Hitachi Zosen: Notice of Extraordinary Income, Extraordinary Losses and Revisions to Earnings Forecasts

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April 25, 2022

Company Hitachi Zosen Corporation

Representative Sadao Mino, President & CEO

(WKN: 7004; Prime Market, Tokyo Stock Exchange)inquiry

Hiroshi Miyazaki General Manager

Corporate Planning Department (Phone +81-6-6569-0005)

Notice of Extraordinary Income, Extraordinary Losses and Revisions to Earnings Forecasts

We hereby report that we recorded extraordinary income and extraordinary losses in the past financial year

March 31, 2022 and announce the following. In addition, due to improvements in operating income and ordinary income, we have revised the earnings guidance published on February 7, 2022 as follows.

1. Entry of the negative difference (extraordinary income)

As stated in the “Notice on the Acquisition of Interests in Steinmüller Babcock Environment Group Companies”.

(to make them subsidiaries)”, issued on December 8, 2021, our consolidated subsidiary Hitachi Zosen Inova AG, which entered into a share purchase agreement on December 9, 2021, has acquired all shares in Steinmüller

Babcock Environment GmbH (current company name: Hitachi Zosen Inova Steinmüller GmbH) on February 9, 2022 and made the company its fully consolidated subsidiary. Accordingly, a negative goodwill gain of JPY 3.8 billion is recorded as extraordinary income in the consolidated financial statements for the year ended March 31, 2022.

2. Recognition of an impairment (extraordinary loss)

(1) Our company’s Ibaraki plants

In our wholesale electricity business, including our Ibaraki plants, we have determined that there is evidence of impairment of fixed assets as cash flows from operations remain negative. As a result of a future impairment test, we plan to reduce the carrying amount to the recoverable amount and record an impairment loss of JPY1.6 billion as an extraordinary loss in unconsolidated financial income for the year ended March 31, 2022. The impact on the Group earnings are the same.

(2) Natural Energy Japan Corporation

At our consolidated subsidiary Natural Energy Japan Corporation (hereafter “NEJ”), we have determined that there is evidence of impairment of fixed assets as the cash flows generated from its operations continue to be negative. As a result of a future impairment test, the carrying amount was reduced to face value and an impairment loss of JPY 2.1 billion was recorded. As a result, we plan to record the same amount as an extraordinary loss in the consolidated financial results for the year ended March 31, 2022.

  • 3. Recognition of the warranty provision (special damage) (unconsolidated)

    As described in item 2. (2) above, due to the increase in the amount of excess debt resulting from the recognition of impairment losses on fixed assets at NEJ, we plan to record an extraordinary loss of JPY 1.7 billion as a provision for warranty loss NEJ in the unconsolidated financial results for the year ended 31 March 2022.

    The warranty provision is only recognized in the individual financial statements and eliminated in the consolidated financial statements; therefore there are no effects on the consolidated result.

  • 4. Revisions to net income forecasts

    For the year ended March 31, 2022, operating income will deteriorate due to an increase in the provision for losses on construction projects, but will improve due to reductions in construction costs and fixed costs.

    In addition, ordinary income will improve due to an improvement in foreign exchange gains and losses and an improvement in equity method investment gains and losses. In addition, profit attributable to Hitachi Zosen shareholders will improve due to a decrease in tax expense. We hereby restate our Group profit guidance for the year ended March 31, 2022 as follows, although we are in the process of preparing it.

    The dividend forecast at the end of the year does not change as a result of this change.

    Revision of Group earnings forecasts for the year ended March 31, 2022 (April 1, 2021 – March 31, 2022)

    net sales

    operating result

    Ordinary Income

    Profit attributable to shareholders of

    Hitachi Zosen

    net earnings per share

    Previous Forecast (A)

    (million yen)

    420,000

    (million yen)

    15,000

    (million yen)

    10,000

    (million yen)

    5,500

    yen 32.63

    Revised prognosis (B)

    440,000

    15,300

    11,500

    7,500

    44.50

    Change (BA)

    20,000

    300

    1,500

    2,000

    To change (%)

    4.8

    2.0

    15.0

    36.4

    (Reference) Last year’s results

    (Year to March 2021)

    408,592

    15,396

    11,792

    4,258

    25.26

    ※The above projections are based on information currently available to us and certainties we believe to be reasonable. Actual results could differ from these projections due to various factors.

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