November 16, 2023
JGC Holdings Corporation
Q&A from the Online Earnings Release Conference (held on November 9, 2023)
On Second Quarter Financial Results for FY2023 Ending March 31, 2024

This content is based on information available on the date of the online earnings release conference (November 9, 2023).
1.

Financial results for the second quarter of FY2023 and full-year earnings forecast
Question

AnswerIn the first-half, the gross profit ratio (7.1%) was lower thanprojected in the full-year earnings forecast (8.5%). Please let
us know about any positive or negative factors and theirquantitative impact.

The weaker of the yen had a positive impact of about 6 billion yen on net
gross profit, while higher costs in projects of overseas subsidiaries (in Saudi
Arabia and Indonesia) had a negative impact of about 12 billion yen.
Accordingly, gross profit declined by approximately 6 billion yen (-1.4%).

Has management been strengthened in response to thelower profitability in projects of Saudi Arabian and Indonesiansubsidiaries?

Overseas subsidiaries often manage projects involving local production for
local consumption and have been authorized to act in securing orders andexecuting projects because prompt decision-making is required. In
response to the loss recorded for the second quarter, we have reorganizedregional oversight while allowing the subsidiaries to retain a degree ofauthority. A system is now in place for regular review of projects at a certain
scale by JGC Corporation, which oversees these subsidiaries.

Is there a risk that costs will continue to increase in theseprojects in Saudi Arabia and Indonesia?

The estimates reflect currently conceivable risks as a facet of necessary
costs.

Have conditions in Israel adversely affected the current Basra
refinery modernization project in Iraq?

At this time, there has been no particular impact on the Basra refinery
modernization project or other current projects in the Middle East. As amatter of crisis management, preparations for a variety of contingencies are
made both at the head office and locally.

2.

Please tell us the reasons for maintaining the same full-year
earnings forecast.

Business performance has a good chance of meeting the forecast. Theearnings forecast was based on an exchange rate of 133 yen to the dollar,
but the rate has changed to 140 yen. Moreover, a certain project isexpected to see increased profit from receiving change orders and making
risk contingency to be profit in the second half.

Please tell us roughly how much of a gain in profit isexpected in the second half.

We expect to increase profit by approximately 10 billion yen, from 6 billion
yen charged in the first half.

Orders, market environment, etc.
Question

AnswerIs there a risk of potentially adverse conditions along the linesof projects that are expected in the second half failing tomaterialize because prices cannot be agreed on with clients,
due to inflation or other factors?

Orders may take longer to negotiate, for example, if agreements cannot
immediately be reached with regard to client budgets and EPC costs due tohigher material and construction costs. However, there are compelling
reasons for clients to implement projects, such as their commitment tosupply natural gas. Although some delays may occur, we take a stance ofworking to ensure that projects can be secured.

Why did a gas processing project in Algeria suddenly emergeas a potential order expected in the second half?

We were approached abruptly by a client about this project following therecent conclusion of a natural gas supply agreement between Algeria and aEuropean country. Expansion is planned at a project site completed by theGroup, and we expect to award the project.

We know there are many potential projects in the market, asexplained by the president in the recent business overview.
Can you tell us what order target the company envisions next
fiscal year?

In addition to large LNG projects, we sense that EPC phase in sustainability
projects involving hydrogen/fuel ammonia or SAF etc., will be realized. Ourorder target for the next fiscal year may be on the same level as this fiscalyear, although that will depend on results for the current fiscal year.

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What is the status of the Area 4 LNG project in Mozambique,for which an order had been expected?

The client is studying several aspects of feasibility, and we are supportingsome of these studies. At present, the timing of the investment decision isstill unknown.

What impact will NuScale canceling plans to build their first
SMR power plant have?

Nuclear power plants in the U.S. have been in operation for 40–50 years. At
the same time, because much power generation is coal-fired, there is aneed to shift to nuclear for output adjustment, as the world continues topursue a transition to renewable energy sources. These considerations
convince us that NuScale SMR technology will certainly be needed. As
before, the company will continue to support NuScale.

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