We'd like to start Mitsubishi Heavy Industries Q1 to Q3 fiscal year 2021 financial results meeting. I will be your moderator for today, the Head of the IR and SR department. My name is Inoue. Thank you very much. First, let me introduce today's speaker. We have Director, Executive Vice President and CFO, Mr. Kozawa. Mr. Kozawa, thank you very much. First, Mr. Kozawa, the CFO, will speak about the Q1 to Q3 fiscal year 2021 financial results. After that, we'll go into a Q&A session. This meeting will end by 4:30 P.M. Thank you very much in advance for your cooperation. For today's material, we will be using the Q1 to Q3 FY 2021 financial results. This one presentation material. Please refer to this through our IR information on our website. So, Mr. Kozawa, CFO, will go into the explanation of the third quarter. The floor is yours.
Good afternoon, everybody. Thank you very much. In terms of the materials, we have already released the material, so I will skip reading the numbers and focus on the highlights and the follow-up information. First, this is the overall review. This is on page four, and then please refer to page five for the numbers and charts. Order intake increased more than 10% by JPY 256.3 billion to JPY 2,492.3 billion yen from the same period last year. Following the first quarter and the same quarter, the Plants & Infrastructure Systems and the Logistics, Thermal & Drive Systems has continued to increase strongly.
Specifically, order intake of Plants and Infrastructure Systems driven by Metals Machinery was JPY 639.1 billion for Q3, already exceeding the level of last fiscal year, which was JPY 575.2 billion. Revenue and profit at all levels went up year-over-year, showing an improvement from last year. Profit from business activities was achieved in all segments. Going to page six and seven, I will explain about the balance sheet. Total assets went up from the end of last fiscal year due to the increase of working capital, but this is normal fund movements and is trending as anticipated. Interest-bearing debt has increased from the previous year-end, but as it was not shown here, it was JPY 1,221.8 billion as of the end of the previous third quarter.
It has gone down by JPY 50 billion year-over-year. Other indicators are within the range of assumptions we have set at the beginning of this fiscal year. Going to page eight, cash flow. Operating cash flow has improved by JPY 287.7 billion year-over-year. One reason is that we saw an increase of profit as well as reduction of contract liabilities and reduced consumption of advances received. To explain more in detail, initially, we were anticipating a certain level of reduction of contract liabilities and advances received. Due to the expanding order intake of Metals Machinery, etc., we were able to book advances received and we were able to reduce the consumption of advances received. Due to this reason, operating cash flow is trending better than our initial outlook.
For investing cash flow, we have steadily proceeded on sales of real estate and cross-held stocks. As such, we are proceeding ahead of schedule while investing in growth areas. Based on the improvement of working capital and acceleration of sales of stocks, we have raised our guidance of full-year free cash flow from +JPY 0 to +JPY 100 billion. Going to page nine. This is a by-segment order intake and order backlog. Page 12 is a slide that shows this as a chart at a glance, so please refer to page 12 if necessary. As I said in the beginning, this year's order intake has substantially exceeded last year's level in Plants & Infrastructure Systems and Logistics, Thermal & Drive Systems.
The main drivers of the improvement were the Metals Machinery and Machinery Systems in Plants & Infrastructure, Logistics Systems, and HVAC and engines in the Logistics, Thermal & Drive Systems. The order intake level of these three sub-segments exceeded that of fiscal year 2019, which was before COVID-19. On the other hand, although auto-related business such as turbochargers and car air conditioning has gone up year-over-year, but the growth in itself is slowing down. Page 10 is the revenue by segment. In the Aircraft, Defense & Space segment, revenue has gone down. Shipment for Aero Structures has declined as well as decline in defense aircraft and Missile Systems, as last year's revenue in these areas were high. As for other segments, revenue recovered from the decline we saw last year due to COVID. Page 11 is the business profit by segment.
As I stated, in the outline, all segments achieved profitability. The reason the FY profit has declined in Energy Systems is that in the same period of the previous year, we booked transfer gains of JPY 83.1 billion from sales of our holdings of the JV, MHI Vestas Offshore Wind. If we exclude this gain from the previous year, business profit would have been a negative of JPY 4.7 billion. This year would actually have been an increase in profit. However, there were the initial phase issues that happened at IGCC, which we explained in the Q2 results briefing, which led to some additional costs in the third quarter. As a result, the third quarter cumulative results stood at JPY 13.8 billion.
In the Plants & Infrastructure Systems, the factor behind the increased profit is increased revenue from the Metals Machinery and organizational transformation, such as sales of the machine tool business. For Logistics, Thermal & Drive Systems segment, although I will go into detail later, demand is robust in this area as recovery from COVID-19 is proceeding. As a result, although there is an impact coming from the shortage of semiconductors and skyrocketing material costs and logistics costs, profits increase. Page 12 is in terms of the by segments situation. It's on the slide 20 onwards. Please refer to them later.
Slide 13 outlines changes in business profit year-on-year. On the far left, business profit for Q3 of fiscal 2020 was JPY 23.7 billion. Excluding SpaceJet costs, business profit was JPY 126.9 billion. Shown on the far right is actual business profit for Q1 to Q3 fiscal 2021 of JPY 80.8 billion. The reasons for the gap are described in between. Net asset variance means the difference in gain on sale of land and others between last fiscal year and this fiscal year. Last fiscal year, we had made a gain of plus JPY 43.8 billion. We don't have the numbers here, but there's a change of JPY 80.8 billion. That's the difference.
Net asset variance means the difference in gain on sale of land and others between last fiscal year and this fiscal year. Last fiscal year, we had made a gain of approximately JPY 30 billion on sale of land of former Iwatsuka plant in Nagoya in Q2. For this fiscal year, as was disclosed in October, we divested a number of properties, including Kurama ground, and the gap is JPY 8 billion. This is posted in Q3. Last year there was more, and therefore it's a decline of JPY 8 billion this quarter. The pink bar on the right showing -JPY 24 billion shows the downside from rising material and transportation costs and production cuts due to shortage of semiconductors. This has impacted mainly the Logistics, Thermal & Drive Systems segment. The blue on the right shows -JPY 24 billion.
This is an increase in profits in line with changes in revenue of Logistics, Thermal & Drive Systems and Commercial Aviation. Please understand this as mainly the recovery from COVID pandemic. The impact of COVID on Logistics, Thermal & Drive Systems and Commercial Aviation is shown on the next slide. Year-on-year, Logistics, Thermal & Drive Systems and aero-engines revenue have increased. Commercial Aviation Aero Structures carryover business revenue has decreased. As a result, impact on the profit was positive for the first two businesses and was negative for the latter business. The total was at JPY 2.24 billion. On the right is JPY 23 billion, showing the impact of changes in revenue and profit improvements in Plants & Infrastructure Systems and Energy Systems.
Regarding the effect of foreign exchange rates, the yen has tended to depreciate against both the US dollar and the euro year-on-year. Fixed cost reductions of JPY 13 billion include fixed cost reduction in Aero Structures, integration of Mitsubishi Power and divestment of machine tool business and acquisition of naval ships business. Please turn to page 14. This slide is a concise explanation of Logistics, Thermal & Drive Systems and commercial aviation-related businesses which were severely impacted by COVID-19 directly. Logistics, Thermal & Drive Systems and aero-engines are on a recovery trend, roughly in line with our initial expectations. However, even within Logistics, Thermal & Drive Systems, there are differences in the pace of recovery in automotive-related products and others.
In Commercial Aviation Aero Structures business, mainly consisting of Aero Structure supply to Boeing, revenue decreased year-over-year, during which the business had already experienced intensely negative effects from COVID-19. Production cuts by aircraft OEMs are continuing. For example, the delivery of Boeing 787, our main model, has decreased significantly to 23 units from 70 units in Q3 last fiscal year. We expect the full year total to be far below our initial forecast and also year-over-year. Slide 15 is the summary of Q1 to Q3 fiscal 2021 results. In one word, after the start of Q2
There were some negatives in some businesses and risks, but some are improving. Overall, we are making progress to achieve the full year forecast. Slide 16 to 18 shows the fiscal 2021 forecast. We are maintaining the forecast for order intake, revenue and profits. For our free cash flow, we made an upward revision of JPY 100 billion based on the progress until now and the forecast going forward. This concludes the Q3 fiscal 2021 financial results presentation. Thank you very much.
Now we would like to go into Q&A session. If you have questions, please press asterisk, and then one. When it's accepted, you will hear a voice saying, "It was confirmed." From the start of the assigning of the investor to the end of the response, the investor's voice will be unmuted. While it's unmuted, please be careful about the sound, like typing.
We will be appointing the investor to ask questions. Does anybody have any questions?
First, from SMBC Nikko Securities, Otake-san, please.
Hello, this is Oti speaking. Can you hear me? Yes, we can. Please go ahead. My first question is the third quarter results. Against your forecast of the business plan, I think it's basically in line with your forecast. In terms of the IGCC issues, they continued into the third quarter. What is your image in actual amount? How much was the impact in terms of the future outlook, what we should consider? If you look to page 13, material cost, logistics cost, the skyrocketing cost, you talked about that in the second quarter. In the third quarter, the impact seems to be widening. Against the full year forecast, how much downward pressure would that have?
Maybe these are the two negative impacts I would like to ask. In terms of the more upside, I think in terms of the aircraft business seems to be progressing well. Where this offset the downside and then be able to reach JPY 160 billion? When is the timeline? I would like to ask you about these things.
First of all, about IGCC. Let me start from IGCC. Yes, in the second quarter, like I said, that it was a considerable amount. For this quarter, not as much as the second quarter, but very close to that amount. In terms of the maybe three-digit or so is the impact in the third quarter. Unfortunately, that is additional cost that we have to consider.
In terms of the future outlook, it's not the case that, we are, you know, accounting this for bit by bit. Basically, all of the costs that we can account for, we have reflected to our results. In the fourth quarter, we think basically things will not worsen, including our expectations. Another question was about the material costs and logistics costs. Well, at the second quarter financial results meeting with the full year outlook, the JPY 25 billion, and I think basically it was about JPY 11 billion back at that time. If you look at the most recent outlook, the full year will be a negative impact of JPY 30 billion downward pressure coming from these factors. That has been reflected in our outlook.
In terms of the upside, maybe I'll be answering in the roundabout way, but if you look at each of the segments and if you look at the outlook and what I feel that each of the segments are facing right now. First, in terms of Energy. JPY 100 billion, I think within the range, I think, we are trending at the more higher range in terms of the progress in maybe in the third quarter, maybe seeing at a lower level. From my point of view, to be frank, I thought that the third quarter would be better. At least three months ago, I was expecting more to come out of Energy Systems. Compared to three months ago, basically, it is trending below our expectations.
In the fourth quarter, there are some projects that we can book sales in the fourth quarter and we have some improvements that we are making. This is number that I think we can achieve. Compared to other segments, maybe the hurdle will be higher with the Energy Systems segment. Going to the Plants & Infrastructure Systems. For here, if we look at the every year progress in the fourth quarter, we are planning to book a certain amount of sales in the fourth quarter. The fourth quarter, basically, we can anticipate some profit being booked. I think the Plants & Infrastructure Systems is progressing steadily.
In terms of the third quarter and fourth quarter, as shown, as written here, the overseas consolidation of the sites of overseas, and then including some costs related to some organizational transaction is included. In the fourth quarter, we're not anticipating further costs. I think for the Plants & Infrastructure Systems, I think we will be able to reach our targets. In terms of the Logistics, Thermal & Drive Systems, the first quarter, second quarter, we were struggling. Going into the third quarter, as I said before, the material costs and logistics cost has gone up. Even so, we have been able to reach this level. Specifically going into fourth quarter, there will be some price increases that will contribute positively to us.
For this segment, we think we can achieve our targets for this segment as well. The Aircraft, Defense & Space segment. At the third quarter, we have already, in terms of profit, exceeded the full year profit level in the third quarter already. For this segment, so we basically are taking conservative stance right now. What we are concerned about is the Aero Structures business. In terms of the Boeing 777 delivery, it is suspended right now. Going into March, whether this will come back again, I think that will be the first concern that we have to look at. In terms of the fixed cost reduction, we are taking initiatives.
That said, we're not saying it's a limit, but I think we have been reducing costs as much as we can, and maybe it will be more and more difficult to show that having a positive impact. I think we have re-reflected some risk in our outlook. I hope, frankly, I think that it'll be better than expectations, but that's roughly our outlook. Thank you.
Thank you very much for your detailed explanation. That's all for me. Thank you.
Thank you, Mr. Okabe. Next, JPMorgan, Sho Fukuhara, please.
Hello. Thank you. First, energy business, it's weaker in Q3 and IGCC. Maybe I missed to hear. You mentioned three digits, I think. I think it's less than three digits, based on my understanding. Excluding that, are there any downward factors other than that? Could you please elaborate?
The biggest is that part. If I have to say, the pace of posting in, of revenue, yeah, I was hoping that the pace would accelerate, but because of the progress of the construction, there were some postponements till Q4, so there are some delays. Numerically, that's the downward reason, sole reason. I hope that answered your question.
Yes. Thank you. One more question. In the Energy segment, gas turbine, large projects, I think you have received nine and full year 15, roughly. How is the progress? How is the order environment? Are there any changes in the environment or any comments, please?
As of now, the annual forecast is 15 units. We believe it's achievable on our normal pace. Including the financial closing and the final contract, whether it can make it on time by March or not, there are some subtle projects that may make it by March or not. There might be just small differences. Unofficial contracts, we believe we will be able to achieve this number, so there's no change in our forecast.
One last question. This is about free cash flow forecast. You have made an upward revision in Q4. Asset management is incorporated. Could you explain the background to this JPY 200 billion, if possible?
In Q4, we are expecting some real estate divestiture, but it's not such a big amount. It's not small, but it's not big either. It was very big till Q3. Free cash flow improvement is due to the advances received. Free cash flow has improved as a result, and that's one point. Another is because cross-shareholdings, we have been able to divest them smoothly. We had a lot to start with, so we have taken various measures to reduce them. Compared to before this fiscal year, we were able to sell a lot. I don't want to share any specific numbers, but just for your understanding, just for your information, just limit it to this meeting only. Likewise, JPY 100 billion or so cross-shareholdings have been sold this fiscal year.
In the beginning, we were not expecting to be able to achieve this much, but because we have been taking such moves, we have been able to push up the free cash flow.
That's all from me. Thank you very much.
From Mizuho Securities, Ito-san, please.
Hi, this is Ito from Mizuho Securities. Thank you for taking my question. I have two questions. First is about the gas turbine order intake trend. From a midterm perspective, I would like to know your view, so including your peers. There's a lot of order activities having an eye on the hydrogen consortium. Are there any of those types of orders? And you have talked about 15 units for this year. For next year, 15 units is a kind of a target that you have?
That's my first question. Oh, excuse me. How do you mean? Co-firing.
In terms of the deals that or the business negotiations that we're doing, it's not that we're going to immediately do the co-firing, but in the couple of years, we'll be able to respond to the hydrogen co-firing. In terms of the business negotiations, we have more and more those type of negotiations, specifically the Americas. Most of the cases, business negotiations is focusing on this hydrogen co-firing. However, in terms of the hydrogen co-firing or in terms of the hydrogen-fed type of firing, basically you don't have the hydrogen in the first place.
In a couple of years, co-firing using hydrogen, conducting hydrogen co-firing is the type of target that we have. This heavy-duty for the business use, the large gas turbines, 30% co-firing is already we are entering some prototype development. I think this is one of the differentiations that we can offer. In terms of talking about the 15-unit order intake, well, depending on the year, some mixed large lots will come as orders. It will be some ups and downs, but 15 units, I think basically is a level of target that we are looking at and we are going forward with our order taking activities based on that type of target.
Thank you. Another point is about the price increase.
I would like to know your take on that. I think in the beginning of the Q&A session, in terms of the Logistics, Thermal & Drive Systems, you said that the price increase is being slightly affected in the fourth quarter. You commented as such. What's its reason? What products? What type of price increase strategy are you taking? What possibilities that have in next year's outlook? Can you talk more about that?
Unfortunately, I do not know the differences by market, but in terms of the products. In terms of the Logistics, Thermal & Drive Systems segment is where the material cost is being impacted most. In terms of the price increase impact, we are hoping that it will show up mostly here.
In terms of the material cost increase, of course, it's not limited to the segment. For instance, Energy Systems for this or the Plants & Infrastructure Systems, this will be impacted as well, the material cost increases. Of course, if we're going to conduct business negotiations, we're going to reflect the price increase. Even with the contracts that we already have, we may put escalation clauses in the clauses so that we can reflect the increase of labor costs or the material costs. Basically, we have been able to pursue these type of clauses, so we're not saying that these were the impact of price increases. What I have referred to is mainly in the Logistics, Thermal & Drive Systems segment.
To add up, so the initiative to increase the price, we have been doing that from before, but we have not been able to reflect that to our transaction prices.
To be able to fully receive that impact, there is a time lag. I think in the fourth quarter you'll start to see the impact. Of course there are some of that initial impact coming from the third quarter. We think that in the fourth quarter we'll be able to even see more of this coming from our price increase activities.
Thank you very much. That's all.
Thank you, Mr. Ito.
Next, Nomura Securities, Maekawa-san, please. I thought you have a question, but you are not asking anymore. Okay. Does anybody else have any questions? If you have questions, please press asterisk and then one. If it's a device trouble, Mr. Maekawa, please press asterisk and then one again. Maekawa-san, please.
Hello, this is Maekawa from Nomura Securities.
I hope you can hear me.
Yes, we can hear you.
Thank you. Thank you for the explanation. I have two major questions. First, I would like to ask about Aircraft, Defense & Space. The cost is not clear, but compared to last fiscal year, the profit has improved very much Q on Q. The profit has increased by around JPY 9 billion. Could you explain the background to this? Especially defense seems good. Also are there any impacts coming from commercial aviation? Could you explain? This is my first question. For SpaceJet. You asked about Q3? As of Q3. Compared to Q2, there's an increase in profit by JPY 9 billion. In Q3 there seems to be an improvement. Could you explain the background to this?
As for SpaceJet, we did not disclose specific numbers, but for this fiscal year, total of -JPY 5 billion was what was the level we had expected. That's the number we have. Please understand, because we do not disclose the details and the specific numbers. Compared to Q2, Q3 is better, you said. There's no major reasons in terms of the revenue sales side compared to Q1 and Q2, Q3. Looking quarter by quarter every three months, the sales is bigger in Q3. There's an additional gross profit because of the increase in sales. Last fiscal year compared to that, it's not that there are significant difference in defense. If I have to say, then CRJ that we acquired, that's relatively strong. It's not a very big number in absolute terms, so sorry for unclear explanation.
One more question. From a different perspective, the profit is improvement. What are the factors that are doing well? Compared to what did you say? I wasn't able to hear you. Compared to the initial plan. You have already achieved the initial plan numbers in Q3. What was effective? Why were you able to achieve the profit in Q3 already?
In that sense, from that perspective, CRJ, compared to the initial forecast, performed better. Also the Aero Structures business. The number of units have declined, and we are reducing fixed costs. We are able to progress within our plan, within the range of our plan. We were able to avoid the risk that we had assumed. Decline in number of units was bigger than we had originally expected.
It was challenging. With our internal efforts, including reallocation of resources, we were able to reduce the impact.
I see. In Q3, it's not that there was any specific major reasons for the contribution to profits. Is that right?
Well, if I have to say this year or this fiscal year, there were no launch vehicle launches. But in Q3, there was a launch vehicle launch, and this was positive for us.
Okay, thank you very much. The second question. I would like to organize my thoughts about the next fiscal year. In Energy, Steam Power, steam products, you have received order for biomass. Backlog is decreasing. You have a JPY 500 billion sales plan. What is the magnitude of decrease in profit?
Would it be around 10% or would it be more decrease if the orders are not coming in? Could you explain about next fiscal year? I think you're focusing on Steam. As you pointed out, for this fiscal year compared to the sales, next fiscal year's revenue will decrease.
That's what we are assuming as well. Looking at the proportion, new plant construction will decrease and after-sales service will recover. All in all, probably the revenue size will be a decrease of a few tens of billions JPY. That's what we are assuming now. The decline will be on the new plant installation and increase will be coming from after-sales service. Looking at profit and loss, the impact to the profit itself is not that big.
Rather more than that, IGCC as well, and negative factors will be gone, and that will push up the profit and the impact from that will be bigger. That's what we are assuming.
One more question, again, about the next fiscal year. You have gain on sales of JPY 20 billion or so this fiscal year. For next fiscal year, how much asset management profit would you be able to generate? Will there be a decrease, a backlash? This is my question.
Fiscal 2020 or this fiscal year, 2021, compared to the, fiscal 2022 at least will be the gain on the sale of properties will be less. That's what we expect because last fiscal year, this fiscal year is very high. In terms of cash, we are selling shares and we are front-loading the divestiture of the shares we can do this year.
We are aggressive this year. Year on year, next fiscal year will be a bit smaller I think. Altogether, I don't know if it will be JPY 20 billion or so. The decrease will be more than JPY 10 billion. As for sales of stock, in terms of selling cross shares, there's no impact on P&L because we have IFRS. It doesn't impact profit. In terms of P&L, the profit and loss coming from the divestiture of land will be the impact. Comparing this fiscal year and next fiscal year, well, I would say the impact would be JPY 10 billion-JPY 20 billion decrease. I'm not sure. I mean, there might be some good offers and we might decide to sell. I mean, we don't know if something like that happens.
Based on our assumption, the impact would be the number that I just mentioned now. Thank you very much.
Maekawa-san, thank you very much. Next, Mitsubishi UFJ Morgan Stanley Securities, Ishizuka-san, please.
It's Ishizuka speaking from Mitsubishi. Thank you. Going to the provision of the IGCC, let me talk about that. I think in the second quarter, I think it was the issue that came up, when you were doing some kind of a experimental operation. In terms of this provision they are making this time, what would this relate to?
We have already delivered this system. There are two plants, and we have already delivered these two plants, and now they're in the operation.
There has been some instability of the operation and taking countermeasures, and there has been some components that we had to change due to this instability. That's one thing that we have conducted. To be frank, there's a guarantee in terms of the operation rate. There is a risk that we'll not be able to achieve this operation rate. That is included in the provisions.
Is this the end of this type of issues or is it going to escalate or more is going to come?
Well, to be frank, I want to believe that this is the end of these type of issues.
If you compare it to the second quarter and the third quarter, is it the same plant that you're talking about?
Well, we only have two.
Well, basically, it's the same category that we are referring to. The amount? 15 billion in the second quarter, in third quarter, is going down to about 10 billion? Well, it's just that the same issue has reduced, but another issue has come up. There's these kind of issues pop up in various locations. I want to think that this is the end, but this is a kind of a unprecedented type of project that we are engaged in. For us to say this is absolutely okay, I think we'll have to take more time to confirm about the operation of this plant. In terms of the gas turbine order intake, currently going into fourth quarter, it's basically a kind of a unofficial contract.
Basically you have to decide about the financing, part of the deal.
That's about 6, right? You're talking about 6 units.
Yes.
In terms of next fiscal year, in terms of the unofficial numbers of orders that you're looking at for Gas Turbine, how many would that be?
It's not included in orders, but basically it's close to closing the deal. It'll be double digits. That'll be for next fiscal year. Excluding the 6 units that I talk about.
In terms of the region, now well previously you talked about Russia, Asia. Are there some regional areas that you can talk about? Which regions that you are looking at?
Yeah, in terms of orders. Yes. In terms of the next fiscal year's negotiations.
Well, it's very difficult for us to refer to what's going to happen in the future. Well, in the third quarter, we have five order intakes. One is in Japan. Four, I think we have a press release. Russia. It's combined with the compressor.
Understood. In terms of the Aircraft, Defense & Space. In the quarter-over-quarter profit increase, in terms of the launch vehicles included and defense-related revenue is increasing, and defense and space volume has gone up, and then the gross profit has gone up with that. That has been the contributor. Is that the correct understanding?
I think in terms of quarter-over-quarter improvement, yes, I think that is a correct understanding. Again, the defense-related revenue is increasing.
Going into the fourth quarter, if you do the calculation in terms of the profit, it should be the same level as the third quarter in terms of profit. The fourth quarter revenue tends to be at a higher level I think. In the fourth quarter, what is the revenue outlook?
The year-end, we tend to have more revenue booked in the fourth quarter because it's the year-end. Basically, I think that will be the same trend for this fiscal year. As an expectation, to be frank, I hope that we'll be able to get more revenue than we are seeing right now.
The 787, in terms of the delivery, compared in third quarter to fourth quarter, is it going to go down or is it going to be flat?
Well, we do not disclose these numbers. It's just for your reference. Just to give you some facts. In January, we had no 787 deliveries, zero. In February, we have no plan to deliver a 787.
For January, February, zero. March, from a customer, there's some orders that request are coming. There's some couple of models that we're going to deliver. Second quarter, fourth four. March, more than four being delivered. I think it's very difficult to anticipate that happening. Whether if you're asking if it's going to increase or decrease, I think there's a high probability that we're going to see a decrease.
Thank you.
Thank you, Mr. Ishizuka. Daiwa Securities, Tai-san, please.
This is Tai. Thank you very much. I wanted to ask about Q3. Profit of 112 billion in Aircraft, Defense & Space. I don't have full understanding of that. Commercial Aviation sales, Q2, Q3 are about the same. If there are no changes there, then there must be significant improvement for defense ministry.
I don't think you'll be able to achieve this number until unless 10% profit improvement is seen. Is that the right understanding? I think you have pretty high visibility about Boeing orders. So Tier 1 Aero Structures. Maybe you're selling to other companies or are there such effects? I was wondering, how is it? Is the profit coming from Defense Ministry or?
Well, to be concise. The profit margin per quarter. Well, because many of the construction, many of the projects are based on the progress. There are some fixed contracts as well. So depending on the volume, there is difference. So the shorter the period we look at, there's more variance in profitability. Having said that, in Q3 compared to Q1 and Q2, defense profit did increase, as you pointed out. It's a considerable amount of profit in Q3.
Annualized, would this be the same annualized?
It's a very different story if you look at the full year. Let me give you one example. We have accounting based on progress and correlation forecast. Looking at the cost, we do incorporate risks. This is based on the accounting rules, and it's very technical, but if there are additional production, do we incorporate that or not? Makes a difference. Final revenue timing or very close to that timing. Total revenue or total cost may change. If that happens, if you look at just three months snapshot, the profit margin may not be accurate. For us, it's very good that it may be, it will be positive, but I wouldn't deny a situation where it would work negatively. Please keep that in mind to look at our numbers when you look at our numbers.
I'm not sure if I was able to answer your question, but.
Okay, my second question is about raw material costs. This fiscal year, JPY 30 billion or so for this fiscal year, you mentioned, I think. On slide 13, up until Q3, the progress is shown. But this is raw materials cost, transportation and shortage of semiconductors all mixed. And if possible, the impact of raw materials until Q3, how much was that? And also shortage of goods and transportation, if you can divide them into three, could you share the breakdown of this JPY 24 billion?
This is a rough answer that I will be giving you at a high level. Up until Q3, raw materials was negative JPY 8 billion. This is the breakdown of JPY 24 billion. Logistics, negative JPY 7 billion. Semiconductor, -JPY 9 billion. This is the actual.
JPY 30 billion for the full year. Materials, - JPY 11 billion. Logistics, - JPY 11 billion. Semiconductor shortage, - JPY 8 billion. Compared to up to three Qs. The final number is subtle, but we are expecting some recovery.
Last of all, my question is something totally different. In Q2, other than IGCC, you had some organizational transformation costs in metals. Q3, is there a lot of costs related to this? In Infrastructure segment, are there any one-time costs? What was the magnitude of that?
You're talking about Plants & Infrastructure Systems. Metals Machinery, there was restructuring. With the consolidation, it's not that the number of projects have increased, but the timing of posting of the cost at Q3 was double-digit or single-digit, a billion yen.
So is this like JPY 2 billion-JPY 3 billion?
Yes.
In Q4, we are not planning to post anything. If that's the case, if you proceed as is, IGCC, if there are no additions in Q4, it'll be 24-25 full year, and Plants & Infrastructure Systems is around JPY 10 billion altogether. It'd be JPY 35 billion one-off impact. There's benefit of JPY 20 billion divestiture. If everything is reversed next year, you can expect to see a profit increase by around JPY 10 billion. Are there any changes you're feeling that may generate some upside? Like your own efforts to improve profitability. Looking at some special factors, you can envision JPY 170 billion or so, but do you feel any changes where you'll be able to say 200 billion or more than that? I'm not sure if I should say the past three months.
In October, we have consolidated, integrated Mitsubishi Power, and that impact will be generated. The fixed cost perspective, many of the corporate functions have been consolidated. There are some savings. As for business, energy transition, what we are about to do, we will be shifting resources from Steam Power. We are proceeding with that. Next fiscal year, this will be accelerated more. I think efficiency can improve in various ways. Mitsubishi Power, I would like to supplement. Up until now, Yokohama building had a lot of people working there, but we have narrowed down, and we have shifted the resources to sites to operate in an integrated way and operate efficiently. We expect to see savings coming from that. At the same time, in October, Maritime Systems, this is former Mitsui E&S, part of business.
I visited the site as well, and as far as I saw, and based on the information I'm getting, I think the integration is proceeding well. People from the former business is doing well, and they are making efforts as well. We believe that we can generate impact.
Would that be JPY 30 billion or JPY 50 billion?
Probably not that much with this, but there are impacts coming in the past few months.