Mitsubishi Heavy Industries, Ltd. (MHI) today announced its intent to book an extraordinary loss from its cruise ship business in the company's consolidated financial results for fiscal year (FY) 2013 (ending March 31, 2014).
The losses stem from the two new AIDA cruise ships under construction, which the yard said they could lose up to $580 million on.
In November 2011 MHI received an order for two large-sized cruise ships for the AIDA Cruises brand. Based on its previous experience building cruise ships, the company set up a project to facilitate prompt implementation of measures necessary for the newly ordered ships' construction. Also, the company, because it views the two ships as next-generation energy-efficient cruise vessels that will function as a prototype for the AIDA Cruises brand, accordingly allotted a proportionate amount of time to handling the pre-construction details.
The foregoing initiatives notwithstanding, as work proceeded in the actual construction phase of the project, difficulties involved in the construction of the prototype became evident. Moreover, the volume of design work relating to the cruise ships cabins and other areas has been vast and significant design changes have been made, with the combined result of a delay in the design work. Said delay has translated not only to increased design costs but also to negative factors in terms of additional material procurement, construction schedule, etc.; and these adverse influences have eroded the originally planned cost structure.
MHI has decided to book an extraordinary loss of approximately 60 billion yen, on the two vessels, as a loss provision related to the construction work in its consolidated financial results for FY2013.
MHI doesn't change the company's earnings forecasts for FY2013 announced on February 6, at this moment. Should it be determined that any revisions are necessary, the company will announce without delay.