November 11, 2021
JGC HOLDINGS CORPORATION
Second Quarter Financial Results for FY2021 ending on March 31, 2022
Q&A from the Online Earnings Release Conference (held on November 11, 2021)
This content is based on information available on the date of the earnings release conference (November 11, 2021).
1.

Financial results for the second quarter of FY2021 ending on March 31, 2022
Question

AnswerWhy did you raise your forecasts for operating profit and other

This is because in the Total Engineering Business, profitability improved onprofit items in the second quarter results?

the Mozambique FLNG, completed projects in Algeria, and multiple

I believe that you initially expected expenses to increase as thedomestic projects. In the Functional Materials Manufacturing Business,

operating rate of the engineers declined, but is the operating

market demand also recovered more than we initially expected, and we wererate improving?

therefore able to secure sales and profits, particularly in fine chemicalproducts.
In terms of the operating rate of the engineers, we are focusing our efforts on
securing FS and FEED orders, but at this time, there has not yet been a clear
improvement in the operating rate.

Why did operating profit decline year-on-year?

In the second quarter of FY2020, we recorded significant one-time profits
from an LNG project completed in the past. As a result, operating profit
declined year-on-year during the second quarter of this year, FY2021.

What is the impact of the increase in raw materials costs andFor projects where we have recently won orders, or will win orders in future,equipment prices?

we have factored in (or will factor in) the increase in equipment prices in the1/4

order, so we think there is no particular issue.
On the other hand, for projects that were ordered between one and three
years ago, we are paying close attention to these trends. However, we havemostly completed procurement work for LNG Canada, so there will be noimpact there. At the Basra refinery modernization project in Iraq, we havethus far been able to manage the impact in contingencies.
How much impact does yen depreciation have?

We expect our sensitivity to forex rates to be as follows: for each 1 yen moveagainst the U.S. dollar, sales will change by 3.0 billion yen, gross profit by 300
million yen, and ordinary profit by 400 million yen.
Please consider these numbers only as a rough guide, as we record sales basedon the percentage of completion method, so the impact of changes in forex
rates may not be straightforward.

As of the end of the second quarter, what is your progress on

We plan to invest approximately 20.0 billion yen by the end of this fiscal year.

the strategic investment that you announced in the medium-

As of the end of the second quarter, we had invested several billions of yen.

term business plan?
2.

Market environment

There was speculative news that some clients planned toAs far as we have confirmed, our clients have denied that they plan to withdraw.

withdraw from the Rovuma LNG project in Mozambique. Do

On the other hand, armed insurgents are active in the area surrounding theyou have any updates on this matter?

construction site in Mozambique, and we think we must pay close attention to
the status of law and order.

Has there been any change in the stance of oil majors, etc.,

Although there is a global trend toward low-carbon and decarbonized energy,

toward investment in LNG amid the global movement toward

energy demand is growing, particularly in developing countries. Accordingly,

low-carbon and decarbonization?

oil majors, etc., do not think it is realistic to completely eliminate all LNG

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(natural gas) over the medium term. However, progress on the large-scale
LNG expansion plan in Qatar may affect the overall supply-demand balancefor LNG. As such, oil majors, etc., are closely following any changes in the LNG
supply-demand balance.
Please tell us about LNG projects from next fiscal year onward.

We have begun to see action on multiple projects, including the expansion ofCameron LNG and Freeport LNG in the U.S., as well as the LNG Canadaexpansion. We are hopeful that we may be able to participate in some LNG
projects from around the second half of FY2022.

3.

Specific businesses

There is increasing focus on small modular reactors (SMR).

The JGC Group has been active in the nuclear power sector for approximately

What kind of opportunities can you expect from your50 years, mainly in radioactive waste processing and disposal, and as such, weinvestment in NuScale Power, LLC (U.S.), and what was thehave a wealth of experience. The parent company of NuScale Power, LLC,

aim of this investment?

which we invested in, is Fluor Corporation (U.S.). We have built an extremely
good relationship with Fluor Corporation through working with them on
projects such as LNG Canada, which is currently underway. We also haveplans for the joint construction of SMRs.
NuScale Power, LLC plans to sell SMRs in Asia and the Middle East over the
medium- to long-term, and it is expected that we will utilize our wealth of
EPC experience in these regions to lead the EPC side of these projects.
Additionally, we have experience and advanced technical expertise related tomodular construction methods, and it is expected that we will utilize thisknowledge when modularizing SMRs.

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Please tell us about the strengthening of your structure in theClients in the domestic pharmaceutical market are currently actively

domestic pharmaceutical sector.

engaging in capital investment amid progress on the development of newdrugs, including vaccines and anticancer drugs, and capital investment in thesector is expected to remain robust going forward. We expect this trend tospread to countries in Asia in future. As such, we are strengthening ourstructure in this sector, including relocating engineers within the Group andthe transfer of the pharmaceutical plant EPC business from IHI Plant
Services Corporation, as was recently announced.

Do you have any updates regarding initiatives in the offshore

In 2018, we created a dedicated business department for offshore windwind segment?

power. We currently have tens of employees working in this area, and havebeen providing support to business operators for FS, FEED, etc., with the aimof winning EPC orders for both offshore and onshore wind projects in Japanand overseas. There are promising projects this fiscal year, for which we hope
to win orders.
We will target orders for first-round projects in “the General Sea Area”(outside of ports and harbors) by working with general contractors on largescale procurement from overseas, transport, and project management.

I think that the creation of integrated urban infrastructure,

At present, we are focusing on winning orders for specific infrastructure

which you set forth in your long-term management vision, is anprojects, such as airports, railways, and waste to power, which will act asarea where the JGC Group can utilize its project management

components of integrated urban infrastructure. Ultimately, we intend tocapabilities, etc. Can you tell us about progress in this area?

create conditions that enable us to create master plans for smart cities andother types of integrated urban infrastructure as a whole, etc.

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