Nippon Gas (8174) Q1 2025 earnings summary

Executive summary

• 1Q results were largely in line with plan, with gross profit slightly above expectations, but all profit stages declined due to higher SG&A from aggressive LP Gas customer acquisition; full-year profit guidance remains unchanged.

• Net income is forecasted to reach a record high for the fiscal year ending March 2025, with a planned dividend of ¥10.2B and a share buyback of up to ¥3.0B.

• The company achieved a net increase of 13,000 LP gas customers, surpassing the previous year's growth and its annual target pace.

• Despite short-term profit decline, management expects long-term gross profit growth from the expanded customer base and bundled service offerings.

• The company is in the second year of a three-year plan targeting ¥15.0B net income and 22% ROE by FYE 03/26.

Financial highlights

• 1Q gross profit was ¥16.95B, nearly flat year-over-year, with LP Gas profit up ¥0.2B and City Gas down ¥0.3B due to lower slide time lag impact.

• SG&A expenses increased by ¥1.5B YoY, mainly from higher customer acquisition costs in LP Gas.

• Operating income for 1Q was ¥2.09B, down 44% YoY; net income for 1Q was ¥1.45B.

• Basic earnings per share for the quarter were ¥13.03, compared to ¥23.37 in the prior year.

• Comprehensive income declined 63.1% YoY to ¥916M.

Outlook and guidance

• Full-year forecast for FY ending March 31, 2025: net sales ¥200B (+2.9% YoY), operating income ¥20B (+14.7%), ordinary income ¥20B (+13.6%), net income ¥14B (+29.3%), and basic EPS ¥126.71.

• No change in full-year profit plan; expects to absorb excess SG&A in later quarters.

• LP Gas residential margin revised upward, while sales volume forecast is slightly reduced due to higher temperature assumptions.

• Electricity margin expected to improve in 2H as sales volume rises.

• ROE target is 20% for FYE 03/25 and 22% for FYE 03/26.