JGC Holdings Corporation

I'm Taguchi of Finance Unit. I'll explain the outline of financial results. Please turn to page 4. This is the highlights of FY2023. Due to the continued difficulties in some overseas projects in total engineering business, additional expenses were posted in Q4 as well, and partly also due to the additional risk contingencies cost, operating loss was incurred. Orders were sluggish as clients' investment decision for large contracts expected at the end of the fiscal year slid to the next fiscal year. Page 5 shows consolidated income statement. Net sales increased to 832.5 billion yen, up 37% year-on-year, but gross profit decreased 56 billion yen to 10.6 billion yen. This is due to the substantial decline in profitability in total engineering business. operating loss was 18.9 billion yen, ordinary profit was 0.3 billion yen, and loss attributable to owners or parent was 7.8 billion yen.

Please take a look at slide 6. I'm going to talk about earnings by segments. Total engineering segment saw progress of large projects, and the net sales grew 40% year-on-year to 773.1 billion yen. Large oil and gas-related and chemical plant projects underway in the Middle East and Southeast Asia resulted in a loss of 22 billion yen due to additional expenses and a large loss provision resulting from estimated cost for countermeasures on risks. Functional materials manufacturing segment saw sales increase of 4.2 billion yen from the previous year to 52 billion yen, driven by increase in catalyst-related sales. The segment income remained flat at 7.2 billion yen due to a lack of recovery in demand for fine chemical products for semiconductor and hard disk-related applications, and as well, increase in depreciation. Please refer to slide 7. Orders for total engineering segment summed up to 293.8 billion yen. In the fourth quarter, there was no order for large projects. Turning to slide 8, the third slide on segments. We had the order backlog of 1,243.9 billion yen. Thanks to the weakening yen, the backlog decline versus the onset of the fiscal year was contained to about 300 billion yen. The breakdown hasn't changed since the onset of the fiscal year. If we look at the breakdown by business area, oil and gas and LNG accounted for about 70% of the backlog, and by region, the Middle East accounted for about 50%. The last slide is on consolidated financial position and cash flow. First on financial position, total assets grew to 792.2 billion yen, driven by the increase in sales. Equity ratio was 48.7%, falling below 50% for the first time since the fiscal year ended March 2009. There was 148.1 billion yen of additional cash balance not posted on our balance sheet, which is the company's share of cash on the balance sheet of the joint ventures. Cash flows are shown in the table below. We had positive operating cash flow of 11.0 billion yen. The positive operation cash flow, despite the fact that we had posted net loss, was mainly due to our posting of large provision for construction losses that has not yet resulted in cash out. We had very large operating cash flow in the previous fiscal year due to the collection of receivables following the conclusion of disputes on previously completed projects. We had 20.2 billion yen of negative net cash flows from investing activities due to factors including acquisition of tangible fixed assets. We had 8.8 billion yen of negative cash flows from the financing activities due to factors including payout of the dividend. Cash and cash equivalents at the end of the fiscal year was 324.5 billion yen, flat growth since the onset of the year. Turning to 11th slide, forecast for FY2024. We expect order of 970 billion yen for total engineering segment. Net sales are expected to be 830 billion yen, on par with the previous fiscal year, thanks to contribution from continued progress on large projects. We forecast gross profit of 58 billion yen, gross margin of 7.0%, operating profit of 26 billion yen, and ordinary profit of 34 billion yen. Profit attributable to owners of parent is expected to be 23 billion yen. We expect 40 yen of dividend per share. The forecast is based on the planned exchange rate of 145 yen to a dollar. On slide 12, I'm going to talk about forecast by segment. We are expecting 770 billion yen for net sales of total engineering segment flat year-on-year growth. We expect the segment profit of 26 billion yen. There are a few projects that ended up generating losses in FY 2023 for which we have set aside a provision for construction losses. The sales from these projects are expected to account for about one-fourth of overall sales. We are expecting net sales of 52 billion yen with the segment profit of 7 billion yen, flat year-on-year growth as we continue to see uncertainty around the recovery of semiconductor and related markets. The last slide, page 13, I will touch on the revision on our shareholders' return policy. The current shareholder return policy was set out in 2021 when the Medium-Term Management Plan, BSP 2025, was formulated. We have just completed fiscal year ended March 2024, the third year of implementing current mid-term management plan. We have reviewed the policy from the perspective of enhancing shareholder returns in light of our current fiscal situation and future business prospects. As a result, we have decided to increase the annual dividend payout per share from 15 yen to 40 yen. Based on revised policy, the dividend forecast for FY 2024 shall be 40 yen per share. I'd like to stop here for my part.

I'm Sato Chairman. As already announced on April 30th, operating loss and net loss were posted for the full year of FY 2023 due to the additional expenses in multiple projects of JGC Corporation, the core entity of EPC business in the group, in addition to the project of overseas group companies. to recover the trust by shareholders and investors for our EPC execution capabilities. We can do nothing but achieving steady and stable performance through steady execution of EPC project that we are working on. Following Q2 and Q3, in this Q4, the profitability has been degenerating in the same project and we intensively scrutinized ongoing overseas major projects in terms of their execution condition, execution plan, and budget. In the review of budget, in order not to repeat the deterioration in profitability going forward, we made a strict scrutiny. As a result, additional risk contingencies expenses were posted. but the likelihood of posting additional loss has become significantly lowered in 2024 and onward. We will strive to recover business performance by steady execution of projects going forward. The reason for posting additional expenses varies by different background and the development of each project. But we, JCC Holdings, examine the underlying causes and countermeasures with JCC Corporation. Shizuka will explain the details later. but we believe that the major direction to realize sustainable growth by transforming ourselves and diversifying business into the five business domains, including energy transition, that we showed in our medium-term management plan of BSP 2025 and long-term management vision of 2040 vision, is not wrong. and this direction remains unchanged even with a loss incurred this time. However, As for the strengthening regional management structure to expand business by strengthening local production and local consumption type sales and project execution capabilities in growth market, which was presented in the long-term management vision, we think we need to decelerate once with loss incurred in overseas group companies.