Delays and Cost Increases Due to Changes in Construction Methods and Unexpected Geological Conditions on a U.S. Construction Project

「Net sales in Japan exceeded the plan as orders increased. Meanwhile, at the U.S. subsidiary, full-scale construction began in December following the early placement of orders for Train 4 (Section 4) of the ground-improvement project at the LNG refinery plant site, which had made a significant contribution to results in the previous period. However, most of the work consisted of detailed design and trial construction, resulting in a figure below the previous-period result.」

「Trial construction for the additional work has now been completed, and detailed design and preparation of the construction plan are under way. Full-scale construction is expected to begin in December.」

「The major ground-improvement project at the LNG refinery plant site, carried over from the previous period, progressed smoothly」

「At the U.S. subsidiary as well, results were broadly in line with the plan, as the major ground-improvement project at the LNG refinery plant site progressed smoothly and ground-improvement work on the dam also commenced.」

「Meanwhile, at JAFEC USA,Inc., the U.S. subsidiary, the amount of the loss declined because of test construction for the ground improvement project at an LNG processing plant site,」

「Meanwhile, at JAFEC USA,Inc., the U.S. subsidiary, the size of the loss was substantially reduced as work began on trial ground-improvement construction at the LNG refinery plant site, resulting in consolidated ordinary income of ¥649 million, up ¥151 million from the same quarter of the previous year, and quarterly net income attributable to owners of the parent of ¥416 million, up ¥132 million.」

「Meanwhile, at JAFEC USA,Inc., the U.S. subsidiary, carryover projects from the previous period progressed smoothly, resulting in consolidated ordinary income of ¥389 million, up ¥174 million from the same quarter of the previous year, and quarterly net income attributable to owners of the parent of ¥274 million, up ¥165 million.」

「However, at JAFEC USA,Inc., the U.S. subsidiary, construction on the planned large-scale project continued to be suspended for ecological and environmental protection reasons, causing indirect costs to be incurred ahead of schedule,」

「However, construction interruptions for ecosystem and environmental protection continued at JAFEC USA,Inc., the U.S. subsidiary, causing indirect costs to be incurred ahead of revenue,」

「However, at JAFEC USA,Inc., the U.S. subsidiary, indirect costs were incurred ahead of schedule because construction was suspended for ecological and environmental protection reasons,」

「Meanwhile, at the local US subsidiary, construction of ground improvements for an LNG terminal was postponed due in part to the impact of carbon-neutral policies. In addition, construction commencement was substantially delayed for some projects due to ecological and environmental issues involving protected plants, resulting in performance well below plan.」

「Meanwhile, at the U.S. subsidiary, construction profitability deteriorated because of work stoppages caused by natural disasters and the novel coronavirus disease, but the company reduced indirect expenses and yard costs and reviewed its staffing, maintaining its initial operating profit plan.」

「Meanwhile, at the U.S. subsidiary, construction volume remained sluggish because of work stoppages caused by natural disasters and other factors, but the company maintained its plan for profit by reducing indirect costs and other expenses.」

「Because indirect costs and other expenses were incurred ahead of revenue at JAFEC USA,Inc., the consolidated ordinary loss was ¥4 million」

「Meanwhile, at the U.S. subsidiary, earnings fell significantly below expectations as construction delays caused by the impact of the coronavirus disease led to higher construction overhead costs.」

「At the U.S. subsidiary, earnings fell significantly short of expectations due to substantial delays in construction progress and increased indirect construction costs.」

「This was because JAFEC USA,Inc., the U.S. subsidiary, had no completed construction work at active sites.」

「In addition to focusing orders on profitability, reviewing its construction structure, and cutting selling, general and administrative expenses, the U.S. subsidiary also benefited from collecting previously unpaid construction payments, reducing the amount of its loss.」

「At the U.S. subsidiary, progress in collecting construction payments following changes in contract terms contributed to a reduction in the size of the loss.」

「However, partly because indirect costs and other expenses were incurred ahead of revenue due to delays in mobilizing for construction and other factors at JAFEC USA,Inc., ordinary income was ¥204 million, up ¥5 million from the same quarter of the previous year, and quarterly net income attributable to owners of the parent was ¥100 million, up ¥9 million.」

「At the U.S. subsidiary, the company worked to reduce the size of its loss by focusing orders on profitability, reviewing its construction structure, and cutting selling, general and administrative expenses.」

「However, because indirect costs and other expenses were incurred ahead of revenue at JAFEC USA,Inc., quarterly net income attributable to owners of the parent was a loss of ¥17 million, compared with income of ¥20 million in the same quarter of the previous year.」

「Although solid orders and construction progress at domestic branches generated ordinary income of ¥198 million, indirect costs and other expenses were incurred ahead of revenue at JAFEC USA,Inc., resulting in quarterly net income attributable to owners of the parent of ¥90 million, compared with a net loss of ¥77 million in the same quarter of the previous year.」

「However, the U.S. subsidiary was forced to accept a significant decline due to delays in starting major construction projects and other factors.」

「Progress on projects in hand at domestic branches exceeded expectations, resulting in net sales of ¥16,847 million, up ¥2,114 million from the same quarter of the previous year. In terms of earnings, despite delays in construction progress at JAFEC USA, the U.S. subsidiary, increased profits at domestic branches and subsidiaries resulted in operating income of ¥317 million, compared with an operating loss of ¥443 million in the same quarter of the previous year, and ordinary income of ¥443 million, compared with an ordinary loss of ¥270 million, representing a significant improvement.」

「Although construction progress was delayed at JAFEC USA,Inc., the U.S. subsidiary, solid construction progress in Japan contributed to operating income of ¥174 million, compared with an operating loss of ¥452 million in the same quarter of the previous year,」

「On a non-consolidated basis, although ¥305 million in ordinary income was recorded due to solid orders and construction progress, delays in construction progress at JAFEC USA,Inc., the U.S. subsidiary, resulted in an operating loss of ¥12 million, compared with a loss of ¥182 million in the same quarter of the previous year,」

「Due to the effects of construction delays caused by changes in construction methods and unforeseen geological issues, as well as delays in final settlement, at projects undertaken by the U.S. subsidiary, operating results were an operating loss of ¥305 million.」

「However, due to higher costs resulting from changes in construction methods and construction delays caused by unforeseen geological issues at projects undertaken by the U.S. subsidiary, net sales were ¥14,732 million, down ¥2,332 million from the same quarter of the previous year; the company recorded an operating loss of ¥443 million, compared with operating income of ¥1,156 million in the same quarter of the previous year; an ordinary loss of ¥270 million, compared with ordinary income of ¥1,262 million; and a quarterly net loss attributable to owners of the parent of ¥510 million, compared with net income of ¥813 million.」

「Higher costs resulting from construction delays caused by changes in construction methods and unforeseen geological issues at projects undertaken by the U.S. subsidiary」