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Japan's biggest defence firms report ‘steady' military sales

Japan’s biggest defence contractors have all reported sharp declines in group revenues and earnings for fiscal year (FY) 2020–21, although defence-sector sales have stayed reasonably strong.

Mitsubishi Heavy Industries (MHI), Kawasaki Heavy Industries (KHI), and the Subaru Corporation have all said in separate statements that the Covid-19 pandemic has had a major adverse effect on their widely diversified business operations.

In defence, the three companies lead many of Japan’s most high-profile programmes including projects to build fighter aircraft, transport aircraft, submarines, and next-generation helicopters. The three companies all indicated that defence-related revenues have not been badly hit by Covid-19.

MHI – Japan’s biggest defence company in terms of sales – said its group revenues in FY 2020–21 declined year on year (y/y) by 8% to JPY3.69 trillion (USD34 billion) and its net profit fell 53% to JPY40.6 billion. MHI’s Aircraft, Defense, and Space (ADS) business segment reported revenues of JPY702.1 billion, a y/y decline of 0.4%, and losses of JPY94.8 billion. ADS losses in FY 2019–20 were JPY208.7 billion.

MHI attributed ADS losses mainly to Covid-19-related downturns in the commercial aerospace industry. The corporation added that despite the losses ADS saw an increase in FY 2020-21 in revenues related to “defense aviation and missile systems” but did not elaborate. MHI’s biggest defence programmes include the assembly of Lockheed Martin F-35 fighter aircraft.

KHI group revenues for FY 2020FY 2020-21 21 were JPY1.48 trillion, a y/y decline of 9%, with overall losses of JPY19.3 billion. KHI’s Aerospace Systems division registered a 29% fall in sales to JPY377.7 billion and operating losses of JPY31.6 billion. Its Ship and Offshore Structure unit posted an 11% y/y increase in sales to JPY79.4 billion but losses of JPY3 billion.

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