FAQ
- Q1 What is the business of TonenGeneral Sekiyu?
- AOur company imports crude oil, oil products, and related products and produces various types of fuel oil and chemical products. We export products and supply products to ExxonMobil Y.K. through their Esso and Mobil brand and also sell to customers under our own General brand. TonenGeneral conducts its business within the ExxonMobil Group global network using consistent, integrated strategies for the purchase of crude and feedstocks, crude refining and product supply, marketing, and chemicals. Shown below is a simplified business structure chart for the TonenGeneral consolidated group.
- Q2 The number of self-service stations has been increasing recently. How is TonenGeneral responding to this trend?
- A Self-service stations were legally authorized in Japan in 1998.
To offer services driven by current needs, we are ahead of most competitors in developing self-service stations.The number of self-service stations for the ExxonMobil Japan group including TonenGeneral reached 1,212 as of the end of 2009, representing 28% of total number of service stations for the group.
- Q3 TonenGeneral entrusts its administrative and marketing operations to outside companies. How will profits be secured for TonenGeneral?
- A We have agreed to fair compensation arrangements on a cost basis. Those operations are periodically reported to TonenGeneral's board of directors' meeting. Directors of TonenGeneral are able to conduct oversight at the management level. In addition, the statutory auditors of TonenGeneral have the right of access to the business records and the management of ExxonMobil Y.K. to verify whether business is being conducted properly.
Concerning product pricing with ExxonMobil Y.K., we have decades of experience in establishing fair transfer prices between the former Esso Sekiyu, the former Mobil Sekiyu and the former Tonen Corporation. We continue to agree with ExxonMobil Y.K. on product transfer pricing intended to reflect actual market conditions.
- Q4 What are you doing in terms of safety and the environment?
- A As an oil refining and sales company, we consider safety and the environment to be matters of the highest importance. We are making full use of the world-class safety and environmental know-how that the ExxonMobil group has accumulated worldwide through its many years in business. Specifically, we are executing the Operations Integrity Management System (OIMS), and actively implementing the Loss Prevention System (LPS), a system for proactively preventing accidents.
Click here for details of OIMS and LPS systems
- Q5 As a result of the merger, ExxonMobil Y.K., a major shareholder, will have stronger controlling power over the company. Won't this be detrimental to returns for minority shareholders?
- A No. We respect the principle of shareholder equality, and TonenGeneral's fundamental mission is to take measures that will profit all of our shareholders. We also have an important obligation to contribute to our other stakeholders-customers, employees, local communities, and society as a whole. In addition, the ExxonMobil relationship brings many benefits to the company, including access to technical, operating, management, and financial best practices on a global scale.
- Q6 What is the dividend policy of the company?
- A Our basic policy is to deliver appropriate dividends to shareholders, while maintaining a sound financial structure, and giving due consideration to consolidated cash flow trends and future capital investments. We continue with our view that the company's wealth that is not otherwise required in our business in a way that meets our rigorous profitability standards should be returned to shareholders.
- Q7 What are TonenGeneral's thoughts on return to shareholders?
- A Our approach to satisfy shareholders' expectation is our own business growth through good returns, maintenance of strong financial health, and a rigorous and conservative decision-making process in investments. Company wealth that is not foreseeably required in our business or that cannot be invested by us in a manner that can yield good returns should be returned to the shareholders. We have returned wealth to our shareholders over the past several years through high dividends and 130 billion yen of share repurchases.
- Q8 My 1,000 General Sekiyu's shares became 370 TonenGeneral's at the time of the 2000 merger of Tonen Corporation and General Sekiyu K.K. How do I buy additional shares up to 1,000 shares? (or sell those shares?)
- A Shareholders who own less than 1,000 shares have no disadvantage to others in terms of dividends but can not exercise voting rights at shareholders meetings, and can not execute normal trades at the share market as the trading unit of TonenGeneral share is 1,000 shares.
A shareholder who holds less than one thousand shares can either (1) sell all of those shares to the company, in a transaction called "KAITORI", or (2) buy additional shares from the company to complete a unit of 1,000 shares, in a transaction called "KAIMASHI".
Formerly, in connection with "KAITORI" or "KAIMASHI" requests, shareholders paid service charges, similar to those in stock trading in the market place. However, in order to simplify adjustments for less-than-unit shares, the Company has now waived service charges for "KAITORI" or "KAIMASHI" transactions.
For more detailed information, shareholders should call the securities firm in which they have a transfer account (For shares less than 1,000 in a special account, please call 0120-232-711, the toll-free dial of Mitsubishi UFJ Trust and Banking Corporation).
- Q9 What is a special account?
- A An account with trust banks opened by stock issuers to secure rights of shares which were not deposited in book-entry transfer of stocks (Hofuri) through a securities firm before implementation of the "dematerialized" book-entry transfer system.
The new "dematerialized" book-entry transfer system for stocks was implemented from January 5, 2009. A special account is not an account to trade stocks. Shareholders must open their own trade accounts with securities firms and transfer their shares to the account in order to sell the shares registered in a special account. Please note that it takes some days to transfer the shares.
If you have inquiries on transfer of shares registered in a special account or requests related to "KAITORI" and "KAIMASHI" transactions, please call 0120-232-711, Mitsubishi UFJ Trust and Banking Corporation, special account manager.
- Q10 What is the meaning of "LIFO"?
- A We adopt LIFO, an inventory valuation method which assumes that most recently acquired products are the ones sold or used first, in determining our costs for purposes of calculation of income. In 2002, we extended this evaluation method to crude and products in transit, in combination with landed crude and products, respectively. Thus our earnings results reflect in a timely manner the changing prices of crude and products, which are sensitive to the international market.
- Q11 How do fluctuations in crude prices affect TonenGeneral's results?
- A The following two factors need to be considered regarding the effects of fluctuation of crude prices on TonenGeneral's performance.
1. Crude prices as our raw material costs
For TonenGeneral's operations in the petroleum business, primarily involving refining and marketing, crude oil is the primary raw material, and fluctuations in crude oil prices are registered as fluctuations in raw material costs. Profitability of our petroleum product business is based, among other things, on the difference between crude oil prices and refined product prices (the "margin"). Therefore, our profitability depends on the extent to which changes in crude oil costs are reflected in the prices of the products that we sell, regardless of the absolute level of either crude oil or refined product prices.
2. Timing of crude cost recognition
Using international practice, TonenGeneral recognizes crude costs when we become owners of the crude, which is usually at loading. This has the effect of prompt recognition of international market crude oil prices. In contrast, most other Japanese oil companies recognize crude oil costs when the crude oil arrives in Japan. Taking into account the usual transportation period from crude-producing countries to Japan, TonenGeneral recognizes fluctuations of crude prices 20-25 days earlier than other Japanese oil companies. As a result, the increase in crude prices is reflected in our costs before the increase is reflected in product prices, and TonenGeneral's earnings are affected unfavorably. When crude prices decrease, this results in favorable effects on TonenGeneral's earnings.
- Q12 What kind of business indicator do you place a special emphasis on?
- A TonenGeneral views Return on Capital Employed (ROCE) as the best measure of capital productivity in our capital-intensive, long-term industry. ROCE is defined as net income before interest and after tax divided by the average of opening and closing capital employed (the sum of shareholders' equity and net debt). Like most measures of this type, it is meaningful if examination company performance over a reasonably long period, rather than quarter-to-quarter or even year-to-year, and therefore matches well with our long-term perspective in managing the business. This indicator measures capital efficiency by indexing returns (earnings) against all the capital used in the business, whether equity or debt, thereby giving a clear picture of whether management's past decisions have added value. This is important because our goal is not to increase profits at all cost, but to increase the efficiency of our profitability.
- Q13 What is the impact of the establishment of battery separator film (BSF) joint venture with Toray Industries, Inc. on TonenGeneral Sekiyu's financial results?
- ATaking into account revaluation of the assets of Tonen Specialty Separator Godo Kaisha (a
subsidiary fully owned by TonenGeneral group) associated with the capital contribution of Toray to the company, as well as certain anticipated preparation and transaction costs associated with the joint venture, we have reported a favorable impact on net earnings arising from the transaction of about 20 billion yen, recognized in 2010 (current period).
While TonenGeneral's ownership of the BSF business will decline to 50% with formation of the
joint venture, effects on near-term earnings (other than transaction effects referred to above) are not expected to be material. Development is also in progress for applications in next-generation hybrid and electric automobiles, and we anticipate growth in demand. We anticipate improved earnings streams resulting from the favorable synergy of Toray's expertise in research and development with our BSF business experience and manufacturing facilities.
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