Notice of Revision to the Consolidated Financial Forecast for the Fiscal Year ending March 31, 2019 and Recognition of Non-Operating Income and Expenses

Toyo Engineering Corporation (hereafter “TOYO”) hereby announce that the board of directors of TOYO resolved today the following revision to the consolidated financial forecast for the fiscal year ending March 31, 2019 announced on May 15, 2018, due to further increase in loss for the ethylene project in the USA. Further, TOYO will recognize non-operating income and expenses on its non-consolidated and consolidated financial results for the fiscal year ending March 31,2019.

1. Revision to the consolidated financial forecasts
(1) Revision to the consolidated financial forecasts for the fiscal year ending March 31, 2019
(from April 1, 2018 to March 31, 2019)

(2) Major reasons of the revision

Due to significant increase of construction cost at an ethylene project in the USA, the operating income is expected to decrease as above, while seeing such positive factors as good profitability of projects other than the ethylene project, improvement of subsidiaries’ operating income, and reduction of SGA. Although improvement of equity in earnings of affiliates and interest income arising from arbitration award (as explained in section 2) enhances ordinary income by 900 million Yen, up to 3,400 million Yen, profit attributable to owners of parents is expected to decrease by 1,800 million Yen, down to 800 million Yen in loss, due to increase of taxes on subsidiaries’ better-than-expected profits.

With regards to the ethylene project in the USA, increasing construction as well as administrative cost (approximately 10,000 million Yen) has been incurred in the 4th quarter of this fiscal year, due to more-than-expected repair works arising from such factors as troubles of equipment and quality of construction works, and revision of schedule up to the completion upon client request during pre-commissioning. As of now, the construction work has been completed, and commissioning of the whole plant has begun. Plant delivery is planned in the first half of fiscal year 2019.


2. Recognition of non-operating incomes and expenses

(1) Equity in earnings of affiliates

TOYO expects to recognize 6,400 million Yen as non-operating income (equity in earnings of affiliates) on its consolidated financial results for the fiscal year (out of which, 2,577 million Yen has been already booked up to 3rd quarter of this fiscal year), thanks to significant improvement of profitability of projects implemented by affiliates in Brazil, arising from such factors as additional change orders, refund of tax which were paid as cost in previous years and so on.

(2) Interest income

Due to interest in arrears arising from an arbitration award on a completed project in India and others, TOYO expects to recognize 3,700 million Yen as interest income on its consolidated financial results for the fiscal year (out of which, 1,043 million Yen has been already booked up to 3rd quarter of this fiscal year).

(3) Provision of allowance for doubtful accounts

Considering worse-than-expected performance and financial position of some subsidiaries, TOYO expects to incur 1,000 million Yen losses by recognizing provision of allowance for doubtful accounts (receivables from subsidiaries) as non-operating expenses on its non-consolidated results for the fiscal year. As this provision is fully eliminated on consolidation, it doesn’t affect the consolidated financial results.

(4) Foreign exchange losses

Due to fluctuations of foreign exchange rate of emerging market, TOYO expects to incur foreign exchange losses of 300 million Yen on its non-consolidated financial results and 100 million Yen on its consolidated the financial results respectively, mainly on receivables from clients.

(Remark) The forecast of consolidated results above was compiled based on the information available at the time of announcement. Due to various factors, actual business results may differ from the predicted figures in some cases.