of LP gas direct sales customers fell slightly from end-FY03/20, to about 550,000. ▷

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LP gas sales volume was about 108,000 tons (-10% YoY). Household LP gas sales volume increased roughly 4% YoY on stay-at- ▷ home demand caused by the COVID-19 pandemic, but commercial (restaurants, etc.), industrial, and auto gas sales volume fell by more than 10% YoY. In the residential electricity sales business, the number of customer households rose about 3,000 from end-FY03/20 to about ▷ 96,000. Low-voltage electricity sales volume was up YoY thanks largely to stay-at-home demand as a result of the COVID-19 pandemic. Industrial gas sales volume fell to about 16,000 tons (-16% YoY) due to a decline in industrial use demand. ▷

Car-Life Division

Car-Life FY03/19 FY03/20 FY03/21 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Gasoline sales volume ('000 kl) - - - 663 711 748 563 578 377 T o Car Life St at ions - - - 537 - - 499 455 - To others - - - 126 - - 64 123 - Business Kerosene ('000 kl) 145 120 273 442 196 133 161 277 57 met rics Diesel oil ('000 kl) 859 934 332 697 776 815 375 666 470 New cars ('000 units) 6 8 7 9 6 8 5 8 5 Pre-owned cars ('000 units) 7 5 6 7 6 7 5 6 5 Gross profit - - - 13.0 11.3 - - 12.9 10.4 SG&A expenses - - - -71.4 -9.5 - - -71.6 -9.4 Profit and Operating expenses - - - 2.8 1.9 - - 1.8 0.9 loss Equity-method earnings - - - 0.0 0.0 - - 0.0 0.0 Profit - - - 1.7 1.0 - - 1.1 0.6 Affiliat e Enex Fleet 0.3 0.2 0.5 0.2 0.3 0.5 0.3 0.4 0.6 earnings Osaka Car Life Group 0.1 0.1 0.3 0.4 0.2 0.3 0.0 0.1 -0.1 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY633mn (-39.3% YoY). Petroleum product sales volume fell due to the COVID- ▷ 19 epidemic and unit sales and revenue from services declined in the car dealership business. Petroleum product sales volume declined YoY on lower auto fuel consumption caused by the COVID-19 pandemic. Gasoline ▷ sales volume fell about 20% YoY and diesel oil sales volume fell about 5% YoY. In automobile-related business, unit sales dropped YoY in the car dealership business as a result of shortened business hours to ▷ prevent the spread of COVID-19. New car sales fell 24% YoY to around 5,000 and used-car sales shrank 20% YoY to around 5,000.

Industrial Business Division

Industrial Business FY03/19 FY03/20 FY03/21 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Gasoline sales volume ('000 kl) - - - 34 241 - - 34 176 Kerosene ('000 kl) - - - 85 142 - - 76 75 Business Diesel oil ('000 kl) - - - 149 280 - - 149 266 met rics Heavy fuel oil ('000 kl) 563 518 385 453 484 548 326 486 539 Asphalt ('000 tons) 69 85 96 120 70 94 109 97 72 Gross profit - - - 1.1 1.4 - - 1.6 2.7 SG&A expenses - - - -0.6 -1.2 - - -0.7 -1.0 Profit and Operating expenses - - - 0.5 0.3 - - 0.9 1.7 loss Equity-method earnings - - - 0.0 0.0 - - 0.0 0.0 Profit - - - 0.3 0.2 - - 0.7 1.5 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY1.5bn (+705.8% YoY). This jump was caused chiefly by reductions in ▷ operating and business costs in petroleum product import/export operations in light of fluctuations in the price of crude oil. In the industrial petroleum product and auto fuel card businesses, sales volume fell YoY on lower factory operation rates and ▷ less card use for commercial vehicles.

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In the asphalt sales business, sales volume was up YoY thanks to brisk road work. ▷ In the marine fuel sales business, sales volume increased YoY aided by growth in the volume of imported oil compliant with ▷ sulfur content regulations, as well as solid inquiries from users in Japan.

Power and Utility Division

Power and Ut ilit y FY03/19 FY03/20 FY03/21 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Elect ricit y (GW h) 625 733 561 775 577 670 563 577 509 - High volt age (GW h) - - 517 636 486 - 272 446 384 Business - Low voltage (GWh) - - 44 138 92 - 180 131 125 met rics Steam ('000 tons) 162 149 137 163 150 161 89 106 125 Heat quantity ('000 J) 280 548 223 264 256 572 172 258 237 Gross profit 2.5 2.4 0.7 1.5 2.6 2.9 2.6 1.5 2.6 SG&A expenses -1.2 -1.1 -1.1 -1.3 -1.2 -1.1 -1.3 -1.2 -1.2 Profit and Operating expenses 1.5 1.1 -0.5 0.6 1.4 1.5 2.3 0.6 1.5 loss Equity-method earnings 0.2 0.1 0.0 -0.1 0.4 0.1 0.5 -0.2 0.3 Profit 0.8 0.6 -0.4 1.0 0.9 0.8 1.7 0.1 1.1 Enex Electric Power Group 0.2 0.1 0.1 0.6 0.0 0.1 0.5 0.4 0.5 Affiliat e Enex Life Service 0.0 0.0 0.1 0.1 0.1 0.0 0.1 0.1 0.1 earnings Tokyo Toshi Service - - 0.1 -0.1 0.2 - 0.2 -0.1 0.3 Oji-It ochu Enex Pow er Ret ailing - - -0.1 0.0 0.2 - 0.3 0.2 0.2 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY1.1bn (+24.1% YoY). This rise was chiefly due to the completion of regular ▷ repair of power generation facilities conducted on a large scale in FY03/20 and subsequent improvement in operation rates. In the electricity business, residential electricity consumption increased as more people stayed home. There was an increase in ▷ low-voltage contracts centered on residential electricity, helping low-voltage sales volume reach 125GWh (+37% YoY). However, there was a substantial decline in large, high-voltage contracts, so high-voltage sales volume was just 384GWh (-

21% YoY). Total electricity sales volume was 509GWh, down 12% YoY. In the heat supply business, heat demand was down 7% YoY due to temperatures being higher than the previous year. ▷

Full-year FY03/20 results

Itochu Enex reported sales revenue of JPY897.4bn (-10.9% YoY). The decline was caused chiefly by a drop in sales volume of ▷ domestic petroleum products and lower sales prices accompanying a drop in crude oil prices. Operating profit was JPY19.3bn (+7.9% YoY). This was due chiefly to a greater profit margin in the Power and Utility Division’s ▷ electric power business. Profit attributable to owners of the parent was JPY12.1bn (+4.3% YoY), setting a record for the fifth fiscal year in a row. This was ▷ chiefly due to a greater profit margin in the Power and Utility Division’s electric power business. In the Home-Life Division, sales revenue was JPY89.1bn (-5.6% YoY). The decline was caused chiefly by lower sales prices ▷ accompanying reduced LP gas import prices and a decline in sales volume due to an unusually warm winter. Operating profit was JPY2.8bn (-21.3% YoY). The drop was caused chiefly by a decline in sales volume due to the warm winter. Profit attributable to owners of the parent was JPY2.1bn (-31.1% YoY). This was chiefly due to a decline in profit from equity-method affiliates on the impact of inventory effects caused by reduced LP gas import prices. In the Car-Life Division, sales revenue was JPY542.7bn (-13.1% YoY). The decline was caused chiefly by a drop in sales volume ▷ of domestic petroleum products and a drop in sales price accompanying lower crude oil prices. Operating profit was JPY8.2bn (-10.7% YoY) and profit attributable to owners of the parent was JPY4.6bn (-11.0% YoY). The lower profits were due chiefly to a drop in the number of cars sold by dealerships and the absence in FY03/20 of one-time earnings booked in FY03/19.

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In the Industrial Business Division, sales revenue was JPY175.2bn (-10.2% YoY). The drop was caused chiefly by a decline in ▷ sales volume for industrial petroleum products and a drop in sales prices accompanying falling crude oil prices. Operating profit was JPY2.8bn (+14.7% YoY), and profit attributable to owners of the parent was JPY2.0bn (+16.0% YoY). This was due mainly to a rise in sales volume for asphalt and domestic marine fuel. In the Power and Utility Division, sales revenue was JPY90.5bn (-3.2% YoY). The decline was mainly due to a drop in sales ▷ volume in the high-voltage electric power business. Operating profit was JPY5.8bn (+113.5% YoY), and profit attributable to owners of the parent was JPY3.5bn (+79.5% YoY). This was mainly due to an increased margin in the electric power business as electric power procurement stabilized. Dividend: The company paid a dividend of JPY44 per share, up from JPY42 per share in FY03/19. This was the seventh straight ▷ fiscal year with a dividend increase. Cash flows: Cash flows from operating activities were JPY28.1bn (versus JPY25.4bn in FY03/19) on a drop in depreciation and ▷ amortization costs, an improved financial account balance, and a lower tax burden. Cash flows from investing activities were - JPY1.4bn (versus -JPY13.4bn in FY03/19) due mainly to the sale or redemption of assets. As a result, free cash flows were JPY26.7bn (versus JPY12.0bn in FY03/19). FY03/21 forecast: The COVID-19 pandemic has impacted energy consumption, especially by causing a drop in industrial ▷ demand in light of a contraction in production. As it is difficult to obtain reasonable calculations of the true impact at this time, Itochu Enex has not yet produced a full-year forecast. However, it plans to announce a forecast as soon as it can make such calculations.

Overview of results by segment

Cumulative FY03/18 FY03/19 FY03/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 245,395 507,990 814,044 1,156,344 288,762 606,834 931,822 1,244,260 274,365 548,143 826,528 1,104,548 YoY 10.5% 8.9% 11.5% 12.4% 17.7% 19.5% 14.5% 7.6% -5.0% -9.7% -11.3% -11.2% Home-Life 23,826 44,246 74,462 109,161 24,565 44,959 74,413 105,112 22,393 40,344 66,372 98,328 YoY - - - - 3.1% 1.6% -0.1% -3.7% -8.8% -10.3% -10.8% -6.5% Car-Life 611,316 813,267 533,750 706,719 YoY ------12.7% -13.1% Industrial Business 175,654 228,946 152,970 206,332 YoY ------12.9% -9.9% Power & Utility 14,670 33,981 54,541 78,560 18,476 48,262 70,439 96,935 25,006 52,943 73,436 93,169 YoY 22.5% 13.8% 19.2% 19.7% 25.9% 42.0% 29.1% 23.4% 35.3% 9.7% 4.3% -3.9% Operating profit 4,664 9,421 14,299 17,153 3,938 8,884 13,267 17,851 4,312 9,527 15,219 19,257 YoY 100.3% 21.5% 5.0% -12.8% -15.6% -5.7% -7.2% 4.1% 9.5% 7.2% 14.7% 7.9% Home-Life 761 824 1,507 3,123 775 1,151 2,050 3,555 555 618 1,204 2,799 YoY - - - - 1.8% 39.7% 36.0% 13.8% -28.4% -46.3% -41.3% -21.3% Car-Life 6,385 9,230 6,438 8,239 YoY ------0.8% -10.7% Industrial Business 1,973 2,449 1,866 2,810 YoY ------5.4% 14.7% Power & Utility 1,915 3,876 4,835 4,626 1,459 2,614 2,102 2,728 1,351 2,913 5,221 5,825 YoY 47.2% 12.9% -4.6% -30.3% -23.8% -32.6% -56.5% -41.0% -7.4% 11.4% 148.4% 113.5% Quarterly FY03/18 FY03/19 FY03/20 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 245,395 262,595 306,054 342,300 288,762 318,072 324,988 312,438 274,365 273,778 278,385 278,020 YoY 10.5% 7.5% 16.0% 14.5% 17.7% 21.1% 6.2% -8.7% -5.0% -13.9% -14.3% -11.0% Home-Life 23,826 20,420 30,216 34,699 24,565 20,394 29,454 30,699 22,393 17,951 26,028 31,956 YoY - - - - 3.1% -0.1% -2.5% -11.5% -8.8% -12.0% -11.6% 4.1% Car-Life - - - 201,951 - - - 172,969 YoY ------14.4% Industrial Business - - - 53,292 - - - 53,362 YoY ------0.1% Power & Utility 14,670 19,311 20,560 24,019 18,476 29,786 22,177 26,496 25,006 27,937 20,493 19,733 YoY 22.5% 7.9% 29.5% 20.7% 25.9% 54.2% 7.9% 10.3% 35.3% -6.2% -7.6% -25.5% Operating profit 4,664 4,757 4,878 2,854 3,938 4,946 4,383 4,584 4,312 5,215 5,692 4,038 YoY 100.3% -12.3% -16.8% -52.9% -15.6% 4.0% -10.1% 60.6% 9.5% 5.4% 29.9% -11.9% Home-Life 761 63 683 1,616 775 376 899 1,505 555 63 586 1,595 YoY - - - - 1.8% 496.8% 31.6% -6.9% -28.4% -83.2% -34.8% 6.0% Car-Life - - - 2,845 - - - 1,801 YoY ------36.7% Industrial Business - - - 476 - - - 944 YoY ------98.3% Power & Utility 1,915 1,961 959 -209 1,459 1,155 -512 626 1,351 1,562 2,308 604 YoY 47.2% -8.1% -41.4% - -23.8% -41.1% - - -7.4% 35.2% - -3.5% Source: Shared Research based on company data

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Home-Life Division

Home-Life FY03/19 FY03/20 FY03/19 FY03/20 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. LP gas direct sales customers - - - - 553 551 552 551 551 551 Elect ricit y ret ail cust omers - - - - 86 91 95 98 81 98 Business LP gas sales volume ('000 tons) 146 100 148 154 120 108 141 156 548 525 met rics Industrial gas ('000 tons) 21 21 21 17 19 19 20 16 80 74 Pressure-resistance containers ('000 units) 78 68 95 95 77 72 96 87 336 332 Gross profit 5.6 4.8 5.6 6.4 5.3 4.6 5.4 6.7 22.4 22.0 SG&A expenses -4.6 -4.6 -4.8 -4.9 -4.8 -4.7 -4.8 -5.1 18.9 19.4 Profit and Operating expenses 0.8 0.4 0.9 1.5 0.6 0.0 0.6 1.6 3.6 2.8 loss Equity-method earnings 0.4 0.1 0.0 0.8 0.3 -0.2 0.2 0.5 1.3 0.8 Profit 0.5 0.3 0.5 1.8 0.5 -0.3 0.6 1.3 3.1 2.1 Itochu Enex Home Life Nishi-Nihon 0.2 0.1 0.2 0.4 0.2 0.1 0.1 0.3 0.9 0.7 Affiliat e Ecore 0.2 0.1 0.1 0.3 0.2 0.1 0.1 0.3 0.7 0.7 earnings Eneark 0.3 0.0 0.0 0.4 0.3 0.0 0.1 0.5 0.7 0.9 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY2.1bn (-JPY955mn YoY). Profit booked under the equity method fell by about ▷ JPY430mn, and a decline in LP gas sales volume also had a negative impact of about JPY530mn. The number of LP gas direct sales customers was flat YoY at 551,000 after restructuring that included the establishment of ▷ Itochu Enex Home-Life Shikoku Co., Ltd., to oversee the Shikoku area. The company acquired 22,000 new customers through commercial rights acquisition and sales efforts, but about the same number ended their contracts or suspended service. LP gas sales volume declined YoY due to reduced demand caused by an unusually warm winter, less auto gas demand as more ▷ and more taxis become hybrid vehicles, and less demand for business use due to the impact of the COVID-19 pandemic. In the residential electricity sales business, the company recommended LP gas customers to switch to a sales arrangement ▷ pairing electricity and LP gas. It sought to win new customers by conducting sales activities door-to-door, at its Car-Life Station

full service stations, and at the Car-Life Division’s bases such as Nissan Osaka. Through these measures, it added about 17,000 customer residences to reach about 98,000. One issue the company wants to address in the electric power business is raising the ratio of low-voltage customers since they pay a higher unit price, and it is steadily doing just that. 70 80% of contracts pair – electricity and gas, which is helping to keep customers from ending their contracts. Industrial gas sales volume declined 8% YoY to 74,000 tons due to lower demand on a decline in electronic component ▷ exports. In addition to lower hydrogen sales volume, lower carbon dioxide gas sales volume on decreased consumption at restaurants and bars caused by the COVID-19 pandemic had a negative impact.

Car-Life Division

Car-Life FY03/19 FY03/20 FY03/19 FY03/20 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Gasoline sales volume ('000 kl) - - - 663 711 748 563 578 3,034 2,600 T o Car Life St at ions - - - 537 - - 499 455 2,099 1,960 To others - - - 126 - - 64 123 935 640 Business Kerosene ('000 kl) 145 120 273 442 196 133 161 277 980 767 met rics Diesel oil ('000 kl) 859 934 332 697 776 815 375 666 2,822 2,632 New cars ('000 units) 6 8 7 9 6 8 5 8 30 27 Pre-owned cars ('000 units) 7 5 6 7 6 7 5 6 25 24 Gross profit - - - 13.0 - - - 12.9 49.5 49.2 SG&A expenses - - - -71.4 - - - -71.6 41.1 41.3 Profit and Operating expenses - - - 2.8 - - - 1.8 9.2 8.2 loss Equity-method earnings - - - 0.0 - - - 0 0.1 0.1 Profit - - - 1.7 - - - 1.1 5.2 4.6 Affiliat e Enex Fleet 0.3 0.2 0.5 0.2 0.3 0.5 0.3 0.4 1.2 1.5 earnings Osaka Car Life Group 0.1 0.1 0.3 0.4 0.2 0.3 0.0 0.1 0.9 0.6 Source: Shared Research based on company data Note: A dash is used where there is a lack of continuity with data booked under the old Life and Industrial Energy Division.

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Profit attributable to owners of the parent was JPY4.6bn (-JPY566mn YoY). A drop in the number of cars sold by dealerships had ▷ a negative impact of about JPY320mn, and the absence of one-time earnings booked in FY03/19 had a negative impact of about JPY250mn. The group’s Car-Life Station full service stations numbered 1,704 locations (a decrease of 62 locations from end-FY03/19). ▷ Petroleum product sales volume fell YoY as the number of Car-Life Stations fell and fuel efficiency improved, and due to the ▷ impact of a warm winter and the COVID-19 pandemic and a decline in demand transactions. In terms of petroleum product retail sales, margins remained robust for the second year in a row due to the effect of an ▷ improved supply and demand balance following restructuring in the petroleum wholesale industry. Profit generated by subsidiary Enex Fleet (number three in terms of share of the fleet services industry) improved YoY by ▷ JPY300mn to reach about JPY1.5bn. The margin on diesel oil improved and refinement of the reward point system and enhanced services at stations also helped to increase sales volume. In automobile-related business, at subsidiary Osaka Car Life Group, which operates car dealerships, 1H auto sales were ▷ favorable, but the number of units sold was down YoY on the impact of the consumption tax hike and the COVID-19 pandemic in 2H.

Industrial Business Division

Industrial Business FY03/19 FY03/20 FY03/19 FY03/20 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Gasoline sales volume ('000 kl) - - - 34 - - - 34 144 146 Kerosene ('000 kl) - - - 85 - - - 76 235 216 Business Diesel oil ('000 kl) - - - 149 - - - 149 667 647 met rics Heavy fuel oil ('000 kl) 563 518 385 453 514 518 326 486 1,919 1,844 Asphalt ('000 tons) 69 85 96 120 70 94 109 97 357 370 Gross profit - - - 1.1 - - - 1.6 5.2 5.6 SG&A expenses - - - -0.6 - - - -0.7 2.7 2.9 Profit and Operating expenses - - - 0.5 - - - 0.9 2.5 2.8 loss Equity-method earnings - - - 0.0 - - - 0.0 0.0 0.0 Profit - - - 0.3 - - - 0.7 1.7 2.0 Source: Shared Research based on company data Note: A dash is used where there is a lack of continuity with data booked under the old Life and Industrial Energy Division.

Profit attributable to owners of the parent was JPY2.0bn (+JPY272mn YoY), helped by a rise in sales volume for asphalt and ▷ marine fuel. In the industrial petroleum products sales business, sales volume fell YoY, largely on the impact of falling domestic demand for ▷ petroleum products accompanying the shift to low-carbon energy sources. In the asphalt sales business, sales volume was up YoY on steady sales due to expanded roadwork as part of disaster recovery ▷ efforts. In the marine fuel sales business, domestic sales volume increased YoY as the company began supplying fuel for ships on new ▷ routes and made progress on expanding supply transactions. However, Q4 sales volume declined YoY with a reduction in ferry service caused by the COVID-19 pandemic.

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Power and Utility Division

Power and Ut ilit y FY03/19 FY03/20 FY03/19 FY03/20 (JPYbn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Act. Act. Elect ricit y (GW h) 625 733 561 775 577 670 563 577 2,694 2,387 - High volt age (GW h) - - 517 636 - - 272 446 2,383 1,948 Business - Low voltage (GWh) - - 44 138 - - 180 131 310 439 met rics Steam ('000 tons) 162 149 137 163 150 161 89 106 611 506 Heat quantity ('000 J) 280 548 223 264 256 572 172 258 1,315 1,258 Gross profit 2.5 2.4 0.7 1.5 2.6 2.9 2.6 1.5 7.1 9.6 SG&A expenses -1.2 -1.1 -1.1 -1.3 -1.2 -1.1 -1.3 -1.2 -4.7 -4.8 Profit and Operating expenses 1.5 1.1 -0.5 0.6 1.4 1.5 2.3 0.6 2.7 5.8 loss Equity-method earnings 0.2 0.1 0.0 -0.1 0.4 0.1 0.5 -0.2 0.2 0.8 Profit 0.8 0.6 -0.4 1.0 0.9 0.8 1.7 0.1 2.0 3.5 Enex Electric Power Group 0.2 0.1 0.1 0.6 0.0 0.1 0.5 0.4 1.0 1.0 Affiliat e Enex Life Service 0.0 0.0 0.1 0.1 0.1 0.0 0.1 0.1 0.2 0.3 earnings Tokyo Toshi Service - - 0.1 -0.1 - - 0.2 -0.1 0.9 0.8 Oji-It ochu Enex Pow er Ret ailing - - -0.1 0.0 - - 0.3 0.2 0.0 0.8 Source: Shared Research based on company data

Profit attributable to owners of the parent was JPY3.5bn (+JPY1.6bn YoY). Lower sales volume in the heat supply business had a ▷ negative impact of about JPY110mn. Positive impacts included about JPY610mn from improvement in profit booked under the equity method and about JPY1.1bn from an improved margin on electricity sales. In the electricity business, low-voltage sales volume focusing on residences increased, but large-scale, high-voltage sales ▷ volume targeting companies declined, so total retail sales volume was down YoY. Itochu Enex is promoting expansion of low- voltage sales because maintaining profitability in the high-voltage market is difficult. In terms of procuring electricity, in-house power sources continue to operate normally. The company has been reducing its reliance on the Japan Electric Power Exchange (JEPX) and increasing procurement by arm’s length transactions. The spot price at JEPX was at a historic low in 2H,

but Itochu Enex prioritizes stable procurement. In the heat supply business, heat demand was down YoY due to summer temperatures being lower than the previous year. ▷

Cumulative Q3 FY03/20 results

Itochu Enex reported sales revenue of JPY671.1bn (-10.6% YoY). The decline was caused chiefly by a drop in sales volume of ▷ domestic petroleum products and a drop in crude oil prices. Operating profit was JPY15.2bn (+14.7% YoY). This was due chiefly to a greater profit margin in the Power and Utility ▷ Division’s electric power business. Profit attributable to owners of the parent was JPY9.3bn (+18.8% YoY). This was chiefly due to a greater profit margin in the ▷ Power and Utility Division’s electric power business. In the Home-Life Division, sales revenue was JPY60.0bn (-9.7% YoY). The decline was caused chiefly by reduced LP gas CPI ▷ prices and a decline in sales volume. Operating profit was JPY1.2bn (-41.3% YoY). Profit attributable to owners of the parent was JPY804mn (-36.6% YoY). This was chiefly due to the impact of inventory effects caused by reduced LP gas CPI prices. In the Car-Life Division, sales revenue was JPY410.9bn (-11.8% YoY). The decline was caused chiefly by a drop in sales volume ▷ of domestic petroleum products and a drop in sales price accompanying lower crude oil prices. Operating profit was JPY6.4bn (+0.8% YoY) and profit attributable to owners of the parent was JPY3.5bn (-3.8% YoY). The rise in operating profit was due chiefly to a drop in sales volume of domestic petroleum products, increased margin on new car sales (including the new model of Nissan Dayz, Note, and Serena) in the car dealership business, higher profit from services, and the inclusion of some

SG&A expenses in financial expenses with the application of IFRS 16. In the Industrial Business Division, sales revenue was JPY128.9bn (-14.3% YoY). The drop was caused chiefly by a decline in ▷ sales volume for industrial petroleum products and a drop in sales prices accompanying falling crude oil prices. Operating

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profit was JPY1.9bn (-5.4% YoY), and profit attributable to owners of the parent was JPY1.3bn (-5.6% YoY). This was due mainly to a decline in sales volume for industrial petroleum products. In the Power and Utility Division, sales revenue was JPY71.4bn (+5.3% YoY). The rise was mainly due to an increase in retail ▷ sales volume in the low-voltage electric power business. Operating profit was JPY5.2bn (+148.4% YoY), and profit attributable to owners of the parent was JPY3.4bn (+236.8% YoY). This was mainly due to an increased margin as the electric power wholesale market stabilized. Forecast: Sales revenue reached 67.1% of the full-year forecast and operating profit 92.2%. The company has not made any ▷ changes to its full-year forecast for FY03/20 announced on April 26, 2019.

Overview of results by segment Home-Life Division

The number of LP gas direct sales customers rose 1,000 from end-September 2019, to about 552,000. LP gas commercial ▷ rights acquisitions slowed due to increasingly fierce competition and higher unit prices. Profit attributable to owners of the parent declined JPY500mn YoY to JPY800mn, due to the effect on inventory of reduced LP ▷ gas import costs. In the residential electricity sales business, the company was successful with activity centered on door-to-door visits by ▷ employees, and is promoting expansion of the customer base with a focus on sales pairing electricity and LP gas; the company added about 14,000 customer residences to reach about 95,000. In areas other than LP gas, sales volume in the industrial gas and container testing businesses were down YoY. This was mainly ▷ due to a decline in hydrogen sales volume as a result of a drop in electronic component exports and a decline in carbon dioxide gas sales volume as a result of market conditions.

Car-Life Division

The group’s Car-Life Station full service stations numbered 1,734 locations (a decrease of 32 locations from end-FY03/19). ▷ Petroleum product sales volume fell YoY as: 1) the number of Car-Life Stations fell, 2) fuel efficiency improved, 3) demand for kerosene fell due to warm winter, and 4) a decline in demand transactions due to regular maintenance at the Etajima Oil Terminal. Profit attributable to owners of the parent fell by JPY100mn YoY to JPY3.5bn. The retail market was firm and the segment was ▷ able to secure profit margins, but this was outweighed by the impact of reduced sales. The gross margin on Car-Life Station fuel sales improved as a result of restructuring in the petroleum wholesale industry. ▷ The company launched car leasing business for individuals as a service related to Car-Life Stations, and plans to focus on this as ▷ a growth area in future. In the rental car business, on the other hand, the number of stores offering the service reached 400, but growth has slowed due to intensifying competition. In automobile-related business, at subsidiary Osaka Car Life Group, which operates car dealerships, the number of units sold ▷ was down YoY on the impact of the consumption tax hike.

Industrial Business Division

In the industrial petroleum products sales business, sales volume fell YoY on the impact of falling domestic demand for ▷ petroleum products accompanying the shift to low-carbon energy sources.

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In the asphalt sales business, sales volume was up YoY. There were many natural disasters (such as typhoons), leading to an ▷ increase in road construction. Domestic asphalt is shrinking due to rationalization of oil companies and, structurally, imported products such as those handed by the company are expanding. In the marine fuel sales business, the market for roll-on/roll-off (RORO) ships and ferries expanded, and the company began ▷ supplying fuel for ships on new routes and made progress on expanding supply transactions. Domestic sales volume increased YoY as a result.

Profit attributable to owners of the parent fell by JPY100mn YoY to JPY1.3bn. Although sales volume increased in the asphalt ▷ sales and marine fuel sales businesses, profit narrowed due to the significant impact of lower sales in the industrial petroleum product sales business.

Power and Utility Division

In the electricity business, low-voltage sales volume focusing on residences increased, but large-scale, high-voltage sales ▷ volume targeting companies declined, so total retail sales volume was down YoY. Meanwhile, profit improved due to the stability of the wholesale electric power market. This is a reversal of the reduced profit experienced in FY03/19 due to volatility

of wholesale prices caused by the weather. In the heat supply business, heat demand was down YoY due to temperatures being lower than the previous year. ▷ Profit attributable to owners of the parent increased by JPY2.4bn YoY to JPY3.4bn. Retail electricity sales fell YoY, but the profit ▷ margin improved due to the stability of the wholesale electric power market. An increase in profits at equity-method affiliates and contributions from development projects also drove higher profit.

1H FY03/20 results

Itochu Enex reported sales revenue of JPY439.1bn (-7.6% YoY). The decline was caused chiefly by a drop in sales price and ▷ sales volume of LP gas in the Home-Life Division following reduced cost, insurance and freight (CPI) prices, and by a drop in sales volume of domestic petroleum products in the Life and Industrial Energy Division. Operating profit was JPY9.5bn (+7.2% YoY). This was due chiefly to a strong retail market for petroleum products in the Life ▷ and Industrial Energy Division, robust sales from automobile dealerships, and securing profit margins in the Power and Utility Division. Profit attributable to owners of the parent was JPY5.2bn (-4.8% YoY). This was chiefly due to the inventory effect caused by ▷ reduced LP gas CPI prices. In the Home-Life Division, sales revenue was JPY36.7bn (-8.9% YoY). The decline was caused chiefly by a drop in LP gas ▷ wholesale sales and auto gas station sales volume. Operating profit was JPY618mn (-46.3% YoY). Profit attributable to owners of the parent was JPY224mn (-71.2% YoY). This was chiefly due to the impact of inventory effects caused by reduced LP gas CPI prices, despite robust sales. In the Life and Industrial Energy Division, sales revenue was JPY354.4bn (-9.1% YoY). The decline was caused chiefly by a drop ▷ in sales volume of domestic petroleum products. Operating profit was JPY5.7bn (+41.0% YoY) and profit attributable to owners of the parent was JPY3.2bn (+9.8% YoY). The rise in profits was due chiefly to securing profit margins on the continuation of a strong retail market for petroleum products and strong sales from automobile dealerships (the new model of Nissan Dayz, Note, Serena, and others). In the Power and Utility Division, sales revenue was JPY53.0bn (+6.8% YoY). The rise was caused chiefly by an increase in the ▷ volume of low-voltage electricity sold primarily in the residential market. Operating profit was JPY2.9bn (+11.4% YoY), and

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profit attributable to owners of the parent was JPY1.7bn (+17.6% YoY). This was due mainly to securing profit margins on stabilization in the electricity trading market, and to an increase in profit derived from equity-method affiliates. Forecast: Sales revenue reached 43.9% of the full-year forecast and operating profit 57.7%. The company has not made any ▷ changes to its full-year forecast for FY03/20 announced on April 26, 2019.

Overview of results by segment Home-Life Division

The number of LP gas direct sales customers remained at similar levels to end-March 2019, at 551,000. Customers declined ▷ due to a drop in the number of customers living in housing complexes, customers who switched to competitors, and cancellations related to aging. This decline offset acquisitions of new customers. Sales volume in direct sales was flat YoY, but total LP gas sales volume was down YoY, primarily because of lower wholesale sales and demand at auto gas stations. In the residential electricity sales business, the company promoted expansion of the customer base with a focus on sales ▷ pairing electricity and LP gas, adding about 9,000 customer residences to reach about 91,000. In areas other than LP gas, sales volume and revenue in the industrial gas and container testing businesses were down YoY. This ▷ was mainly due to a decline in carbon dioxide gas sales as a result of the market conditions, and reactionary falloff after extraordinary factors in nitrogen sales in FY03/19.

Life and Industrial Energy Division The company established an environmental business department in FY03/20, starting a new organizational structure with the transfer of automobile-related business from the Mobility Life Division.

The group’s Car-Life Station full service stations numbered 1,742 locations (a net decrease of 24 locations from end-FY03/19). ▷ Although sales volume was down YoY for gasoline and diesel fuel, it was up YoY for kerosene due to temperatures at the beginning of the period being lower than the previous year. In automobile-related business, at subsidiary Osaka Car Life Group, which operates car dealerships, new car sales were robust ▷ especially with the new model of Nissan Dayz (launched at end-March 2019), the popular Note, Serena, and others. As a result, units sold and profit both rose YoY. Asphalt business: Sales volume of asphalt is trending downward due to the expansion of reclaimed asphalt pavement (RAP). ▷ The company’s strategy is to prop up the business by expanding sales of softening agents used in the production of RAP.

Power and Utility Division

In the electricity business, low-voltage sales volume focusing on residences increased. However, competition grew fiercer in ▷ the large-scale, high-voltage market (targeting companies) because of expanded sales by major competitors, and the number of large contracts declined as Itochu Enex emphasized profitability. As a result, total retail sales volume was down YoY. In the heat supply business, heat demand and profit were both down YoY due to temperatures being lower than the previous ▷ year.

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Income statement

Income statement FY03/11 FY03/12 FY03/13 FY03/14 Income statement (IFRS) FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (Japanese GAAP) (JPYmn) Act. Act. Act. Act. (JPYmn) Act. Act. Act. Act. Act. Act. Act. Act. Sales 1,185,731 1,414,161 1,430,746 1,506,606 Sales 1,430,746 1,506,606 1,373,393 1,071,629 1,028,939 1,156,344 1,244,260 1,104,548 YoY 9.4% 19.3% 1.2% 5.3% YoY - 5.3% -8.8% -22.0% -4.0% 12.4% 7.6% -11.2% Sales revenue 864,589 966,044 936,841 723,645 695,060 744,767 1,007,086 897,427 YoY - 11.7% -3.0% -22.8% -4.0% 7.2% 35.2% -10.9% Gross profit 64,901 64,604 70,055 71,455 Gross profit 69,666 71,599 85,720 89,562 93,604 88,822 84,210 86,418 YoY 0.5% -0.5% 8.4% 2.0% YoY - 2.8% 19.7% 4.5% 4.5% -5.1% -5.2% 2.6% GPM 5.5% 4.6% 4.9% 4.7% GPM 4.9% 4.8% 6.2% 8.4% 9.1% 7.7% 6.8% 7.8% Other income (expenses) -56,928 -59,724 -72,620 -73,178 -73,926 -71,669 -66,359 -67,161 SG&A expenses -55,873 -55,631 -56,329 -58,016 SG&A expenses -55,668 -57,862 -71,184 -73,226 -74,697 -70,931 -67,318 -68,858 Gains (losses) on fixed assets -914 -1,460 -1,825 -593 -982 -964 -229 - Other -346 -402 389 641 1,753 1,221 1,192 - YoY -4.4% -0.4% 1.3% 3.0% YoY - 4.9% 21.6% 0.8% 1.0% -3.1% -7.4% 1.2% SG&A expenses YoY 3.9% 23.0% 2.9% 2.0% -5.0% -5.1% 2.3% Operating profit 9,028 8,973 13,726 13,439 Profit from operat ing act ivit ies 12,738 11,875 13,100 16,384 19,678 17,153 17,851 19,257 YoY 48.1% -0.6% 53.0% -2.1% YoY - -6.8% 10.3% 25.1% 20.1% -12.8% 4.1% 7.9% OPM 0.8% 0.6% 1.0% 0.9% OPM 0.9% 0.8% 1.0% 1.5% 1.9% 1.5% 1.4% 2.1% Financial income (expenses) -98 -115 -174 -228 Financial income (expenses) -476 -456 -581 -708 -834 -803 -2 -1,047 Equity in earnings (losses) of affiliates 323 116 -28 528 Equity in earnings (losses) of affiliates -28 528 -357 -672 500 493 1,565 1,768 Extraordinary gains and losses -1,440 -518 -1,465 218 Gains (losses) from sale of shares in affiliates - 1,897 -7 - - 2,326 - - Pre-tax profit 8,181 8,952 11,498 14,158 Pre-tax profit 12,234 13,844 12,155 15,004 19,344 19,169 19,414 19,978 YoY -12.4% 9.4% 28.4% 23.1% YoY - 13.2% -12.2% 23.4% 28.9% -0.9% 1.3% 2.9% Pre-tax profit margin 0.7% 0.6% 0.8% 0.9% Pre-tax profit margin 0.9% 0.9% 0.9% 1.4% 1.9% 1.7% 1.6% 2.2% Income taxes -3,791 -4,581 -5,004 -5,751 Income tax expenses -4,840 -5,794 -5,626 -6,040 -6,599 -5,945 -5,749 -5,793 Net income before minority interests 4,390 4,371 6,493 8,407 Profit 7,393 8,050 6,529 8,964 12,745 13,224 13,665 14,185 Minority interests -506 -478 -917 -1,004 Profit attrib. to non-controlling interests -923 -925 -1,026 -1,495 -2,340 -2,199 -2,106 -2,129 Ne t in c o me 3,884 3,893 5,577 7,403 Profit attributable to owners of the parent 6,471 7,124 5,503 7,469 10,405 11,025 11,559 12,056 YoY -10.9% 0.2% 43.2% 32.7% YoY - 10.1% -22.8% 35.7% 39.3% 6.0% 4.8% 4.3% Net margin 0.3% 0.3% 0.4% 0.5% Profit margin 0.5% 0.5% 0.4% 0.7% 1.0% 1.0% 0.9% 1.3% Source: Shared Research based on company data Note: Figures for the Industrial Material and Energy Trade segments for FY03/13 were obtained by subtracting earning for the Power and Utility segment from the company’s disclosed data.

ROE, ROA, ROIC

FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Act, Act, Act, Act, Act, Act, Act, Act, Act, Act, ROE 4.3% 4.2% 7.1% 7.8% 5.7% 7.5% 10.0% 9.8% 9.7% 9.6% Net margin 0.3% 0.3% 0.5% 0.5% 0.4% 0.7% 1.0% 1.0% 0.9% 1.1% Total asset turnover 4.39 4.85 4.61 4.73 4.23 3.39 3.17 3.18 3.29 2.90 Financial leverage (equit y mult iplier) 2.97 3.15 3.40 3.47 3.39 3.20 3.10 3.24 3.18 3.04 ROA (RP-based) 3.0% 3.1% 3.9% 4.3% 3.7% 4.7% 6.0% 5.3% 5.1% 5.2% ROIC 4.4% 4.3% 6.0% 5.2% 5.7% 7.1% 8.4% 6.8% 6.9% 7.5% NOPAT 5,354 5,322 7,896 7,361 8,431 10,967 13,605 11,860 12,342 13,307 Net assets + Interest-bearing debt 120,811 124,188 132,667 140,360 148,031 154,364 161,662 174,134 179,224 177,870 ROIC (before tax) 7.5% 7.2% 9.6% 8.5% 8.8% 10.6% 12.2% 9.9% 10.0% 10.8% OPM 0.8% 0.6% 0.9% 0.8% 1.0% 1.5% 1.9% 1.5% 1.4% 1.7% Sales / Invested capital 9.81 11.39 10.78 10.73 9.28 6.94 6.36 6.64 6.94 6.21

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Balance sheet

Balance sheet (JPYmn) FY03/11 FY03/12 FY03/13 FY03/14 Balance sheet (IFRS) FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Current assets 167,938 197,877 193,078 193,258 Current assets 189,196 188,193 157,708 137,865 178,127 212,769 199,775 161,240 Cash and cash equivalents 23,735 15,313 17,881 14,090 Cash and cash equivalents 18,062 14,251 16,184 20,824 22,727 22,573 18,725 19,243 Accounts receivable–trade 117,450 150,896 139,140 144,689 Accounts receivable–trade 136,578 140,289 98,449 71,968 94,759 119,541 106,165 86,911 Merchandise and finished goods 12,274 14,899 17,045 17,552 Inventories 18,134 18,655 27,794 25,160 27,155 28,380 33,053 24,263 Other current assets 14,480 16,770 19,012 16,927 Other current assets 16,422 14,999 15,281 19,913 33,486 42,275 41,832 30,823 Fixed assets 109,647 107,176 130,669 137,034 Noncurrent assets 126,697 132,839 171,351 166,188 166,476 169,852 174,598 226,417 Investment securities 14,457 13,791 15,270 13,498 Equity method investments 6,032 5,927 10,551 8,786 11,749 26,145 29,441 31,583 Long-term loans receivable 1,576 1,167 964 805 Other investments 8,925 7,349 8,924 8,029 7,461 3,406 4,186 3,860 Tangible fixed assets 73,382 73,634 89,369 96,553 Tangible fixed assets 57,655 66,988 88,836 88,311 87,588 85,326 87,599 132,870 Investment real estate Investment real estate 15,632 14,236 14,369 13,262 11,986 10,166 9,819 13,147 Goodwill 4,053 3,431 3,209 3,173 Goodwill - 229 108 588 533 692 521 521 Intangible assets (excl. goodwill) 3,144 3,412 8,165 8,264 Intangible assets (excl. goodwill) 10,999 10,280 23,474 24,329 23,638 20,798 20,091 20,005 Others 13,036 11,741 13,693 14,741 Other noncurrent financial assets 27,454 27,830 25,089 22,883 23,521 23,319 22,941 24,431 Total assets 277,585 305,053 323,747 330,292 Total assets 315,893 321,032 329,059 304,053 344,603 382,621 374,373 387,657

Current liabilities 139,128 173,145 162,233 159,302 Current liabilities 161,738 159,201 149,443 111,997 143,751 174,929 165,463 133,224 Short-term bonds and debt 8,397 20,350 14,595 11,340 Short-term bonds and debt 14,745 11,499 14,208 5,299 9,318 12,432 11,217 7,024 Accounts payable–trade 106,598 129,225 119,006 123,785 Accounts payable–trade 124,046 125,655 104,564 80,745 101,902 127,445 121,677 83,936 Accrued income tax 3,127 2,383 3,933 3,947 Accrued income tax 3,994 4,021 2,489 3,351 5,258 3,650 3,193 4,172 Other current liabilities 21,006 21,187 24,699 20,230 Other current liabilities 18,952 18,025 28,182 22,602 27,273 31,402 29,376 38,092 Fixed liabilities 44,334 35,817 54,983 58,308 Noncurrent liabilities 56,501 58,268 66,669 74,894 73,375 70,626 64,344 102,549 Long-term bonds and debt 19,081 10,334 26,247 27,174 Long-term bonds and debt 26,158 27,099 26,746 32,366 31,702 30,273 22,893 18,156 Retirement benefit liabilities 5,992 6,239 6,404 6,941 Retirement benefit liabilities 7,005 7,042 9,350 10,127 9,761 9,820 9,936 10,335 Other fixed liabilities 19,261 19,244 22,332 24,194 Other noncurrent liabilities 23,338 24,127 30,573 32,401 31,912 30,533 31,515 74,058 Total liabilities 183,462 208,962 217,217 217,610 Total liabilities 218,238 217,469 216,112 191,823 217,126 245,555 229,807 235,773 Net assets 94,123 96,091 106,531 112,682 Total capital 97,655 103,563 112,947 117,162 127,477 137,066 144,566 151,884 Shareholders' equity 91,752 93,409 98,155 103,004 Equity attrib. to owners of parent 89,425 94,144 97,432 100,526 108,511 116,104 122,290 128,333 Capital stock 19,878 19,878 19,878 19,878 Capital stock 19,878 19,878 19,878 19,878 19,878 19,878 19,878 19,878 Capital surplus 18,737 18,737 18,737 18,737 Capital surplus 18,737 18,737 18,743 18,740 18,740 18,892 18,922 18,934 Retained earnings 63,796 65,186 69,106 74,654 Retained earnings 54,087 59,378 62,223 66,024 73,300 80,352 86,769 92,761 Other capital components -9,336 -8,642 -7,816 -8,514 Other capital components -1,527 -2,098 -1,661 -2,364 -1,655 -1,145 -1,406 -1,370 Treasury stock -1,322 -1,750 -1,750 -1,750 Treasury stock -1,750 -1,750 -1,751 -1,752 -1,752 -1,873 -1,873 -1,870 Non-controlling interests 2,371 2,682 8,376 9,678 Non-controlling interests 8,231 9,419 15,515 16,636 18,966 20,962 22,276 23,551 Total liabilities and capital 277,585 305,053 323,747 330,292 Total liabilities and capital 315,893 321,032 329,059 304,053 344,603 382,621 374,373 387,657 Capital expenditures 5,228 7,608 11,484 16,490 Capital expenditures 11,484 16,490 15,911 12,229 10,058 14,432 13,715 - Depreciation and amortization -6,092 -6,613 -6,773 -8,537 Depreciation and amortization -9,226 -10,226 -10,535 -12,608 -10,856 -10,315 -10,086 -19,580 Goodwill amortization -1,808 -1,728

Total interest-bearing debt 27,478 30,684 40,842 38,514 Total interest-bearing debt 40,904 38,599 40,954 37,665 41,020 42,705 34,110 25,180 Net cash -3,743 -15,371 -22,961 -24,424 Net cash -22,842 -24,348 -24,770 -16,841 -18,293 -20,132 -15,385 -5,937

Accounts receivable days 35.3 34.6 37.0 34.4 Accounts receivable days 33.5 31.7 29.0 29.6 33.8 33.1 31.9 Days in inventory 3.7 3.7 4.3 4.4 Days in inventory 4.7 6.6 9.8 10.2 9.5 9.7 10.3 Accounts payable days 34.2 31.9 33.3 30.9 Accounts payable days 31.8 32.6 34.4 35.6 39.2 39.2 36.9 Working capital efficiency 4.8 6.4 8.0 7.9 Working capital efficiency 6.5 5.7 4.4 4.1 4.1 3.6 5.3

Current ratio 120.7% 114.3% 119.0% 121.3% Current ratio 117.0% 118.2% 105.5% 123.1% 123.9% 121.6% 120.7% 121.0% Fixed ratio 83.7% 87.2% 75.1% 75.2% Fixed ratio 70.6% 70.9% 56.9% 60.5% 65.2% 68.4% 70.0% 56.7% Equity ratio 33.1% 30.6% 30.3% 31.2% Equity ratio 28.3% 29.3% 29.6% 33.1% 31.5% 30.3% 32.7% 33.1% Source: Shared Research based on company data

Total assets mostly comprised trade receivables and fixed tangible assets. The company plans to reduce fixed tangible assets. Cash and cash equivalents appear small in light of revenues.

Trade receivables and inventories Seasonal factors affect trade receivables and inventories. Demand for most of the fuels that the company sells is weak in the summer and strong in the winter so accounts receivable increase during 2H. The company collects these payments during 1H. The amount of trade receivables is large because it includes gasoline tax. Diesel oil delivery tax is not included in the value of the total sales, but is included in trade receivables.

Accounts payable associated with LP gas and gasoline procurement are due within 30 days, like most companies in the energy industry. However, the company does not have a uniform payment cycle for accounts receivable because it has a stringent screening process for credit and cash transactions; accounts receivable tends to fluctuate quarterly.

The company extends credit to at least 20,000 clients. The company stated that its sales and credit departments analyze a client’s creditworthiness and decide whether to conduct credit or cash transactions.

The Home-Life Division reassesses the value of its inventory every quarter. This is necessary because the company has gas canisters at customers’ homes. Changes in cost, insurance, and freight (CIF) prices significantly affect the company’s earnings.

Industrial Energy business (formerly under the Industrial Energy & Logistics Division) The payment cycle for the Industrial Energy business, both for procurement and sales, is 30 days. Thus, demand for cash changes depending on the inventory. The company pays more attention to inventory than the trading volume.

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Cash and cash equivalents As for liquidity, the company manages funds throughout its global supply chain utilizing experience accumulated over the years. Previously it had JPY30.0bn in cash and cash equivalents, but it was able to squeeze this down to JPY20.0bn with appropriate controls.

The company maintains credit lines with banks to provide liquidity as needed and to give it flexibility when it comes to fundraising, and otherwise believes that maintaining cash reserves of between JPY15.0bn and JPY20.0bn is sufficient.

Fixed assets The Home-Life Division and Life Energy business (under the Life and Industrial Energy Division) have a major portion of the company’s fixed assets. These assets belong to the retail operations of the Home-Life Division and service stations and dealers (land and buildings) under Life Energy business of the Life and Industrial Energy Division.

Investments

Investments FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 (JPYmn) IFRS IFRS IFRS IFRS IFRS IFRS IFRS Capit al expendit ures 5,860 5,228 7,608 11,484 16,490 15,911 12,229 10,058 14,432 13,715 Home-Life 1,366 1,274 1,328 2,888 2,865 3,897 4,545 3,683 4,258 3,259 Pow er and Ut ilit y 2,841 8,807 8,750 4,638 2,990 6,014 6,660 Life Energy and Logist ics 2,848 1,743 Indust rial Energy and Logist ics 618 758 Car-Life (old) 3,053 2,154 1,900 4,001 2,976 2,438 2,573 1,718 Energy Trade (old) 842 927 3,580 1,168 955 623 352 609 Other 1 1 9 12 - - - Adjustments 596 870 798 577 887 191 191 1,058 694 1,295 Investments accounted for by equity-method 5,456 6,572 6,440 6,032 5,927 10,551 8,786 11,749 24,145 29,441 Home-Life 4,448 4,480 4,242 4,354 4,718 6,722 5,821 7,682 17,699 18,774 Pow er and Ut ilit y 1,029 549 3,080 2,370 3,530 7,936 10,112 Life Energy and Logist ics 510 555 Indust rial Energy and Logist ics Car-Life (old) 499 452 113 91 100 179 99 92 Energy Trade (old) 498 1,623 2,063 105 107 102 496 445 Adjustments 8 14 19 453 453 468 - - - Depreciat ion -6,434 -6,092 -6,613 -9,226 -10,226 -10,535 -12,608 -10,856 -10,824 -10,086 Home-Life -1,471 -1,423 -1,484 -2,923 -2,887 -3,375 -4,232 -3,475 -3,246 -2,698 Pow er and Ut ilit y - - - -2,340 -3,239 -3,086 -3,867 -3,264 -3,468 -3,494 Life Energy and Logist ics -2,184 -1,990 Indust rial Energy and Logist ics -1,372 -1,377 Car-Life (old) -3,632 -3,516 -3,340 -3,222 -2,810 -2,942 -3,371 -3,131 Energy Trade (old) -633 -618 -1,202 -372 -760 -627 -679 -686 Other -5 -4 -4 -7 -8 -4 - Adjustments -691 -527 -579 -362 -522 -501 -459 -300 -509 -527 Goodwill amort izat ion -2,284 -1,808 -1,728 (*) (*) (*) Home-Life -1,302 -861 -710 Car-Life -819 -823 -832 Energy Trade -252 -213 -274 Adjustments 89 89 89 Impairment losses -199 -100 -117 -227 -1,363 -1,680 -687 -922 -1,429 -638 Home-Life -123 -6 -12 -13 -70 -46 -5 -40 -173 -251 Pow er and Ut ilit y - - - - -283 -201 -13 - Life Energy and Logist ics -669 -216 Indust rial Energy and Logist ics - -171 Car-Life (old) -75 -94 -104 -71 -740 -1,314 -682 -952 Energy Trade (old) - - - -25 -80 -15 Adjustments - - - -118 -190 -104 -574 Source: Shared Research based on company data Segment data for FY03/12 and earlier 8before segmentation changes) are Shared Research estimates. Goodwill amortization for FY03/13–FY03/15 is included in depreciation and amortization costs.

Financing In compiling a financing plan, the company reallocates resources based on its cash flow and then makes up for any shortfall by raising more funds. The company considers factors such as the status of long-term power-generation projects, and decides whether to turn to bank lending or issue bonds. As stated above, the company uses project financing to reduce investment risks. This method was used when the company built its Tainai Wind Far in Niigata Prefecture and expanded its coal-fired facility in Hofu, Yamaguchi Prefecture. In addition, exiting from businesses through the sale of assets to Enex Infrastructure Investment Corporation will facilitate the promotion and management of projects.

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Overview of investment securities The company owns the following investment securities as part of an effort to maintain and strengthen business relationships. Investment securities Specified equity securities Ticker No. of shares ('000) BS amount (JPYmn) Purpose for shareholding FY03/18 FY03/19 FY03/18 FY03/19 Maeda Road Construction Co., Ltd. 1883 598 598 1,286 1,285 Mainly for Energy Trade Division JTXG Holdings, Inc. 5020 756 756 487 383 Key supplier Kohnan Shoji Co., Ltd. 7516 81 81 206 223 Mainly for Car-Life Division Enex Infrastructure Investment Corp. 9286 - 2,370 - 201 For maintaining business relationship Tonami Holdings Co., Ltd. 9070 25 25 156 156 Mainly for Energy Trade Division Hachi-ban Co., Ltd. 9950 40 40 126 129 Mainly for Home-Life Division euglena Co., Ltd. 2931 87 87 89 60 For Life and Industrial Energy Division Tokushu Tokai Paper Co., Ltd. 3708 10 10 41 40 Mainly for Energy Trade Division Oji Holdings Corporation 8411 10 10 7 7 For Life and Industrial Energy Division Watanabe Sato Co., Ltd. 4215 3 3 6 7 For Life and Industrial Energy Division Taiho Transportation Co., Ltd. 5007 1 1 5 4 For Life and Industrial Energy Division Sokoseiren Co., Ltd. 8308 20 4 5 3 For Life and Industrial Energy Division Cosmo Energy Holdings Co., Ltd. 8630 20 - 69 - Key supplier Senko Group Holdings Co., Ltd. 3708 12 - 10 - For Life and Industrial Energy Division Hyoki Kaiun Kaisha, Ltd. 2599 2 - 4 - For Life and Industrial Energy Division Source: Shared Research based on company data

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Cash flow statement

Cash flow statement FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS Cash flows from operating activities Pre-tax profit 8,181 8,951 12,234 13,844 12,155 15,004 19,344 19,169 19,414 19,978 Depreciation 6,092 6,613 9,226 10,226 10,535 12,608 10,856 10,824 10,086 19,580 Impairment losses 100 117 - - - - - Amortization of goodwill 1,808 1,728 - - - - - Losses on bad debt 84 - - - - - Gains (losses) on fixed assets 403 8 914 1,460 1,825 593 982 1,544 241 428 Financial income (expenses) 120 147 476 456 581 708 834 803 2 1,047 Equity in losses (profits) of inv estments accounted for by equity method -322 -115 28 -528 357 672 -500 -493 -1,565 -1,768 Gains (losses) from sale of investment securities -87 447 - - - - - Gains (losses) from business transfer and sale of inv estments in affiliates -73 -1,897 7 - - -2,326 - - Change in accounts receivable–trade -4,744 -33,340 6,001 -4,098 42,785 24,438 -22,938 -25,998 13,602 19,388 Change in inventories -1,841 -2,514 -2,112 -129 1,944 2,659 -1,337 -1,964 -4,667 8,814 Change in accounts payable–trade 2,980 22,558 -1,432 1,309 -31,493 -23,999 21,158 26,284 -5,788 -37,741 Others 2,671 -481 1,523 3,186 2,426 1,842 -4,629 3,699 2,935 3,673 Subtotal 15,288 4,119 26,942 23,829 41,122 34,525 23,770 31,542 34,260 33,399 Interest and dividend income received 584 439 365 440 513 434 510 737 491 1,669 Interest expenses paid -427 -468 -707 -614 -747 -906 -927 -873 -838 -1,126 Income taxes paid -3,964 -4,361 -3,846 -6,125 -6,552 -3,731 -5,522 -7,167 -8,510 -5,836 Cash flows from operating activities 11,481 -271 22,754 17,530 34,336 30,322 17,831 24,239 25,403 28,106 Cash flows from investing activities - - - - - Purchase of investments accounted for by equity method -100 -0 -5,363 -14 -2,649 -5,972 -2,663 -2,825 Proceeds from sale of investments accounted for by equity method 312 2,397 2 12 - - 103 5,201 Purchase of investments -2,229 -2,153 -1,417 -917 -598 -5,147 -30 -256 -284 - Proceeds from sale of investments 871 1,111 1,583 2,830 972 4,490 1,472 5,411 103 - Acquisition of subsidiaries (net of cash acquired) -3,077 -457 -8,971 -1,426 -2,430 -1,690 -645 -3,751 - -5,566 Proceeds from sale of subsidiaries (net of cash acquired) 85 17 - 3,001 -598 - 3,585 Payment for loans receivable -412 -810 -8,071 -1,958 -2,903 -191 -1,661 -444 -907 -1,017 Collection of loans receivable 1,662 723 1,527 1,190 2,987 350 1,710 5,675 752 1,316 Purchase of tangible fixed assets and investment real estate -3,516 -5,938 -9,184 -15,105 -14,054 -10,609 -8,436 -11,887 -12,883 -11,941 Proceeds from sale of tangible fixed assets and investment real estate 404 1,477 1,640 1,704 1,495 1,942 2,810 2,536 1,978 2,616 Purchase of intangible fixed assets -1,712 -1,670 -2,300 -1,385 -1,857 -1,689 -1,622 -2,545 -832 -1,980 Proceeds from sale of intangible fixed assets 293 3 51 114 82 70 169 136 193 22 Others -667 793 1,257 -4,197 -8,831 -6,763 827 199 Cash flows from investing activities -8,298 -6,904 -24,930 -12,556 -20,410 -16,673 -14,712 -18,458 -13,410 -1,411 Cash flows from financing activities - - - - - Change in short-term debt and CP -1,925 5,985 -4,526 5 -9,840 -5,192 -1,743 7,323 -6,311 -1,753 Proceeds from bonds and debt 9,950 21,241 992 5,058 8,315 7,500 - - - Repayment of bonds and debt -11,937 -3,467 -10,046 -7,872 -4,041 -9,472 -3,858 -8,615 -3,963 -8,381 Capital transactions with non-controlling interests 30 -478 - 132 76 75 50 Sale and acquisition of treasury stock -0 -428 -0 - - -121 - - Dividends paid to parent company shareholders -1,821 -2,276 -1,808 -1,808 -2,599 -2,599 -2,881 -3,989 -4,971 -4,859 Dividends paid to non-controlling interests -125 -143 -132 -175 -215 -110 -345 -615 -459 -419 Others -1,233 -1,063 -0 -1 0 -1 - -0 - - Cash flows from financing activities -7,091 -1,392 4,759 -8,859 -12,115 -9,059 -1,195 -5,850 -15,857 -26,196 Change in cash and cash equivalents -3,943 -8,480 2,583 -3,885 1,811 4,590 1,924 -69 -3,864 499 Cash and cash equivalents (beginning of year) 27,598 23,735 15,436 18,062 14,251 16,184 20,824 22,727 22,573 18,725 Cash and cash equivalents translation adjustments 80 57 43 74 122 50 -21 -85 16 19 Cash and cash equivalents (year-end) 23,735 15,312 18,062 14,251 16,184 20,824 22,727 22,573 18,725 19,243 Source: Shared Research based on company data

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Other information

History

Itochu Enex was established in January 1961, when Itochu Sekiyu K.K., a subsidiary of ITOCHU Corporation, was split up. Itochu Enex was created to sell products manufactured at the Mizushima refinery in Kurashiki, Okayama Prefecture. The refinery was constructed and operated by Nippon Mining Co., Ltd., a trading partner of ITOCHU Corp. (now JX Holdings, Inc. [TSE1: 5020]).

Corporate timeline Date Type Details Jan. 1961 Itochu Enex founded when Itochu Sekiyu K.K., a subsidiary of ITOCHU Corporation, is split up. Purpose: sell products produced in Mizushima by Nippon Mining Co., Ltd. (Marks ITOCHU's entry into the petroleum sector.) May 1965 M&A Acquires stock in Oita Kyuseki Hanbai Co., Ltd. (now a consolidated subsidiary) Mar. 1970 M&A Acquires stock in Unoshima Sansuiso K.K. and advances into the high-pressure gas business Apr. 1977 M&A Merges with Itochu Fuel Corporation Listed on the second sections of the Osaka Securities Exchange and the Tokyo Stock Feb. 1978 Exchange Promoted to the first sections of the Osaka Securities Exchange and the Tokyo Stock Sep. 1979 Exchange Jul. 1990 M&A Acquires goodwill and employees from Itochu Oil Co., Ltd., subsidiary of ITOCHU Corporation Dec. 1997 M&A Acquires stock in Seibu Petroleum Corporation Takes over gas supply service in Nakatsu, Oita Prefecture, with the goal of breaking into the Mar. 2001 M&A city gas market Jul. 2001 Changes its name from Itochu Fuel Corporation to Itochu Enex Co., Ltd. Takigawa Enex Co., Ltd. (currently Itochu Enex Home-Life Nishi-Nihon Co., Ltd.) commences May 2005 M&A operations after taking over the business operations of Takigawa Industries Co., Ltd. The company acquires stock in Kokura Enterprise Vehicle Service Co., Ltd. (now consolidated Jul. 2005 M&A subsidiary Kokura Enterprise Energy Co., Ltd.) Kokura Enterprise Energy Co., Ltd. takes over the business of Kokura Enterprise Co., Ltd. and Oct. 2005 M&A commences operations The company acquires stock in Itochu Energy Marketing Co., Ltd., and puts it into operation Apr. 2007 M&A as a wholly owned subsidiary Ecore Co., Ltd. is founded by the consolidation of Itochu Enex Home-Life Kyushu (the Apr. 2007 M&A company's wholly owned subsidiary) and Idex Gas K.K. (wholly owned subsidiary of Shin- Idemitsu Co., Ltd.) Itochu Enex Co., Ltd. acquires Kohnan Corporation's oil sales business and stock in Kohnan Sep. 2008 M&A Fleet Corporation, and begins operating the acquired business The petroleum product trading business run by ITOCHU Corporation and the petroleum product logistics business run by Itochu Petroleum Japan Ltd. are split off and acquired by Oct. 2008 M&A Itochu Enex Co., Ltd., which puts the acquired businesses into operation as its Energy Trade Division The company transfers the LPG lorry wholesales business to JAPAN GAS ENERGY Apr. 2009 M&A CORPORATION, then acquires the shares of JAPAN GAS ENERGY CORPORATION Feb. 2011 M&A Invests in IP Power Systems Corp. to break into the electric power retailing business Acquires the shares of JEN Holdings Co., Ltd. to break into the electricity and steam supply Mar. 2011 M&A business for factories Acquires the shares of Tokyo Toshi Service Company (currently consolidated subsidiary) to May 2012 M&A break into the heat supply business Itochu Enex Home-Life Kanto Co., Ltd. (currently consolidated subsidiary) and ing Corporation Apr. 2013 M&A establish a new joint venture, ing Energy Corporation, under their joint management. Sep. 2013 The company sells shares in IP Power Systems Corp. May 2014 M&A The company acquires stock in Osaka Car Life Group Co., Ltd. Jan. 2015 Est ablishes Oji-It ochu Enex pow er ret ailing Co., Lt d. joint ly w it h Oji Green Resources Co., Lt d. Oct. 2015 Establishes PT. ITC ENEX INDONESIA Jul. 2016 Est ablishes ENEX Life Service Co., Lt d. Acquires shares in Maiora Asset Management Co., Ltd. (currently Enex Asset Management Co., Jan. 2017 M&A Ltd.) Oct. 2017 Est ablishes EneArc joint ly w it h Osaka Gas Co., Lt d. Source: Shared Research based on company data

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News and topics June 2020 On June 23, 2020, Shared Research updated the report following interviews with the company.

May 2020 On May 15, 2020, the company announced FY03/21 earnings and dividend forecasts and changes to its medium-term plan.

On the same day, the company announced FY03/21 earnings and dividend forecasts and revisions to numerical targets in its medium-term plan. These had been pending at the time of its FY03/20 results announcement (April 30, 2020).

FY03/21 earnings forecast

Sales revenue: JPY710.0bn (-20.9% YoY) ▷ Operating profit: JPY16.0bn (-16.9% YoY) ▷ Pre-tax profit: JPY16.7bn (-16.4% YoY) ▷ Profit attributable to owners of the parent: JPY11.0bn (-8.8% YoY) ▷ Reasons for revision: As of April 30, 2020, Itochu Enex had not produced a full-year forecast as it was difficult to make ▷ reasonable calculations of the impact of the novel coronavirus (COVID-19) pandemic at that time. The company reassessed the situation and conducted as thorough a review as possible and was able to forecast the impact on some of the businesses at this time. It expects solid sales of household fuels and electricity and fuels for the logistics industry, but expects lower demand for industrial fuels and gasoline and falling automobile sales to drag on earnings.

FY03/21 dividend forecast The company expects to maintain dividend per share at JPY44, in line with FY03/20. The company’s policy is to pay stable dividends with a consolidated dividend payout ratio of 40% or higher.

Revisions to medium-term plan (FY03/20–21) The company revised the numerical targets in its medium-term plan.

Profit attributable to owners of the parent: JPY11.0bn (JPY12.5bn at time of announcement) ▷ ROE target: N/A (9.0%) ▷ Dividend payout ratio: 40% or higher (no change) ▷ Capex: JPY43.0bn (JPY60.0bn) ▷

Top management

The company has eight directors. Three are former ITOCHU Corp officials; three are Itochu Enex executives. Of the two outside directors, one is from ITOCHU Corp. The company also has four auditors, of whom three are former officials of ITOCHU Corp. Of the four, two are outside auditors, one of them is a representative of ITOCHU Corp.

The company’s president and the past two presidents came from ITOCHU Corp. Two came from Itochu’s Finance, Realty, Insurance & Logistics Services Company. The current president assumed his post in June 2012. He is a former representative director of ITOCHU Corp and president of the company’s Finance, Realty, Insurance & Logistics Services Company. His predecessor, who served from June 2006 until June 2012, was also a former representative director of ITOCHU Corp and president of the company’s Finance, Realty, Insurance & Logistics Services Company. This president replaced another former ITOCHU Corp executive, who was a representative director of ITOCHU Corp and the president of the Energy Company.

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Kenji Okada, representative director and president Kenji Okada, representative director and president, joined ITOCHU Corporation in 1974. After serving as an executive responsible for dealing with Seven-Eleven Japan, Okada became general manager of the Construction & Realty Department and the head of the private finance initiative (PFI) office. In 2004, Okada was appointed the chief operating officer of the Construction & Realty Division. Okada then became an executive officer in 2005. In 2007, he was named executive vice president of the Finance, Realty, Insurance & Logistics Services Company, as well as chief operating officer of the Construction & Realty Division. In 2008, Okada became managing executive officer and the president of the Finance, Realty, Insurance & Logistics Services Company.

While at ITOCHU Corp, Okada cut business risk. He strengthened ITOCHU’s equity businesses and launched what would become one of Japan’s biggest real estate investment trusts. Okada was also behind the company’s acquisition of i-Logistics Corporation (formerly TSE: 9321), which became Itochu Logistics Corp.

After becoming president of Itochu Enex in June 2012, Okada has been strengthening the company’s management in preparation for further growth. Okada launched the “Moving 2014” campaign and called for the company to expand.

Dividend policy

Itochu Enex seeks to maintain a dividend payout ratio of at least 40% on a consolidated basis. The goal is to provide stable dividend payments to reward shareholders. As for retained earnings, the company will invest the funds to further strengthen and expand operations.

FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. T ot al dividends a) 2,276 1,814 1,808 2,260 2,486 2,712 3,616 4,520 4,745 4,971 Total treasury stock acquired b) 0 427 0 0 1 1 - 121 - - Total returns to shareholders c) = a) + b) 2,276 2,241 1,808 2,260 2,487 2,713 3,616 4,641 4,745 4,971 Net income attributable to parent company shareholders d) 3,884 3,893 6,471 7,124 5,503 7,469 10,405 11,025 11,559 12,056

Dividend payout rat io a) / d) 58.6% 46.6% 27.9% 31.7% 45.2% 36.3% 34.8% 41.0% 41.1% 41.2% Total shareholder return ratio c) / d) 58.6% 57.6% 27.9% 31.7% 45.2% 36.3% 34.8% 42.1% 41.1% 41.2%

Net assets available to common 91,752 93,409 89,425 94,144 97,432 100,526 108,511 116,104 122,290 128,333 shareholders (year-end) Avg. of beginning and end of year f) 90,915 92,581 91,417 91,784 95,788 98,979 104,519 112,308 119,197 125,312 Before deducting assets available to 91,752 93,409 89,425 94,144 97,432 100,526 108,511 116,104 122,290 128,333 holders of Class A preferred shares EPS (JPY) 34.1 34.2 57.3 63.1 48.7 66.1 92.1 97.6 102.4 106.8 Dividend per share (JPY) 20.0 16.0 16.0 20.0 22.0 24.0 32.0 40.0 42.0 44.0 DOE a) / f) 2.5% 2.0% 2.0% 2.5% 2.6% 2.7% 3.5% 4.0% 4.0% 4.0% Source: Shared Research based on company data

Major shareholders

% of shares Top shareholders Shares held ('000) outstanding Itochu Corporation 60,978 53.97% Japan Trustee Services Bank, Ltd. (Trust account) 5,326 4.71% The Master Trust Bank of Japan, Ltd. (Trust account) 4,538 4.02% Enex Fund 3,040 2.69% Japan Trustee Services Bank, Ltd. (Trust account 9) 2,041 1.81% JXTG Holdings, Inc. 2,010 1.78% GOVERNMENT OF NORWAY 1,588 1.41% Nippon Life Insurance Company 1,542 1.36% Itochu Enex Employee Shareholding Association 1,115 0.99% Maeda Road Construction Co., Ltd. 957 0.85% Source: Shared Research based on company data (As of March 31, 2019)

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Employees

Employees FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 IFRS IFRS IFRS IFRS IFRS IFRS IFRS Number of employees 3,528 3,441 3,408 3,829 3,964 6,034 6,096 5,958 5,613 5,619 Home-Life 1,563 1,577 1,630 1,594 1,405 1,509 Pow er and Ut ilit y 401 423 429 430 442 443 Life Energy and Logist ics 1,487 Indust rial Energy and Logist ics 2,095 Car-Life (old) - - - - 1,566 3,650 3,745 3,620 Eergy Trade (old) - - - - 311 293 210 225 Other - - - - 30 - - - Corporate - - - - 83 91 82 69 83 85 Temporary employees (average) 2,026 2,070 1,944 2,195 2,367 2,532 2,504 2,211 2,141 2,050 Source: Shared Research based on company data (As of March 31, 2019)

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Company profile Company name Head office Itochu Enex Co., Ltd. 2-10-1, Toranomon, Minato-ku, Tokyo, 105-8430, Japan Phone Listed on +81-3-4233-8000 Tokyo Stock Exchange First Section Established Exchange listing January 28, 1961 February 1978 Website Financial Year-End

March http://www.itcenex.com/english/ IR contact IR homepage

- http://www.itcenex.com/english/ir/ IR email IR phone - +81-3-4233-8003

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