TOKYO — Japanese engineering group Mitsui E&S Holdings has sold roughly 100 billion yen ($930 million) in operations and assets, the company said Thursday, as it scrambles to shore up finances eroded by a money-bleeding Indonesian power plant project.
The deals are part of a turnaround plan drawn up last May by the Japanese ship- and plant-builder amid a bleak outlook. It had booked more than 150 billion yen in losses on the coal-fired plant project, leaving earnings deep in the red, while its mainstay shipbuilding business is expected to see a sixth straight year of operating losses in fiscal 2020.
By April, Mitsui E&S had arranged the sale of subsidiaries Showa Aircraft Industry and Mitsui E&S Plant Engineering as well as its solar power business, among other assets. Proceeds from the deals exceed the initial target of 70 billion yen, President Ryoichi Oka said in an earnings briefing.
The company plans to take further steps to fortify its financial health, including selling part of its stake in an infrastructure engineering firm.
But the problems with the Indonesian project are being compounded by the coronavirus pandemic. Multiple workers on the site tested positive for the virus in late March, and work was put on hold in April.
“If we can restart by November, [losses] will remain within the allowances we’ve already booked,” Oka said. Delays beyond then could take the additional costs beyond this buffer.
The outbreak poses other risks as well. Mitsui E&S unit Modec could be forced to suspend construction of floating production, storage and offloading platforms, or FPSOs, for example. The recent plunge in crude prices may also weigh on orders as oil companies rethink their plans.
Mitsui E&S reported a net loss of 86.2 billion yen for the fiscal year ended in March, larger than its 69.6 billion yen loss the previous year. It expects to break even in fiscal 2020.
The company’s order book reached a record 1.82 trillion yen at the end of fiscal 2019, thanks to brisk demand for FPSOs in emerging markets. But much will depend on the effect of the pandemic and crude oil prices.
Mitsui E&S postponed the release of its medium-term business plan for the three years through fiscal 2022, which had been slated to come out alongside fiscal 2019 earnings.
“This is a time of great change, and we can’t afford to just hunker down and ride it out,” Oka said, stressing the need to “take the lead.”