IHI takes ¥9 billion hit from Brazilian shipyard venture

EAS shipyard

APRIL 29, 2015 — Citing the impacts of Brazil’s corruption scandal and the drop in energy prices, Japan’s IHI Corporation said yesterday that it would record an extraordinary loss of ¥9 billion (about $75.5 million) for the fiscal year ended March 31, 2015 in relation to its 33% stake in Brazilian shipbuilder EAS (Estaleiro Atlântico Sul S.A.).

IHI said it had invested in EAS in 2013 with the goal of supplying offshore energy exploration facilities such as FPSOs (Floating Production, Storage and Offloading Systems) and that, at the time, EAS was the only Brazilian company capable of constructing large-scale offshore structures and was poised for further growth with existing orders for 7 drill ships and 20 tankers and an expectation of future orders with respect to FPSO construction projects.

“EAS’s financials and cash position, however, have weakened significantly due to, among other things, allegations of corruption in the Brazilian economy, which has interfered with EAS’s ability to obtain payments for certain overdue amounts, and the quick downturn in the Brazilian economy as a result of the drop in energy prices,” IHI said yesterday

IHI says it has been carefully considering all of its options, including the possibility of restructuring EAS, and, more broadly, has been giving careful consideration to its strategy for its offshore energy exploration-related businesses in Brazil.
It says it continues to see high potential in the Brazilian offshore energy exploration business.”Thus, for the time being,” says the company, “IHI intends to continue its business related to offshore energy exploration but to do so cautiously while at the same time seeking to minimize losses.”