Tokyo, April 25, 2016 - Mitsubishi Heavy Industries, Ltd. (MHI) hereby announces its intent to book an extraordinary loss from its cruise ship business in the company's consolidated financial results for fiscal year (FY) 2015 (ending March 31, 2016).
1. Background to the extraordinary loss
In November 2011 MHI received an order for two large-sized cruise ships for the AIDA Cruises brand. Due to difficulties in construction of the prototype ship, the Company booked extraordinary losses of 64.126 billion yen in its consolidated financial results for fiscal year 2013 (ending March 31, 2014) and 69.534 billion yen for fiscal year 2014 (ending March 31, 2015).
Due to design changes in the construction phase and the need to address faults found in the final stages, delivery of the first ship was delayed and the Company booked an extraordinary loss of 53.061 billion yen in the third quarter of fiscal year 2015.
In the fourth quarter of fiscal year 2015, the Company made finishing touches to the ship before delivery, installed the ship's control systems and it underwent final inspections. However, the ship is fitted with cutting-edge equipment and resulting work took longer than we expected, there were more faults in main engines, and in addition to noise reduction measures requested by the customer during sea trials, fires broke out onboard. In the end the ship was not delivered until the middle of March, 2016.
Furthermore, due to the first ship's delayed delivery and adjustments made resulting from customer feedback, the construction phase of the second ship has been significantly impacted.
As a result of the above, the Company has booked additional extraordinary loss of 50.850 billion yen for the fourth quarter of fiscal year 2015.
The overall extraordinary losses throughout fiscal year 2015 amount to 103.911 billion yen.
2. Impact on FY2015 earnings forecast
The impact of the extraordinary loss has been factored into the "Revisions of FY2015 Consolidated Financial Results Estimates," released separately today (April 25, 2016).