Japanese engineering and construction giant JGC has recognised a very large loss on the Inpex-operated Ichthys liquefied natural gas project in Australia in its 2021 financial results, but is forecasting that sales and profitability are on the rise.
The loss provision on the Ichthys project was 57.5 billion yen (US$447 million) which consigned JGC to a net loss of 35.5 billion yen ($276 million) in the year ending 31 March 2022.
Operating profit was 20 billion yen, similar to the previous year, on the back of revenues of 428 billion yen, 5.5% less year-on-year.
JGC said that, in the full year: “Profits exceeded forecasts due to solid execution and completion of EPC projects, strong performance in the functional materials manufacturing segment, and benefits from the (Japanese yen) depreciation.”
Cost impacts are anticipated from the Ukraine crisis that have been factored into project budgets. Sales and profits, meanwhile, are expected to increase in the 2022 financial year, added JGC.
The company's order book stands at 1.2 trillion yen, of which oil and gas comprises 513 billion yen and LNG contracts make up 417 billion yen.
The lion's share of JGC's major contracts are overseas including LNG Canada, Mozambique FLNG, LNG terminals in Taiwan, and a Saudi Arabia gas separation plant.
The company is also performing front-end engineering and design work on floating LNG projects in Malaysia and Nigeria.
No explanation was provided for the Ichthys LNG provision. JGC was the largest shareholder in the joint venture that performed the huge Ichthys LNG onshore engineering, procurement and construction contract.
JGC had 40%, with Chiyoda and KBR on 30% each. The joint venture for several years has been locked in well-publicised legal disputes with the Ichthys operator Inpex and sub-contractor groups.
Last month, KBR said a conditional settlement had been reached with a sub-contractor consortium, but other legal cases were ongoing.
JGC has put in place a series of actions in an effort to "transform" its EPC operations.
The first step was to appoint a non-Japanese president — former KBR executive Farhan Mujib — at the overseas EPC operating company.
It is putting in place a stronger framework for regional management at JGC Asia Pacific, and it is formulating a medium-term IT strategy, with April 2023 as the start of the accelerated digitalisation of EPC works.