Shizuoka Gas : Flash Report for the Term Ended December31,2018

Flash Report for the Term Ended December31,2018[Japan GAAP] (Consolidated)

Company Name: SHIZUOKA GAS CO., LTD.

Code Number:
Representative:	Hiroyuki Kishida, Representative Director and President
Inquiries to:	Yuichiro Hikino, Accounting Manager, Management Control Dept.
Telephone:	[phone]

9543

February 6, 2019

Listing:Tokyo Stock Exchange (1st section) URL:https://ir.shizuokagas.co.jp/en/

Date of annual general meeting of shareholders	March 20, 2019
Date for presentation of the financial statements report	March 22, 2019
Date of dividend payment:	March 22, 2019
Preparation of supplemental explanatory materials：	Yes
Holding of FY2018 financial briefing session：	Yes(for institutional investors)

1. Consolidated Business Results (January 1 to December 31, 2018)

(Amounts under one million yen are omitted; YoY % change)

(1) Operating Results

Net sales (¥ million)	Operating profit (¥ million)	Ordinary profit (¥ million)	Profit attributable to owners of parent (¥ million)
Reporting term Previous term	143,199 ( (17.4% 122,027 (( 12.4	4,869 (36.9)% 7,711 ((24.6)	5,589 (33.0)% 8,341 (22.3)	3,290 ((34.0)% 4,985 (25.9)

Note: Total comprehensive income（¥ million） Reporting term: 1,956((70.9)%)

Previous term: 6,719((3.8)%)

Profit per share (¥)	Diluted profit per share (¥)	Return on equity (ROE) (%)	Ordinary profit / Total assets (%)	Operating profit / Net sales (%)
Reporting term Previous term	44.58 67.56	44.49 67.43	4.4 6.8	5.0 7.6	3.4 6.3

Reference: Share of profit of entities accounted for using equity method（¥ million） Reporting term: 183

Previous term: 144

(2) Financial Position

Total assets (¥ million)	Net assets (¥ million)	Equity ratio (%)	Net assets per share (¥)
Reporting term Previous term	113,668 109,229	82,356 82,472	66.6 69.1	1,024.71 1,022.66

Reference: Net assets excluding subscription rights to shares and non-controlling interests (¥ million)

Reporting term: 75,669 Previous term: 75,459

(3) Cash Flows

Cash flows from operating activities (¥ million)	Cash flows from investing activities (¥ million)	Cash flows from financing activities (¥ million)	Cash and cash equivalents at end of period (¥ million)
Reporting term Previous term	11,885 10,746	(5,334) (6,596)	(4,239) (5,450)	12,338 10,024

2. Dividend Payment

Dividend per share (¥)					Total amount for annual dividend payments (¥ million)	Pay-out ratio (consolidated) (%)	Dividend payments/ Net assets (consolidated) (%)
End of Q1	End of Q2	End of Q3	End of Q4	Total
FY 2017 FY 2018	- -	7.00 7.50	- -	7.00 7.50	14.00 15.00	996 1,070	20.7 33.6	1.4 1.5
FY 2019(forecast)	-	8.00	-	8.00	16.00	/	20.1	/

3. Consolidated Business Forecast for Current Term (January 1 to December 31, 2019)

(Amounts under one million yen are omitted; YoY % change)

Net sales (¥ million)	Operating profit (¥ million)	Ordinary profit (¥ million)	Profit attributable to owners of parent (¥ million)	Profit per share (¥)
Full term	161,100 12.5%	8,830 81.3%	9,240 65.3%	5,880 78.7%	79.62

※Notes

• (1) Major changes in subsidiaries: No

  Note: Transfer of specified subsidiaries during the reporting period resulting in changes in the scope of consolidation

• (2) Changes in accounting policies, estimates, or retrospective restatements

  • a) Changes in accounting policies due to revisions of accounting standards: No

  • b) Other: No

  • c) Changes in accounting estimates: No

  • d) Retrospective restatements: No

• (3) Number of issued shares (ordinary shares)

  • a) Number of issued shares at end of period (including treasury shares)

    Reporting term: 76,192,950

    Previous term: 76,192,950

  • b) Number of treasury shares at end of period

    Reporting term: 2,349,097

    Previous term: 2,406,480

  • c) Average number of shares outstanding during the term

Reporting term: 73,813,326

Previous term: 73,783,687

※This flash report is exempt from review procedures under the Financial Instruments and Exchange Act.

※Caution Concerning Forward-Looking Statements

Business forecast and other forward-looking statements contained in this document are assumptions based on information available to the company and judgments deemed rational at the time this document was published. Forward-looking statements are not a guarantee that forecast will be achieved. Actual earnings may differ significantly from business forecast due to various factors. For further details, please refer to " FY2019 Forecast " on page 4.

1. Operating Results and Financial Position

(1)Overview of Operating Results

(Operating Results in Fiscal Year 2018)

The Japanese economy experienced moderate growth during the fiscal year. Corporate profits reached record highs, while capital investment rose. At the same time, employment and payrolls improved, driving a continued rebound in personal consumption.

In the energy industry, the April 2016 deregulation of electricity retail sales and the April 2017 deregulation of gas retail sales ushered in an era of major change in the business environment, as energy providers and entities from outside the energy industry began to compete against each other cross-market.

Given these conditions, the Shizuoka Gas Group has engaged in a number of initiatives, aiming to be the leading regional solutions company providing optimal solutions for a wide range of customer needs.

Group net sales for the year amounted to ¥143,199 million, an increase of 17.4% year on year. This result was mainly due to higher gas sales volume, upward revisions in gas unit sales prices necessitated under the gas rate adjustment system, and higher sales of electricity. Profits for the period were impacted negatively by the timing differences between raw materials cost fluctuations and the impact of these fluctuations on gas unit sales prices. As a result, operating profit fell 36.9% to ¥4,869 million, while ordinary profit fell 33.0% to ¥5,589 million. Profit attributable to owners of parent amounted to ¥3,290 million, a decrease of 34.0%.

The following describes our performance by segment.

• 1. Gas

  As of the period end, the company had 356,969 customers (installed meter basis), an increase of 6,752 customers during the period. This increase was mainly due to the addition of Shimada Gas Co., Ltd. as a consolidated subsidiary in March 2018 and winning new customers in the new construction and existing home markets.

  Gas sales volume increased 6.2% year on year to 1,558 million ㎥. Residential-use gas volume fell 1.8% to 92 million ㎥, mainly due to warmer weather and less demand for hot water and heating. Commercial-use gas (offices, retail outlets, public facilities, and medical institutions) volume increased 1.5% year on year to 81 million ㎥, helped by new customer development. Industrial-use gas volume increased 9.5% to 813 million ㎥, driven by steady demand growth among large-volume customers. Wholesale gas volume rose 3.8% to 572 million ㎥.

  Gas net sales rose 16.8% year on year to ¥116,902 million, mainly due to higher unit gas prices stemming from the gas rate adjustment system, as well as higher sales volume. Segment income (operating profit) fell 34.1% to ¥6,568 million. This decrease was due to the impact of the time lag between raw materials price changes and the reflection of these changes in gas unit sales prices.

• 2. LPG and Other Energy Services

  Net sales increased 18.9% year on year to ¥17,938 million, mainly due to an increase in unit gas sales prices for LPG gas and growth in electricity sales. Segment income (operating profit) rose 25.6% to ¥691 million.

• 3. Other Businesses

  Net sales in our Other Businesses segment (facilities construction, gas piping installations, gas appliance sales, etc.) amounted to ¥15,420 million, up 13.8% year on year, mainly due to a rise in facilities construction revenues. Segment income (operating profit) rose 0.3% to ¥649 million.

FY 2018	FY 2017	Change	Change (%)
Number of Customers		356,969	350,217	6,752	1.9
Gas Sales (million ㎥)	Residential	92	94	(2)	(1.8)
	Commercial	81	80	1	1.5
	Industrial	813	742	71	9.5
	Wholesale	572	551	21	3.8
	Total	1,558	1,467	91	6.2

(Notes)

• 1. Number of Customers represents the number of meters installed as of the end of the period.

• 2. Number of Customers does not include the number of end users of wholesale customers.

• 3. Segment performance includes inter-segment transactions.

• 4. Sales volume reflects a conversion of 45MJ/㎥, rounded down to the nearest whole unit.

• 5. Consumption tax excluded.

(FY2019 Forecast)

We forecast FY2019 net sales of ¥161,100 million, which represents an increase of 12.5% compared to FY2018.

This increase is based on expected increases in gas sales volume and trends toward slightly higher gas unit sales stemming from prices necessitated under the gas rate adjustment system. While we forecast higher overhead expenses for the next period, we project ordinary profit of ¥8,830 million, up 81.3% due mainly to the time lag between raw materials price changes and the reflection of these changes in gas unit sales prices. Our outlook for ordinary profit is ¥9,240 million, up 65.3%, while our forecast for profit attributable to owners of parent is ¥5,880 million, an increase of 78.7% year on year. The Company expects to make capital investments of ¥9,782 million for fiscal 2019 (55.1% increase), mainly due to investments in new businesses and pipe construction.

(¥ million)

FY 2019 Forecast	FY 2018 Result	Change	Change (%)
Net sales	161,100	143,199	17,900	12.5
Operating profit	8,830	4,869	3,960	81.3
Ordinary profit	9,240	5,589	3,650	65.3
Profit attributable to owners of parent	5,880	3,290	2,589	78.7
Capital investment	9,782	6,306	3,475	55.1

Assumptions: Crude oil price (Japan CIF) $ 75/bbl, Exchange rate ¥110/USD

(2) Overview of Financial Position

(Assets, Liabilities, Net Assets, and Cash Flows)

1. Assets, Liabilities, and Net Assets

Total assets as of the end of the period amounted to ¥113,668 million, an increase of ¥4,438 million compared to the end of the prior fiscal year. Although noncurrent assets decreased due to ongoing depreciation and amortization, this overall increase in assets was mainly a result of a rise in raw materials associated with higher LNG inventory volumes.

Liabilities increased ¥4,553 million to ¥31,311 million. This result was mainly due to an increase in accounts payable-trade in connection with the timing of raw materials payment settlements.

Net assets fell ¥115 million compared to the end of the prior year, amounting to ¥82,356 million. This decrease was mainly due decreases in valuation difference on available-for-sale securities, offsetting increased retained earnings resulting from profits generated during the period.

As a result, the Company's shareholders' equity ratio at the end of the period was 66.6%.

2. Cash Flows

Cash and cash equivalents ("Cash") amounted to ¥12,338 million as of the end of the period, an increase of ¥2,313 million compared to the end of the prior period.

The following describes the Company's cash flows and major factors in cash flow changes

(Cash Flows from Operating Activities)

Cash from operating activities amounted to ¥11,885 million, compared to cash from operating activities of ¥10,746 million in the prior period. Although the Company recorded income of ¥14,609 million before depreciation and amortization, year-end increases inventory balances contributed to the final net result.

(Cash Flows from Investing Activities)

Cash used in investing activities amounted to ¥5,334 million compared to cash used in investing activities of ¥6,596 million in the prior period. This result was mainly due to expansion and maintenance of gas pipeline networks.

(Cash Flows from Financing Activities)

Cash used in financing activities amounted to ¥4,239 million compared to cash used in financing activities of ¥5,450 million in the prior period. This result was mainly due to repayments of loans and payments of dividends.