Chiyoda Corp., one of the world’s leading builders of liquefied natural gas plants, said Thursday it will receive a total of ¥180 billion from trading house Mitsubishi Corp. and MUFG Bank to turn around its finances.
Under a reconstruction plan, Chiyoda will get a capital injection of ¥70 billion from the trading house through the issuance of preferred shares. Mitsubishi, the largest shareholder in the engineering company, will also provide ¥90 billion in long-term loans.
“When accepting orders, (Chiyoda’s) risk analysis was very poor,” Mitsubishi President and CEO Takehiko Kakiuchi said at a news conference. “It was getting too many orders that exceeded its management resources.”
MUFG Bank will offer ¥20 billion in subordinated loans, which can be incorporated as part of a company’s capital base because of the low priority for repayment.
Preferred shares carry no voting rights but holders have priority in receiving dividends.
According to the major plant engineering firm the preferred shares to be allotted to Mitsubishi can be converted to common stock, but the trading house is not currently planning to convert the shares for sale in the market.
Asked about the possibility of making Chiyoda one of its consolidated subsidiaries, Kakiuchi said, “To be honest, I don’t have strong feelings about that. The goal is the company’s revival, and we are not aiming to control Chiyoda.”
Also on Thursday Chiyoda reported a group net loss of ¥214.9 billion in the business year that ended in March, mainly due to additional costs for its large-scale LNG project in Louisiana in the United States.
The net loss was a reversal from a profit of ¥6.45 billion in the previous fiscal year. It attributed the increased costs to additional construction work and low labor productivity.
It recorded a group operating profit of ¥199.8 billion in fiscal 2018, deteriorating from an operating loss of ¥12.33 billion the year before, on consolidated revenues of ¥341.9 billion, down 33.1 percent.
For the current business year, Chiyoda said it expects to book a group net profit of ¥6 billion and an operating profit of ¥12 billion on revenues of ¥390 billion.
Chiyoda Corp. formally announced Wednesday the appointment of a corporate adviser from general trader Mitsubishi Corp., Chiyoda’s top shareholder, as its chairman and chief executive officer, effective June 25.
The Mitsubishi adviser, Kazushi Okawa, 62, will lead the company’s turnaround efforts. Before taking on the advisory post in April, Okawa headed Mitsubishi’s infrastructure project and plant engineering departments.
Current Chiyoda President and CEO Masaji Santo will become president and chief operating officer.