Recognition of Non-operating Income and Extraordinary Loss
Unifly NV (consolidated subsidiary)
The development project ordered by Company A in 2021 and the development work handled by Company B
Numerous defects were identified due to development delays and quality issues at Company B, the conditions for lump-sum acceptance could not be met, and acceptance of the project as a whole could not be obtained.
Approximately ¥33 million in non-operating income, approximately ¥94 million in extraordinary loss, and a net loss impact on earnings of approximately ¥61 million
Second quarter of the fiscal year ending January 2027
The Company's consolidated earnings forecast for the current fiscal year is currently under review. If the Company determines that a revision is necessary, it will promptly announce the revision.
Company response
Cessation of transactions with Company B (Company B will not be engaged as a subcontractor going forward)
• Cessation of transactions with Company B: Company B will not be engaged as a subcontractor going forward. • Review of the management structure: Since making Unifly a subsidiary, the Company has tightened its criteria for selecting partners, and none of the projects currently in progress carries risks similar to those in this matter. • Review of contract structures: For new contracts entered into since the Company made Unifly a subsidiary, the Company has completed the transition to contract structures that, in principle, provide for partial acceptance at each milestone rather than lump-sum acceptance.
Company A continues to place a high value on Unifly's development work and intends to continue placing new orders with Unifly. Company B will not be engaged as a subcontractor going forward, the criteria for selecting partners have been tightened, and the transition to contract structures that avoid lump-sum acceptance has been completed.
If the Company determines that a revision to its earnings forecast is necessary, it will promptly announce the revision.
| Item | Details |
|---|---|
| Event name | Recognition of Non-operating Income and Extraordinary Loss |
| Subject Entity | Unifly NV (consolidated subsidiary) |
| Target Locations / Products | The development project ordered by Company A in 2021 and the development work handled by Company B |
| Cause | Numerous defects were identified due to development delays and quality issues at Company B, the conditions for lump-sum acceptance could not be met, and acceptance of the project as a whole could not be obtained. |
| Amount of Impact on Business Performance | Approximately ¥33 million in non-operating income, approximately ¥94 million in extraordinary loss, and a net loss impact on earnings of approximately ¥61 million |
| Accounting period in which recognized | Second quarter of the fiscal year ending January 2027 |
| Impact on Earnings Forecast | The Company's consolidated earnings forecast for the current fiscal year is currently under review. If the Company determines that a revision is necessary, it will promptly announce the revision. |
| Suspended operations | Cessation of transactions with Company B (Company B will not be engaged as a subcontractor going forward) |
| Measures to prevent recurrence | • Cessation of transactions with Company B: Company B will not be engaged as a subcontractor going forward. • Review of the management structure: Since making Unifly a subsidiary, the Company has tightened its criteria for selecting partners, and none of the projects currently in progress carries risks similar to those in this matter. • Review of contract structures: For new contracts entered into since the Company made Unifly a subsidiary, the Company has completed the transition to contract structures that, in principle, provide for partial acceptance at each milestone rather than lump-sum acceptance. |
| Outlook | Company A continues to place a high value on Unifly's development work and intends to continue placing new orders with Unifly. Company B will not be engaged as a subcontractor going forward, the criteria for selecting partners have been tightened, and the transition to contract structures that avoid lump-sum acceptance has been completed. |
| Planned follow-up disclosure | If the Company determines that a revision to its earnings forecast is necessary, it will promptly announce the revision. |
Items this document does not state (14)
These are items the company does not state in this document. We do not leave them blank, nor fill them in from other sources or by inference.
The reasons the company gives
The company's own explanation, not something inferred from the numbers.Numerous defects arose due to development delays and quality issues at Company B, Unifly's subcontractor, and the conditions for lump-sum acceptance could not be met. The decision to engage Company B and enter into the contract was made before the Company made Unifly a subsidiary.