JGC Holdings Corporation

I am Taguchi, General Manager of Finance Unit. I would like to present the outline of financial results for fiscal year 2022. I will explain the results for FY 2022, followed by the forecast for FY 2023. First, page 4 is the highlights of FY 2022 results. Three highlights are listed. Due to the steady progress in major projects, including LNG in Canada and refinery in Iraq, both net sales and net profit were above the forecast. Order intake was in high level, almost in line with the plan, and the sufficient level of order backlog, ¥1,563.4 billion, was secured. As for dividend, Following the shareholder return policy, we keep the dividend payout ratio of 30%. Number of shares decreased in this fiscal year following the share buyback completion of 20 billion yen, which was decided in February. With this, dividend per share will be 38 yen, up by 2 yen from the forecast. Next, this is the income statement. We recorded substantial year-on-year growth in sales and profit. Net sales were 606.8 billion yen, up 42% year-on-year. Profit ratio increased 0.4 percentage points to 11%. Operating profit increased 77% to 36.6 billion yen, despite the increased SG&A cost. Ordinary profit increased 68% to 50.5 billion yen. And profit and loss attributable to owners or parent turned positive, 30.6 billion yen. ROE was 7.8%. Next, this is segment information. In total engineering segment, sales and profit increased year on year. Net sales increased 173.6 billion yen year-on-year to 551.6 billion as large project in Canada and Iraq overseas, and life science and biomass power plant businesses in Japan progress steadily as planned. Segment profit increased by 16.3 billion yen year-on-year to 33.4 billion yen due to the profitability improvement with a steady execution of project and impact by depreciation of yen. In the fourth quarter, additional profit was posted due to the profitability improvement in multiple steadily ongoing project including those close to the completion. In functional materials manufacturing segment, net sales increased slightly to 47.7 billion yen, but profit stayed flat at 7.1 billion yen. In addition to the demand decrease in semiconductor-related businesses, soaring fuel cost and raw material cost impacted to push down the profitability. Other segment is as shown here. Outline of contract of total engineering segment. Overseas new contract substantially recovered to achieve 696.3 billion yen. Domestic new contract remained at 127.6 billion yen with a pushback of investment decision of large project into the next fiscal year. The total of overseas and domestic was 823.9 billion yen. Major new contracts include gas oil separation unit in Saudi Arabia, chemical project in Thailand, floating LNG in Malaysia, and large-scale excellent plants in the US, which was posted in the fourth quarter. Outstanding Contracts As new contracts were in high level of over 800 billion yen, outstanding contracts as of the end of the fiscal year were 1 trillion 563.4 billion yen, up 300 billion from the beginning of the year. By business area, oil and gas account for 48% and RNG 24%. By region, on the right, Middle East account for 46%, America and others 20%, followed by Asia and Japan. As for major projects, those in Saudi Arabia, Malaysia, and the U.S., which were received in this fiscal year, were added to the contract of over 100 billion yen.

This shows you the consolidated financial conditions and cash flows. There were no major changes in financial conditions. Equity ratio was 55.7%, flat from the previous fiscal year. Operating cash flows recorded positive 110.7 billion yen, which substantially exceeded the net income thanks to the collection of debt after a resolution of dispute over the project completed in the past. Cash flows from investing amounted to negative 11.4 billion yen due to the acquisition of property, plant and equipment and digital related investment. Cash flows from financing amounted negative 61.2 billion yen due to repayment of interest-bearing liabilities, share buybacks and others. Cash and cash equivalents was 332.7 billion yen, increased by 44.7 billion yen from the beginning of FY 2022. The company's share of cash in joint ventures, which is off the balance sheet, decreased by 67.9 billion yen to 171.7 billion yen. I will explain our forecasts for fiscal year 2023. For the total engineering segment, New Order's target is 800 billion yen. Net sales? forecast is 800 billion yen as substantial sales increase is expected in this segment. Gross profit is almost flat of 6.8 billion yen and profit margin is 8.5%. We expect operating profit to be 38 billion yen with no change in SGA expenses. Ordinary profit to be 45 billion yen and profit attributable to owners of the parent is 32 billion yen. Dividends per share will be up 2 yen to 40 yen. An exchange rate used for this forecast is 133 yen to 1 U.S. dollar. Next, I will explain the forecast by a segment. In the total engineering segment, we can anticipate the steady progress of orders received in fiscal year 2022, and strong growth in both sales and profit are expected to continue from the previous year. Forecast of net sales is 743 billion yen and segment profit is 38.5 billion yen. A drop in profit margin is estimated after discounting the personnel cost hike following the improvement of employees' benefits and DX related depreciation and running costs as well as fixed cost increase. In the functional material manufacturing segment, profit margin fell in the fourth quarter of FY 2022, owing to the severe business environment, and this affected our forecast, which estimates net sales to be 50%. 50 billion yen flat from the previous year, and segment profit to decline to 5.7 billion yen. Others will be virtually flat. As for adjustment, we expect 2.1 billion yen increase in cost for segment profit, taking into account the higher fixed cost that is not allocated to contractors. such as personal expenses and R&D costs related to growth strategy. This concludes my explanation.

I'm Sato, Chairman and CEO. I'll talk about the perception of the market environment in the group's future direction. As for the market environment surrounding JGC Group in FY 2022, in total engineering business, in addition to the recovery in energy demand with an eye for the post-pandemic, for the diversified procurement of natural gas RNG with a backdrop of energy de-raspidification of EU, overseas oil measures, and oil and gas producing countries' state oil companies fully resume the capital investment. In Japan, with the continued clients' capital investment in life science sector, business has progressed steadily. Furthermore, in sustainability sector including hydrogen, fuel, ammonia and SAF, there have been progress in specific project in Japan and abroad. In functional materials manufacturing business, future uncertainty increased in global economy and semiconductor-related market in the second half of the fiscal year, but in general, clients' demand has been sustained firm. In total engineering business amid the booming market condition, orders in FY 2022 hit the second high in the record at 820 billion yen pursuing the seller selective order taking. As for the business results, the full-year target were achieved in net sales and profits in all levels due to the solid project management in ongoing project and the steady product demand in functional materials manufacturing business centering on FCC catalysts. Alloy improved substantially from FY 2021 at 7.8%. To summarize, FY 2022 was an extremely fruitful year for the GGC Group, with great progress over FY 2021 in terms of orders and business results. As for FY2023, global economy seems to be uncertain due to the prolonged inflation and monetary tightening policy. But in total engineering business, we expect that equally robust market as FY2022 will be sustained. On the other hand, in functional materials manufacturing business, markets of chemicals catalyst product and semiconductor-related product which have been supporting profit will be stalled, and on the profit front, temporarily, it will be a slightly severe year. In FY 2023, we make maximum effort to achieve the high-level order target of 800 billion yen following FY 2022 and the full-year business targets. In the results meeting of the first half FY 2022 in November last year, I talked about the two conflicting issues of the response to the present energy demand and acceleration of decarbonization as the two challenges that the world is required to find solutions for. Six months have passed since then, and now the energy industry is faced with three conflicting challenges, or three lemurs, of energy affordability for the reasonable energy price, energy security to supply the appropriate amount of energy with stability, and decarbonization.