Japan’s Chiyoda has bucked the trend in the oil and gas industry and posted a rise in profits in the June quarter, despite a fall in revenue.

Chiyoda booked a profit of 4.5 billion yen ($42.6 million) for the three months to 30 June, an increase on the 2.3 billion yen profit recorded over the same period last year.

The company attributed the rise in profits to improved profitability of its ongoing projects and a reduction in selling, general and administrative expenses, helping offset a 24.2% decline in revenue, to 65.5 billion yen.

As of 31 June, the company’s backlog stood at 77.6 billion yen, down 4.4% on a year ago, as new orders dropped 30.6%, year-on-year, to 23.1 billion yen.

Projects progress despite Covid-19 challenges

In its financial report, Chiyoda noted that work in its liquefied natural gas business had largely been unaffected by the current global economic slowdown in the wake of the coronavirus crisis.

It highlighted the third and final train at Freeport LNG in the US had commenced commercial operation in May, while the third and final train at Cameron LNG had also commenced production in May and was currently progressing towards commercial operation as planned. It added that the engineering, procurement and construction phase of the Golden Pass LNG project was also progressing as planned.

Meanwhile, during the quarter, Chiyoda was awarded the EPC contract for Train 7 of the Nigeria LNG project, in a consortium with Saipem and Daewoo.

The company also confirmed that it was currently revamping its previously constructed LNG and gas processing plants in Qatar, while also preparing an EPC proposal for the planned North Field Expansion Project, which will involve four 7.8-million tonne per annum trains.

Energy transition

The company is also branching out into the clean energy sector, with the company currently carrying out the world’s largest battery energy storage system project in Japan, as well as work on mega solar, or photovoltaic, facilities, as well as the largest biomass firing plant in Japan.

It has also embarked on several hydrogen related projects, and recently teamed up with Mitsuibishi in a memorandum of understanding with five Singaporean companies to look at developing hydrogen as an energy source for Singapore.

Chiyoda also confirmed that it was considering participating in a floating offshore wind farm, with the company identifying the sector as an area for future opportunities.

Forecast warning

While the results in the recent quarter were positive, going forward Chiyoda warned it anticipated some construction delays and additional project costs as a result of the global Covid-19 pandemic.

It anticipates profit for the full financial year, which ends 31 March 2021, to total 7 billion yen, down on the 12.18 billion yen profit booked the prior financial year, while revenues are anticipated to fall from 385.92 billion yen in the recent financial year to just 280 billion yen this year.

Despite the uncertain outlook, Chiyoda has also forecast that it will be awarded roughly 650 billion yen in new orders over the current financial year.

Finance

Japan's Chiyoda posts rise in profits despite revenue drop