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Idemitsu posts good sales & profits on back of high crude prices

Nov '08
Idemitsu Kosan Co Ltd announces consolidated financial results for the second quarter of fiscal year 2008.

Summary of Consolidated Operating Results for the Q2 FY2008
In the petroleum industry, the price of Dubai crude oil hit a new record-high in the range of $140 plus per barrel in July 2008. However, subsequently it continued on a downward trend, due partly to growing concern over the global economic slowdown with the outset of financial crisis, and finally fell below 100$/bbl in September, thus exhibiting violent fluctuations.

The average crude oil price for the 6-month period from April to September 2008 increased by 47.7$/bbl against the same period last year to 115.1$/bbl. The cost increased resulting from the substantial rise in crude oil prices and demand of a domestic petroleum product also decreased by a price rise and environment awarness.

In the petrochemical industry, the prices for naphtha, a petrochemical raw material, also rose significantly along with crude oil prices and then dropped back. The average naphtha price for the 6-month period from April to September 2008 increased by 355$/bbl against the same period last year to 1,039$/bbl.

The domestic market encountered a harsh business environment as seen in the production adjustment for styrene monomers and paraxylene affected by worsening profitability due to soaring raw material prices and a softened supply and demand relationship resulting from enhanced production capacity.

The Idemitsu Group's cumulative consolidated net sales for the second quarter of fiscal 2008 (from April to September 2008) increased by 34.3% on a year-on-year basis to 2,280.4 billion due to the rise in crude oil & naphtha prices and consolidated operating income climbed by 69.8% from the same period of the previous year to 61.4 billion, assisted by increased profits from the oil exploration and production business thanks to the rise in crude oil prices.

In addition, the Company adopted the LIFO (last-in, first-out) method for the valuation of inventories. However, the Company has changed the base period for the valuation from one year or an interim period in the past to each quarter from the first quarter of the current consolidated fiscal year. This change in the valuation method has contributed to an increase in operating income of 27.7 billion.

Non-operating profits and losses resulted in a loss of 1.4 billion, worsening by 7.4 billion compared with the same period of the previous year due to a decline in foreign exchange gains, and as a result consolidated ordinary income was 60.0 billion, a climb by 42.4% on a year-on-year basis.

Extraordinary account resulted in a profit of 0.1 billion, down by 0.1 billion from the same period a year earlier. In addition, the total amount of corporate income taxes and minority interests was 41.2 billion, an increase by 12.6 billion compared with the same period last year. As a result, consolidated net income stood at 18.9 billion, an increase by 37.2% compared with the same period last year.

The performance according to the business segment is as follows:

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