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

2020/03 Half-year Financial Results

11 November, 2019

© 2019 Mitsui E&S Holdings Co., Ltd.

Table of Contents

 2020/03 Half-year Financial Results	Page
	Highlight		3
 2020/03 Half-year Summary of Results	4
 2020/03 Half-year Summary of Balance Sheet	5
 2020/03 Half-year Summary of Cash Flow	6
 2020/03 Half-year Results Summary by Segment	7-12
 Coal-fired power plant civil engineering construction	13-15
 2020/03 Forecast
	2020/03	Forecast Summary	16
	2020/03	Forecast Summary by Segment	17-18

• Appendix

	CAPEX・DEP・R&D・Employees	19
 Market Share of Mitsui E&S Group	20
	Topics	21-23

• Progress & Re-planning of

"Mitsui E&S Group Business Revival Plan"

• Explained separately

© 2019 Mitsui E&S Holdings Co., Ltd.

Highlight

2020/03	 New Order	495.0 Billion Yen（ QoQ	）
Half-year		Net Sales	356.9 Billion Yen（ QoQ	）
Results
		Ordinary Income	(64.9) Billion Yen（ QoQ	）

	◆	New Order	1,000.0 Billion Yen（Comp. Pre Forecast	）
2020/03	◆	Net Sales	790.0 Billion Yen（Comp. Pre Forecast	）
Forecast
	◆	Ordinary Income	(67.0) Billion Yen（Comp. Pre Forecast	）

Significantly

decrease of

Ordinary Income

• Loss increases on Coal-fired power plant civil engineering construction
• • Come out risks for unexpected factors on installation of CW pipe
  • Maximum losses approx. 71.3 billion yen.

© 2019 Mitsui E&S Holdings Co., Ltd.	3

2020/03 Half-year Summary of Results

				（JPY: Billion）
		2018/09	2019/09	Var.
	New Order	245.9	495.0	+249.1
	Net Sales	311.7	356.9	+45.2
	Operating Income	(28.0)	(67.7)	(39.7)
	（OP ratio）	(9.0％)	(19.0%)	－
	Ordinary Income	(24.3)	(64.9)	(40.6)
	（OD ratio）	(7.8％)	(18.2％)	－
	Profit attributable	(47.9)	(66.5)	(18.6)
	to owners
＜ Average FX ＞
	USD	111.09Yen	107.78Yen

• New Orders

Mainly due to award FPSO and O ＆M by Petrobras Related to Búzios 5.

• Net Sales

Increase due to delivery of Marine Diesel Engines , progress the FPSO Government Ship.

• Ordinary Income

Maximum losses approx. 71.3 billion yen incurred in Coal-fired power plant civil engineering construction work in Indonesia, resulting in significantly decrease of the profit

© 2019 Mitsui E&S Holdings Co., Ltd.	4

2020/03 Half-year Summary of Balance Sheet

（JPY: Billion）

	2019/03	2019/09	Var.
Total Assets	999.1	988.3	(10.8)	Mainly due to decrease of short-term loan collection by
MODEC
（Cash）	100.9	111.9	+11.0
（Receivables）	225.8	245.7	+19.9
（Fixed Assets）	371.5	372.9	+1.4
Total Liabilities	718.9	788.0	+69.1
（Advances by	92.6	96.2	+3.6
Customers）
（Provision for losses on	61.0	111.1	+50.1	Increased due to profitability goes down
construction contracts）	by Indonesian EPC
（Debt (with interest)）	204.6	199.8	(4.8)
Net Assets	280.2	200.3	(79.9)
（Own capital）	159.5	83.0	(76.5)	Significantly decrease due to Indonesian EPC
Capital-to-asset ratio	16.0％	8.4％
DE Raito	1.3	2.4

© 2019 Mitsui E&S Holdings Co., Ltd.	5

2020/03 Half-year Summary of Cash Flow

				（JPY: Billion）
	2018/09	2019/09	Var.
Operating CF	3.1	(19.8)	(22.9)	Spending increase due to loss
increases by Indonesian EPC
Investing CF	1.6	37.0	+35.4	Mainly due to increase of short-term
loan collection by MODEC
Free CF	4.7	17.2	+12.5
Financial CF	2.8	(3.2)	(6.0)

© 2019 Mitsui E&S Holdings Co., Ltd.	6

2020/03 Half-year Results Summary by Segment

						（JPY: Billion）
		New Order			Net Sales
	18/09	19/09	Var.	18/09	19/09	Var.
Ship	47.2	27.0	(20.2)	46.4	52.7	+6.3
Ocean	40.3	334.5	+294.2	113.1	148.6	+35.5
Development
Machinery	84.6	81.4	(3.2)	86.2	94.4	+8.2
Engineering	39.9	24.0	(15.9)	29.5	25.1	(4.4)
Other	33.9	28.1	(5.8)	36.5	36.1	(0.4)
Total	245.9	495.0	+249.1	311.7	356.9	+45.2

© 2019 Mitsui E&S Holdings Co., Ltd.	7

2020/03 Half-year Results Summary by Segment

							（JPY: Billion）
	Operating Income		Ordinary Income（*）
	18/09	19/09		Var.	18/09	19/09	Var.
Ship	(3.1)	(1.8)		+1.3	(3.3)	(1.9)	+1.4
Ocean	10.8	(2.3)		(13.1)	14.0	1.4	(12.6)
Development
Machinery	4.5	4.8		+0.3	5.0	5.1	+0.1
Engineering	(40.8)	(71.0)		(30.2)	(40.4)	(71.3)	(30.9)
Other	0.6	2.7		+2.1	0.4	1.8	+1.4
Total	(28.0)	(67.7)		(39.7)	(24.3)	(64.9)	(40.6)

（*）No audit. For your reference, we disclose internal amount

© 2019 Mitsui E&S Holdings Co., Ltd.	8

Ship

Main products︓Commercial Ship/Government Ship Ship Repairs

2019/03		2020/03						（JPY ︓ Billion）
					 New Order ︓ QoQ (20.2)
New Order		Net Sales		120.0	The market started to move, but
		113.2
							prices are still low. Mitsui E&S
			100.0					96.9
		83.2							Shipbuilding Co., Ltd. maintain sorting
							69.5		orders, resulting in just waiting
	47.2				46.4	52.7		watchfully in the first half. Recover in
								the second half.
	27.0
13.69.2	22.6 23.0
							 Net Sales ︓ QoQ +6.3
1Q	2Q	3Q	4Q（Forecast）
1Q	2Q	3Q	4Q（Forecast）	The ship construction progressed as
Operating			Ordinary				planned. Especially increased
Income			Income				Government Ships, resulting
1Q	2Q	3Q	4Q（Forecast） 1Q	2Q	3Q	4Q（Forecast）	increased compared to the same
period of previous fiscal year.

(0.8)(1.6)	(1.8)	(2.0)	(0.5)(1.7)	(1.9)	(2.0)
(3.1)	(3.3)
	(6.6)	(8.1)		(6.8)	(8.3)

• Ordinary Income︓ QoQ +1.4

The yen has been strong, however Ordinary Income improved as government vessels progressed smoothly.

© 2019 Mitsui E&S Holdings Co., Ltd.	9

Ocean Development	of FPSO etc.
	Main products︓EPCI/Lease/Charter/Operation/

	2019/03		2020/03						（JPY ︓ Billion）
						 New Order ︓ QoQ +294.2
New Order		600.0	Net Sales
			Awarded FPSO and O＆M by Petrobras
		334.5						320.0
							Related to Búzios 5.
			254.2				222.5
							167.1
							148.6
			66.0			113.1		 Net Sales︓QoQ +35.5
		40.3	46.9 58.2
30.012.1
							Revenue increased mainly due to
1Q	2Q	3Q	4Q（Forecast）
1Q	2Q	3Q	4Q（Forecast）	progress of 3 EPCI projects
Operating				Ordinary
Income				Income		25.9
				14.9		14.0	17.6
			11.9
		10.8						 Ordinary Income︓QoQ (12.6)
1.4	0.2			2.5 1.8	1.4		1.0	Provision for loss on construction
										contract was recorded for the EPCI
		(2.3)								project for Gulf of Mexico
			(6.0)
1Q		2Q	3Q	4Q（Forecast）		1Q	2Q	3Q	4Q（Forecast）

© 2019 Mitsui E&S Holdings Co., Ltd.	10

Machinery

Main products︓Marine diesel engine, Container Crane, Infrastructure, Industrial Machinery, These after-sales service

2019/03	2020/03	（JPY ︓ Billion）
(3.2)
	 New Order︓QoQ

New Order	200.0	Net Sales	186.9	200.0
	185.3
122.6		135.8
84.6		94.4
81.4		86.2
54.2 54.8		43.7 46.0

Marine diesel engines and after- sales service remained steady, resulting in the same level as the previous year.

 Net Sales︓QoQ +8.2

1Q	2Q	3Q	4Q（Forecast） 1Q	2Q	3Q	4Q（Forecast）
Operating				Ordinary
Income				Income
			10.2						11.2
			9.0				8.0	9.0	
		7.5
	4.5 4.8					5.0	5.1
1.4 1.3				1.7 1.5
1Q	2Q	3Q	4Q（Forecast）	1Q		2Q	3Q	4Q（Forecast）

Due to an increase in Marine diesel engine and Industrial Machinery, Net Sales exceeded the previous fiscal year.

Ordinary Income︓QoQ +0.1

After-sales service was performing well, however, profit of Container Crane deteriorated, in the same level as the previous year.

© 2019 Mitsui E&S Holdings Co., Ltd.	11

Engineering

Main products︓Environmental Energy, Infrastructure, Chemical Plant

2019/03	2020/03	（JPY ︓ Billion）

 New Order︓QoQ (15.9)

New Order

Net Sales

Decrease due to refrain orders for large projects.

			58.9			69.0 70.0
	39.9	49.7	50.0		49.8
23.4	24.0		29.525.1	 Net Sales︓QoQ (4.4)
12.6			22.2 15.9
			4Q（Forecast） 1Q	2Q	3Q	4Q（Forecast）	Decrease due to reduction in
1Q	2Q	3Q	construction volume.
Operating		Ordinary
Income		Income
1Q	2Q	3Q	4Q（Forecast）	2Q	3Q	4Q（Forecast）
			1Q
1.2			1.0
(1.1)			(1.0)			 Ordinary Income︓QoQ (30.9)

(40.8) (40.8)(40.4) (41.0)

(71.0)	(75.0)	(71.3)	(79.4)	(75.0)
	(79.7)

As a result of reviewing the Coal- fired power plant civil engineering construction risk, the estimated maximum risk cost was approximately 71.3 billion yen, resulting in a significantly losses.

© 2019 Mitsui E&S Holdings Co., Ltd.	12

Coal-fired power plant civil engineering construction

 Status of loss construction

＜ Summary of construction ＞

	Conclusion of	Type of	Place	Construction scope	Contract
	Contracts	contract	delivery date
	March,		Batang Central Java,	Coal-fired power plant	November,
	Lump sum	(1,000MW×2) civil engineering
	2012	Indonesia	2020
		construction work
＜ The sequence of events ＞

Accumulated losses approx. 151.0 Billion Yen（Inc. 2019/09E Provision approx. 101.2 Billion Yen ）

2018 2Q	2018 4Q
Detected Broken	Come out the risk
the CW* piping	of process delay
Additional cost
Approx. 41.3 Billion Yen	Approx. 38.0 Billion Yen

※CW（Cooling Water)

2019 2Q

Come out risks due to unexpected factors on installation of CW pipe

Approx. 71.3 Billion Yen

© 2019 Mitsui E&S Holdings Co., Ltd.	13

Coal-fired power plant civil engineering construction

＜ The factor of deteriorating profitability ＞

• Come out risks due to the following unexpected factorson installation of CW pipe
• • Conditions for marine conditions are severer than expected.
  • Changing materials and increasing quantity due to soft ground of a sea.
  • Based on the proof data obtained from the test construction, Set aside the maximum loss with external specialist.

＜Breakdown for additional losses＞

• Additional losses in 192Q approx.71.3 Billion Yen
• • Increase risk costs for unsatisfactory weather during installation（Approx.20.0 Billion Yen）
  • Additional costs for changing materials and

increasing quantity on backfill work （Approx.30.0 Billion Yen）

 Others (adapting to the delay of the processes)

（Approx.21.3 Billion Yen）

Continue construction status monitoring with external experts,

absolutely complete the project within this range.

© 2019 Mitsui E&S Holdings Co., Ltd.	14

Coal-fired power plant civil engineering construction

• List of Coal-fired power plant civil engineering construction

Projects	Area		Progress	Delivery Year
19/03	19/09
A	Vietnam	98%	98%	2019
B	Indonesia	67%	73%	2020
C	Indonesia	71%	88%	2021

A Construction is already in the commissioning stage,

and will be completed in the second half of 2020/03 B Come out additional cost of CW pipe installation

C Construction have been progressed as planned

© 2019 Mitsui E&S Holdings Co., Ltd.	15

2020/03 Forecast Summary

			（JPY: Billion）
	Previous	Forecast	Var.
	Forecast	（11 Nov. 2019）
	（10 May 2019）
New Order	800.0〜	1,000.0	－
1,000.0
Net Sales	840.0	790.0	(50.0)
Operating Income	12.0	(72.0)	(84.0)
Ordinary Income	17.0	(67.0)	(84.0)
Profit attributable	3.0	(88.0)	(91.0)
to owners
Free CF	(41.0)	(5.0)	+36.0
Interest-bearing debt	240.0	180.0	(60.0)

* Forecast FX Rate US$/Yen 110

*Effect to foreign exchange rates by currency on operating profit

=1 yen per US$ corresponds to 0.5 billion yen. (Strong yen =Improvement of operating profit )

© 2019 Mitsui E&S Holdings Co., Ltd.	16

2020/03 Forecast Summary by Segment

							（JPY: Billion）
		New Order			Net Sales
	Previous		Forecast		Previous		Forecast
	Forecast		Var.	Forecast		Var.
		(11 Nov. 2019)		(11 Nov. 2019)
	（10 May, 2019）			（10 May, 2019）
Ship	110.0		100.0	(10.0)	120.0		120.0	－
Ocean	300.0〜		600.0	+100.0	350.0		320.0	(30.0)
Development	500.0
Machinery	200.0		200.0	－	200.0		200.0	－
Engineering	90.0		50.0	(40.0)	80.0		70.0	(10.0)
Other	100.0		50.0	(50.0)	90.0		80.0	(10.0)
Total	800.0〜		1,000.0	－	840.0		790.0	(50.0)
1,000.0

© 2019 Mitsui E&S Holdings Co., Ltd.	17

2020/03 Forecast Summary by Segment

						（JPY: Billion）
	Operating Income		Ordinary Income
	Previous	Forecast			Previous	Forecast
	Forecast		Var.	Forecast	Var.
	(11 Nov. 2019)		(11 Nov. 2019)
	（10 May, 2019）			（10 May, 2019）
Ship	(2.0)	(2.0)		－	(2.0)	(2.0)	－
Ocean	8.0	(6.0)		(14.0)	15.0	1.0	(14.0)
Development
Machinery	8.0	9.0		+1.0	8.0	9.0	+1.0
Engineering	(4.0)	(75.0)		(71.0)	(4.0)	(75.0)	(71.0)
Other	2.0	2.0		－	0	0	－
Total	12.0	(72.0)		(84.0)	17.0	(67.0)	(84.0)

© 2019 Mitsui E&S Holdings Co., Ltd.	18

Appendix) CAPEX・DEP・R&D・Employees

				（JPY: Billion）
	2018/09	2019/03	2019/09	2020/03
	Actual	Actual	Actual	Forecast
CAPEX	9.1	18.3	6.8	11.5
Depreciation	7.5	14.5	7.9	ー
R&D	1.4	4.5	1.8	4.0
Employees	13,611 People	13,607 People	14,050 People	ー

© 2019 Mitsui E&S Holdings Co., Ltd.	19

Appendix）New Ship・Marine Diesel Engine

New Ship （Mitsui E&S Shipbuilding Co., Ltd.）

	New Orders		Deliveries		Backlogs
Commercial Ship		0		5	16
Government Ship・		0		0	9
Other Ship
Total		0		5	25

Marine Diesel Engines（Mitsui E&S Machinery Co., Ltd.）

	2018/09	2019/09	2020/03
	Unit	House Power	Unit	House Power	Unit	House Power
	(10Kps)	(10Kps)	(10Kps)
New Orders	52	97	90	169	ー	ー
Deliveries	77	197	113	221	ー	ー
Back logs	108	251	111	210	ー	ー
Production	76	196	104	196	208	398

© 2019 Mitsui E&S Holdings Co., Ltd.	20

Appendix) Topics

Shipbuilding Joint Venture to Commence Business Operations

Mitsui E&S Shipbuilding Co., Ltd. ("MES-S), in partnership with Mitsui & Co., Ltd. ("Mitsui) and Yangzijiang Shipbuilding (Holdings), Ltd. ("YZJ";), has established a shipbuilding joint venture, Jiangsu Yangzi-Mitsui Shipbuilding Co., Ltd. (Taicang, Jiangsu, China; President: Song Shuming) and has made preparations for commencing business operations. On August 1, the company officially commenced its business operations as a new manufacturing base of new ships.

Presence in water robot technology

As a member of "Team KUROSHIO" formed with domestic research institutes and private companies, Mitsui E&S Shipbuilding participated in "Shell Ocean Discovery XPRIZE", an international competition for seabed exploration technology from 2016 to 2018, won the second place.

We were mainly responsible for the development of the offshore repeater (Autonomous Surface Vehicle: ASV) and contributed greatly to the results of KUROSHIO.

Based on our advanced technical capabilities backed by achievements, we will continue to develop water robots and strive to provide new value to our customers.

© 2019 Mitsui E&S Holdings Co., Ltd.

Award ceremony at Monaco

ASV

21

Appendix) Topics

Delivered the first 1000kW class gas turbine SB5N

Mitsui E&S Machinery Co., Ltd. has developed the 1,000kW class gas turbine SB5N and started sales in FY2019. The first gas turbine cogeneration system was delivered to companies in Hyogo Prefecture.

We boast a top-class share in Japan for the mid-sized MSC series (3-15 MW) equipped with Solar Turbines gas turbines. We have added our own gas turbine SB5N as a new lineup and will develop aggressive sales activities in the generation market.

Awarded a heating furnace order for a domestic chemical plant

Mitsui E&S Plant Engineering Co., Ltd.("MPE" a wholly owned subsidiary of Mitsui E&S Engineering Co., Ltd.) awarded a heating furnace (detailed design, procurement, and from a major domestic chemical manufacturer in July 2019. This project scheduled to be completed in 2021, and we are currently working on a detailed design.

MPE constructed Japan's first ethylene plant in 1958, former Mitsui Engineering & Shipbuilding Co., Ltd. We have many achievements in establishing new heating furnaces used to heat fluids for domestic and overseas oil refining and petrochemical manufacturers.

We will continue to make proposals and receive orders in line with the life cycle of customer plants.

© 2019 Mitsui E&S Holdings Co., Ltd.	22

Appendix) Topics

MODEC Develops "MODEC NOAH™" and "M350™"

MODEC, Inc. ("MODEC") is pleased to announce that it has developed the "MODEC NOAH" and "M350", next generation new built hulls for Floating Production Storage and Offloading (FPSO) vessels utilizing its extensive knowledge, experience and proven successes in engineering, construction, operations and maintenance of FPSOs as a leading company in this industry.

With two next generation new built FPSO hulls in MODEC's portfolio, namely, "MODEC NOAH" and "M350", MODEC is very well prepared to meet the new market demands for larger FPSOs.

MODEC NOAH

MODEC Awarded Letter of Intent by Petrobras 2 FPSO and O&M

MODEC, Inc. ("MODEC") has received a Letter of Intent (LOI) for the supply, charter, and operations of a Floating Production Storage and Offloading (FPSO) vessel for Búzios 5 and Marlim revitalization project from Petróleo Brasileiro S.A. ("Petrobras").

MODEC is responsible for the engineering, procurement, construction, mobilization, chartering and operations of the FPSO, including topsides processing equipment as well as hull and marine systems. SOFEC, Inc., a MODEC group company, will design and supply the spread mooring system for the floating unit. In addition to these FPSOs, MODEC will also provide three more FPSOs for the country within the next years: the FPSO Carioca MV30, the FPSO Guanabara MV31 and the FPSO Almirante Barroso MV32. These FPSOs will be deployed in the pre-salt of Santos Basin.

© 2019 Mitsui E&S Holdings Co., Ltd.	23

社会に⼈に信頼されるものづくり企業であり続けます

To continue working as a company trusted by society and individual through products and services we offer

In this document, forward-looking statements, targets, plans, strategies, etc. of the Company contain forward- looking statements. These are forecasts that the Company rationally determined based on information that can be grasped at the present time and include known and unknown risks and uncertainties. Accordingly, there is a possibility that actual results or developments of our company in the future may be significantly different.

The translation of English is merely created for reference and this does not detain any parties.

© 2019 Mitsui E&S Holdings Co., Ltd.