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To Our Stakeholders

On behalf of the Chiyoda Group, I appreciate your continued support over the past 9 months and I hereby present an interim update of our corporate overview of the third quarter of fiscal year 2016.

Under the current Medium Term Management Plan, we have been working hard to achieve the growth strategies for offshore and upstream field defined in the Plan. However, as a result of the difficulties due to severe business environment faced by EMAS CHIYODA Subsea (ECS), a UK-registered affiliate in which Chiyoda has a 35% stake, Chiyoda has had to recognize a non-operating expense of JPY 13,000 million for the loss of equity and an extraordinary loss of JPY 23,800 million for the loan and other expenses. Due to this ECS related loss, Chiyoda forecasts that JPY 36,000 million of the final loss for the fiscal year ending March 2017 will be recorded.

Chiyoda’s management deeply regrets the losses associated with this investment, even though Chiyoda made detailed and long research and risk analysis of subsea industry before making investment decision.

I would like to address that this loss is investment-related issue. Our capabilities in engineering and project management continue to flourish. The Company is actively engaged in LNG projects in Australia, the United States, Russia and Indonesia; in petroleum refinery and metal projects in Malaysia, Vietnam and Saudi Arabia; and in airport projects in Mongolia and the Philippines. Domestically Chiyoda is successfully executing petroleum and petrochemical projects, mega solar projects, food manufacturing and pharmaceutical projects.

Despite the current severe and difficult business environment caused by prolonged low oil price, Chiyoda Group will continue to enhance and reinforce its engineering technology and project management capability.

Having thoroughly considered our financial conditions and nature of investment – related losses, we plan to maintain JPY 6.00 per share dividend.

We ask all of our shareholders for your continued support in our ongoing efforts.

February 2017

Sincerely yours,

Keiichi Nakagaki,
Senior Executive Vice President (acting CEO)
Chiyoda Corporation

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