Cost Overruns and Delays in Revenue Recognition Associated with Highly Challenging Development Projects
First written in FY2021. 5 of 12 entries say "Mitigated", first in FY2024-Q2. Latest entry: FY2026.
2 other companies' latest entry also says "Mitigated".
- FY2026MitigatedAnnual report
「Against this backdrop, during the consolidated fiscal year, sales to overseas markets including the United States were strong, the proportion of projects involving new development elements declined year on year, and initiatives such as price pass-through and cost reductions proved effective. As a result, both revenue and profit increased significantly year on year to record highs.」
The deterioration in project profitability caused by additional specifications, rework and extended delivery times for new development projects, which became apparent in the previous fiscal year, was mitigated through a lower project mix, passing on price increases and cost reductions, resulting in a substantial recovery in profit. - FY2026-H1MitigatedAnnual report
「In the interim consolidated accounting period, sales to overseas markets, including the United States, were strong, while the proportion of projects containing new development elements declined. As a result, both sales and profit increased substantially year on year.」
The proportion of projects containing difficult new development elements declined, and sales and profit increased substantially. It is stated that the risk of deteriorating project profitability due to additional specifications, rework and extended delivery times, which became apparent in the previous fiscal year, was relatively mitigated in the interim period. - FY2025MaterialisedAnnual report
「During the fiscal year, a high proportion of projects included new development elements, meaning the evolution and modification of user-developed products. In addition to the time required to respond to further specification changes requested by users and adjust quality, several events requiring extended delivery times and additional costs occurred, including additional costs to meet acceptance conditions and rework after delivery.」
Specification changes, quality adjustments, additional costs, rework and extended delivery times associated with difficult development projects actually occurred across multiple projects and were cited as factors behind the 73.1% year-on-year decline in operating profit. - FY2025-H1MaterialisedAnnual report
「During the interim consolidated accounting period, a high proportion of projects included new development elements, meaning the evolution and modification of user-developed products. This resulted in several events requiring extended delivery times and additional costs, including time spent responding to specification changes and adjusting quality, additional costs to meet acceptance conditions, and rework after delivery.」
The traditional risks associated with difficult new development projects, including specification changes, quality adjustments, additional costs, rework and extended delivery times, actually materialized across multiple projects. They have also been cited as factors behind the sharp decline in profit. The amounts attributable to these risks are not disclosed separately. - FY2024-Q3MitigatedAnnual report
「As production systems have become larger, the company has recently received more orders for high-value projects containing many new elements, making profitability an important consideration. During the current fiscal year, however, it secured profits exceeding its forecasts on these projects through accumulated technical know-how, detailed coordination when receiving orders, improved production efficiency, cost reductions and higher added value. In addition, foreign exchange effects had a positive impact on projects denominated in foreign currencies.」
Although the risk of low profitability for high-value projects containing many new elements remains, the company explained that it secured profits exceeding its forecasts through accumulated technical know-how, coordination when receiving orders, improved production efficiency, cost reductions and higher added value. - FY2024-Q2MitigatedAnnual report
「As production systems have become larger, the company has recently received more orders for high-value projects containing many new elements, creating the possibility that some projects may become less profitable. During the current fiscal year, however, it secured profits exceeding its forecasts on these projects through accumulated technical know-how, improved production efficiency and cost reductions. In addition, foreign exchange effects had a positive impact on projects denominated in foreign currencies.」
The risk of low profitability for high-value projects containing many new elements continued to be disclosed, but the company explained that it secured profits exceeding its forecasts during the current fiscal year through accumulated technical know-how, improved production efficiency and cost reductions. - FY2023RestatedAnnual report
「The group’s policy is to undertake development and production even for challenging projects requiring unprecedented technologies or other capabilities when it determines that the expected future profitability and growth outweigh the risks. Accordingly, the expected results may not be achieved, or material costs and additional labor hours may exceed initial estimates. In such cases, the timing of revenue recognition may be deferred, and cost of sales and development costs may increase.」
The company continued to describe its policy of accepting challenging development projects and the associated risks of failure to achieve expected results, excess material costs and additional labor hours, delays in revenue recognition, and increases in cost of sales and development costs. - FY2022RestatedAnnual report
「The group’s policy is to undertake development and production even for challenging projects requiring unprecedented technologies or other capabilities when it determines that the expected future profitability and growth outweigh the risks. Accordingly, the expected results may not be achieved, or material costs and additional labor hours may exceed initial estimates. In such cases, the timing of revenue recognition may be deferred, and cost of sales and development costs may increase.」
The company continued to describe its policy of accepting challenging development projects and the associated risks of failure to achieve expected results, excess material costs and additional labor hours, delays in revenue recognition, and increases in cost of sales and development costs. - FY2022-Q2MaterialisedAnnual report
「For the six-month period of the second quarter of the current consolidated fiscal year, revenue from expected overseas projects and projects with substantial development components shifted into the second half due to the change in the revenue recognition standard, limiting the increase in revenue. However, each profit measure exceeded the previous forecast because the period included a large number of relatively profitable projects, mainly in Japan.」
The company explained that projects overseas and projects with substantial development components actually experienced delays in revenue recognition into the second half due to the change in the revenue recognition standard. Profit exceeded the previous forecast because of highly profitable domestic projects. - FY2021First statedAnnual report
「The group’s policy is to undertake development and production even for challenging projects requiring unprecedented technologies or other capabilities when it determines that the expected future profitability and growth outweigh the risks. Accordingly, the expected results may not be achieved, or material costs and additional labor hours may exceed initial estimates. In such cases, the timing of revenue recognition may be deferred, and cost of sales and development costs may increase.」
In line with its policy of accepting and producing challenging development projects, the company identified as new risks failure to achieve expected results, excess material costs and additional labor hours, delays in revenue recognition, and increases in cost of sales and development costs.