Mitsui E&S : 2nd Quarter Consolidated Financial Results for FY 2019

November 11, 2019

Mitsui E&S Holdings Co., Ltd. and its Consolidated Subsidiaries

2nd Quarter CONSOLIDATED FINANCIAL RESULTS FOR FY2019

From April 1, 2019 to September 30, 2019

Code number:	7003	URL:	https://www.mes.co.jp/
Shares Listed:	Tokyo Stock Exchange
Representative:	Ryoichi Oka, President, Representative Director, and COO
Inquiries:	Kazunori Miyake, General Manager of Finance & Accounting Dept.
Tel: [phone]
Scheduled date to file Quarterly securities report:	November 13, 2019
Scheduled date to commence dividend payments:	－
Supplementary explanatory materials prepared:	Yes
Explanatory meeting:			Yes (for analysts)

(Amounts less than one million yen are truncated)

1. Consolidated Financial Results for 2nd Quarter FY2019 (April 1, 2019 to September 30, 2019)

			(Millions of yen)
	From Apr. 1, 2018	From Apr. 1, 2019	Change (%)
	to Sep. 30, 2018	to Sep. 30, 2019
New Orders Received	245,914	495,007	101.3
Net Sales	311,701	356,857	14.5
Operating Loss	(27,980)	(67,737)	－
Ordinary Loss	(24,313)	(64,898)	－
Loss attributable to owners of parent	(47,861)	(66,491)	－
Earnings per Share (Yen)	(592.14)	(822.56)	－
Operating Cash Flow	3,134	(19,767)	－
Investing Cash Flow	1,555	36,956	2276.6
Financing Cash Flow	2,815	(3,165)	－

Figures in parentheses represent negative.

Total Assets

Net Assets

Shareholders' Equity to Total Assets

	(Millions of yen)
As of Mar. 31, 2019	As of Sep. 30, 2019
999,100	988,328
280,239	200,333
16.0%	8.4%

Note: This consolidated financial results has been prepared in accordance with Japanese accounting standards and Japanese law.

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2. Dividends

(Yen)

FY2018

FY2019

FY2019

(forecast)

Annual dividends per share

First quarter

－

－

Second quarter

0.00

0.00

Third quarter

－

－

Year-end

0.00

0.00

Total

0.00

0.00

Note: Revision of the most recent dividends forecast: None

3. Forecast of Financial Results for FY2019

(Millions of yen)

Net Sales

Operating Income

Ordinary Income

Profit attributable to

Earnings per Share

owners of parent

(Yen)

Year ending

790,000

(72,000)

(67,000)

(88,000)

(1,088.64)

March 31, 2020

Note: Revision of the most recent financial forecast: None

Reference: Estimate is based on exchange rate of USD1.00 = JPY110.0

4. Notes

(1) Changes in significant subsidiaries during the period

(changes in specified subsidiaries resulting in the change in scope of consolidation):

None

(2) Application of specific accounting for preparing the quarterly consolidated financial statements:

Yes

(3) Changes in accounting policies, accounting estimates or restatements

i )

Changes due to amendment of accounting standards:

None

ii )

Changes due to other reasons:

None

iii )

Changes in accounting estimates:

None

iv )

Restatements:

None

(4) Number of shares outstanding (common stock)

FY2018 /

FY2019 2Q

FY2018 2Q

shares

shares

Number of shares outstanding at the end of period (including treasury stock)

83,098,717

83,098,717

Number of treasury stock at the end of period

2,271,423

2,258,076

Average number of shares during the period (cumulative quarterly consolidated period)

80,828,358

80,835,111

NOTICE REGARDING QUARTERLY REVIEW PROCEDURES FOR THE QUARTERLY FINANCIAL RESULTS

This quarterly financial results statement is exempt from the quarterly review procedures based upon the Financial Instruments and Exchange Act. At the time of disclosure of this quarterly financial results statement, the quarterly review procedure based upon the Financial Instruments and Exchange Act has not been completed.

FORWARD LOOKING STATEMENTS AND OTHER SPECIAL ITEMS

The forecasts for financial results are based on information available at the time this report was released. These forecasts and other forward-looking statements are not guarantees of future performance. Actual operating results may differ from the above forecasts due to known and unknown risks, uncertainties, and other factors.

HOW TO GET THE SUPPLEMENTARY EXPLANATORY MATERIALS

Explanatory meeting for analysts is scheduled for November 11, 2019. Supplementary explanatory materials, which will be distributed at the said meeting, is planned to be posted on our web site.

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Overview of Reportable Segment

Reportable Segment is classified into 4 segments: Ship, Ocean Development, Machinery and Engineering. Main products and servicesof each Reportable Segment are as follows.

Reportable Segment	Main Products and Services
Ship	Commercial ships, naval ships, high speed passenger/vehicle ferries, offshore structures, underwater TV
vehicles, steel structures
Ocean Development	FPSOs (floating production storage offloading vessels)
	Marine and stationary diesel engines, marine equipment, gas engines, steam turbines, blowers, process
Machinery	compressors, gas turbines, cogeneration system, regulating system, container cranes, industrial cranes,
container terminal management systems, HWM manipulators, equipment of radar sensing for underground
	and construction, bridges, port structures, induction heaters
Engineering	Renewable energy power generation plants, power generation business, overseas civil works, chemical plants,
waste treatment plants, water treatment plants, resources recycling plants, PCB disposal plants

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New Orders by Segment			(Millions of yen)
	From Apr. 1, 2018	From Apr. 1, 2019	Difference
	to Sep. 30, 2018	to Sep. 30, 2019
Ship	47,209	27,004	(20,204)
			(42.8%)
Ocean Development	40,303	334,517	294,214
			730.0%
Machinery	84,606	81,370	(3,235)
			(3.8%)
Engineering	39,930	23,966	(15,964)
			(40.0%)
Others	33,864	28,147	(5,717)
			(16.9%)
Total	245,914	495,007	249,092
			101.3%
Net Sales by Segment			(Millions of yen)
	From Apr. 1, 2018	From Apr. 1, 2019	Difference
	to Sep. 30, 2018	to Sep. 30, 2019
Ship	46,434	52,661	6,227
			13.4%
Ocean Development	113,108	148,619	35,510
			31.4%
Machinery	86,158	94,411	8,252
			9.6%
Engineering	29,460	25,076	(4,384)
			(14.9%)
Others	36,539	36,089	(450)
			(1.2%)
Total	311,701	356,857	45,156
			14.5%
Operating Income (Loss) by Segment			(Millions of yen)
	From Apr. 1, 2018	From Apr. 1, 2019	Difference
	to Sep. 30, 2018	to Sep. 30, 2019
Ship	(3,118)	(1,841)	1,276
Ocean Development	10,824	(2,337)	(13,162)
Machinery	4,527	4,772	245
Engineering	(40,771)	(71,047)	(30,276)
Others	557	2,717	2,160
Total	(27,980)	(67,737)	(39,756)
Figures in parentheses represent negative.

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Consolidated Balance Sheets

			(Millions of yen)
		As of March 31, 2019	As of September 30, 2019
Assets
Current assets
Cash and time deposits	100,857	111,851
Trade receivables	225,765	245,721
Merchandise and finished goods	4,967	5,262
Work in progress	42,294	55,400
Raw materials and supplies	8,439	10,123
Short-term loans	41,038	1,646
Others	46,050	38,416
Allowance for doubtful accounts	(1,452)	(1,526)
Total current assets	467,959	466,896
Non-current assets
Property, plant and equipment
Land	245,736	245,693
Others, net	96,303	99,334
Total property, plant and equipment	342,040	345,027
Intangible assets
Goodwill	11,616	10,556
Others	17,874	17,276
Total intangible assets	29,490	27,832
Investments and other assets
Others	160,268	149,234
Allowance for doubtful accounts	(658)	(663)
Total investments and other assets	159,609	148,571
Total non-current assets	531,140	521,431
Total assets		999,100	988,328

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					(Millions of yen)
			As of March 31, 2019	As of September 30, 2019
Liabilities
Current liabilities
Trade payables	190,955		209,166
Short-term borrowings	3,535		15,232
Current portion of long-term borrowings	39,062		44,275
Current portion of bonds	10,000		15,000
Commercial papers	-		4,000
Accrued income taxes	11,846		8,593
Advances from customers	92,603		96,208
Provision for construction warranties	10,781		9,874
Provision for losses on construction contracts	60,972		111,069
Other provisions	7,104		5,896
Asset retirement obligations	2		3
Others	37,875		34,089
Total current liabilities	464,740		553,409
Long-term liabilities
Bonds	40,000		35,000
Long-term borrowings	112,020		90,271
Liability for severance and retirement benefits		463		514
for directors and corporate auditors
Other provisions	2,167		2,099
Net defined benefit liabilities	13,104		13,411
Asset retirement obligations	1,878		1,801
Others	84,487		91,487
Total long-term liabilities	254,121		234,585
Total liabilities	718,861		787,995
Net assets
Shareholders' equity
Common stock	44,384		44,384
Capital surplus	18,747		18,745
Retained earnings	67,812		1,513
Treasury stock	(4,759)		(4,729)
Total shareholders' equity	126,185		59,914
Accumulated other comprehensive income
Net unrealized holding gains (losses) on		3,365		2,421
securities
Unrealized gains (losses) on hedging derivatives	(6,065)		(10,953)
Revaluation reserve for land	37,807		37,803
Foreign currency translation adjustments	740		(3,840)
Remeasurements of defined benefit plans	(2,488)		(2,339)
Total accumulated other comprehensive income	33,359		23,092
Subscription rights to shares	205		181
Non-controlling interests	120,488		117,145
Total net assets	280,239		200,333
Total liabilities and net assets		999,100		988,328

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Consolidated Statements of Operations

					(Millions of yen)
			April 1, 2018 to	April 1, 2019 to
			September 30, 2018	September 30, 2019
Net sales	311,701		356,857
Cost of sales	313,814		399,648
Gross loss		ሺ2,113)	ሺ42,790)
Selling, general and administrative expenses	25,867		24,946
Operating loss		ሺ27,980)	ሺ67,737)
Non-operating income
Interest income	3,301		3,135
Dividend income	784		495
Equity in earnings of unconsolidated subsidiaries		1,451		1,784
and affiliates accounted for using equity method
Gain on valuation of derivatives	105		-
Others	862		636
Total non-operating income	6,506		6,052
Non-operating expenses
Interest expenses	1,402		1,272
Commitment fee	-		868
Foreign currency exchange losses	783		63
Loss on valuation of derivatives	-		354
Others	653		655
Total non-operating expenses	2,839		3,213
Ordinary loss		ሺ24,313)	ሺ64,898)
Extraordinary income
Gain on disposal of non-current assets	19		369
Gain on sales of investment securities	28		-
Total extraordinary income	47		369
Extraordinary losses
Loss on disposal of non-current assets	358		151
Loss on impairment of non-current assets	540		177
Loss on sales of shares of subsidiaries and affiliates	-		310
Loss on valuation of investment securities	312		223
Loss on valuation of shares of subsidiaries and		-		43
affiliates
Loss on litigation	167		-
Total extraordinary losses	1,379		906
Loss before income taxes		ሺ25,645)	ሺ65,435)
Income taxes	17,684		1,638
Loss		ሺ43,330)	ሺ67,073)
Profit (loss) attributable to non-controlling interests	4,531		ሺ581)
Loss attributable to owners of parent			ሺ47,861)	ሺ66,491)

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Consolidated Statements of Comprehensive Income

				(Millions of yen)
		April 1, 2018 to	April 1, 2019 to
		September 30, 2018	September 30, 2019
Loss	(43,330)		(67,073)
Other comprehensive income
Net unrealized holding losses on securities	(180)		(1,547)
Unrealized gains (losses) on hedging derivatives	(1,198)		575
Foreign currency translation adjustments	(4,854)		(4,088)
Remeasurements of defined benefit plans	921		102
Share of other comprehensive income of affiliates	1,801		(7,006)
accounted for using equity method
Total		(3,509)		(11,965)
Comprehensive income		(46,839)		(79,038)
Comprehensive income attributable to
Owners of parent	(49,727)		(76,755)
Non-controlling interests	2,887		(2,283)

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Consolidated Statements of Cash Flows

				(Millions of yen)
		April 1, 2018 to	April 1, 2019 to
		September 30, 2018	September 30, 2019
Cash flows from operating activities
Loss before income taxes	ሺ25,645)	ሺ65,435)
Depreciation and amortization	7,527		7,908
Loss on impairment of non-current assets	540		177
Amortization of goodwill	618		522
Increase (decrease) of allowance for doubtful	ሺ146)		95
accounts
Increase in net defined benefit liabilities	174		266
Decrease in net defined benefit assets	340		601
Interest and dividend income	ሺ4,086)	ሺ3,631)
Interest expenses	1,402		1,272
Equity in earnings of unconsolidated subsidiaries	ሺ1,451)		ሺ1,784)
and affiliates accounted for using equity method
Foreign currency exchange gain, net	ሺ423)	ሺ2,357)
Gain on sales of investment securities, net	ሺ28)	-
Loss on sales of subsidiaries and affiliates' stocks	-		310
Loss on valuation of investment securities	312		223
Loss on valuation of shares of subsidiaries and	-		43
affiliates
Loss (gain) on disposal of non-current assets, net	339		ሺ218)
Loss on litigation	167		-
Decrease (increase) in trade receivables	32,931		ሺ17,058)
(Increase) in inventories	ሺ10,008)	ሺ15,330)
Increase (decrease) in trade payables	ሺ1,887)	18,144
Decrease (increase) in other assets	ሺ9,146)	8,231
Increase in other liabilities	18,255		45,645
Others, net		ሺ5,639)	2,228
Sub-total		4,145		ሺ20,145)
Interest and dividend received	6,625		4,904
Interest paid	ሺ1,471)	ሺ1,289)
Payments for loss on litigation	ሺ167)	-
Income taxes paid		ሺ5,997)	ሺ3,236)
Net cash provided by (used in) operating activities		3,134		ሺ19,767)

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				(Millions of yen)
		April 1, 2018 to	April 1, 2019 to
		September 30, 2018	September 30, 2019
Cash flows from investing activities
Net decrease in time deposits	34		36
Capital expenditure	ሺ9,059)	ሺ6,834)
Proceeds from sales of non-current assets	3,342		1,434
Purchases of investment securities	ሺ58)	ሺ3)
Proceeds from sales of investment securities	28		-
Purchase of shares of subsidiaries and affiliates	ሺ561)	ሺ3)
Proceeds from sales of shares of subsidiaries and	-		200
affiliates
Payments for investments in capital of subsidiaries	-		ሺ260)
and affiliates
Disbursements of loans receivable	ሺ50,609)	ሺ5,647)
Collection of loans receivable	58,436		47,993
Others, net		1		40
Net cash provided by (used in) investing activities		1,555		36,956
Cash flows from financing activities
Net increase in short-term borrowings	17,799		11,819
Net increase in commercial papers	8,000		4,000
Proceeds from long-term borrowings	20,205		2,330
Repayments of long-term borrowings	ሺ40,973)	ሺ18,426)
Repayments of lease obligations	ሺ1,043)	ሺ1,713)
Cash dividends	ሺ2)	ሺ1)
Dividends paid to non-controlling interests	ሺ1,068)	ሺ1,027)
Others, net		ሺ100)	ሺ146)
Net cash provided by (used in) financing activities		2,815		ሺ3,165)
Effect of exchange rate changes on cash and cash	ሺ1,987)		ሺ1,864)
equivalents
Net increase in cash and cash equivalents		5,518		12,159
Cash and cash equivalents at beginning of period	86,311		97,408
Increase (decrease) due to changes in scope of	580		ሺ32)
consolidation
Cash and cash equivalents at end of period		92,411		109,535

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