gnavistart_XotNannRS
gnaviend_XotNannRS
  1. HOME
  2. Investor Relations
  3. Management Strategy
  4. Risk Factors

Investor Relations

Risk Factors

The primary issues regarding investment risk that could affect investor decisions, such as matters related to the Chiyoda Group’s financial position, performance and cash flow, and the countermeasures that Chiyoda Group takes against risks, include but are not limited to the issues discussed below. The Chiyoda Group recognizes that there is always potential for these risks to occur and is always working to minimize such eventualities.

The Chiyoda Group also responds as quickly as possible to minimize the impact of issues that present risks if and when they occur.

As of the time of writing, the potential risks stated below have been identified by Chiyoda Group management in its reviews.

(1)Effects of changes in the economic trend

The results of the Chiyoda Group may be affected by the suspension, postponement, or review of customers’ investment plans in the wake of changes in global economic trends and the Great East Japan Earthquake. The Group may also sustain impact from the project plans, profitability, or payment collection for its work, depending on the management situation of its business partners involved in plant construction, such as subcontractors and suppliers of equipment and materials. When the Group is considering entering into transactions, it strives to avoid and/or minimize these risks by paying close attention to economic trends, understanding the situation of its business partners, examining the wisdom of entering into transactions with the business partners in question, confirming the status of transactions, securing alternative business partners, and taking other measures if considered necessary.

(2)Earthquakes and other natural disasters, and terrorisms, conflicts, and other unavoidable occurrences

Should earthquakes and other natural disasters, terrorism, conflicts, and other unavoidable force majeure events occur, the Chiyoda Group may suffer from delays in customers’ investment decision making, direct or indirect damage to construction sites of projects under execution or in offices in Japan or overseas, delays in the delivery of equipment and materials, risks involving the safety of construction workers, the suspension of construction work, and other consequences.

While placing top priority on the avoidance of human injury, the Chiyoda Group has structured a risk management system that includes cooperation with customers and other related parties to support an immediate initial response should such events occur. In addition, the Chiyoda Group will take other steps to avoid or minimize these risks, including negotiating contractual provisions that rationally allocate additional costs to customers.

(3)Surge in cost of equipment and materials

Because of the time lag in plant construction between the time of estimation for equipment and material and the time of placement of orders for the relevant equipment and materials, prices of equipment and materials may rise to a level higher than estimated. In particular, prices of steel products may rise further from the current prices due to surges in the prices of raw materials. Trends in market prices of copper, nickel, aluminum, zinc, and other nonferrous metals are also unpredictable. To avoid and minimize these risks, the Chiyoda Group has taken initiatives such as diversifying suppliers by using vendors from different parts of the world, placing orders for the necessary equipment and materials early, and developing cooperative relationships with leading suppliers.

(4) Mobilization of construction workers and securing equipment and materials

Mobilization of construction workers and securing equipment and materials If construction workers, equipment, materials, or other infrastructure necessary for large-scale construction work cannot be mobilized or secured in a timely manner in accordance with the plan, construction may be delayed, resulting in the expenditure of additional costs for acceleration to make up for the delay. The Chiyoda Group strives to avoid these risks and to minimize their effects by developing alliances with leading subcontractors and vendors of equipment and materials as partners.

(5)Plant Accidents

The possibility exists that a serious incident such as an explosion or fire may occur at plants that the Chiyoda Group is constructing or has completed. The Chiyoda Group could be adjudged responsible for such accidents and could be held liable for damages, which could impact the Chiyoda Group’s performance. The Chiyoda Group works to avoid or minimize this risk by taking all possible measures to preclude the occurrence of such incidents, including quality control and safety management. Other countermeasures include procuring appropriate insurances and negotiating contracts that rationally allocate customer responsibility for damages.

(6)Change in Exchange Rates

In overseas construction projects, payments made to Chiyoda for construction are sometimes in currencies different to those made by Chiyoda to vendors for equipment and materials and/or subcontractors. Foreign currency exchange rates may therefore affect the financial results of the projects. The Chiyoda Group works to avoid and minimize such foreign currency fluctuation risks by using forward foreign exchange contracts and matching planned outlays in multiple currencies with construction payments and receivables.