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© 2019 Mitsui E&S Holdings Co., Ltd.
Mitsui E&S Group Business Revival Plan
2019.05.10
© 2019 Mitsui E&S Holdings Co., Ltd.
Introduction
2
• Background • Due to losses in several large-scaled overseas EPC ※ projects, the
consolidated financial foundation has been seriously damaged.
Recovery of equity capital and securing of funds are urgently required.
• Under the deterioration of profits in the existing business, it is necessary to exit from the unprofitable businesses and foster the new promising businesses that will be the pillars of the profits.
• Outline of “Mitsui E&S Group Business Revival Plan”
1. Reinforcement of Financial Structure Disposal of the inefficient assets Reduction of the fixed cost
2. Reform of Business Structure Exit from unprofitable businesses Focus on the growing businesses
Targets in FY 2022 (consolidated) Interest-bearing debt EBITDA
multiples <5.0x Ordinary income ratio> 4.0% Total asset turnover> 0.8 x
• Shift to a balance-sheet-oriented management (aiming to reduce interest-bearing debt & effective use of the assets)
• Breaking from the sales-first principle
※EPC:”Engineering, Procurement & Construction” works in a series of process of a plant contract
FY20XX:Fiscal year lasting from April 1, 20XX to March 31 of the next year (The same applies thereafter)
© 2019 Mitsui E&S Holdings Co., Ltd.
1. Reinforcement of Financial Structure
3
© 2019 Mitsui E&S Holdings Co., Ltd.
FY 0
2
4
6
8
10
12
14
16
△ 1,000
△ 500
0
500
1,000
1,500
2,000
2,500
3,000
2013 2014 2015 2016 2017 2018
%
Interest-bearing Debt /EBITDA
有利子負債 EBITDA EBITDA倍率
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2013 2014 2015 2016 2017 2018
Un
it :
100
mill
ion
yen
Net Assets
利益剰余金 資本金その他
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0
2,000
4,000
6,000
8,000
10,000
12,000
2013 2014 2015 2016 2017 2018
Total Asset Turnover
売上高 総資産 総資産回転率
Decrease in Total Asset Turnover→Decrease in sales→Total assets are flat
4
Decrease in Net Assets
→Decrease in retained earnings
Recovery of the financial and profitability status is the urgent issue.
Elevation of Interest-bearing Debt EBITDA Multiple
→Increasing tendency ininterest-bearing debt
→Decrease in EBITDA
1-①.Financial & Profitability Status (Consolidated)
Turn over Totalassets
Total Asset Turnover
Interest-Bearing Debt
EBITDA EBITDA Multiple
Retainedearnings
Capital & others
FY
FY
© 2019 Mitsui E&S Holdings Co., Ltd.
• Further asset disposal and capital measures are under consideration for recovery of damaged net assets
• Improvement of Return on Total Asset⇒ Sales ordinary income ratio 4.0% × Total asset turnover ratio 0.8x
• Improvement of Ratio of Debt / Profitability⇒ Interest-bearing debt EBITDA Multiples < 5.0x
• Improvement of Return on Total Asset⇒ Sales ordinary income ratio 6.0% × Total asset turnover ratio 1.0x
• Disposal of the fixed assets (Head office building etc.)• Disposal of the owned securities (Listed shares, Shares of subsidiaries etc.)• Reduction of the fixed cost (Personnel and other expenses etc.)
Financial and Profitability Measures
1-②.Numerical Targets (consolidation) & Measures
5
Short-term Measures (Target for FY2019)
Mid-term Strategy (Target for FY2022)
Long-term Strategy (Target for FY2025)
© 2019 Mitsui E&S Holdings Co., Ltd.
2. Reform of Business Structure
6
© 2019 Mitsui E&S Holdings Co., Ltd.
2-①. Issue Analysis
7
Shipbuilding Business• Continuing the status of oversupply and price decline
in the merchant ship market.
• Profitability of merchant ship business has been deteriorated. Operating income ratio of naval & patrol ship etc. are appropriate.
Engineering Business• EPC and O&M ※ businesses in the renewable energy
field can be further developed.
• In the businesses of chemical plant and civil engineering of power plant, several large losses have been continuously recorded.
In the current internal and external environment, it is difficult to continue the business of overseas EPC project.
As the fixed cost burden of the naval & patrol ship business is heavy, the merchant ship business is also necessary for continuation of both businesses.
Operating income ratio resultsFY2015-2018 average
Operating income ratio resultsFY2015-2018 average
Chemicalplant
TotalCivil worksof power
plant
Renewableenergyplant
Merchantship
Naval &Patrol ship
Others Total
※O&M :”Operation & Maintenance” works on behalf of a plant owner
© 2019 Mitsui E&S Holdings Co., Ltd.
2-②. Exit Plan from Unprofitable Business
8
• Consolidate the resources dispersed among Mitsui E&S Engineering Co., Ltd.(MES-E) and its subsidiaries, and integrate and enhance the technological capabilities.
• Consolidate the resources related to chemical plant into Mitsui E&S Plant Engineering Co, Ltd.(MPE).
• Consolidate the resources related to environmental recycling and biogas into Mitsui E&S Environment Engineering Co, Ltd.(MKE).
• Dispatch engineers from MPE to MODEC, Inc. to focus on the ocean development business.
• Under the direct control of MES-E president, complete with full force.
• After completion, exit from the civil engineering business of power plant.
• After delivery of the ships ordered so far, the building business of the merchant ship at Chiba Shipyard will shrink.
• By stages, shift to an organization that focuses on the businesses of energy engineering and construction of large steel structures.
Reorganization of the engineering business
Completion of the existing civil works of power plant
Change of the business portfolio at Chiba Shipyard
© 2019 Mitsui E&S Holdings Co., Ltd.
2-③.Reform of Business Structure
9
【Policy】 Keep with “3-domain” concept of 2025Vision
• Expands 5 businesses of Machinery, Ocean Development, Power Generation, Shipbuilding and Social Infra. in 3 domains: “Environment & Energy”, “Marine Logistics & Transportation”, and “Social & Industrial Infrastructure”.
• Enhance LSS(Lifecycle Solution Service) business according to the product life cycle.
Pursuing the synergies among inside and outside of Mitsui E&S Group• Machinery, Ocean Development, and Power Generation business shall be positioned as core business to
enhance through the collaborations within the group.
• Shipbuilding and Social Infra. business is positioned as a collaborative business, aiming for the growth through collaboration and alliances with companies outside the group.
Machine-ry
OceanDevelop
ment
PowerGene-ration
SocialInfra.
Ship-building
Corebusiness
Aim to establish a new business structure by FY2022
Collaborative business
Collaborative business
© 2019 Mitsui E&S Holdings Co., Ltd.
• Expand product lineup centered on marine & industrial machinery with the strong points of quality, price competitiveness and networks, and develop LSS business.
• The biomass power generation business of MES-E should be integrated into BURMEISTER & WAIN SCANDINAVIAN CONTRACTOR A/S (BWSC).
• BWSC Japan should expand the markets to Southeast Asia in the future, after the Japanese market.
• Establish a new organization to promote energy engineering business field(offshore FPSO, gas business, etc.).
• Cooperate with companies outside the group to enhance the competitiveness.
• Consolidate the resources related to social infrastructure should be integrated to Mitsui E&S Steel Structures Engineering Co., Ltd.(MSE) in order to launch a new company for the social infrastructure businesses .
• As the large-scaled structure construction business, the wind power mill installation business of MES-E should be integrated to the new company.
• Considering collaboration with companies outside the group to enhance the competitiveness and expand the business.
Reorganization of Shipbuilding Business
2-④.Measures for Reform of Business Structure
10
Expand the product lineup of Machinery Business
Reorganization of Power Generation Business
Reorganization of Social Infrastructure Business
※BWSC Japan:BWSC’s subsidiary in Japan
© 2019 Mitsui E&S Holdings Co., Ltd. 11
MES-M
MODEC
New Infra. OC
BWSC
Supply of Equipment & After service
Techno-Service
Power Generation
Shipbuilding
Ocean Development
Social Infra.
BridgeNew
construction・Repair
MES-S
Naval/Patrol ShipNew building・
Repair
Merchant Ship
Energyengineering
EngineIndustrialMachine Crane Robot
Expansion of product lineup
Ocean refining(Oil/ Gas)
Project composition (EPC)Ocean development plant
(FPSO / FSRWP※)
Project composition (EPC)Medium-scale power plant
(Renewable energy plant Power generation barge)
2-⑤. Organization after Reformation (at FY2022)
Focus on equipment and services related to oil, gas and renewable energy
Machinery
Collabora
tion a
nd
part
ners
hip
with o
ther
com
panie
s
Colla
bora
tion a
nd
partn
ersh
ip w
ith o
ther
com
panie
s
Power generation(Oil・Gas・Biomass)
Wind power mill
installation
Pontoon
LSS Business
※Floating Storage, Regasification, Water-Desalination & Power-Generation
© 2019 Mitsui E&S Holdings Co., Ltd.
Transfer
MITSUI E&SEngineering
(MES-E)
Civil works of power plant/the existing projects
Transfer
2-⑥. Reorganization of Engineering Business
12
Renewable energy
(Biomass)
MKE(Environment)
MPE(Chemical Plant)
Fusion and enhancement of technologies
BWSC
Renewable energy
(Wind Power) New Company
Personnel transfer after completion
MES-E will focus on the operation of MKE / MPE and the completion of the existing projects for the civil works of power plant.
After completion of the projects, we will shift such resources to the renewable energy business.
※Under direct control of MES-E president
※Reorganization of power generation business
※Reorganization of social infra. business
© 2019 Mitsui E&S Holdings Co., Ltd.
3. Business Outlook
13
© 2019 Mitsui E&S Holdings Co., Ltd.
3-①.Financial Forecast
14
単位:億円
Emphasize on probability, not a wishful thinking, but a solid plan
Focus on securing profits while sales decreased by exit from unprofitable business
FY2022Ordinary income ratioabout 4%
Paradigm change from Sales-first principle to Profit-oriented policy
FY2018(result)
FY2022(forecast)
Sales
Operatingincome
Ordinaryincome
Opera
ting incom
era
tio
Ord
inary
incom
era
tio
(100 m
illion y
en)
(100 m
illion y
en)
(100 m
illio
n y
en)
© 2019 Mitsui E&S Holdings Co., Ltd.
3-②.Financial Forecast
15
The management based on BS will replace the PL-oriented management.
単位:億円
Aiming to compress assets and to improve Total asset turnover ratio
FY2022Total asset turnover ratio
about 0.8x
Aiming to reduce interest-bearing debt to approximately 80% of FY2018 level by FY2022, and to reduce EBITDA multiple of interest-bearing debt
FY2022Interest-bearing debt EBITDA multiple
about 5.0x
FY2018(result)
Tota
lass
ets
(100 m
illion y
en)
Net
ass
ets
ratio
FY2022(forecast)
© 2019 Mitsui E&S Holdings Co., Ltd.
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
(2,000)
0
2,000
4,000
6,000
8,000
10,000
12,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Ord
inar
y In
com
e R
atio(%
)
Sale
s (1
00 m
illio
n y
en)
Roadmap from MBP17 to 2025Vision
16
Definitely target: 4% of Ordinary Income Ratio for dividendsAfter then, aim to achieve 6% in FY2025.
16In FY2025, the profitability will achieve the target of 2025 Vision, though the sales amount is forecasted as less than its original target.
3-③.History and Roadmap of Business Plans
salesRed: Mid-term target valueBlue: Target value after review
MBP17 MBP20 MBP23
Target of MBP14
MBP14
MBP14 Basis Development• Net sales: approx. 800 billion yen
• Ordinary Income Ratio: About 2%
(below each target)
MBP17 Revolutionary Change
• Sequent large losses of projects occurred
• Shipbuilding market staying sluggish
• Shifted to “Holding Company” system
• Reinforcing the financial structure
MBP20 Significant Advance
• To exit from unprofitable business
• To focus on growth businesses
• To break from sales-first principle
Target of MBP17
Target of MBP20
Revival Plan
Target of 2025Vision
FY
© 2019 Mitsui E&S Holdings Co., Ltd.
4. Schedule
17
© 2019 Mitsui E&S Holdings Co., Ltd.
We will enhance our management foundation by executing this Revival Plan.
4. Schedule
18
FY2018 FY2019 FY2020 FY2021 FY2022
Reinforcement of Financial Structure
Disposal of assets
Reduction of fixed cost
Reform of Business Structure
Enhancement of the core businesses
Reorganization of Shipbuilding Business
Reorganization of Social Infrastructure Business
Reorganization of Engineering Business
Disposal of assets
Reduction of costs
Collaboration / Reform of portfolio
Organization specialized to complete the existing civil works in power plants
Reorganization / Exit from unprofitable business
MBP17 MBP20
Building of a new production system
Short-term measure Mid-term strategy
Expansion of machinery product lineup
Business Revival Plan
Continuation
Continuation
New OC
© 2019 Mitsui E&S Holdings Co., Ltd.
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To continue working as a company trusted by society and individual through products and services we offer