Message from the President

Driving the Next Stage of Growth Through Business Structure Transformation

Since our founding more than 100 years ago, the Toho Gas Group has grown as an energy infrastructure provider, supported by a wide range of stakeholders. However, in recent years, the outlook for the energy sector has become extremely uncertain, due in part to heightened geopolitical risks globally. In addition, against the backdrop of major changes in social structures, including decarbonization and population decline, sustainable growth based solely on conventional approaches has become difficult to achieve.

Amid these conditions, in March 2025, the Group announced Medium-Term Management Plan 2025–2027 as the second step toward realizing the ideal positioning set forth in Toho Gas Group Vision. Even in a highly uncertain and rapidly changing environment, we will fulfill our social responsibility of ensuring a stable supply of energy while promoting business structure transformation to enhance corporate value.

Specifically, while making the most of the strengths we have cultivated to date, we will accelerate the reallocation of management resources and grow strategic businesses such as the electricity business and overseas business to a scale comparable to our core businesses, including the city gas and LP gas businesses.

Review of the First Year of Medium-Term Management Plan 2025–2027 : Advancing Business Structure Transformation

In FY2025, the first year of Medium-Term Management Plan 2025–2027, the business environment remained uncertain due to factors including U.S. policy trends. Nevertheless, the Group fulfilled its mission of providing a safe, reliable, and stable energy supply in its core businesses, while steadily advancing the transformation of the business structure set out in the plan.

The number of customers in the energy business progressed steadily toward the targets of the plan, reaching 3.12 million. In strategic businesses that will drive future growth, the electricity business remained profitable for the second consecutive year, and we decided to invest in large-scale gas engine power generation facilities to strengthen earning capacity. In the overseas business, we steadily expanded business scale, including participation in renewable energy projects in Australia.

Accelerating Business Structure Transformation by Integrating Three Strategies

Although the business environment is expected to remain uncertain from FY2026 onward, the Group will integrate and advance the three strategies set out in Medium-Term Management Plan 2025–2027—business strategy, financial strategy, and human resource strategy—while enhancing its earning power and accelerating business structure transformation.

Business Strategy : Promoting Core and Strategic Businesses in Tandem

As part of our business strategy, in our core city gas and LP gas businesses, we will provide a safe, reliable, and stable energy supply by maintaining a well-balanced raw material procurement portfolio that takes geopolitical risks into account, while ensuring robust supply and service systems. At the same time, by promoting the review of operational workflows through the use of advanced digital technologies such as generative AI, we will absorb increases in fixed costs associated with rising prices and maintain and strengthen the earnings base of our core businesses.

As for our strategic businesses that drive growth, in the electricity business, we are strengthening our sales capabilities through the expansion of electricity rate plans and services, as well as enhancing procurement capabilities by broadening our network of business partners, in addition to advancing the construction of large-scale in-house power sources. In our overseas business, we will strengthen our business promotion framework by leveraging established bases in the United States and Southeast Asia, while advancing the development of a business portfolio that covers all of our overseas operations.

We are also continuing our efforts toward achieving carbon neutrality. As outlined in the Toho Gas Group 2050 Carbon Neutrality Initiatives, updated in March 2026, we will focus first on reducing carbon emissions through the expanded use of natural gas, based on the “S+3E” approach, which aims to balance the three Es of energy security, economic efficiency, and environmental compatibility with safety as the major premise. Furthermore, with an eye to 2050, we will work to achieve a carbon-neutral energy supply by introducing e-methane and biogas, utilizing hydrogen, creating carbon credits, and developing renewable energy, in combination with technologies such as CO2 separation, capture, utilization, and storage.

Financial Strategy : Enhancing Earning Power and Improving Capital Efficiency

To sustainably enhance corporate value, improving capital efficiency is essential.

In our financial strategy, we will first focus on strengthening cash flow generation in our core businesses. At the same time, we will secure funds through measures such as the sale of cross-shareholdings and accelerate investment in strategic businesses, which serve as the drivers of growth. In making these investments, we will enforce strict investment discipline and, post-investment, enhance earning capacity through monitoring based on return on invested capital (ROIC).

In addition, we will work to optimize shareholders’ equity with the aim of achieving an appropriate capital structure. As part of this effort, and with a target equity level of 400 billion yen, we plan to implement shareholder returns exceeding a total payout ratio of 100 percent in fiscal 2026.

Through the steady execution of these initiatives, we aim to achieve the targets set out in Medium-Term Management Plan 2025–2027, namely, consolidated ordinary income of 30.0 billion yen and return on equity (ROE) that sustainably exceeds the cost of shareholders’ equity.

Human Resource Strategy : The Source of Value Creation

We believe that people are the primary source of value creation and are the drivers of business structure transformation. As such, it is essential to create a virtuous cycle in which individual growth leads to organizational growth.

As specific initiatives, we are working to enhance employee engagement and create an environment in which everyone can fully demonstrate their capabilities and translate them into results and growth. We are expanding systems and fostering a supportive organizational culture from four perspectives: human resource management; diversity, equity, and inclusion; flexible working styles and productivity improvements; and safety and health management. In addition, to encourage employees to take on challenges to drive transformation and create a virtuous cycle of taking on challenges and achieving growth, we introduced a new human resource system in April 2026.

Further details on these initiatives are disclosed in our Human Capital Report 2026 (Japanese only), published in March 2026.

Promoting Sustainability Management to Realize Sustainable Growth

The Toho Gas Group promotes sustainability management in order to contribute to the resolution of social issues through its business activities and to achieve sustainable growth together with its stakeholders. While “sustainability management” may be a relatively new term, it is rooted in the enduring values advocated by our founder, namely, that customers, shareholders, and employees form a trinity, and that it is essential that all of the Company’s stakeholders enjoy mutual prosperity. In this sense, sustainability management can be said to have been part of our approach since our founding.

In April 2026, we established the Sustainability Council directly under the Board of Directors to further advance sustainability management. From environmental, social, and governance (ESG) perspectives, we will promote both the realization of a sustainable society and the enhancement of corporate value.

From an environmental perspective, we will focus on expanding the use of natural gas and providing solutions that contribute to decarbonization, while accelerating various initiatives toward achieving a carbon-neutral energy supply.

Regarding efforts focused on society, we will continue to address social issues in local communities. Each of our employees is motivated by a strong desire to contribute to the community, and this commitment has become embedded in our organizational culture. By building on this culture, we will contribute to resolving social issues such as revitalizing and enhancing the resilience of local communities.

With regard to governance, we will continue to strengthen our systems and rules to ensure thorough compliance with laws and regulations, including the Antimonopoly Act. From a corporate governance standpoint, to further enhance management transparency and independence, the Group increased the number of outside directors in June 2026, bringing the proportion of outside directors on the Board to 40%. To remain a company that is truly trusted by our stakeholders, we will continue to ensure strict compliance and build a robust governance framework.

Remaining a Trusted Presence at the Heart of Local Communities

Although the Group’s operating environment is characterized by uncertainty and structural change, the Group will continue to take on bold challenges, viewing these changes as an opportunity for further evolution. Leveraging the business foundation, technologies, and expertise cultivated over more than a century, we will transform our business structure with the aim of growing our strategic businesses to a scale comparable to our core businesses by the mid-2030s.

In addition, by building on the relationships of trust we have established with our stakeholders—shareholders and investors, customers, local communities, and employees—we will earnestly address the challenges facing local communities and businesses and continue to move forward as a corporate group that leads the realization of a sustainable society.

Guided by our corporate slogan, “Toward the Heart of the Future,” which expresses our commitment to remaining a trusted presence at the heart of local communities and among our customers, we will continue to take on new challenges. I look forward to your continued understanding and support for the Group.