Eneos Holdings Inc., the Japanese oil refiner and fuel retailer, raised its forecast for net profit in the year to March 2027 by 48% to 615 billion yen on Wednesday, saying strong fuel export markets and higher crude prices would more than cover a 111.8 billion yen write-down in its renewable energy business.

The revision shows how Japan's refiners are earning more from an oil shock that has also made their crude harder and costlier to obtain. With the Strait of Hormuz effectively closed to their tankers, the companies have rerouted supply while prices for oil and fuel have risen, and investors in the sector are now being paid for it: Eneos also raised its dividend.

The new profit forecast is 200 billion yen above the 415 billion yen target Eneos set on May 14 and left unchanged in August, the company said in a filing. Nikkei Asia put the figure at about $3.85 billion. It compares with profit of 258.7 billion yen in the previous fiscal year.

Eneos now expects revenue of 13.86 trillion yen, up 7.9% from the earlier forecast, and operating profit of 910 billion yen, up 49.2%.

Fuel exports drive the Eneos upgrade

Most of the improvement comes from refining and selling fuel. Stripping out gains on the value of oil inventories, Eneos expects its petroleum products business to earn operating profit of 495 billion yen, against 265 billion yen forecast in May. The company attributed the 230 billion yen increase mainly to exports of petroleum products into favorable overseas markets.

Its oil and natural gas exploration and production arm is expected to earn 140 billion yen, up 40 billion yen, on higher crude and gas prices. The electricity business forecast doubled to 30 billion yen on better sales margins, and the high performance materials unit was lifted by 8 billion yen to 24 billion yen, helped by a C4 chemicals business in the United States.

Across the group, operating profit excluding inventory effects is forecast at 770 billion yen, up 180 billion yen. Inventory valuation gains are expected to add another 140 billion yen, compared with 20 billion yen in the earlier plan.

The assumptions behind the numbers have moved with the market. Eneos now assumes Dubai crude will average $95 a barrel over the fiscal year, with $100 for October through December and $90 from January. Its May forecast used $85. The exchange rate assumption is 157 yen to the dollar for the year and 155 yen from October.

Shareholders get a larger payout. The board approved an interim dividend of 19 yen a share, up from the 17 yen previously planned, payable Dec. 10, and forecast the same amount at year-end. That takes the full-year dividend to 38 yen from 34 yen.

A 111.8 billion yen renewables impairment

The one segment moving the other way is renewable energy. Eneos said it recognized impairment losses of 111.8 billion yen in the July-September quarter, mostly on goodwill and other assets from its 2022 acquisition of Japan Renewable Energy Corp. The charge reduces profit attributable to shareholders by 97.8 billion yen.

The company said slower progress on decarbonization, higher development costs and higher interest rates had led it to tighten investment discipline and become more selective about new projects. Lower expected cash flows and a higher discount rate triggered the write-down.

The renewable energy segment is now forecast to lose 112 billion yen at the operating level this year, against a 1 billion yen profit in the May plan. Eneos said it would keep working to improve returns at existing power plants, including by installing battery storage.

Japan's refiners and the Hormuz detour

Eneos Chief Executive Tomohide Miyata told a news conference on Wednesday that crude supply was badly disrupted from March, but "we've been able to handle procurement in various ways," Nikkei Asia reported. He does not expect large drops in supply volume, according to the report.

Eneos moves crude through the Mediterranean and around the Cape of Good Hope, Nikkei said. In many cases Saudi oil is shipped to an Egyptian port and sent through the Sumed pipeline to larger tankers. The Cape route takes twice as long as sailing through Hormuz, and transport costs have risen more than tenfold, the newspaper reported.

Rivals reported similar gains. Idemitsu Kosan Co. also raised its full-year forecast, according to Nikkei. Cosmo Energy Holdings Co., the country's third-largest refiner, said net profit for April through September rose more than sixfold to 147 billion yen on inventory gains and stronger refining margins, Reuters reported on Tuesday. Its refineries ran at 92.8% of capacity.

Dependence on Gulf crude has fallen but not gone away. Idemitsu still buys more than 60% of its crude from the Middle East and Cosmo about half, down from above 90% for both before the closure, Nikkei reported. Cosmo is negotiating 2027 term contracts with Middle Eastern producers and aims to keep volumes steady, Reuters said, citing Senior Executive Officer Tomoki Iwai.

Capital Times has reported separately on attacks on tankers near Hormuz and on Saudi Aramco's third-quarter results.

The Eneos forecast leaves room for prices to cool. It assumes Dubai crude falls to $90 a barrel from January, $10 below its assumption for the current quarter. The interim dividend will be paid on Dec. 10.