Mitsubishi Heavy Projects 10% Profit Rise Driven by Robust Defence Demand

TOKYO: On Friday, Japan's Mitsubishi Heavy Industries forecasted a 9.6 per cent increase in operating profit for the year due to strong defence demand, not accounting for possible U.S. tariffs' effects, but the projections and fiscal 2024-25 earnings fell short of expectations. The firm anticipates an operating profit of 420 billion yen ($2.9 billion) for the fiscal year ending March 2026, after a 35.6 per cent rise to 383.2 billion yen in the past year. In this fiscal year, the operating profit from the aerospace and defence segment is anticipated to increase by 40 per cent. In contrast, earnings from energy systems, encompassing power generation equipment such as turbines, are estimated to rise by 17 per cent, according to the company.

Mitsubishi Heavy stated in a presentation that the forecast "excludes both upside and downside risks related to U.S. tariff policy effects." Although certain price hikes are anticipated for imported components for U.S.-made gas turbines, "we intend to reduce the direct effect via price pass-through," Chief Financial Officer Hisato Kozawa stated during a briefing. "What concerns us the most is primarily the secondary effects of economic decline, or decrease in logistics volume," said Chief Executive Eisaku Ito, noting that Mitsubishi Heavy would think about diversifying production locations. In the meantime, Ito stated that the demand for the company's power generation systems will stay strong, fueled by investments in data centres and the return of manufacturing to the U.S., a policy supported by U.S. President Donald Trump.

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For the entire 2024-25 fiscal year, revenue totalled 5.03 trillion yen, marginally surpassing the average forecast from analysts in data gathered by LSEG, while net income stood at 245.4 billion yen, falling short of the consensus estimate of 267.0 billion yen. Shares of Mitsubishi Heavy dropped over 7 per cent after the earnings report but bounced back in afternoon trading, finishing the day down 5.6 per cent on Friday. During Japan's most significant defence expansion since the war, Mitsubishi Heavy, a key producer of aircraft, missiles, and naval vessels for the Japanese military, has experienced a share price increase of over five times in the last two years.