TOKYO -- Mitsubishi Heavy Industries said on Monday that it returned to profitability in the April-June fiscal first quarter, as the Japanese industrial conglomerate aims to stage a turnaround from the COVID-induced aviation crisis.
Mitsubishi Heavy, the developer of Japan's first commercial jet program and the subcontractor of Boeing and Airbus, is one of the hardest hit Japanese manufacturers amid the COVID crisis. In October, the company decided to freeze the SpaceJet commercial jet program.
The company now looks to its mainstay business of energy to get itself out of the slump. Mitsubishi Heavy is the leading gas turbine maker along with General Electric and Siemens.
Three-month operating balance turned to a profit of 21.4 billion yen ($195 million) from a year-ago loss of 71.3 billion yen, as sales increased 9.5% to 851.7 billion yen. For the year through March, the Tokyo-based company predicts its operating profit will nearly triple to 150 billion yen.
A three-year business plan, announced in October, calls for the company to raise the operating profit margin to 7% in fiscal 2023, up from 1.5% in fiscal 2020. Profit margin had been depressed in recent years by the costs of developing the SpaceJet and acquiring the aircraft maintenance and repair operations from Bombardier.
Mitsubishi Heavy now bets that demand for hydrogen and ammonia will grow in the coming years as a new fuel for thermal power generation, as the world shifts away from coal and gas. Hydrogen and ammonia, which is a compound of hydrogen and nitrogen, do not produce heat-trapping carbon dioxide when they are burned.
Making hydrogen power a reality requires development of infrastructure for supply networks from production to distribution.
Other new business areas Mitsubishi Heavy is looking at include: artificial intelligence to manage demand and supply for electricity; carbon capture technologies; hydrogen-based steelmaking; and cold chain monitoring systems.
More traditional businesses are also expected to rebound, including turbochargers and compressors, as the global economy recovers. Turbochargers are widely used in automobiles, while compressors are key components in air conditioners and refrigerators.
Cost-cutting remains a key driver of profit growth. After reducing the workforce for the SpaceJet program to less than a tenth, Mitsubishi Heavy has restructured its shipbuilding business to focus on warships and sold off an automotive gear unit to motor maker Nidec this year.