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Japan’s Three Heavy-Industry Leaders: FY2026 Financial Comparison
A five-year comparison of Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and IHI.
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The FY2026 full-year results of Japan’s three major heavy-industry companies—Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and IHI—are now available. This article compares their five-year trends side by side using only earnings releases and XBRL data published on TDnet. The conclusion is clear: although all three companies share a common trend of rising revenue, they have diverged significantly in the structure of their cash generation and in capital efficiency.
Over the four years from FY2022 to FY2026, the three companies’ combined revenue increased from ¥6,533.9 billion to ¥8,928.7 billion, while Business Profit (Operating Profit) expanded from ¥287.4 billion to ¥742.8 billion. Revenue growth remained in the single digits annually, whereas profit growth exceeded 20% per year. The data indicate that the heavy-industry sector has entered a phase in which earnings are being generated through profitability rather than volume.
| Indicator | FY2022 | FY2023 | FY2024 | FY2025 | FY2026 |
|---|---|---|---|---|---|
| Revenue | 6,533.9 | 7,281.2 | 7,828.8 | 8,783.2 | 8,928.7 |
| Business Profit (Operating Profit) | 287.4 | 357.5 | 258.6 | 669.7 | 742.8 |
| Business Profit Margin | 4.4% | 4.9% | 3.3% | 7.6% | 8.3% |
| Profit attributable to owners of the parent | 201.3 | 227.9 | 179.1 | 446.1 | 601.1 |
| Capital Expenditures (Capex) | — | 190.8※ | 240.4※ | 436.6 | 374.5 |
| Operating Cash Flow | 544.0 | 158.5 | 424.8 | 856.9 | 1,203.9 |
※Because IHI’s Capital Expenditures (Capex) were unavailable for FY2022–FY2024, the figures represent the combined total for two companies.
The decline in Business Profit to ¥258.6 billion in FY2024 was primarily caused by IHI recording a one-year Business Profit loss of ¥70.1 billion. The detailed composition of the loss cannot be identified from the available data. However, IHI recovered sharply to ¥143.5 billion in FY2025, suggesting that the decline was not structural.
The most notable figure is FY2026 Operating Cash Flow of ¥1,203.9 billion. This was 3.2 times the combined Capital Expenditures (Capex) of ¥374.5 billion, implying that more than ¥800 billion remained after absorbing investment. As discussed below, however, the source of this ample cash generation was not profit alone.
The four-year CAGR was calculated using the following formula.
CAGR = (FY2026 value ÷ FY2022 value)^(1/4) - 1| Indicator | Mitsubishi Heavy | Kawasaki Heavy | IHI | Three Companies Combined |
|---|---|---|---|---|
| Revenue CAGR | +6.5% | +11.4% | +8.8% | +8.1% |
| Business Profit CAGR | +28.2% | +33.4% | +19.4% | +26.8% |
| Net Income CAGR | +30.8% | +49.2% | +25.0% |
Kawasaki Heavy leads in revenue growth, with an annual rate of 11.4%, but Mitsubishi Heavy is overwhelmingly larger in absolute profit. Mitsubishi Heavy’s FY2026 Business Profit of ¥432.2 billion was approximately three times Kawasaki Heavy’s and 2.6 times IHI’s. In contrast, IHI recorded the highest growth in net income, at +42.8%. However, IHI’s earnings growth benefited from a low FY2026 Effective Tax Rate of 10.9%; the difference between net-income growth and pretax-profit growth of +33.9% can be attributed to this lighter tax burden.
For Mitsubishi Heavy, reported revenue declined from ¥5,027.1 billion in FY2025 to ¥4,974.1 billion in FY2026, while the XBRL year-on-year tag, ChangeInNetSales, indicates +14.1%. The two figures diverge. Because the margin calculations are consistent with the ¥4,974.1 billion shown in the table, this article uses the reported absolute figure as the basis for its ratio analysis. However, the discrepancy may reflect segment reclassifications or changes in presentation, and this limitation should be noted.
| Indicator | Mitsubishi Heavy | Kawasaki Heavy | IHI |
|---|---|---|---|
| Gross Profit Margin, FY2022 | 17.0% | 17.1% | 17.9% |
| Gross Profit Margin, FY2026 | 21.8% | 19.7% | 23.1% |
| Improvement | +4.8 pt | +2.6 pt | +5.2 pt |
| Operating Profit Margin, FY2022 | 4.2% |
IHI posted the largest improvement in Gross Profit Margin, at +5.2 percentage points, and its FY2026 margin of 23.1% was the highest among the three companies. Although IHI has the smallest revenue scale, it generates the highest value added per unit of revenue.
Kawasaki Heavy, by contrast, showed considerable volatility. Its Gross Profit Margin fell to 16.9% in FY2024 and its Operating Profit Margin dropped to 2.5%, before recovering sharply to 20.3% and 6.7%, respectively, in FY2025. The Gross Profit Margin eased to 19.7% in FY2026, as cost of sales increased to ¥1,856.3 billion, up 9.3% year on year, outpacing revenue growth of 8.5%. Kawasaki Heavy has the highest earnings-margin volatility of the three.
Mitsubishi Heavy’s Selling, General & Administrative Expenses ratio declined by 1.6 percentage points, from 14.3% to 12.7%. This was not merely a ratio effect: expenses also fell in absolute terms by ¥84.1 billion, from ¥716.9 billion to ¥632.8 billion. The decline in absolute expenses despite broadly flat revenue suggests that the company may have made progress in restructuring its cost base. However, the possible impact of the aforementioned classification changes cannot be ruled out, so a definitive conclusion would be premature.
Order intake and order backlog for heavy-industry companies are not stored in XBRL and therefore cannot be analyzed directly. As an alternative indicator, this article examines the difference between Contract Assets, which are recognized as work progresses, and Contract Liabilities, which are advance-payment-related obligations. A negative difference, meaning that Contract Liabilities exceed Contract Assets, indicates a business structure in which cash is received before the company fulfills its performance obligations.
| FY2026 (¥ billion) | Mitsubishi Heavy | Kawasaki Heavy | IHI |
|---|---|---|---|
| Contract Assets | 1,019.1 | 199.7 | 104.9 |
| Contract Liabilities | 2,161.8 | 386.8 | 311.4 |
| Difference | -1,142.6 | -187.1 | -206.5 |
| Difference / Revenue | -23.0% | -8.1% |
Mitsubishi Heavy’s excess Contract Liabilities expanded 4.9-fold, from ¥231.5 billion in FY2022 to ¥1,142.6 billion in FY2026. In the single year from FY2025, the balance increased by ¥490.5 billion. Contract Liabilities were equivalent to 43.5% of revenue, representing advance payments roughly equivalent to five months of annual revenue on a simple calculation. This suggests favorable order conditions for large, long-lead-time projects. However, the balance also incorporates the costs required to fulfill the contracts before the amounts are recognized as future revenue, meaning it can become a profitability risk if costs rise.
IHI’s Contract Assets declined from ¥126.5 billion in FY2022 to ¥104.9 billion in FY2026, while Contract Liabilities increased from ¥214.7 billion to ¥311.4 billion, causing the difference to expand 2.3-fold. The decline in Contract Assets is consistent with a reduction in unbilled revenue recognized under percentage-of-completion accounting—in other words, an improvement in the collection cycle. Kawasaki Heavy’s difference-to-revenue ratio was the lowest among the three, at -8.1%, indicating relatively low reliance on advance payments.
| Indicator | Mitsubishi Heavy | Kawasaki Heavy | IHI |
|---|---|---|---|
| Inventory Turnover Days, FY2026 | 76 days | 130 days | 112 days |
| Five-year range | 76–77 days | 130–146 days※ | 100–112 days |
| Inventories / Revenue | 20.9% | 35.6% | 30.7% |
| Capex / Revenue, FY2025 | 4.8% |
※Kawasaki Heavy’s FY2022 figure is shown as 19 days, but its Inventories of ¥78.6 billion are discontinuous with the ¥690.4 billion and higher levels reported from FY2023 onward. The figure was therefore excluded from the range because it is believed to reflect differences in accounting standards or classification.
Mitsubishi Heavy’s Inventory Turnover Days remained remarkably stable at 76–77 days throughout the five-year period. Maintaining inventory days at a constant level while revenue increased 1.29-fold demonstrates discipline in production and procurement management.
IHI’s Inventory Turnover Days, by contrast, lengthened by 12 days, from 100 days in FY2025 to 112 days in FY2026. Inventories increased 13.6%, from ¥444.0 billion to ¥504.2 billion, while revenue grew by only 1.0%. At the same time, Capex-to-revenue remained the highest among the three companies, at 5.9%. This suggests that capacity expansion and advance inventory accumulation are occurring in parallel. If this reflects preparations for higher production, the inventory may convert into future revenue; if collection is delayed, however, it could place pressure on working capital.
Kawasaki Heavy’s 130 days is the longest absolute level, but the figure has declined for four consecutive years from 146 days in FY2023, indicating an improving direction.
Free Cash Flow in this article is calculated as Operating Cash Flow plus Investing Cash Flow. For Mitsubishi Heavy in FY2026: ¥942.6 billion + (-¥49.1 billion) = ¥893.4 billion.
| FY2026 (¥ billion) | Mitsubishi Heavy | Kawasaki Heavy | IHI |
|---|---|---|---|
| Operating Cash Flow | 942.6 | 140.0 | 121.3 |
| Operating Cash Flow / Revenue | 19.0% | 6.1% | 7.4% |
| Capital Expenditures (Capex) | -181.0 | -95.9 | -97.6 |
| Investing Cash Flow | -49.1 |
Mitsubishi Heavy’s Operating Cash Flow-to-revenue ratio of 19.0% substantially exceeded its Operating Profit Margin of 8.7%. The increase in Contract Liabilities accounts for this gap.
Increase in Contract Liabilities = 2,161.8 - 1,443.9 = ¥717.9 billion → Ratio to Operating Cash Flow of ¥942.6 billion = 76.2%Of Mitsubishi Heavy’s FY2026 Operating Cash Flow of ¥942.6 billion, the ¥717.9 billion increase in Contract Liabilities represented 76% on a simple comparison. In other words, the company’s record cash generation depended substantially not only on the quality of its earnings but also on the working-capital inflow from customer advances. Once the increase in Contract Liabilities levels off, Operating Cash Flow could converge toward the level of Business Profit. Cash and cash equivalents doubled from ¥657.8 billion to ¥1,334.8 billion, reaching 16.1% of total assets.
Kawasaki Heavy’s cumulative Free Cash Flow over five years was only ¥29.6 billion. Against cumulative Operating Cash Flow of ¥488.5 billion, Investing Cash Flow continued to be negative, with outflows of ¥406.4 billion from FY2023 through FY2026. The company therefore remains unable to fully fund its growth investments through internally generated cash. Free Cash Flow was negative in FY2023 and FY2024, consistent with positive Financing Cash Flow and external funding during those years. Although FY2026 Free Cash Flow was positive at ¥12.0 billion, it was below Total Shareholder Returns (cash) of ¥25.9 billion, suggesting that distributions depended on liquidity on hand or external funding.
IHI generated Operating Cash Flow of ¥121.3 billion against restrained Investing Cash Flow of -¥18.4 billion, producing Free Cash Flow of ¥102.9 billion. Nearly all of this amount was used for debt repayment and shareholder returns through Financing Cash Flow of -¥97.8 billion. The company’s priority on strengthening its financial position is clear.
| FY2026 | Mitsubishi Heavy | Kawasaki Heavy | IHI |
|---|---|---|---|
| ROE | 12.2% | 13.7% | 28.4% |
| ROE, FY2022 | 7.7% | — (JGAAP) | 19.3% |
| Equity Ratio | 37.3% | 26.4% | 26.9% |
| Net D/E | — | — |
ROE is calculated using average equity. A DuPont decomposition reveals the source of the differences among the three companies.
ROE = Net Income Margin × Total Asset Turnover × Financial Leverage Mitsubishi Heavy: 6.7% × 0.67 × 2.75 = 12.2% Kawasaki Heavy: 4.7% × 0.73 × 4.01 = 13.7% IHI: 9.8% × 0.70 × 4.12 = 28.4%IHI’s ROE of 28.4% is supported by the combination of the highest net-income margin among the three companies, at 9.8%, and the highest financial leverage, at 4.12 times. However, the high margin must be discounted for the temporary impact of its 10.9% Effective Tax Rate. If IHI had been taxed at a rate closer to the average for the three companies, its ROE would have been correspondingly lower. Even so, Net D/E nearly halved from 0.59 times in FY2022 to 0.31 times in FY2026, while the Equity Ratio improved by 6.6 percentage points, from 20.3% to 26.9%. Leverage is therefore moving from dependence on borrowing toward normalization through capital accumulation.
Kawasaki Heavy’s ROE of 13.7% reflects a structure in which low profitability—a net-income margin of 4.7%—is supplemented by financial leverage of 4.01 times. Its Equity Ratio improved by only 3.0 percentage points over the four years from FY2023, to 26.4%, leaving it with the thinnest financial base of the three. Mitsubishi Heavy has the most stable balance sheet, with an Equity Ratio of 37.3%, but its lower leverage results in ROE of 12.2%. Nevertheless, its ROE increased by 4.5 percentage points from 7.7% in FY2022, making the improvement high quality because it was led by profitability.
All three companies carried out stock splits within the most recent five-year period. As a result, direct comparisons of EPS, BPS, and dividends using the reported figures without adjustment are not meaningful.
Stock-split detection: Mitsubishi Heavy carried out an approximately 1-for-10 split in FY2024, Kawasaki Heavy an approximately 1-for-5 split in FY2026, and IHI an approximately 1-for-7 split in FY2026, as estimated from changes in shares outstanding. Mitsubishi Heavy’s FY2023 EPS of ¥388.43 appears to plunge to ¥66.07 in FY2024, but this is a consequence of the split; on a split-adjusted basis, EPS increased from ¥38.84 to ¥66.07. The table below converts the figures to each company’s latest share-count basis.
| Company | FY2022 | FY2023 | FY2024 | FY2025 | FY2026 |
|---|---|---|---|---|---|
| Mitsubishi Heavy | 33.8 | 38.8 | 66.1 | 73.0 | 98.9 |
| Kawasaki Heavy | 26.1 | 63.3 | 30.3 | 105.1 | 129.4 |
| IHI | 62.8 |
| FY2026 | Mitsubishi Heavy | Kawasaki Heavy | IHI |
|---|---|---|---|
| BPS | 919.2 | 1,050.6 | 615.2 |
| BPS, FY2022, adjusted | 469.6 | 572.3 | 360.9 |
| Per-share dividend, adjusted | 25.0 | 34.2 | Approx. 20.0※ |
| Dividend Payout Ratio | 25.3% | 26.4% |
※IHI’s FY2026 dividend was unavailable in the provided data. The approximate figure is calculated backward from the Dividend Payout Ratio of 13.2% and EPS of ¥151.88.
BPS increased by 1.7 to 2.0 times from FY2022 at all three companies, showing that accumulated earnings have steadily been reflected in net assets. Mitsubishi Heavy’s split-adjusted dividend increased for five consecutive years, from ¥10.0 to ¥13.0, ¥20.0, ¥23.0, and ¥25.0. Its Dividend Payout Ratio remained in the 25%–34% range. The FY2026 ratio was the lowest in five years at 25.3%, but this reflected EPS growth of 35%; the company continued to raise its dividend.
Kawasaki Heavy’s Dividend Payout Ratio of 26.4% and DOE of 3.6% exceed Mitsubishi Heavy’s levels. However, as noted above, Total Shareholder Returns (cash) of ¥25.9 billion exceeded Free Cash Flow of ¥12.0 billion. The sustainability of these returns therefore depends on future cash-generation capacity. IHI’s Dividend Payout Ratio of 13.2% was notably the lowest, while its DOE of 3.7% was the highest. This reflects the fact that returns on equity appear high when equity is relatively thin; viewed against earnings, the company appears to retain a comparatively large share of profit internally.
Data note: Mitsubishi Heavy’s Total Shareholder Returns (cash) are shown as ¥0.1 billion for FY2026, almost identical to its Share Repurchases / Buybacks of ¥0.01 billion. This strongly suggests that dividend payments may not be included in the relevant tag. The company’s actual distribution should therefore be assessed using its Dividend Payout Ratio of 25.3% and DOE of 3.1%. Kawasaki Heavy’s and IHI’s Total Shareholder Returns (cash) of ¥25.9 billion and ¥21.2 billion, respectively, are consistent with figures that include dividends.
Because cumulative quarterly results were not included in the available data, progress against the next-year forecasts cannot be calculated reliably. Instead, this section compares FY2026 actual results with the following-year forecasts to identify the growth rates embedded in each company’s outlook.
| Item | Mitsubishi Heavy | Kawasaki Heavy | IHI |
|---|---|---|---|
| FY2026 actual revenue (¥ billion) | 4,974.1 | 2,311.2 | 1,643.4 |
| Next-year revenue forecast (¥ billion) | 5,400.0 | 2,560.0 | 1,830.0 |
| Change | +8.6% | +10.8% | +11.4% |
| FY2026 actual Business Profit (¥ billion) | 432.2 |
IHI presents the most interesting case. It expects Business Profit to rise sharply by 45.0%, from ¥165.5 billion to ¥240.0 billion, while net income is forecast to increase by only 2.5%. This divergence is consistent with an assumption that FY2026’s Effective Tax Rate of 10.9% will normalize. In FY2026, pretax income was ¥185.4 billion and income taxes were ¥20.2 billion. If the tax rate returns to the 20% range, the increase in Business Profit will not be fully reflected in net income. In other words, IHI’s FY2026 net income of ¥160.9 billion should be viewed as having benefited from a tax-related uplift.
Kawasaki Heavy is also conservative, forecasting revenue growth of 10.8% but net-income growth of only 1.8%. In FY2026, Equity Method Income/Loss of ¥24.1 billion and Finance Income of ¥21.6 billion supported earnings. The conservative forecast may reflect caution regarding the repeatability of these non-operating items. Mitsubishi Heavy is the only company forecasting net-income growth of 14.4%, above its revenue growth forecast of 8.6%.
The following discussion goes beyond the scope of the provided data and is a qualitative assessment based solely on implications that can be inferred from the financial figures.
Defense-related business: The rising trend in Contract Liabilities common to all three companies may indicate increasing advance payments for long-lead-time projects. Mitsubishi Heavy’s Contract Liabilities of ¥2,161.8 billion, equivalent to 43.5% of revenue, may reflect the accumulation of multiple large, multi-year projects. However, business-segment breakdowns were not included in the available data, so the contribution of the Defense & Space business cannot be isolated quantitatively.
Gas Turbine and energy demand: The 4.8-percentage-point improvement in Mitsubishi Heavy’s Gross Profit Margin over four years may reflect a higher mix of high-margin projects related to electricity demand. Capex-to-revenue declined from 4.8% in FY2025 to 3.6% in FY2026, suggesting that the company may have moved beyond the initial investment phase of capacity expansion.
Aircraft engines: IHI’s Inventory Turnover Days lengthened to 112 days, while Capex-to-revenue remained at approximately 6% for the second consecutive year. This is consistent with long-term production preparations and the accumulation of component inventories. Kawasaki Heavy’s Equity Method Income/Loss also increased from ¥11.3 billion in FY2024 to ¥23.1 billion in FY2025 and ¥24.1 billion in FY2026. This may indicate greater earnings contributions from joint-venture businesses, although the specific businesses cannot be identified from the available data.
The financial data portray three distinct profiles within the same heavy-industry category: Mitsubishi Heavy, which leads in scale and cash depth; Kawasaki Heavy, which leads in growth but has a thinner financial base; and IHI, which stands out in profitability and capital efficiency but leaves room for further verification regarding earnings quality. Looking ahead, the key measures of sustainability will be Mitsubishi Heavy’s Operating Cash Flow after Contract Liabilities stabilize, the consistency between Kawasaki Heavy’s Free Cash Flow and shareholder returns, and IHI’s earnings level after tax-rate normalization.
This article is for informational purposes only, based on publicly available financial data (TDnet XBRL filings). It is intended as a financial analysis resource and does not constitute investment advice.
| +31.5% |
| FY2026 Revenue YoY | -1.1% | +8.5% | +1.0% | +1.7% |
| FY2026 Net Income YoY | +35.3% | +22.9% | +42.8% | +34.7% |
| 3.1% |
| 6.9% |
| Operating Profit Margin, FY2026 | 8.7% | 6.3% | 10.1% |
| Improvement | +4.5 pt | +3.2 pt | +3.2 pt |
| Selling, General & Administrative Expenses Ratio, FY2022 | 14.4% | 14.0% | 15.1% |
| Selling, General & Administrative Expenses Ratio, FY2026 | 12.7% | 14.2% | 14.8% |
| -12.6% |
| Contract Liabilities / Revenue | 43.5% | 16.7% | 18.9% |
| Difference, FY2022 | -231.5 | — (unavailable) | -88.1 |
| 4.6% |
| 6.0% |
| Capex / Revenue, FY2026 | 3.6% | 4.2% | 5.9% |
| -128.0 |
| -18.4 |
| Free Cash Flow | 893.4 | 12.0 | 102.9 |
| Financing Cash Flow | -274.5 | -33.2 | -97.8 |
| Share Repurchases / Buybacks | -0.01 | -0.03 | -1.3 |
| Five-year cumulative Free Cash Flow | 1,773.3 | 29.6 | 375.8 |
| 0.31x |
| Effective Tax Rate | 24.5% | 21.0% | 10.9% |
| Equity attributable to owners of the parent (¥ billion) | 3,088.5 | 878.1 | 652.2 |
| 42.1 |
| -64.4 |
| 106.4 |
| 151.9 |
| 13.2% |
| DOE | 3.1% | 3.6% | 3.7% |
| 145.1 |
| 165.5 |
| Next-year Business Profit forecast (¥ billion) | — (not disclosed) | — (not disclosed) | 240.0 |
| FY2026 actual net income (¥ billion) | 332.1 | 108.1 | 160.9 |
| Next-year net-income forecast (¥ billion) | 380.0 | 110.0 | 165.0 |
| Change | +14.4% | +1.8% | +2.5% |