NEWTOWN, Conn. - Thanks to strong performance in its aerospace and consumer markets, Kawasaki Heavy Industries continues to slowly improve along with world economies.
Kawasaki's consolidated net sales for the fiscal year ended March 31, 2013, fell 1 percent to JPY1,289 billion. The company posted net income of JPY30.9 billion, compared to JPY23.3 billion in 2012. The company's aerospace operations grew 16 percent to JPY239 billion, compared to JPY207 billion in 2012.
In the military aerospace sector, KHI has been focusing on the concurrent development of the P-1 and C-2 aircraft for the Japan Ministry of Defense. The P-1 effort remains on schedule, with the delivery of the first production aircraft achieved in March 2013. The C-2 program which has been beset by delays is scheduled to enter mass production in 2014. The aircraft will replace Japan's aging fleet of P-3C and C-1 aircraft. This $2.7 billion effort is Japan's first large-scale aircraft development program for either the civil or military sector in 30 years.
Although investment in these aircraft will continue to impact the bottom line for quite some time, KHI hopes to expand into commercial aviation markets. Kawasaki is studying potential commercial variants of both the C-2 and the P-1 in cooperation with Japan Aircraft Development Corp (JADC). The two civil designs are known as the YCX, a commercial freighter variant of the C-2, and the YPX, a 100- to 150-seat commercial airliner variant of the P-1. Both variants are highly speculative at the moment.
Interestingly, as Japan seeks to support its defense industry, the country has begun gradually chipping away at its ban on international arms sales. The government eased the policy somewhat in 2012 to allow for some exports and, more critically, to allow firms to jointly develop new products with foreign companies. Reports indicate that the U.K. and Japan are in the process of negotiating a deal to cooperate on six projects for joint research and/or co-development of arms. In addition, Japan is considering allowing exports of Japanese-made parts for the F-35 Joint Strike Fighter.
While such moves are welcome to Japan's sheltered defense industry, the country is expected to maintain stringent limitations that include a ban on exports that could fuel international conflicts while maintaining strict control over transferring parts to third countries. The downside is the uncompetitive nature of the domestic defense industrial base, coupled with the small batch production for Japan's military, will likely make products too pricey for foreign customers.
The biggest market driver for KHI Aerospace remains commercial subcontracting for aircraft primes Boeing and Airbus. Thanks to the record orders received by Boeing over the past few years, KHI has expanded its aerospace facilities to meet the demand of the production ramp-up on the 787 program.
Meanwhile, the company is looking to increase its workshare on Airbus programs. A win by KHI will see it supply components for the Rolls-Royce Trent XWB engine used to power the new Airbus 350 XWB. More recently, the firm has signed on to develop components for Pratt &Whitney's PW1100G-JM engine, which will power the Airbus A320neo family of aircraft. Under the auspices of Japan Aero Engines Corporation (JAEC), Kawasaki will manufacture parts of the engine's fan and low-pressure compressor. With more than 1,200 A320neo airplanes on order, the program will be a steady revenue generator for the firm.
Overall, KHI, thanks to its widely varied industries, remains in good standing as a provider of goods and services not only to Japan and the Japanese military but also to the world.
