Big profit downgrade and management shuffle for Japanese EPC giant

Japanese engineering and construction giant JGC is sweeping away several top executives in a management restructure following a costly financial hit due to difficulties on several major international projects including liquefied natural gas.

The company announced a significant earnings downgrade and a management restructure on 12 February, and those management changes will take effect from today, 1 April.

The earnings revision applies to the fiscal year ending 31 March 2025, and includes a profit loss attributable to owners of 7.8 billion yen (US$52 million). The previous guidance was a net profit of 23 billion yen ($153 million), the company said.

Operating loss will be 19 billion yen versus previous guidance of 26 billion yen operating profit.

The reasons for the downgrade are the execution of engineering, procurement and construction contracts related to the LNG terminal facilities in Taiwan, two projects in Saudi Arabia, the LNG Canada project and delays to project final investment decisions in Japan that led to losses.

In Taiwan, JGC said client had delayed the handover of parts at the construction site and a resolution was not foreseen.

In Saudi Arabia, a subcontractor is in financial distress, leading to delays and workers' strikes.

In Canada, up to 1000 additional skilled workers are needed to help with project completion, pushing up costs.

JGC said its order backlog as at the end of 2024 was 1.1 trillion yen. By sector, LNG accounted for 42%, and oil and gas 36%. By region, the Middle East accounted for 58%, the Americas 15% and Asia including Japan 26%.

Management changes

The management changes that take effect from 1 April include the resignation of Tadashi Ishizuka as president and chief operating officer of JGC Holdings and Farhan Mujib, the president of JGC Corporation, stepping aside.

Mujib will continue on the board and as an adviser, but will retire from both roles by the end of June.

Chief executive Masayuki Sato paid tribute to Ishizuka, who since becoming president in 2017 had been instrumental in the management of engineering, procurement and construction projects.

He had taken the lead in the award to JGC of the contracts for large EPC projects — the floating LNG project in Mozambique and the LNG Canada project, and had overseen the completion of difficult projects including the Kuwait refinery and US ethylene projects.

At JGC Corporation, where Mujib is stepping aside, six executive officers who are experienced in EPC projects will lead the execution and management of EPC projects.