Chiyoda Corporation (6366)
Financial Results for the Three months Ended June 30, 2017

Abridged Translation:
The report is not audited and this translation is an abridged version prepared based on the statutory format in Japan for reference
purpose only. If there is any discrepancy between this translation and the original Japanese version, the Japanese shall prevail.

Consolidated Financial Results
for the Three Months Ended June 30, 2017
August 9, 2017
Company name:
Listing:
Stock code:
URL:
Representative:
Inquiries:TEL:

CHIYODA CORPORATIONFirst Section of the Tokyo Stock Exchange
6366
http://www.chiyoda-corp.com/
Masaji Santo, President & CEO
Shinji Kusunoki, GM, Finance and Accounting Unit
+81-45-225-7745

Scheduled date to file Quarterly Report: August 9, 2017
Preparation of Quarterly Supplementary Explanation Material: Yes
Quarterly Financial Results Presentation Held: Yes (for Analysts and Institutional Investors)(Millions of yen with fractional amounts discarded, unless otherwise noted)

1. Consolidated performance for the three months ended June 30, 2017
(1) Consolidated operating results(Percentages indicate year-on-year changes)

Revenue

Operating income

Millions of yen

For the three months
ended June 30, 2017
For the three months
ended June 30, 2016
Note: Comprehensive Income:%Millions of yen%

117,858 (11.8)

584(83.4)

3,525(11.4)

133,639

6.1

the three months ended June 30, 2017:
the three months ended June 30, 2016:

Net income per share
For the three months
ended June 30, 2017
For the three months
ended June 30, 2016

Profit attributable toowners of parent

Ordinary income
Millions of yen%

Millions of yen%

996 (88.8)

165(95.5)

3,712

84.0

8,926

154.1

(542) million yen / (－)%
419 million yen / (80.3)%

Fully diluted net
income per share

Yen

Yen

0.64

－

14.33

－

(2) Consolidated financial position
Total assets
Millions of yen

Net assets

Equity ratio

Millions of yen%

As of June 30, 2017
456,478
154,999
33.6
As of March 31, 2017
461,331
157,125
33.7
Reference: Equity As of June 30, 2017: 153,231 million yen
As of March 31, 2017: 155,339 million yen

2. Cash dividends
Cash dividends per share
Record date

First quarter

Yen

Second quarter

Yen

Fiscal year ended March
31, 2017
Fiscal year ending March
31, 2018
Fiscal year ending March
31, 2018 (Forecast)
Note: Revision to the latest forecast announcement 2017: None

Third quarter

Fiscal year-end

Annual

Yen

Yen

Yen

-

6.00

6.00

-

6.00

6.00

Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

3. Consolidated earnings forecasts for the fiscal year ending March 31, 2018 (from April 1, 2017 toMarch 31, 2018)(Percentages indicate year-on-year changes)

Revenue
Millions of yen

Operating income%

Millions of yen%

Fiscal year ending
430,000 (28.8)
8,500 (45.8)
March 31, 2018
Note: Revision to the latest forecast announcement 2017: None

Profit attributable toowners of parent

Ordinary income

Net income
per share

Millions of yen%

Millions of yen%

Yen

10,000

-

5,000

-

19.31

4. Others(1) Changes in Significant Subsidiaries during the Period (changes in specified subsidiaries accompanying
changes in the scope of consolidation): None
(2) Adoption of Specified Accounting Methods for the Preparation of Quarterly Consolidated Financial
Statements: None
(3) Changes in Accounting Policies and Accounting Estimates / Restatements
a. Changes in accounting policies due to revisions of accounting standards, etc.: Noneb. Changes in accounting policies other than a. above: Nonec. Changes in accounting estimates: None
d. Restatements: None
(4) Number of issued shares (common stock)a. Total number of issued shares at the end of the period (including treasury stock)
As of June 30, 2017
260,324,529 shares
As of March 31, 2017
260,324,529 sharesb. Number of treasury stock at the end of the period
As of June 30, 2017
1,353,359 shares
As of March 31, 2017
1,351,100 sharesc. Average number of shares during the period
For the three months ended June 30, 2017258,971,855 shares
For the three months ended June 30, 2016
258,982,866 shares*Presentation of Implementation Status of Quarterly Review Procedure
The review procedure of quarterly financial statements based on the Financial Instruments and Exchange Law has not been
completed at the time of the disclosure of these Consolidated Financial Statements.

*Proper use of earnings forecasts, and other special directions
The forward-looking statements, including earnings forecasts, contained in these materials are based on information
currently available to the Company and on certain assumptions deemed to be reasonable. Actual business and other results
may differ substantially due to a number of factors.

Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

Table of Contents for the appendices

1.

2.

3.

Qualitative Information Related to Consolidated Performance ................................................... 2(1)

Qualitative Information on Business Performance ............................................................... 2(2)

Financial Information on Business Performance .................................................................. 3(3)

Outlook for the Next Fiscal Year .......................................................................................... 3(4)

Objectives of the Medium-Term Management Plan ............................................................. 3

Consolidated quarterly financial statements ............................................................................... 7(1)

Consolidated balance sheets .............................................................................................. 7(2)

Consolidated statement of income and comprehensive income .......................................... 9(3)

Notes on Consolidated Quarterly Financial Statements ..................................................... 10

Production, Contracts and Revenue ........................................................................................ 111

Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

1. Qualitative Information Related to Consolidated Performance(1) Qualitative Information on Business Performance
During the first three months of this fiscal year, macroeconomic development remained uncertain, mainly
due to Arab nations sever diplomatic ties with Qatar announced in June this year, as well as the protracted
conflict in Syria and the political uncertainty in Europe over Brexit.
The business environment for the Chiyoda Group remained challenging. As the Organization of Petroleum
Exporting Countries (OPEC) reached a deal to curtail oil production, oil prices hovered around levels of $40
a barrel not staging a solid recovery.
Meanwhile, for new liquefied natural gas (LNG) projects, final investment decisions tend to be pushed back.
Amidst these developments, the Group continued global project execution of its large-scale LNG projects in
the U.S., Australia, Russia and Indonesia. At the same time, the Group kept up its comprehensive strategic
efforts to receive new orders by conducting feasibility study and bidding for high feasible projects.
Meanwhile, EMAS CHIYODA Subsea Limited (hereinafter “ECS”), an engineering, procurement,
construction and installation (hereinafter “EPCI”) service provider involved in subsea projects, and its
subsidiaries filed for protection under Chapter 11 of the U.S. Bankruptcy Code in February 2017 andobtained confirmation of the proposed reorganization plan in June by the U.S Bankruptcy Court, Southern
District of Texas. With the completion, ECS became a wholly owned subsidiary of Subsea 7 S.A. (hereinafter“Subsea 7”) and is not accounted as Group entity using equity method.
Consequently, on a consolidated basis, New Orders for the fiscal year under review amounted to 37,946
million yen (down 35.0% year on year). Backlog came to 783,283 million yen (down 10.7% year on year),
Revenues of completed construction contracts amounted to 117,858 million yen (down 11.8% year on year
and Operating Income came to 584 million yen (down 83.4% year on year). Ordinary income amounted to
996 million yen (down 88.8% year on year). Profit attributable to owners of parent came down to 200 million
yen (compared to 3,712 million yen year on year).
The summary of activities in the engineering business; reportable segments below:
LNG Plant/ Gas Related Work
Overseas, Engineering, Procurement and Construction (EPC) projects for LNG plants are ongoing in the
U.S., Australia, Russia and Indonesia. In addition, in Mozambique pre-contract work is continued, for which
the Group was already selected as EPC contractor. Moreover, overseas Group companies are working on
EPCm (Engineering, Procurement and Construction management) for a project modifying and renovating
LNG and gas processing plants formerly built by the Company, as well as an EPC project for helium
production facilities in Qatar under long-term EPCm services contracts.
In Japan, the EPC work for a project of modifying and renovating LNG receiving terminals formerly built by
the Company is under way.
Refinery/Petrochemical/Metal
Overseas, Front-End Engineering and Design (FEED) work for petrifaction projects in the U.S. is ongoing.
In Malaysia, Engineering, Procurement, Construction and Commissioning (EPCC) work for a residue fluid
catalytic cracking (RFCC) project is progressing well, and a Group company in Southeast Asia is conducting
EPC work for petrochemical tank terminal facilities. The Chiyoda Group is also undertaking project
management of a refinery, chemical production and other downstream projects in Asia based on long-term
contracts. In the metal field, the EPC work for a titanium sponge plant in Saudi Arabia was completed.
In Japan, the Group continues to perform EPC work to facilitate inter-refinery cooperation in terms of mutual
accommodation of fuel and to optimize the configuration of refineries and other facilities for petroleum
companies, The Group also continues work on renovating and revamping the existing faculties incompliance with the Basic Act for National Resilience, as well as work for petrochemical production faculties
and other existing facilities to improve energy efficiency and repair or replace aging equipment.
Pharmaceutical/Biochemistry/General Chemistry/Environment/Infrastructure
Overseas, in the transportation infrastructure field, the Group is conducting EPC work for a new international
airport in Mongolia and the New Bohol Airport in the Philippines. In the environment field, the Group is
working to win a contract for a specific project introducing Chiyoda Thoroughbred 121 (CT-121) Process2

Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

into flue gas desulfurization facilities in coal-fired power plants in India. Moreover, the Group is executing a
project demonstrating equipment for plant factories which use artificial light in Dubai, the United ArabEmirates, and will continue to promote the introduction of this equipment in markets principally in the Middle
East and Russia.
In Japan, the Group is working on EPC work for flue gas desulfurization facilities in coal-fired power plants
and photovoltaic (mega solar) facilities.
In other fields as Agriculture, pharmaceuticals and biochemistry, the Chiyoda Group is conducting EPC workfor Vegetable factories that comply with the latest food safety and hygiene standards, research institutes,
facilities capable of handling high-potency pharmacologically active agents and therapeutic antibodies,including cutting-edge injection production facilities, drug substance plants and bio-medicine manufacturing
facilities. The Group is also currently building Japan’s first demonstration plant for bio-jet and diesel fuelproduction for Euglena Co., Ltd., scheduled for completion by October 2018.
New Business Fields
In offshore and upstream fields, ECS and its subsidiaries, which had filed for protection under Chapter 11of the U.S. Bankruptcy Code, completed its reorganization process in June with the approval of its
reorganization plan by the U.S Bankruptcy Court, Southern District of Texas. With the completion, ECS
became a wholly owned subsidiary of Subsea 7 and Chiyoda will started discussions with Subsea 7 on
further developments. In the meantime, Xodus Group Ltd., the Group’s subsidiary in the U.K., is continuing
to provide design, consulting and other services related to the construction of offshore development facilities
and the safe removal of aging facilities to companies such as those developing natural resources.
In the new energy field, the Group is planning to implement a demonstration project in 2020 using thehydrogen acquired in Asia as fuel for power plants in Japan. This project is aimed to be commercialized asa hydrogen supply chain that leverages technologies for large-scale hydrogen storage and transportation
system developed by the Company, in order to realize a hydrogen-energy based society.
The digital innovation business field, in a tie-up agreement with GRID, Inc., one of leading venturecompanies in the field of AI technologies in Japan, the Company started projects using AI technologies toimprove plant productivity.

(2) Financial Information on Business PerformanceThis section is not translated.

(3) Outlook for the Next Fiscal Year
Same as released on May 12, 2017.

(4) Objectives of the Medium-Term Management Plan
The Chiyoda Group has released a new medium-term management plan (MTMP) -"Mirai Engineering” A
Grand Opportunity for the Future - for the period covering from fiscal year 2017 to 2020. The aim of the
MTMP is to transform Chiyoda to become a global top-tier “Engineering, Integrated Engineering & Service
Provider” in the fields of energy and the environment.
This will be achieved by structural reforms and growth strategies which anticipate global developments.
1)

Assessment of the previous medium-term management plan "Seize the Moment, Open Up New
Frontiers"
As a result of the former MTMP (FY2013 to 2016) the Chiyoda Group maintained its No.1 position
in LNG and made a steady progress in new business areas including life science and new energy.
However, the Group now faces challenges such as a realignment of the business portfolio including
the offshore and upstream and further strengthening of risk management capabilities.

2)

New medium-term management plan "Mirai Engineering” A Grand Opportunity for the Future
Given developments in the macro environment, such as changes in the supply and demand
structure for energy, heightened awareness of the global environment, and digital innovation
driving changes in the industrial structure, the Chiyoda Group will (a) contribute to the developmentof a sustainable society by providing technological and project execution capabilities, (b) achieve

3Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

harmony between energy and the environment, and (c) create a business management approachthat resonates with all stakeholders and earns their recognition and trust.
In the MTMP, the Group will seek to simultaneously pursue a transformation its business model with 10-year
timeframe by
1) Structural Reform, creating a management base for future growth and2) Growth Strategy aiming at expanding business fields
Structural Reform(i) Enhancement of risk management capabilities.
Along our technological advantages leading to improved earnings on a profitable path which ensuresachievement of quantitative targets set for fiscal 2020, Group will strengthen structure for execution andprofitability management of EPC projects on a consolidated basis. We will also establish structure for
expansion of business fields and transformation of business model.
(ii) Increase of basic earnings strength and enhancement of resilience to downturns
We will seek to expand basic earnings by technological and project execution capabilities and costcompetitiveness, and by reducing consolidated fixed costs with the aim of balancing basic earnings andcosts, and realign domestic and global operational structure.
(iii) Further expansion of human resource base
To strengthen our technical capabilities and project execution capabilities, the Group will restructure andoperate a human resource development system with medium to long-term outlook and implement optimal
assignment of human resources for continuous earnings growth. Through these efforts, we will foster astronger corporate culture with a foundation of high loyalty and willingness to pursue new challenges.
Growth Strategies
Expansion of business fields and transformation of business model
In the fields of EPC, LNG, gas, petroleum, chemicals and metal resources will remain Chiyoda Group’s corebusinesses. In addition, we plan to expand into two key business fields of “Energy” and “Environment” (thevertical axis in the chart below), and aim to innovate EPC execution and diversify business and service
areas by utilizing innovative digital technologies (the horizontal axis in the chart below).

4

Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017(i) Building an Energy Value Chain business
The Group plans to enhance the upstream segment (entering and strengthening floater business),
midstream (comprehensively strengthening and expanding LNG lineup) and downstream (building-up
orders in petroleum, chemicals, and metal resources responding to shale opportunities and increasing
demand from newly developing countries, and also, entering to the Gas to Power field).
In addition, the Group aims to move into the asset holding business and asset management service, which
will lead to development of businesses & services field.
(ii) Expanding global environmental engineering business
The Group will expand the field of new energy (integration of renewable energy with energy storage,electricity storage as well as dispersion energy), the environment, energy conservation and industrial
facilities (technologies that reduce environmental impact and conserve energy for industrial facilities andmetal resources fields), and life science (Investigate opportunities and pursues appropriate business models
in regenerative medicine field).
(iii) Developing new business model in alignment with digital society
For innovative EPC execution and its application in the asset management business, we will work on
cultivating capable human resources, partnering with cutting-edge digital technology companies anddeveloping project IT with artificial intelligence (AI) and others.
“Mirai Engineering” derived from integration of the above three growth strategies, which combines 1) Energy
Solutions, 2) Environmental Solutions, 3) Technology and business model innovation to contribute asustainable society with harmony between energy and the environment.

5

Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

Quantitative targets
The Group regards fiscal year 2020 as a checkpoint for the next 10-year growth strategy, aiming to achieve
consolidated net profit of 20 billion yen with double-digit ROE based on increased earnings strength throughthe structural reform and the strengthening of existing businesses. We look to continue expansion of
earnings through the growth strategies toward fiscal 2026 and beyond
Investment strategies
The Group’s profit distribution policy is to allocate 50% of consolidated net profit each fiscal year toinvestment for business growth, while maintaining proper financial health.
In terms of investment areas, the Group will carefully select projects that will contribute to strengthen corebusiness fields and realize the three growth strategies.
With respect to the investment size, the Group will set an aggregate of roughly 30 billion to 50 billion yen
over four years, using cash on hand in addition to investment funds under the profit distribution policy, withassumption under investment discipline thoroughly.
Shareholder Return Policy
The Group will strive to achieve a consolidated dividend payout ratio at least 30% during the MTMP periodwith a minimum full-year dividend of 6 yen per share. Actual dividend amount each fiscal year shall be
determined in consideration of progress under the Growth Strategy and the Investment Strategy together
with operating environment.

6

Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

2. Consolidated quarterly financial statements(1) Consolidated balance sheets(Millions of yen)
As of March 31,2017

As of June 30,2017

135,373

129,604

59,86551,060

Securities

7,999

7,999

Costs on uncompleted construction contracts

24,22028,197

Jointly controlled assets of joint venture

164,283

175,511

Other

35,04429,656

Allowance for doubtful accounts(1,541)(1,450)Total current assets

425,244

420,578

Buildings and structures, net

6,627

6,438

Land

5,266

5,266

Other, net

1,265

1,169

Total property, plant and equipment

13,15812,873

8,098

7,566

Investment securities

7,707

7,878

Other

7,458

7,908

Allowance for doubtful accounts

(336)

(327)

Total investments and other assets

14,83015,45936,08635,899461,331456,478

AssetsCurrent assets
Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts

Non-current assets
Property, plant and equipment

Intangible assets
Investments and other assets

Total non-current assets
Total assets

7

Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

(Millions of yen)
As of March 31,2017
Liabilities
Current liabilities
Notes payable, accounts payable for construction contracts
Short-term loans payable
Current portion of long-term loans payable
Income taxes payable
Advances received on uncompleted construction contracts
Provision for warranties for completed construction
Provision for loss on construction contracts
Provision for bonuses
Provision for loss on business of subsidiaries and associates
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Provision for treatment of PCB waste
Net defined benefit liability
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

8

As of June 30, 2017

160,096203
10,004668
85,187
319
3,315
3,156
22,91915,311
301,182

159,035180
10,0031,000
95,982
286
4,461
1,431
12,296
13,654
298,333

4
338
1,522
1,158
3,023
304,206

2
339
1,695
1,108
3,145
301,479

43,396
37,112
72,132(1,431)
151,210

43,396
37,11270,744(1,432)
149,821

379
499
2,656
592
4,128
1,785
157,125
461,331

293
714
1,770
630
3,410
1,768
154,999
456,478Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017(2) Consolidated statement of income and comprehensive income(Consolidated statement of income)(Millions of yen)Three months ended
June 30, 2016

Three months ended
June 30, 2017

Revenue of completed construction contracts

133,639

117,858

Cost of sales of completed construction contracts

124,927

112,402

Gross profit on completed construction contracts

8,712

5,455

Selling, general and administrative expenses

5,186

4,871

Operating income

3,525

584

Interest income

329

546

Dividend income

625

79

Share of loss of entities accounted for using equity method

－

43

4,788

－

39

53

5,783

722

Interest expenses

53

50

Share of loss of entities accounted for using equity method

294－

Foreign exchange losses

－

150

Other

34

108

Total non-operating expenses

382

310

8,926

996

Gain on sales of investment securities

313－

Total extraordinary income

313－

Profit before income taxes

9,239

996

Income taxes - current

4,490

2,238

Income taxes - deferred929(1,443)

Total income taxes

5,419

795

Profit

3,819

200

107

35

3,712

165

Non-operating income

Foreign exchange gains
Other
Total non-operating income
Non-operating expenses

Ordinary income
Extraordinary income

Profit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

9Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

(Millions of yen)Three months ended
June 30, 2016

Three months ended
June 30, 2017

3,819

200

(229)

(86)

Deferred gains or losses on hedges(1,924)207

Foreign currency translation adjustment(1,269)(1,317)

Remeasurements of defined benefit plans, net of tax

37

38

Share of other comprehensive income of entities accounted forusing equity method

(13)

413

(3,400)

(743)

419

(542)

Comprehensive income attributable to owners of parent

424

(553)

Comprehensive income attributable to non-controlling interests

(5)

10

ProfitOther comprehensive income
Valuation difference on available-for-sale securities

Total other comprehensive income
Comprehensive income
Comprehensive income attributable to(3) Notes on Consolidated Quarterly Financial Statements(Notes on Assumptions for a Going Concern)
None(Notes on Significant Changes in the Amount of Shareholders’ Equity, if Applicable)
None

10

Chiyoda Corporation (6366)
Consolidated Financial Results for the three months Ended June 30, 2017

3. Production, Contracts and Revenue(Millions of yen)
Apr. 1, 2017－Jun. 30, 2017

Apr. 1, 2016－Jun. 30, 2016
New
contracts(ratio)Revenue(ratio)Backlog ofcontracts(ratio)New
contracts(ratio)Revenue(ratio)Backlog ofcontracts(ratio)57,511

132,7311,010,736

37,144

117,056

783,283

98.4%

99.3%

100.0%

97.9%

99.3%

100.0%

28,404

98,338723,026

17,92090,164518,266

48.6%

73.6%

71.5%

47.2%

76.5%

66.2%

5,901

2,939

21,701

828

3,121

9,212

10.1%

2.2%

2.2%

2.2%

2.7%

1.2%

Refinery/Petrochemical/
Metal

10,814

20,847

181,943

11,1559,289

156,861

18.5%

15.6%

18.0%

29.4%

7.9%

20.0%

Pharmaceutical/Biochemistry/
Chemical

7,536

6,432

30,502

1,689

4,974

32,026

12.9%

4.8%

3.0%

4.5%

4.2%

4.1%

Environment/New Energy/

3,030

3,120

49,862

4,393

7,354

60,418

Infrastructure

5.2%

2.3%

4.9%

11.6%

6.2%

7.7%

1,823

1,053

3,699

1,156

2,141

6,498

3.1%

0.8%

0.4%

3.0%

1.8%

0.8%

908

908

-

801

801

-

1.6%

0.7%

-

2.1%

0.7%

-

58,419133,639

1,010,736

37,946

117,858

783,283

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

26,705

17,457104,036

17,226

20,203

118,960

45.7%

13.1%

10.3%

45.4%

17.1%

15.2%

31,714

116,182

906,699

20,71997,654

664,322

Engineering
LNG Plant
Gas Development/
Processing/Receiving

OthersOther Business

Total

Domestic
Overseas

54.3%
86.9%
89.7%
54.6%
82.9%
84.8%
Note1: The backlog of contracts for the three months ended June 30, 2017 includes a decrease due to changes inconstruction contracts acquired in prior fiscal years, and an increase due to foreign exchange translation
adjustments.
Note2: The total amount of the above table does not include consumption tax.

11