TOKYO, Feb 5 (Reuters) - Cosmo Oil Co, Japan’s third-biggest refiner by sales, said on Thursday it will reorganize itself under a holding company to boost profitability as the country’s refining industry prepares for another round of consolidation.
With a shrinking population driving ever more fuel-efficient cars, Japan’s refinery industry, with five large and several smaller operators, is struggling to be profitable. Refiners have also been hit hard by a drop in oil prices, which has caused them to rack up inventory losses of more than $5 billion.
Idemitsu Kosan Co, Japan’s second-biggest refiner by sales, is in talks to buy the fifth-biggest, Showa Shell , in a 500 billion yen deal that would bring them close to JX Holdings, a person with knowledge of the issue said in December.
The move may force other companies like Cosmo and TonenGeneral Sekiyu into further action beyond a move to set up a venture last month to integrate their Chiba complexes near Tokyo, industry sources have said.
Creating a holding company is the best choice to respond effectively to a possible industry reorganisation in future, Koji Moriyama, a Cosmo executive in charge of corporate planning, said at an earnings briefing on Thursday.
“I think all refiners are studying (a reorganisation) and our company is also doing that, but no specific details have been decided,” he told a news conference.
Cosmo will put oil refining, oil marketing and upstream resource business into three separate units under a holding firm, Moriyama said. The move is scheduled to take place in October following shareholders’ approval in June and a go-ahead from the authorities.
The company, in which an investment arm of the Abu Dhabi government has a roughly 21 percent stake, reported a loss of 62 billion yen in the nine months through December, compared with a profit of 4.5 billion yen in the year earlier period.
Cosmo Oil is forecasting a full-year loss of 91 billion yen in the year through March 31, its worst in six years, as plunging oil prices are expected to force it to book inventory losses of 110 billion yen.
JX Holdings, Japan’s biggest refiner, and Idemitsu Kosan are also forecasting losses, hit by inventory losses that total nearly $5 billion.
$1 = 117.2200 yen Reporting by Osamu Tsukimori; Editing by Aaron Sheldrick and Sunil Nair