JGC Holdings Corporation

This is Sun Taguchi, Group Finance and Accounting Department. Thank you for this opportunity. I will explain the outline of financial results they use in agenda on slide two. Please look at slide three. This shows the highlights of FY20 results. In FY20, we received an order for a large refinery modernization project in Iraq. We also received orders in Japan in chemical and biomass power generation. We secured the orders of 680 billion yen more than the initial forecast. The impact of COVID-19 is still going on. Its impact is rather severe than we had first expected, though we do not have a rapid recovery in net sales in the second half of the year, but ongoing projects are making good progress. We achieved improved profitability in some projects, both at home and abroad, thanks to the strong project execution. We also reduced SCNA. All in all, operating income and ordinary income in FY20 exceeded our initial forecasts. This slide shows income and comprehensive income. Today, we separately disclosed notice of disparity between earnings forecast and actual results. Year-on-year basis, actual income decline and profit increased. Net sales was 433.9 billion yen down 46.8 billion yen year-on-year. It was lower than the initial forecast. In the initial forecast, we had assumed business environments affected by COVID-19 would be back to normal during the year. Unfortunately, we did not see a big improvement in our business environment, thus we could not see our expected rapid recovery moving toward the end of the fiscal year. Gross profit was 43.7 billion yen, up 400 million year-on-year. This was better than the initial forecast. Profit ratio was 10.1%, up 1.1 point year-on-year. We had an increased profit thanks to the smooth execution in projects, both at home and abroad, up until the third quarter. Though we had an expense from the lost quotation in the fourth quarter, but the project profit turned out to be rather firm. Operating income was 22.8 billion yen, up 2.6 billion yen year-on-year. Thanks to the reduction of S&A, operating income shows a growth compared with the initial forecast. Ordinary income was 25.5 billion yen, up 3.1 billion yen year-on-year. Profit attributable to owners of the parent was 5.1 billion yen, up 1 billion yen year-on-year. It was 35% lower than the initial forecast. This was caused by the impairment of 2.9 billion yen in the fourth quarter as well as 1.3 billion yen for the valuation loss of investment securities. They were caused by the impairment we had in the U.S. crude oil and gas production and sales assets due to the sluggish price of crude oil as well as by the valuation loss due to the substantial price reduction in the power generation and water business in the UAE. There are special laws of 4.9 billion yen. This is just one-time loss without cash out. As for the annual dividend per share, it is 12 yen per share, no change from the initial forecast.

Next is segment information. In the total engineering segment, sales decreased due to the continued impact of COVID-19, but profits increased owing to the steady execution of projects in Japan and overseas. Net sales were 388.5 billion yen, and segment profit was 16.8 billion yen. In the functional materials manufacturing segment, both sales and profits were down due to the continued decline in overall product demand caused by COVID-19. Net sales were 40.7 billion yen and segment profit was 5.8 billion yen. In other businesses, sales and profits were down. Next, moving on to the consolidated balance sheet. Current assets increased by ¥10.4 billion year-on-year to ¥548.3 billion due to an increase in accounts receivables among other factors, and fixed assets increased by ¥20.8 billion to ¥154.1 billion due to factors including the consolidation of new subsidiaries. Total assets grew by 31.2 bn yen to 702.5 bn yen. Current liabilities were down by 31.3 bn yen to 197 bn yen year-on-year due to redemption of bonds and decrease in accounts payables for construction. Non-current liabilities increased by 35.9 billion yen to 87.8 billion due to the issuance of bonds and the effect of newly consolidated subsidiaries. JGC's share of cash held by the joint venture, which is not recorded on the bond sheet, was 197 billion yen. The shareholder security ratio was 59.4%. Let's move on to the consolidated cash flow statement. Operating cash flow was positive 12.4 billion yen. Investing cash flow was negative 13.5 bn due to the purchase of tangible fixed assets and the purchase of investment securities, among other factors. The balance of cash and cash equivalents at the end of the fiscal year was 268.2 bn, almost some change from the end of the previous fiscal year. Next is the outline of contracts. Overall, orders received were 683 billion yen, exceeding the initial forecast. Overseas, there was a marked tendency for large projects to be pushed back the following fiscal year or later due to customers' revised investment plans. As there were no large-scale projects following the oil refinery modernization project in Iraq, the total project amount was muted at 509 billion yen. In Japan, we received 182.1 billion yen in orders, far exceeding our initial expectation, mainly for biomass power generation projects. Next slide is a status without signing contracts. The order backlog at the end of March 2021 was 1 trillion and 241.2 billion yen, and we have secured a volume of work that will serve as a base load for the next several years. By sector, LNG accounted for 41%, petroleum refining 36%, and power generation grew to 13%. By region, North America and the Middle East accounted for 36% each. Major projects include the LNG project in Canada, the oil refinery project in Iraq, and the biomass power generation project in Japan. Lastly, I would like to explain our business forecast for fiscal 2021. The EBC market, especially in the oil and gas sector, continues to be challenged by uncertainties, and hence we are targeting 500 billion yen in order. Net sales are expected to increase year-on-year to 470 billion yen thanks to the progress on ongoing LNG Canada project and the oil refinery modernization project in Iraq. Gross profit is expected to go down year-on-year to 38 billion yen, and the gross margin is expected to fall to 8.1%. We have factored in the risk of a decline in capacity utilization rate due to a decrease in the number of large projects underway and limited orders for new large projects. As a result, operating income and ordinary income are expected to decrease to 16 billion yen and 19 billion yen respectively. Net income attributable to owners of the parent is expected to increase to 13 billion yen due to a decrease in foreign taxes. We forecast a dividend of 15 yen per share, aiming for a consolidated payout ratio of 30%. This forecast is based on an exchange rate of 170 yen to the U.S. dollar. And this concludes my explanation on the financial summary. Thank you very much for your attention.

Hello, this is Shizuka, present COO. If I may, I would like to be brief in my explanation on business report since afternoon long-term management vision and medium-term business plan will be explained. Please turn to page 3. As Taguchi explained, consolidated orders received in FY 2020 was ¥683 billion, almost par to the target. In overseas oil and gas business, we received a large oil and gas processing project in Saudi Arabia. We achieved about 500 billion yen. In the overseas infrastructure business, in the middle column, non-ferrous refinery project was postponed due to COVID-19. Thus, we could not achieve the target. Here in Japan, We have been backed up by strong life science and renewable energy sectors. We achieved 182 billion yen, more than the target. So putting them together, it became 683 billion yen. Please turn to page four. Total engineering aims at 500 billion yen in the consolidated orders for FY 2021. We are still faced with market uncertainties, so we are going to focus more on those projects whose probability is rather high. This has been the policy in making our plan. Here I need to remind you that we had changes in our organizations. Former overseas oil and gas became energy solutions, and former overseas infrastructure became facility infrastructure solutions. So what you see here are those new names. First, energy and solutions. As I have already mentioned this, we have projects like non-ferrous metals in Indonesia, gas chemical projects in the United States, and oil refinery in Russia. We will focus on those projects because they are quite plausible. This has been already mentioned earlier. Here we will aim at 260 billion yen. Facility infrastructure solutions aims at 80 billion yen in orders. Major expectations include LNG-fired power in Indonesia, and storage tank business in Taiwan, water treatment in the Middle East, and railways related in the Philippines and others. Our expectations in domestic EPC, life science continues to be rather strong. We also have opportunities in nuclear power and maintenance. we would like to aim at a total of 160 billion yen. Now please turn to page five. Functional Materials Manufacturing. Here we have three areas, catalysts and fine chemicals, and fine ceramics. In a nutshell, catalysts with the COVID-19 surge, energy demand has been declining so Refinery utilization has come down, so we believe the demand here is going to be flat or decline a little. Fine chemicals in the middle. This area has also been affected by the COVID-19, but there has been a gradual recovery recently in automotive exhaust gas cleaning catalyst supporting materials. functional coating materials for eyeglasses. So we can have some expectation for profit recovery. Yes sir, we keep our fingers crossed here. Lastly, fine ceramics. Demand in semiconductor is now expanding. Silicon nitride substrates for power semiconductor for electric vehicles and hybrid vehicles are promising. This is another area we can have expectations like fine chemicals. With this, I would like to conclude my brief explanations on business overview. Thank you for your kind attention. Hello, everyone. This is Masayuki Sato, Chairman, JGC. As you know, the business environment surrounding JGC Group are changing so dramatically. Believing that in order for us to grow continuously, we must transform ourselves by having long-term perspectives. With this in mind, we produced our long-term management vision called 2040 Vision. This time, we announced a 2040 vision and a medium-term business plan, BSP 2025, at the same time. Why? Mid-term business plan or BSP 2025 is the very first five-year plan looking into long-term business structure transformation. This is a plan to enable us to achieve our financial goals. At the same time, the five-year plan, though its contributions to business performance is somewhat limited, is here to secure a large amount of strategic investment for us to develop a future growth engine. I hope you understand this point. Time is limited today, so without further ado, I will now explain some of the highlights of 24 Division for the JGC Group. Please turn to page 5. In developing 24 division, we redefined our purpose. So first allow me to explain this purpose itself. As you see here, the JGC group was established in 1928. Since then, we have been engaged in supporting the foundations of industry and society at large at the crossroads of challenges in balancing energy and environmental needs. The business environment surrounding the JGC Group is changing so dramatically. In order to grow continuously, we must respond to immediate changes quickly and flexibly. We need to raise our perspectives. We have a long-term and global vision that we are here to contribute to the healthy future of people and the globe. Every one of the employees must share this purpose, and we need to change ourselves, so we believe. Please turn to page 6. And now, we, JGCN group, redefined its purpose, that is enhancing planetary health. It contains our aspiration that we want to enhance both human culture and human lives, and in global environment or the nature systems people depend on. Now, please turn to page 11. Here, I would like to explain the background of 2040 vision. What are the social issues we judges in group aspires to solve? The social issues in our group would aspire to solve are three, pursuing both stable energy supply and decarbonization, reducing environmental impact of resource consumption, and building and maintaining vital infrastructure and services. Moving toward the year 2014, we have our purpose of making contributions to making a healthy future for humans and the planet, and we aim at solving those three social issues. Now please turn to page 13. Here I would like to explain our to-be in the year 2040. In order for the JGCN group to solve these three social issues, as we move into 2040, we will transform the JGCN group itself in five business areas where we can leverage our technology, track records, and core competence. They are energy transition, healthcare life sciences, high performance and functional materials, circular economy, and industrial and urban infrastructure. Now please turn to page 14. Here I would like to give you specific numbers we aim at in 2040. Currently, oil and gas is most dominant in our business areas. We aim at 60% with energy transition and 40% with other areas. In terms of business models, currently EPCN is dominant. We aim at 60% with EPC, and non-EPCN accounted for 40%. By expanding non-EPC business, we would like to diversify our earnings structure. Please turn to page 16. Here, I would like to explain three aspects of transformation to realize our 2B. First is a transformation in business areas. This is a shift from oil and gas centric business to energy transition as well as expansion of business areas. Second is business models transformation. Its focus is placed on EPC and manufacturing models. Here now we are talking about deepening our EPC business model as well as diversifying into non-EPC business models. Third is transformation of organization. Here now we are talking about how we can transform and reinforce our organizations. In addition to the traditional Japan-centric management and mega-sized projects, we need to establish a region-based management and we need to enforce our culture of innovation. Next, please look at page 17.