Mitsubishi Heavy forecasts 10 per cent profit growth this year on strong defence demand

Japan's Mitsubishi Heavy Industries on Friday projected a 9.6 per cent growth in operating profit for the year on robust defence demand, while excluding the potential impact of US tariffs, though the outlook and fiscal 2024-25 earnings missed estimates.

The company expects an operating profit of 420 billion yen ($2.9 billion) for the financial year to March 2026, following a 35.6 per cent jump to 383.2 billion yen in the previous year.

In the current fiscal year, operating profit from the aerospace and defence segment is expected to grow 40 per cent, while earnings from energy systems - including power generation equipment like turbines - are projected to rise 17 per cent, the company said.

The forecast, "does not include upside or downside risk from US tariff policy impact," Mitsubishi Heavy said in a presentation.

While some cost increases are expected for imported parts for US-made gas turbines, "we plan to minimize direct impact through price pass-through," Chief Financial Officer Hisato Kozawa told a briefing.

"What worries us the most is rather the secondary impacts of economic downturn, or reduction in logistics volume," Chief Executive Eisaku Ito said, adding that Mitsubishi Heavy would consider diversifying production sites.

Meanwhile, Ito said the demand for the company's power generation systems will remain resilient, driven by investments in data centres and the reshoring of manufacturing back to the US, a policy championed by US President Donald Trump.

For the full 2024-25 year, revenue came in at 5.03 trillion yen, slightly above analysts' mean estimate in data compiled by LSEG, but net income was at 245.4 billion yen, below the consensus estimate of 267.0 billion yen.

Mitsubishi Heavy's shares fell more than seven per cent following the earnings release but recovered in afternoon trading, closing down 5.6 per cent on Friday.

Amid Japan's largest post-war defence buildup, Mitsubishi Heavy, a major manufacturer of jets, missiles and naval ships for Japanese forces, has seen its shares surge more than fivefold over the past two years.

(Reporting by Kantaro Komiya; Editing by Mrigank Dhaniwala and Sherry Jacob-Phillips)