Risk of Large-Scale Project Cancellations, Delays and Deteriorating Profitability

「Operating income declined sharply year on year because profit recognition from large orders was concentrated from the second quarter onward.」

「We are working to ensure consistent schedule management from sales proposals through construction, reduce costs and workloads through standardisation and productivity improvements, and establish a sustainable project execution structure, including by expanding our network of partner companies.」

「Logistics: Revenue and profit declined as intensive efforts to secure small and medium-sized projects were offset by a lull in large projects.」

「Design, manufacturing and other work for large-scale projects was brought forward in part to level out progress, and revenue was recognised in line with progress.」

「Revenue was recorded mainly from in-facility automation projects incorporating the "Multi-Shuttle" system for online retailers, third-party logistics providers and manufacturers. However, because the timing of large-scale projects was uneven, revenue recognition became more concentrated from the second quarter onward, resulting in revenue from this business of ¥4,817 million, down 24.9% year on year.」

「With respect to new-build projects, the Company received an order in Malaysia, together with its local overseas subsidiary, for the construction of one LPG tank, but did not secure any other large-scale projects in Japan or overseas.」

「Although the order environment for new-build projects remained weak, partly due to the impact of COVID-19, revenue was generated mainly from domestic maintenance projects. Revenue was ¥6,430 million, down 6.9% year on year. Operating income was affected by the low profitability of some projects and the reversal of gains recognized in the previous fiscal year from provisions for construction projects recorded in prior years. As a result, the operating loss was ¥418 million, compared with an operating loss of ¥93 million in the same quarter of the previous year.」

「Although orders for new-build projects remained weak, partly due to the impact of COVID-19, robust domestic maintenance projects brought revenue to ¥4,827 million, up 29.5% year on year. However, operating income was affected by the low profitability of some projects and the reversal of gains recognized in the previous fiscal year from provisions for construction projects recorded in prior years. As a result, the operating loss was ¥233 million, compared with an operating loss of ¥9 million in the same quarter of the previous year.」

「Orders for new-build projects remained sluggish, partly due to the impact of the COVID-19 pandemic, while revenue was ¥2,232 million, up 82.0% year on year, driven mainly by solid domestic maintenance projects. However, the operating loss was ¥257 million, compared with operating income of ¥29 million in the same quarter of the previous year, due to the low profitability of projects generating revenue and the absence of the reversal gain on provisions for construction projects from prior years recorded in the same quarter of the previous year.」

「Although the sluggish order environment for new-build projects remained unchanged, revenue was recorded mainly from maintenance projects, resulting in revenue from this business of ¥6,908 million, up 39.9% year on year.」

「Revenue was ¥26,963 million, down 14.5% year on year, and the operating loss was ¥240 million, compared with operating income of ¥2,035 million in the same quarter of the previous year, due to project schedules being pushed back and some unprofitable projects in the logistics systems business, as well as the continued challenging business environment in the machinery and plant business.」

「Revenue was recorded mainly from in-facility transport equipment projects incorporating the "Multi-Shuttle" automated case-storage system and from equipment projects for airports. However, revenue and profit declined due to lower revenue caused by project schedules being pushed back, the occurrence of some unprofitable projects, and higher costs associated with strengthening personnel resources to further expand the logistics business.」

「Revenue was recorded mainly from in-facility transport equipment projects incorporating the "Multi-Shuttle" automated case-storage system, primarily for online retailers, and from transport equipment projects for manufacturers. Compared with the same quarter of the previous year, however, revenue and profit declined due to a one-off decline in revenue caused by project schedules being pushed back, deteriorating profitability in some projects, and higher costs associated with strengthening personnel resources to further expand the logistics business.」

「Based on practical experience, we recognise that the possibility of projects being cancelled, postponed or otherwise modified for customer-related reasons is extremely low. If such an event nevertheless occurs and an adverse impact on performance is expected, our policy is to negotiate persistently with the customer through sincere discussions in order to minimise the impact.」

「Due in part to a decline in large new-build projects in Japan and overseas, revenue from this business was ¥7,181 million, down 22.7% year on year. Operating profit was ¥211 million, down 67.4%, mainly due to a decline in overseas projects.」

「Net sales in this business were ¥5,564 million, down 22.1% year on year, due in part to a decline in large new construction projects in Japan and overseas. Operating profit was ¥291 million, down 72.0% year on year, due in part to a downturn in overseas projects.」

「Amid limited opportunities for new and expanded tank projects as capital investment plans were postponed due to an uncertain market environment, we pursued proactive sales activities by expanding the areas in which we sought orders. However, we did not secure any large-scale projects, and competition also intensified further in the maintenance field, resulting in a challenging business environment.」

「Revenue from this business was ¥9,284 million, down 47.2% year on year, as capital investment demand remained weak due to persistently low crude oil prices and prolonged easing of LNG supply and demand, while orders for large-scale new-build projects remained sluggish.」

「Revenue from this business was ¥7,144 million, down 42.8% year on year, due to sluggish orders for large-scale new-build projects.」

「Revenue from this business was ¥2,795 million, down 54.6% year on year, due to sluggish orders for large-scale new-build projects and the impact of domestic repair and maintenance projects being shifted into a different period.」

「The Group's performance may be adversely affected if projects are cancelled, postponed or otherwise modified for reasons attributable to customers. In addition, because these projects are undertaken under turnkey contracts, profitability may deteriorate and performance may be adversely affected if unexpected increases in the prices of equipment and materials, transportation costs or construction costs resulting from a rapid change in economic conditions, natural disasters, outbreaks of disease or serious accidents occur.」