ENEOS Holdings (JXHGF) Risk Analysis

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Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

ENEOS Holdings disclosed 31 risk factors in its most recent earnings report. ENEOS Holdings reported the most risks in the “Finance & Corporate” category.

Risk Overview Q1, 2017

Risk Distribution

52% Finance & Corporate

16% Production

13% Ability to Sell

10% Legal & Regulatory

6% Macro & Political

3% Tech & Innovation

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

S&P500 Average

Sector Average

Risks removed

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Risks changed

ENEOS Holdings Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q1, 2017

Main Risk Category

Finance & Corporate

With 16 Risks

Finance & Corporate

With 16 Risks

Number of Disclosed Risks

S&P 500 Average: 32

Recent Changes

0Risks added

0Risks removed

0Risks changed

Since Mar 2017

0Risks added

0Risks removed

0Risks changed

Since Mar 2017

Number of Risk Changed

S&P 500 Average: 4

See the risk highlights of ENEOS Holdings in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 31

Finance & Corporate

Total Risks: 16/31 (52%)Above Sector Average

Share Price & Shareholder Rights8 | 25.8%

Share Price & Shareholder Rights - Risk 1

JXTG Holdings may fail to realize the anticipated benefits of the share exchange due to the challenges of integrating the operations of JXTG Holdings and TonenGeneral.

The success of the share exchange will depend, in part, on JXTG Holdings' ability to realize anticipated growth opportunities and cost savings from combining the businesses of JXTG Holdings and TonenGeneral. JXTG Holdings' ability to realize these anticipated benefits will depend in part on the extent to which JXTG Holdings can successfully implement and manage the business integration of JXTG Holdings and TonenGeneral, including the following: - effectively integrating the respective organizations, business cultures, procedures and operations of JXTG Holdings and TonenGeneral;- identifying and streamlining redundant operations and assets, and combining the product and service offerings effectively and quickly;- identifying areas and activities that present substantial potential synergies as a result of the share exchange, and allocating resources effectively to those and other promising areas and activities;- smoothly transitioning relevant operations and facilities to a common information technology system; and - developing and implementing uniform accounting policies, internal controls and procedures, disclosure controls and procedures and other governance policies and standards. If JXTG Holdings is not able to successfully manage the integration process, take advantage of anticipated synergies, and create an integrated business, the anticipated benefits of the share exchange and subsequent integration may not be realized fully, may take longer to realize than expected or may not be realized at all.

Share Price & Shareholder Rights - Risk 2

Uncertainties associated with the share exchange may damage JXTG Holdings' relationships with customers, suppliers and business partners of JXTG Holdings and TonenGeneral.

Customers, suppliers and business partners of JXTG Holdings or TonenGeneral may, in response to the share exchange or to subsequent steps taken to integrate the businesses of JXTG Holdings and TonenGeneral, delay or defer decisions concerning their relationships with JXTG Holdings. Moreover, the terms of some of the business alliances to which JXTG Holdings has succeeded permit the business partner to terminate the alliance upon the completion of the share exchange. The loss of such customers, suppliers and business partners, or the termination of business alliances may have a material adverse effect on JXTG Holdings' business and results of operations.

Share Price & Shareholder Rights - Risk 3

JXTG Holdings is exposed to various factors beyond its control, such as world supply of copper concentrates, that may adversely affect the results of operations in its smelting and refining business in the Metals segment.

JXTG Holdings relies on third-party suppliers for the concentrate to be used in its smelting and refining business, acquiring copper concentrate for its smelting operations from overseas suppliers to produce refined copper for sale to its customers. If the world supply of copper concentrate becomes strained, due to declines in worldwide reserves of ore with high copper content, increasing demand for copper concentrate from large consumers in China and India, the emergence of an oligopoly of mining majors or other factors, it may lead to intense competition for the copper concentrate available in the world market. JXTG Holdings has invested in and financed various mining complexes to source a significant portion of the copper concentrate used in its smelting and refining business. If operations in any of the mining complexes in which JXTG Holdings has invested or financed are significantly reduced, interrupted or curtailed, JXTG Holdings may be unable to timely procure on similar terms the raw materials it needs for its smelting and refining business, and its financial condition and results of operations may be adversely affected. In addition, the margin JXTG Holdings earns in its smelting and refining business principally consists of smelting and refining charges and a sales premium above the London Metal Exchange price of refined copper. Various factors beyond JXTG Holdings' control may, however, affect the smelting and refining charges or sales premiums JXTG Holdings is able to collect. Smelting and refining charges are established through negotiations with copper concentrate suppliers. If the world supply of copper concentrate becomes insufficient for reasons stated above, JXTG Holdings' negotiating position may become weaker. These factors may combine to put downward pressure on smelting margins and may lead to an adverse effect on JXTG Holdings' results of operations. Moreover, JXTG Holdings' smelting and refining contracts are denominated in dollars and therefore, JXTG Holdings' smelting and refining margins tend to decline when the yen appreciates in value. Sales premiums are established through negotiations with its customers and reflect various factors, including demand for refined copper, import tariffs and other importation costs, as well as product quality. Depending on the outcome of customer negotiations, JXTG Holdings' margins could decrease, potentially leading to a material adverse effect on JXTG Holdings' financial condition and results of operations.

Share Price & Shareholder Rights - Risk 4

Japan's unit share system imposes restrictions on the rights of holders of shares of JXTG Holdings common stock that do not constitute a unit.

Pursuant to the Companies Act of Japan and certain related legislation, the Articles of Incorporation of JXTG Holdings provide that 100 shares of JXTG Holdings common stock constitute one unit. Holders of shares that constitute less than one unit do not have voting rights under the Companies Act of Japan, which imposes other significant restrictions and limitations on such holders. The transferability of such shares is also significantly limited. Under the unit share system, holders of shares constituting less than one unit have the right to require the issuer to purchase their shares. In addition, JXTG Holdings' Articles of Incorporation will provide that a holder of less than a unit of JXTG Holdings shares may request that JXTG Holdings sell to such holder such amount of shares which will, when added together with the shares constituting less than one unit, constitute one unit of shares, as long as JXTG Holdings has treasury stock to sell upon such request.

Share Price & Shareholder Rights - Risk 5

Rights of shareholders under Japanese law may be more limited than under the laws of other jurisdictions.

The Articles of Incorporation, Share Handling Regulations and Regulations of the Board of Directors, as well as the Companies Act of Japan, govern the affairs of JXTG Holdings. Legal principles relating to such matters as the validity of corporate actions, directors' and officers' fiduciary duties and shareholders' rights may be different from those that would apply if JXTG Holdings were a non-Japanese company. Shareholders' rights under Japanese law may not be as extensive as shareholders' rights under the laws of other countries or jurisdictions within the United States. You may have more difficulty in asserting your rights as a shareholder than you would as a shareholder of a corporation organized in another jurisdiction.

Share Price & Shareholder Rights - Risk 6

Because of daily price range limitations under Japanese stock exchange rules, you may not be able to sell JXTG Holdings shares at a particular price on any particular trading day, or at all.

Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium between bids and offers. These exchanges are order-driven markets without specialists or market makers to guide price formation. To prevent excessive volatility, these exchanges set daily upward and downward price fluctuation limits for each listed stock based on the previous day's closing price. Although transactions on a given Japanese stock exchange may continue at the upward or downward price limit, if the price limit is reached on a particular trading day, no transactions on such exchange may take place outside these limits. Consequently, an investor wishing to sell shares on a Japanese stock exchange at a price outside of the relevant daily limit may be unable to complete the sale through that exchange on that particular trading day.

Share Price & Shareholder Rights - Risk 7

It may not be possible for investors to effect service of process within the United States upon JXTG Holdings' directors, senior management or corporate auditors, or to enforce against JXTG Holdings or those persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States.

JXTG Holdings is a joint stock company incorporated under the Companies Act of Japan. All of JXTG Holdings' directors, senior management and corporate auditors reside outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process within the United States upon these persons. Furthermore, many of the assets of JXTG Holdings and these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to enforce, against JXTG Holdings or these persons, judgments obtained in the U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States. JXTG Holdings believes that there is doubt as to the enforceability in Japan, in original actions or in actions to enforce judgments of U.S. courts, of claims predicated solely upon the federal securities laws of the United States.

Share Price & Shareholder Rights - Risk 8

JXTG Holdings will likely terminate its registration under the Exchange Act and cease to be an SEC reporting company as soon as practicable in accordance with applicable rules and regulations.

JXTG Holdings will likely decide to terminate its registration under the Exchange Act as soon as practicable in accordance with the rules that permit the deregistration of eligible foreign private issuers. If JXTG Holdings terminates its registration, it will no longer be subject to the reporting provisions of the Exchange Act. As a result, U.S. shareholders will have access to less information about JXTG Holdings and its business, operations and financial performance. If JXTG Holdings terminates its registration under the Exchange Act, it will cease, among other things, to be subject to the liability provisions of the Exchange Act and the provisions of the Sarbanes-Oxley Act of 2002. If JXTG Holdings is unable to terminate its registration as currently contemplated, it may incur additional costs in order to maintain compliance with applicable U.S. laws and regulations.

Accounting & Financial Operations4 | 12.9%

Accounting & Financial Operations - Risk 1

JXTG Holdings' internal control system, including those relating to compliance, risk management and financial reporting, may not function effectively, which may result in restatements and harm the reliability of JXTG Holdings' financial statements.

There are inherent limitations on the effectiveness of internal controls, including those relating to compliance, risk management and financial reporting, due to such factors as susceptibility to collusion,management override and failure of human judgment. In addition, control procedures generally are designed to reduce, rather than eliminate, business risks. Moreover, any failure to maintain adequate internal controls over financial reporting could result in accounting errors or misstatements in the financial statements that may result in restatements and harm the reliability of the financial statements. In the event that the JXTG Holdings' internal control system does not function effectively, and if a breach of compliance occurs, risk of loss in a significant amount manifests or there is damage to credibility, JXTG Holdings' financial condition and results of operations may be adversely affected.

Accounting & Financial Operations - Risk 2

JXTG Holdings is a holding company and its ability to meet its obligations depends upon the results of operations from its subsidiaries. JXTG Holdings' ability to pay dividends is also restricted by statutory provisions.

JXTG Holdings is holding company for the combined group. It conducts substantially all of its operations through its subsidiaries and is dependent upon the earnings and cash flows of, and dividends and other distributions from, its subsidiaries to provide funds necessary to meet its obligations. The ability of JXTG Holdings' subsidiaries to pay dividends to JXTG Holdings may be limited by statutory provisions and contractual restrictions. As a result, although JXTG Holdings' subsidiaries may have cash, JXTG Holdings may not be able to access that cash to satisfy its obligations and pay dividends to its stockholders, if any. Under the Companies Act of Japan, JXTG Holdings is not able to declare or pay dividends unless it meets specified financial criteria on an unconsolidated basis. Generally, JXTG Holdings is permitted to pay dividends only if it has certain surplus as calculated based on the aggregate of other capital surplus and other retained earnings on its unconsolidated balance sheet as of the end of the preceding fiscal year as determined in accordance with Japanese GAAP. For details of restrictions on the payment of dividends, see "Item 10. Additional Information-Memorandum and Articles of Incorporation-Dividends-Restrictions on Dividends." In addition, JXTG Holdings' right to participate in any distribution of assets of any of its subsidiaries upon the subsidiary's liquidation or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent that any claims by JXTG Holdings as a creditor of such subsidiary are recognized. As a result, the shares of each subsidiary to be held by JXTG Holdings are effectively subordinated to all existing and future liabilities and obligations of that subsidiary.

Accounting & Financial Operations - Risk 3

A decline in market value of inventory or decline in profitability of non-financial assets may result in significant write-down of inventories or impairment of non-financial assets.

Due to the 70-day stockpiling requirement for crude oil and refined petroleum products under Japanese law and other reasons JXTG Holdings holds large amounts of inventories of, among others, crude oil, natural gas and copper whose prices fluctuate and are affected by the market conditions and general economic environment. In the event that the net realizable value of inventories at the end of a fiscal period is lower than the corresponding carrying amount of the inventories, the carrying amount must be reduced to the net realizable value, with the difference between the carrying amount and the net realizable value recognized within cost of sales for the respective fiscal period. Such write-down of inventories may have an adverse effect on JXTG Holdings' financial condition and results of operations. In the Energy segment, JXTG Holdings' use of the average cost method for evaluating its crude oil inventory may have the effect of keeping the level of the cost of inventories higher as compared to the latest prices JXTG Holdings pays for crude oil. Especially during prolonged periods of decreasing crude oil prices, the average cost method may adversely affect JXTG Holdings' results of operations because market prices for inventories of crude oil or other petroleum products could fall below the average cost of crude oil in JXTG Holdings' inventory, which may lead to inventory write downs as described above. JXTG Holdings also has substantial non-financial assets subject to impairment test. If changes in the business environment cause the profitability of non-financial assets to decline which makes it unlikely that the associated carrying amount can be recovered, an indication of an impairment loss exists. In such cases, JXTG Holdings will need to make an estimate on the recoverable amount of the non-financial assets, being the higher of its fair value less costs of disposal and its value in use; fair value less costs of disposal is the amount that would be received from the sale of the asset less the costs of disposal, while value in use is the present value of the future cash flows expected to be derived from the asset. The amount by which the carrying amount of the asset exceeds its recoverable amount will be recognized as an impairment loss. This may have an adverse effect on JXTG Holdings' financial condition and results of operations.

Accounting & Financial Operations - Risk 4

Oil and gas reserves data are only estimates and JXTG Holdings' future production may be lower than the amount indicated by estimated reserves.

The estimation of oil and gas reserves involves subjective judgments and determinations based on available geological, technical, contractual and economic information. Proved developed oil and gas reserves are those that can be expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. None of these amounts can be determined with certainty. Substantial upward or downward revisions in reserves estimates may be required, based on new information from production, drilling, exploration, sampling or testing activities or changes in economic factors, as well as from developments such as acquisitions and dispositions, new discoveries and extensions of existing fields or deposits and the application of improved recovery techniques. Reserves estimates are also subject to correction for errors in the application of published rules and guidance. A downward revision of a reserves estimate is an indication of lower future production. If actual reserves are less than estimated, this may have an adverse effect on JXTG Holdings' production, financial condition and results of operations.

Debt & Financing2 | 6.5%

Debt & Financing - Risk 1

JXTG Holdings has significant debt, which may adversely affect JXTG Holdings' ability to conduct capital expenditures or acquisitions and may increase its financing costs.

JXTG Holdings has significant debt. The degree to which such indebtedness could have consequences on its future prospects includes the effect of such debts on its ability to conduct capital expenditures or acquisitions. The portion of available cash flow that will need to be dedicated to repayment of indebtedness will reduce funds available for other uses, including working capital and capital expenditures. Additionally, if interest rates rise, either in Japan or overseas, it would increase the cost of JXTG Holdings' debt, which may have an adverse effect on JXTG Holdings' financial condition and results of operations. In order to make payments of principal and interest relating to its debt, it may be necessary for JXTG Holdings to raise funds through additional borrowings or issuance of corporate bonds or commercial paper, but a variety of factors, including the credit ratings of JXTG Holdings, the level of indebtedness, a deterioration in JXTG Holdings' business performance or the state of financial markets could increase financing costs, which may adversely affect JXTG Holdings' financial condition and results of operations.

Debt & Financing - Risk 2

JXTG Holdings may not be able to maintain and grow its business if it is unable to successfully implement capital expenditures on schedule and in amounts not exceeding its projections.

Continuing capital expenditures, including investments and loans, are necessary for the ongoing maintenance and growth of JXTG Holdings' businesses, for the acquisition of new business opportunities and in developing projects, particularly large ones. However, due to changes in the external environment or other factors, such as significant reduction in crude oil prices, inadequacy of cash flow, project delays, expiration of licenses and potential cost overruns, as well as technical, fiscal, regulatory and political conditions, it is possible that JXTG Holdings may not be able to implement its capital expenditure plans as scheduled or at all, that investment amounts will greatly exceed projections or may not be recovered, or that anticipated earnings from the projects will not materialize, each of which may adversely affect JXTG Holdings' financial condition and results of operations.

Corporate Activity and Growth2 | 6.5%

Corporate Activity and Growth - Risk 1

The failure or poor performance of strategic alliances or investments, over many of which JXTG Holdings has little to no control, may adversely affect JXTG Holdings' financial condition and results of operations.

JXTG Holdings seeks to capture opportunities by entering into and enhancing alliances with energy companies through joint ventures, other alliances and investments in order to expand the Oil and Natural Gas E&P segment as well as to market its refined petroleum products and other products. On many of the projects involving strategic alliances, particularly in the Oil and Natural Gas E&P segment, JXTG Holdings will not be the operator and therefore, will have limited or no influence over, and control of, the behavior, performance and costs of operation of the alliances. Despite not having control, JXTG Holdings could still be exposed to the risks associated with these operations, including reputational, litigation (where joint and several liability may apply) and government sanction risks. There is also a risk that JXTG Holdings' joint venture participants may at any time have economic, business or legal interests or goals that are inconsistent with those of the joint venture or JXTG Holdings, or the joint venture partners may be unable to meet their economic or other obligations and JXTG Holdings may be required to fulfill those obligations alone. If it is not possible to achieve the desired results from strategic alliances or investments or key joint ventures experience financial difficulties for any reason, or if JXTG Holdings fails to identify or enter into effective alliances with partners with whom significant business relationships and synergies may be developed or it fails to maintain JXTG Holdings' existing alliances and business relationships, JXTG Holdings' financial condition and results of operations may be adversely affected.

Corporate Activity and Growth - Risk 2

JXTG Holdings faces operating risks that may cause significant business interruptions.

JXTG Holdings is exposed to a variety of potentially severe operating risks, including the risk of fire, explosions, embargos, natural disasters (such as earthquakes, thunderstorms, hurricanes and volcanic eruptions), accidents, cyberattacks, mechanical problems, labor disputes, epidemics, unexpected geological conditions, mine collapses, environmental hazards and weather and other natural phenomena. JXTG Holdings' sourcing of raw materials, shipment of products and other transportation activities are subject to the hazards of marine operations, such as piracy, capsizing, collision and adverse weather and sea conditions. If any of these operating risks materializes, JXTG Holdings could incur substantial losses. Such losses may involve or arise from serious personal injury or loss of life, severe damage to or destruction of property such as plants, natural resources, equipment, pollution and other environmental damage, cleanup costs and liabilities, regulatory investigations and penalties, and suspension of operations. Such losses may also involve or arise from severe damage to or destruction of information systems that JXTG Holdings uses for production, sales and accounting, despite the security and safety measures that are in place for these information systems. JXTG Holdings' operating risks also include the risk that its business partners may suffer significant business interruptions. JXTG Holdings maintains insurance against some, but not all, of the risks described above. There can be no assurance that JXTG Holdings will have continued access to comparable coverage at acceptable rates or that such coverage will be adequate to cover losses or liabilities that may arise. Any shortage in such coverage could adversely affect JXTG Holdings' financial condition and results of operations in the event any of the risks described above materializes.

Production

Total Risks: 5/31 (16%)Above Sector Average

Manufacturing2 | 6.5%

Manufacturing - Risk 1

The development of oil, gas and mineral resources is subject to substantial uncertainties, and requires significant capital investments that JXTG Holdings may not be able to recover.

JXTG Holdings' oil and gas fields and copper deposits are in various stages of development. Successful completion depends upon overcoming substantial risks, including, but not limited to, risks relating to failures of siting, financing, construction and governmental approvals. There can be no assurance that any individual project will be completed or otherwise successfully commence commercial operations, or that capitalized costs for projects under development are recoverable. For oil and gas assets, the capitalized costs for exploratory wells are expensed when it is determined that there is no asset value based on the evaluation results. For both oil and gas assets, as well as copper deposits, if a project under development is abandoned or determined to be impaired, all capitalized development costs are expensed in full or reduced to recoverable amount, as applicable. Unsuccessful development efforts may have an adverse effect on JXTG Holdings' financial condition and results of operations.

Manufacturing - Risk 2

JXTG Holdings' future production and proved reserves of oil and gas may be adversely affected by its inability to find or acquire rights to additional oil and gas reserves that are economically recoverable.

JXTG Holdings' future production of oil and gas in the Oil and Natural Gas E&P segment will be affected by its success in finding or acquiring, and exploring and developing, additional reserves in a manner that allows economically viable production. Internationally, government-owned oil and gas companies control at least two-thirds of the potential resource base, with only the remainder available for exploration by private oil companies like JXTG Holdings. To the extent that government-owned oil and gas companies choose to develop their oil and gas resources without the participation of international oil and gas companies, or to the extent that JXTG Holdings is not viewed as a sufficiently attractive alliance partner, its exploration and development opportunities will be limited to a smaller potential resource base. Because of limited access to major, new exploration and development opportunities, the bidding for such available opportunities has been intense and is characterized by high prices for successful bids and stringent conditions on exploration. Unless JXTG Holdings conducts successful exploration and development activities or purchases rights to proved reserves or resources to be converted into proved reserves, or both, its proved reserves will decline as its existing reserves are exhausted. If JXTG Holdings is unable to consistently acquire adequate rights to oil and gas reserves, production levels may decline, which could adversely affect JXTG Holdings' financial condition and results of operations.

Employment / Personnel1 | 3.2%

Employment / Personnel - Risk 1

The failure to attract and retain sufficient skilled exploration and production engineers may adversely affect JXTG Holdings' competitiveness in the oil and gas E&P business.

JXTG Holdings' success in the Oil and Natural Gas E&P segment depends partly on its effective use of advanced exploration and extraction technologies and methods. In order to implement advanced technologies in a technology-driven industry and to achieve future growth, JXTG Holdings must recruit and retain qualified scientists and engineers. Success in attracting and retaining personnel with the range of capabilities and experience required in the Oil and Natural Gas E&P segment is not guaranteed. Failure to retain and attract critical personnel could result in a shortage of such people due to normal attrition. This could result in an inability to maintain an appropriate level of technological improvements or take advantage of new opportunities that may arise. A subsequent decline in competitiveness could have an adverse impact on JXTG Holdings' financial condition and results of operations.

Costs2 | 6.5%

Costs - Risk 1

The prices and margins for JXTG Holdings' products may fluctuate significantly and JXTG Holdings may not be adequately hedged, which may adversely affect JXTG Holdings' financial condition and results of operations.

The financial results of the Oil and Natural Gas E&P segment of JXTG Holdings are largely dependent on the prices that it can charge on crude oil and gas that it produces and sells. Similarly, the financial results of the copper resource development business in the Metals segment of JXTG Holdings are largely dependent on the price that it can charge on copper concentrates that it produces and sells. Such prices are dependent on prices prevailing in the market from time to time. Historically, crude oil, natural gas and copper prices have been volatile and are likely to continue to be volatile in the future, especially given current geopolitical and economic conditions. The prices for crude oil, natural gas and copper are affected by changes in supply and demand and can be influenced by various underlying factors including economic conditions, foreign exchange rates and other economic indicators, weather conditions, laws and regulations and actions taken by market participants and regulatory bodies. Furthermore, political developments, including war, embargoes and political strife in regions where crude oil, natural gas and copper are produced, as well as production adjustments by the Organization of the Petroleum Exporting Countries, or OPEC, non-OPEC countries and unconventional oil and gas producers can affect the supply and prices of such commodities. Crude oil, natural gas and copper prices declined in fiscal years ended March 31, 2015 and 2016, while they increased in the fiscal year ended March 31, 2017. Crude oil and copper prices were $47 per barrel and $5,157 per ton in 2017, which are the average prices during the fiscal year ended March 31, 2017, respectively, compared with $46 per barrel and $5,217 per ton in 2016, respectively. Crude oil and copper prices were $84 per barrel and $6,568 per ton in 2015, respectively. A decline in crude oil, natural gas and copper prices could adversely affect JXTG Holdings' financial condition and results of operations. The financial results of JXTG Holdings are also dependent on the margins that it can realize on its products, including its refined petroleum and petrochemical products. Margins are affected by various factors and are dependent not only on the prices for raw materials including commodities such as crude oil and copper, but also on the prices JXTG Holdings can charge for its products. For example, margins on JXTG Holdings' refined petroleum products are affected by changes in supply and demand for such products as well as various underlying factors including economic conditions, weather conditions, actions taken by market participants such as changes in domestic refinery capacity, laws and regulations and actions taken by regulatory bodies, lower demand due to lower population growth rate, consumer preferences and competition from alternative energy sources. Margins on JXTG Holdings' petrochemical products are affected by factors such as increases in supply capacity due to the construction of new production facilities or the expansion of existing facilities and trends in demand for apparel, automobiles and home electronics. JXTG Holdings attempts to preserve or increase margins by, to the extent possible, reflecting changes in the cost of sales and market trends in general in the sales prices of its products. However, due to price competition and other factors, it may not always be possible for JXTG Holdings to preserve significant margins, or any margins at all. Moreover, even if JXTG Holdings can adjust the sale prices of its products to reflect changes in cost of sales, price changes may lag changes in the cost of sales. Any lag will adversely affect JXTG Holdings' ability to preserve margins during periods of sudden or prolonged increases in raw materials prices. Thus, margins may decline for extended periods of time when prices for raw materials are generally rising. Reduction of JXTG Holdings' margins could have an adverse effect on JXTG Holdings' financial condition and results of operations. JXTG Holdings also expects to enter into contracts to hedge a portion of its exposure to fluctuations in the prices for crude oil, copper and other raw materials. As part of this strategy, it may utilize fixed-price forward physical purchase and sale contracts, futures, financial swaps, and option contracts traded in over-the-counter markets or on exchanges or entered into on a negotiated basis. However, JXTG Holdings may not be able to cover the entire exposure of its assets or positions to market price volatility, and the coverage will vary over time. As a result, fluctuating raw material prices may adversely affect its financial results to the extent it has unhedged positions. In addition, economic hedging activities may not be treated as hedges for accounting purposes under IFRS, resulting in increased volatility in JXTG Holdings' net income.

Costs - Risk 2

The high cost or unavailability of drilling rigs, equipment, supplies and oil field services could adversely affect JXTG Holdings' ability to execute its exploration and production plans on a timely basis and within its budget.

In connection with the exploration and production of oil and gas, JXTG Holdings expects to lease the necessary exploration and production materials such as drilling rigs and other equipment and supplies from third parties, and also expects to obtain related oil field services from third parties. From time to time, and especially during periods when market prices for crude oil are high, these materials and services are in short supply. During these periods, the costs for these materials and services may increase substantially. Moreover, JXTG Holdings' access to such materials and services may be delayed or the materials and services may not be available on commercially acceptable terms. If JXTG Holdings is unable to obtain required materials and services on commercially acceptable terms and in a timely manner, JXTG Holdings' financial condition and results of operations could be adversely affected.

Ability to Sell

Total Risks: 4/31 (13%)Above Sector Average

Competition1 | 3.2%

Competition - Risk 1

JXTG Holdings may not be able to maintain its competitiveness in the energy business due to intense competition from other industry participants.

JXTG Holdings' business, especially in the Energy segment, faces intense competition from energy companies in China, Korea and the rest of Asia, including Showa Shell Sekiyu K.K. and Idemitsu Kosan Co. Ltd., which have announced intentions to merge, as well as Cosmo Oil Co., Ltd. in Japan, oil refiners and chemical companies in Korea and Singapore, and government-owned oil companies in emerging countries. The market for refined petroleum products is extremely price competitive due to the industry's excess refining capacity and excess of service stations. The market for petrochemical products faces significant pricing pressure due to an expansion and operation of new plants in China, Korea and emerging countries. Competition among industry participants at present is intense, and the trend toward lower demand for petroleum products in Japan and the trend toward increasing manufacturing capacities for petrochemicals may further enhance such competition. One of the key components of JXTG Holdings' competitive position is its ability to manage expenses successfully, which requires continuous management focus on reducing unit costs, improving efficiency and concentrating business activities. In addition, JXTG Holdings may need to implement initiatives to maintain its competitiveness. Such initiatives may result in significant charges and may not be realized as scheduled or, even if the intended benefits are realized, may not be able to achieve the level of success expected. If JXTG Holdings is not able to effectively operate its businesses, including appropriate management of manufacturing costs, in the increasingly competitive environment, its financial condition and results of operations could be adversely affected.

Demand2 | 6.5%

Demand - Risk 1

Because most of JXTG Holdings' revenue is concentrated in Japan, enhanced energy-conservation trends and adverse economic conditions in Japan may adversely affect JXTG Holdings' financial condition and results of operations.

82.4% of JXTG Holdings' revenue in the fiscal year ended March 31, 2017 was generated from customers located in Japan. The concentration of sales in the Japanese market makes JXTG Holdings' business highly dependent on consumer demand and general economic conditions in Japan. In industrialized countries such as Japan, there has been an increasing emphasis on initiatives related to concerns over the earth's environment. These initiatives include achieving reductions in greenhouse gas emissions and in the use of energy and natural resources. Amid these developments, demand for petroleum products in Japan is expected to continue to decline along with the trend towards wider use of fuel-efficient automobiles and the transition to other energy sources, such as gas and electricity. If these trends continue or accelerate, demand for refined petroleum products could continue to decline, adversely affecting JXTG Holdings' financial condition and results of operations. Any decline in domestic economic activity would likely depress demand for petroleum products. Furthermore, demand for refined petroleum products in Japan is expected to continue to decline due to such structural factors as the spread of fuel-efficient cars and the advancement of fuel conversion. Owing to JXTG Holdings' concentration of sales in the Japanese market, such decreases in demand may adversely affect JXTG Holdings' financial condition and results of operations.

Demand - Risk 2

As sales of certain products in China and other Asian countries are significant, decline in demand or failure for demand to grow in those regions may adversely affect JXTG Holdings' financial condition and results of operations.

JXTG Holdings relies significantly on customers in China and other Asian countries for sales of petroleum products, petrochemicals, electronic materials and certain other products. JXTG Holdings expects to undertake further business expansion in these countries in light of the expected decrease in demand in Japan. If demand for JXTG Holdings' products in China and other Asian countries declines due to destabilization of the political climate, social unrest, adverse economic conditions, change in supply-demand balance, changes in laws and their application and in governmental policies or other adverse conditions in these countries, or such demand fails to grow as expected in the medium to long term, JXTG Holdings' financial condition and results of operations may be adversely affected.

Brand / Reputation1 | 3.2%

Brand / Reputation - Risk 1

Negative media coverage of the share exchange, as well as statements by parties with competing interests, could have a materially adverse effect on JXTG Holdings' reputation, business and results of operations.

The share exchange of JXTG Holdings and TonenGeneral has been covered by both Japanese and foreign media. Some of this coverage may be negative and pertains to a wide range of matters relating to the share exchange. Negative media coverage about the share exchange, regardless of its veracity, may affect investor sentiment and could have a material adverse effect on the stock price of JXTG Holdings. The resulting reputational harm from such negative media coverage relating to the share exchange may also affect consumer perception, negatively affecting the business and results of operations of JXTG Holdings. JXTG Holdings may also be forced to devote considerable resources to address the impact of such media coverage relating to the share exchange.

Legal & Regulatory

Total Risks: 3/31 (10%)Above Sector Average

Regulation1 | 3.2%

Regulation - Risk 1

JXTG Holdings may not be able to comply with, or incur significant expenditures in complying with, new laws or regulations, changes to existing laws or regulations or violations of laws or regulations that are applicable to JXTG Holdings, its business and its employees.

JXTG Holdings, its business and its employees will be subject to general laws, regulations and accounting rules applicable to its business activities. If laws or regulations that are applicable to JXTG Holdings, its business and its employees are newly implemented or changed, if JXTG Holdings or its employees are unable to comply with applicable laws and regulations, or if compliance with applicable laws and regulations result in significant additional expenditures, it may have an adverse effect on JXTG Holdings' financial condition and results of operations and may affect how JXTG Holdings operates its businesses.

Environmental / Social2 | 6.5%

Environmental / Social - Risk 1

Misappropriation of customers' personal information or proprietary data may cause JXTG Holdings to incur significant costs and liabilities.

JXTG Holdings will manage (directly or through third-party vendors) various personal information and proprietary data of its customers in connection with certain of its businesses, including in the Energy segment. JXTG Holdings may be required to incur significant costs to protect against the threat of security breaches relating to this personal and proprietary data, or to address problems caused by such breaches. In addition, if personal information of JXTG Holdings' customers or other proprietary data is misappropriated or if any other significant security breach occurs, whether relating to the information JXTG Holdings manages or otherwise, JXTG Holdings could be subject to claims, litigation or other potential liabilities that could adversely affect its financial condition and results of operations.

Environmental / Social - Risk 2

JXTG Holdings may incur liabilities and obligations in complying with existing or future environmental regulations, including a potential liability relating to its subsidiary, Gould Electronics Inc.

Because JXTG Holdings' various businesses give rise to considerable quantities of wastewater, gas emissions and waste materials, it is subject to extensive environmental protection laws and regulations in Japan and other jurisdictions. These laws and regulations provide for, among other things: - restrictions on, or imposition of fees for, the discharge of waste substances or for cleanup costs, including with respect to soil contamination, wastewater, gas or solid waste materials;- fines and payment of damages for serious environmental offenses;- closure of any facility which fails to comply with regulatory orders, or fails to correct or halt operations causing environmental damage;- mandatory contributions to the International Oil Pollution Compensation, or the IOPC, Funds; and - dismantlement, abandonment and restoration of properties and facilities at the end of their useful lives. In addition, recent environmental regulations directed at reducing greenhouse gas emissions mandate the blending of bioethanol as well as impose a carbon tax on petroleum products, necessitating additional capital investments in refineries or resulting in increases in refining and other manufacturing-related costs. If Japanese or authorities of other governments revise current environmental regulations or introduce new regulations, compliance with existing and any future regulations may result in significant additional expenditures. Liabilities and obligations incurred in complying with environmental regulations may have an adverse effect on JXTG Holdings' financial condition and results of operations and could affect how JXTG Holdings operates its businesses. Furthermore, continued and increased attention on climate change by non-governmental and political organizations as well as by the broader public is likely to lead to additional regulations designed to reduce greenhouse gas emissions. If JXTG Holdings is unable to find economically viable, as well as publicly acceptable, solutions that reduce its carbon emissions for new and existing projects or products, JXTG Holdings may experience additional costs, delayed projects and reduced production. Gould Electronics Inc., or Gould Electronics, a subsidiary of JXTG Holdings in the United States, is a potential responsible party for the cleanup of certain sites under U.S. environmental laws, such as the Superfund Act. Gould Electronics has provided reserves that it considers appropriate, but the actual amount that Gould Electronics may have to contribute to any cleanup may exceed the reserves. The ultimate financial exposure of Gould Electronics will depend on numerous factors, including the quantity of the substance and its toxicity for which the areas were designated, the total number of other potential responsible parties and their financial position and remedial methods and technologies. Depending on the amount of any shortfall in the reserves of Gould Electronics, JXTG Holdings' results of operations and financial condition may be adversely affected.

Macro & Political

Total Risks: 2/31 (6%)Above Sector Average

International Operations1 | 3.2%

International Operations - Risk 1

JXTG Holdings' business may be adversely affected by risks and uncertainties in the foreign jurisdictions from which it sources raw materials.

JXTG Holdings sources raw materials for its businesses from countries and regions worldwide. JXTG Holdings relies almost entirely on crude oil supplies from the Middle East as well as on limited copper concentrate sources in South America, Southeast Asia, and Australia. JXTG Holdings' business may be adversely affected by various risks in the foreign jurisdictions where it sources raw materials, including destabilization of the political climate, social unrest, adverse economic conditions, change in supply-demand balance and changes in laws and their application and in governmental policies. If JXTG Holdings' supplies of raw materials are disrupted, it may be unable to obtain adequate substitutes because there are only a limited number of jurisdictions from which raw materials can be sourced.

Capital Markets1 | 3.2%

Capital Markets - Risk 1

JXTG Holdings' financial condition and results of operations may be adversely affected by fluctuations in foreign exchange rates.

Fluctuations in foreign exchange rates may adversely affect JXTG Holdings' margins and revenue of products sold overseas. For example, a strengthening of the yen against the dollar will adversely affect the margins for petrochemical and electronic material products exported to China and other Asian countries because the dollar is the main currency for such exports. In addition, because sales in the Oil and Natural Gas E&P segment fluctuate along with movements in foreign exchange rates, when the yen is appreciating, sales will decline in yen terms. Moreover, fluctuations in foreign exchange rates may adversely affect the yen translated price JXTG Holdings pays when it purchases crude oil used in the Energy segment. In addition, foreign exchange rate fluctuations may have a material effect on the yen-translated values of the assets, liabilities, income and expenses of foreign operations whose functional currencies are not yen. The high and low noon buying rates for dollars for cable transfers in yen as certified for customs purposes by the Federal Reserve Bank of New York expressed in yen per $1.00 were 118.32 and 100.07 for the fiscal year ended March 31, 2017, ¥125.58 and ¥111.30 for the fiscal year ended March 31, 2016 and 121.50 and 101.26 for the fiscal year ended March 31, 2015.

Tech & Innovation

Total Risks: 1/31 (3%)Above Sector Average

Trade Secrets1 | 3.2%

Trade Secrets - Risk 1

JXTG Holdings' failure to protect its intellectual property rights from infringement may result in a loss of its competitive advantage, and any claim of intellectual property infringement may result in substantial payments or the prohibition of the use of the relevant technologies.

JXTG Holdings' businesses rely in part on proprietary refining and manufacturing technologies, proprietary rights in its products, processes and brands, and on its ability to obtain patents, licenses and other intellectual property rights over such technologies to prevent misuse by competitors. Any of JXTG Holdings' patents could be challenged, invalidated or circumvented. There can be no assurance that claims allowed on any present and future patents and other intellectual property rights will be sufficiently broad to protect JXTG Holdings' interest in or expected returns from the underlying technologies. In addition, a claim from a third party of infringement of intellectual property rights may lead to the payment of substantial royalties or to the prohibition of the use of the relevant technologies. Intellectual property litigation is costly to defend, outcomes may not be known for prolonged periods of time and can result in significant damage awards and injunctions. Consequently, any future litigation relating to intellectual property that JXTG Holdings becomes a party to, regardless of the ultimate result, could have an adverse effect on JXTG Holdings' results of operations and financial position.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.

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