Kawasaki Heavy Industries ((JP:7012)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call from Kawasaki Heavy Industries presented a mixed sentiment, with notable advancements in Aerospace and Energy Solutions. However, challenges in other segments, such as Powersports & Engine, along with foreign exchange losses, painted a less favorable overall financial outlook.
Improved Full-Year Profit Forecast
Kawasaki Heavy Industries has raised its full-year business profit forecast to JPY 43 billion, a JPY 3 billion increase from previous estimates. This improvement is attributed to enhanced profitability in the Aerospace Systems and Energy Solutions & Marine Engineering segments, aided by a weaker yen.
Energy Solution & Marine Engineering Growth
The Energy Solution & Marine Engineering segment experienced significant growth, reporting a JPY 7.3 billion year-on-year increase. This was largely due to substantial contributions from ship and offshore structure projects and Energy Marine machinery businesses.
Operating Cash Flow Improvement
The company’s operating cash flow saw a JPY 15.1 billion improvement from the previous year. This was mainly due to better collection of receivables in the Powersports & Engine segment.
Hydrogen Business Achievements
Kawasaki’s hydrogen business marked significant milestones, including participating in the Dakar rally with hydrogen-fueled engine vehicles, achieving fourth place in the Mission 1000 category, and winning the Masuda Award for a 100% hydrogen-fueled dry combustion gas turbine.
Significant Losses and Decrease in Business Profit
The company faced considerable financial challenges, with a loss before income taxes of JPY 17.9 billion and a loss attributable to owners of the parent company at JPY 13.4 billion. Business profit also decreased sharply by JPY 80.1 billion to JPY 0.7 billion compared to the previous year.
Powersports & Engine and Precision Machinery Challenges
There was a significant year-on-year decrease in profit in the Powersports & Engine segment due to heightened sales promotion and recall expenses in the U.S. The Precision Machinery & Robot segment also suffered due to stagnant inventory and decreased demand in China.
Foreign Exchange Losses
Foreign exchange losses amounted to JPY 10.8 billion in the third quarter, primarily due to the valuation of hedges of foreign exchange contracts.
Free Cash Flow Deterioration
Free cash flow deteriorated by JPY 12.6 billion from the previous year. This was driven by increased expenditures for acquiring fixed assets and a JPY 27.8 billion increase in cash outflow from investing activities.
Forward-Looking Guidance
Looking ahead, Kawasaki Heavy Industries forecasts a full-year business profit of JPY 43 billion, an increase from earlier predictions. Despite this positive revision, expectations for income before taxes and net income remain unchanged due to anticipated losses from hedge valuation. The third quarter saw orders totaling JPY 1,290.1 billion and revenue of JPY 1,229 billion. The company is focused on enhancing asset efficiency and meeting its fiscal targets, maintaining its dividend forecast.
In conclusion, the earnings call highlighted a blend of optimism and caution. While improvements in certain segments offer hope, significant losses and foreign exchange challenges underscore the need for strategic adjustments. Investors and stakeholders will closely watch how Kawasaki Heavy Industries navigates these mixed financial waters in the coming quarters.
