Investing in Japan: Mitsubishi Heavy Industries provides solutions to a broad range of industries

Its aerospace business and “Space Jet” were hit hard by COVID-19

Mitsubishi Heavy Industries, Ltd. manufactures and sells heavy machinery worldwide.　 Starting with ship building, the company provides solutions to a broad range of industries from railways and other transportation systems to the energy sector and space development.

Although headquartered in Tokyo, Mitsubishi Heavy Industries also has factories for its aerospace projects in the Chubu region where many aerospace related companies are located and occupying 50% of share in Japan's aircraft parts and products market. 

Mitsubishi Heavy Industries has been in a difficult business environment recently. The new coronavirus pandemic decreases the profits of the company’s mainstay aircraft parts business. The company is reviewing the development plan for the jet passenger plane "Space Jet," which was originally called "Mitsubishi Regional Jet (MRJ)" as a 90-seat aircraft. It plans to reduce significantly future investment for the project. 

Space Jet project has started in 2008. It was a major project aimed at fostering the Japanese aircraft industry, with the government subsidizing the development cost of 50 billion yen. However, due to various problems during development, the delivery of the first aircraft, which was initially planned in 2013, has been significantly delayed. In February, Mitsubishi Heavy Industries announced that it would postpone its delivery target to 2021 or later. The flight test is not scheduled yet at this moment so the delivery time will be further delayed. 

In addition, profits in the aviation industry deteriorated significantly due to the pandemic causing orders from airline carriers, the main customers of Space Jet, to decrease and some investors worry that they may even postpone the purchase. 

As for the power sector such as turbine manufacturing for thermal power generation, which earned about 60% of the company's profit in the fiscal year ended March 2020, project schedules are delaying at home and abroad due to the influence of the global infections. There is another concern that the business performance of the sector will deteriorate amid global decarbonization trend.

UAE made history for the Arab World with H2A rocket launched by Mitsubishi Heavy Industries

For these reasons, Mitsubishi Heavy Industries' consolidated net income for the year ended March 2020 decreased by 21% from the previous year to 87.1 billion yen. The slowdown in the aircraft parts business, which is considered to be a pillar of the company’s earnings gave downward presser to its financial results. 

The production of Boeing, whose aircrafts house main wing parts manufactured by Mitsubishi Heavy Industries has particularly large share. Boeing's medium-sized aircraft "787" has a high Japanese component supply ratio of 30%, and the reduction in production by Boeing instantly lead to less profits of related Japanese companies. 

As for financial results for April – June 2020, Mitsubishi Heavy Industries posted quarterly loss of 57,902 million yen and predicts no profit for the entire year ending March 2021 in its consolidated business. Even in these difficult situations, there are great expectations for Mitsubishi Heavy Industries' high technology in the aerospace industry. 

Mitsubishi Heavy Industries launched the first Mars probe by United Arab Emirates on July 20. So far Mitsubishi Heavy Industries has successfully launched 45 times in a row, including the UAE probe. The success rate for launching the H2A rocket used for this time and the H2B, the same generation rocket combined is 98%, which is higher than the world standard of 95%.  Mitsubishi Heavy Industries will further expand its space business with such high technology and excellent track record.