Keiichiro Okabe (left)  Chairman  Cosmo Oil Co., Ltd.  Yaichi Kimura (right)  President  Cosmo Oil Co., Ltd.

The Cosmo Oil Group Mission

The Cosmo Oil Group's mission is to help accommodate the varied needs of society primarily through the supply of petroleum energy products. To this end, we will establish a strong, integrated framework for our core operations--from oil exploration and production to the refining and marketing of petroleum products and petrochemicals.in order to deliver stable energy supplies on a global level while ensuring harmony with the environment.

To achieve these objectives, it is essential for us to remain an organization capable of sustainable growth. We believe we must push ahead with CSR management, with the aim of building an operational base that is strong and flexible enough to withstand future changes in our business environment, while investing for growth and responding to the expectations of all stakeholders.

Performance in FY2009

In FY2009, ended March 31, 2010, consolidated net sales declined ¥816.1 billion year on year, to ¥2,612.1 billion. This was mainly due to falling domestic sales of fuel oil products excluding gasoline stemming from economic stagnation and users switching to alternative fuels. By contrast, the Group posted an increase in gasoline sales volume, reflecting its success in retaining customer loyalty. An inventory valuation undertaken during the year helped boost earnings and led to operating income of ¥34.2 billion. After factoring out the effect of the inventory valuation, however, the Group would have reported an operating loss of ¥18.4 billion, as surging crude oil prices and the depressed state of the market for petroleum products made it difficult to maintain appropriate margins. Income before income taxes and minority interests increased ¥152.7 billion over the previous year to ¥35.5 billion, reflecting the impact of an inventory valuation gain, resulting in a net loss of ¥10.7 billion, after the deduction of corporate income tax. This marks an improvement of ¥81.7 million over the previous year.

Having failed to reach our financial targets, we are not satisfied with our performance for the year. However, we made steady progress in building a foundation for our next stage of growth. For example, we completed construction of a heavy oil cracking facility (coker unit) at the Sakai Refinery, an essential strategy for reinforcing the competitiveness of our refineries. We also built an infrastructure for expanding exports of middle distillates (jet fuel, kerosene, diesel fuel) following the full-scale launch of the coker unit, and we saw an increase in the contribution to total sales by our sales subsidiaries. In other highlights, we commenced operations at our para-xylene joint venture with Hyundai Oilbank, and we made investments to ensure stable production in the Oil Exploration and Production business segment.

Medium-Term Policies from FY2010

The current fiscal period marks the first year of the Group's Fourth Consolidated Medium-Term Management Plan, covering the three-year period from April 2010 to March 2013. Through the plan, we will seek to streamline our operations by taking full advantage of our achievements to date, with the aim of establishing a solid business foundation and reinforcing our financial base. Specifically, we are targeting operating income of ¥69.0 billion in the year ending March 2013.an ¥87.4 billion improvement from the year under review.after factoring out inventory valuations. With domestic demand for petroleum products falling at an accelerated pace, the Group faces a challenging situation that requires drastic measures to address structural changes in the oil industry. However, we intend to streamline our business by making full use of our previous achievements, while continuing to invest in the petrochemicals and the oil exploration and production businesses, in order to establish a solid business foundation and reinforce our financial base. In addition, we will work to create a framework that is impervious to external conditions, such as sharp fluctuations in oil prices, and thus maximize corporate value.

With respect to dividends, our policy is to maintain stable dividend payments without linking them to our bottom line earnings, which incorporate inventory valuations that are hugely impacted by sharp fluctuations in crude oil prices.