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Mitsubishi Heavy's aviation business seen more than doubling profit

TOKYO -- Aviation is giving a lift to Japanese heavy industry companies this fiscal year thanks to brisk demand for plane parts.

     Mitsubishi Heavy Industries' commercial aviation and transport systems business is on track to generate nearly 60 billion yen ($484 million) in operating profit in the year through March, up 150% on the year and far surpassing the 45 billion yen projected at the end of July.

     Robust sales of parts used in Boeing aircraft are pushing up earnings, as are productivity improvements.

     Last fiscal year, the company supplied the main wings and rear fuselage for 98 Boeing 777s and 122 787 Dreamliners. The volume is seen increasing by a few units for each type this fiscal year. In response to the strong sales, Mitsubishi Heavy is preparing an output increase. Efficiency enhancement measures that went into full swing late last fiscal year will widen margins, too. The company had been processing parts in Aichi Prefecture and assembling them in Hiroshima Prefecture. But the company is shifting to handling everything in Hiroshima.

     Aircraft parts are sold in dollars, so the yen's sharper-than-expected decline against the greenback is amplifying earnings, too.

     The mainstay energy and environment business is likely to fall short of the earnings forecast made at the end of July -- which projects a 5% increase in operating profit to 170 billion yen -- due in part to troubleshooting costs at some power generation facilities. But with the aviation segment offsetting the negative impact, the company is still seen attaining its overall operating profit target of 320 billion yen, up 8%.

     The aviation businesses of other heavy industry companies are also doing well.

     Operating profit in Kawasaki Heavy Industries' aerospace segment is likely to jump 21% to 44 billion yen. The company upgraded its initial forecast by 3 billion yen at the end of October. Sales of forward and center fuselages have been brisk, as have landing gear wheel wells to Boeing and other private-sector customers. And efforts to cut costs are paying off, too.

     IHI's aerospace and defense business is expected to see a 19% increase in operating profit to 47 billion yen. The segment, which supplies engines and engine parts to both Boeing and Airbus, is seen generating the bulk of the 50 billion yen group operating profit forecast by the company.

     Aircraft demand is expected to continue growing as the number of air travelers increases in emerging markets and elsewhere. Airlines order aircraft with a long-term view so demand is somewhat insulated from economic fluctuations.

     The Japanese companies, highly reputed for their technology, work with Boeing and Airbus from the development stage, limiting the risk of price competition.

(Nikkei)

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