Engineering The Future

We would like to express our sincere gratitude to our shareholders for their constant support of the Company and the Group.
Fiscal 2010 is the final year of the JGC Group’s medium-term management plan, “Scenario 2010,” which aims at transforming JGC into a Group that meets the needs of all its customers by engineering the future.
Culminating in fiscal 2010, the entire JGC Group is united in working to achieve the goals of “Scenario 2010.”

Third Highest Level of Net Income Achieved in Fiscal 2009
In fiscal 2009, the year ended March 31, 2010, the support of shareholders and customers, as well as the hard work of everybody in the Group, helped JGC to report consolidated net sales of ¥414.2 billion, operating income of ¥41.9 billion, and net income of ¥27.1 billion, attaining the third highest level of net income in the company’s history. As a result, JGC was able to pay shareholders an annual dividend of ¥21.0 per share, as planned. As for new contracts, a total of ¥733.5 billion was achieved amidst a severe competitive environment.
Our forecast for fiscal 2010 is for consolidated net sales of ¥500.0 billion, operating income of ¥47.0 billion, and net income of ¥33.0 billion, and we plan on paying a full-year dividend of ¥30.0 per share. We have set a target for orders of ¥500.0 billion, and will do our best to achieve this target.
In fiscal 2009, there was a strong sense of uncertainty at first in the engineering market due to a decline in the economic viability of new capital investment plans resulting from the drop in crude oil prices in the wake of the financial crisis that occurred in the US in September 2008, which caused customers to take a wait-and-see stance with respect to decisions on investments, expecting plant costs to fall.
However, as crude oil recovered from $40 per barrel at the start of the year to around $70, the economic viability of capital investment projects improved, and there was also a sense that overall plant costs were no longer falling, so projects related to oil and natural gas development, and to petroleum refining and petrochemicals, especially in the Middle East and North Africa, moved to the execution phase.
JGC made sure it maximized such market changes, winning orders for large-scale gas processing projects in Algeria and Abu Dhabi and a large-sized LNG project in Australia by the end of September, and since the value of orders won reached ¥490.0 billion by the second quarter, the full-year consolidated target was raised from ¥500.0 billion at the start of the term to ¥700.0 billion. JGC continued to make its presence felt in its areas of strength, natural gas and LNG, thereafter, winning an LNG project order in Papua New Guinea, and we were able to exceed the revised target.
Meanwhile in the engineering and construction (E&C) market, emerging engineering contractors from South Korea and Europe made a full-scale entry into international bidding for downstream areas such as Middle East petroleum refining and petrochemicals by using low cost as a lever. Together with the traditional Japanese, US, and
European engineering contractors, including JGC, this marked the arrival of an era of severe cost competition.

Customers to Maintain Development Investments
Especially in Upstream Areas in Fiscal 2010
We are forecasting that the E&C market in fiscal 2010 will see an amount of investments executed equal to that of fiscal 2009, especially in upstream areas. We believe that natural gas development will further expand in the Middle East. The reasons for this are the transition to large-scale production in the region for natural gas-based petrochemicals, and the rising demand for natural gas-powered electricity generation and water desalination driven by increasing population and urbanization. In addition, projects to newly install and expand petroleum refining plants, including exports of products having high cost competitiveness, are being planned.
In Southeast Asia and Oceania, demand for natural gas is growing rapidly, not only among major consumers such as China and India but also in Indonesia, Thailand, Singapore, and Malaysia, and we forecast that new LNG
projects will take shape in Australia. We believe one factor that will accelerate this trend is the depletion of existing gas fields in Indonesia. Meanwhile, within Japan, we forecast that the pharmaceutical industry will plan for investment in the biochemicals field, especially in custom-made antibodies.

E&C Business to Focus on Realizing Plant Costs Suited to Customer Needs and
Strengthening Non-Price Competitiveness
JGC intends to concentrate all of its efforts in fiscal 2010 on coming out ahead in severe cost competition and attaining our order target of ¥500.0 billion. We will continue efforts to realize plant costs that match customer needs in all phases of project execution, such as pursuing strict economical design, procuring equipment that meets customer specifications, and utilizing construction subcontractors that can deliver on both performance and cost competitiveness. We also plan to have our overseas engineering subsidiaries zealously pursue more contracts for small- and medium-sized local projects. We will also continue to work on strengthening nonprice competitiveness based on enhanced technology, such as entry into the floating LNG field, development of the small- and medium-sized LNG plant concept, highpressure CO₂ recovery, new propylene manufacturing, and upgrading low-grade coal.
To date, JGC has carried out enterprise investment business in areas where we are able to leverage the technological capabilities we have accumulated through the E&C business, and in countries and regions where we have experience, such as the water desalination and power generation businesses, emissions credits trading and resource development. In fiscal 2009, there were major developments in the water business in particular, including participation in a seawater desalination project in Tianjin, China, as well as investment in Ebara Engineering Service Co., Ltd. and joint acquisition of an Australian water business company in fiscal 2010. We plan to continue with our investment business, especially in the areas of infrastructure and the environment in the Middle East, North Africa, and Asia, and we would like to be further involved in the businesses of power generation and water desalination, including photovoltaics (PV) and concentrated solar power (CSP), water, utilization of low-grade coal, and urban and regional development.
JGC will maintain E&C as its core business even while aiming to become a “Standout Engineering Enterprise” that can help customers in the enterprise investment business and a wide range of other business fields based on the current Scenario 2010 medium-term plan, for which fiscal 2010 will be the final year. We plan to announce our next medium-term management plan around fall to winter 2010.

We ask our shareholders for your continued support and guidance.

July 2010