IHI Corporation

Business Details

Composed of three pillars: the prime mover business centered on land-based power plants and marine engines, the carbon solutions business including boilers and storage facilities, and the nuclear equipment business. Provides manufacturing, sales, EPC, and lifecycle services for power generation and energy infrastructure both domestically and internationally. Against the backdrop of rising energy security concerns and the decarbonization trend, the segment is also expanding into next-generation energy fields such as building an ammonia value chain. Positioned as a "core business" of the IHI Group, it functions as a stable source of cash generation.

Recent Overview

In FY2026 (ending March 2026), both revenue and profit declined significantly year on year, and impairment losses also increased

In the Resources, Energy & Environment segment for FY2026 (ending March 2026), revenue was ¥376,720 million (versus ¥411,463 million in the prior fiscal year) and segment profit was ¥5,959 million (versus ¥16,136 million in the prior fiscal year), with both revenue and profit declining significantly year on year. In addition, impairment losses surged to ¥2,970 million (versus ¥282 million in the prior fiscal year), suggesting a decline in profitability of certain assets. Note that, in a correction disclosure dated May 25, 2026, the depreciation and amortization figure for the Social Infrastructure segment in the prior fiscal year (FY2025, ended March 2025) was corrected; there is no change to the figures for this segment itself.

Key Products

Growth Drivers

• Expanding demand for prime movers and power generation equipment amid rising awareness of energy security
• Orders and progress on large-scale power plant projects in emerging markets, primarily in Southeast Asia
• Medium- to long-term expansion of the Carbon Solutions Lifecycle Business (LCB)
• Progress in developing decarbonization technologies such as ammonia gas turbines toward commercialization
• Expected recovery in demand for nuclear equipment amid renewed attention to nuclear energy

Risks

• Risk of temporary revenue decline due to a gap between Carbon Solutions LCB projects
• Risk of deteriorating profitability at overseas consolidated subsidiaries (such as Carbon Solutions overseas subsidiaries)
• Costs and trust-recovery risks associated with a quality issue related to improper conduct in engine test-run records in the prime mover business
• Uncertainty in the energy market due to geopolitical risks and changes in U.S. policy
• Risk of deteriorating construction profitability due to rising material prices and labor costs
• Risk of declining profitability of certain assets, as indicated by the increase in impairment losses

Business Details

A business segment handling Bridges & Floodgates, Transportation Systems, Shield Systems, Concrete Building Materials, and other offerings. Note that, from the current consolidated fiscal year, the reporting segment for Urban Development has been changed from Social Infrastructure to Others. The segment's main markets are national resilience programs and demand for maintenance and repair of aging infrastructure, and it operates mainly for domestic public infrastructure. Key affiliated companies include IHI Infrastructure Systems, IHI Infrastructure Construction, and Terratec Limited, with operations both domestically and overseas.

Recent Overview

Revenue continued to decline even after transferring Urban Development to Others, but the segment turned profitable

Following the change of the Urban Development reporting segment from Social Infrastructure to Others starting in FY2026 (ending March 2026), the prior-year comparative figures have also been restated (transferring external revenue of ¥16,174 million, segment profit of ¥13,684 million, segment assets of ¥151,625 million, depreciation of ¥6,288 million, and capital expenditures of ¥15,242 million). On a restated basis, revenue declined from ¥139,736 million to ¥129,642 million, while segment profit/loss turned positive, moving from △¥4,242 million to ¥3,727 million. Note that, per the correction dated May 25, 2026, the prior fiscal year's depreciation was revised from ¥9,903 million to ¥3,615 million, and the Others column was revised from ¥1,753 million to ¥8,041 million.

Key Products

Growth Drivers

• Expanding demand for maintenance, repair, and renewal of bridges and floodgates driven by the continued national resilience program
• Expanding opportunities for the lifecycle business amid an accelerating shift toward preventive infrastructure maintenance
• Strengthened competitiveness and global expansion through the integration of IHI Infrastructure Systems and IHI Infrastructure Construction
• Improved productivity and order competitiveness through labor-saving, automation, and digital transformation initiatives

Risks

• Impact on construction schedules and profitability from severe labor shortages in the construction sector and overtime work limit regulations
• Structural decline in revenue due to the transfer of businesses such as Concrete Building Materials and Transportation Systems
• Costs related to addressing improper conduct in the Transportation Systems business (snow removal equipment) and risk of delayed trust recovery
• Deteriorating construction profitability due to the persistent rise in material prices and labor costs
• Risk of fluctuations in revenue and profit due to gaps in construction progress on large-scale projects such as bridges and floodgates
• Reduced ability to absorb fixed costs due to the smaller business scale following the transfer of the Urban Development segment

Business Details

Provides manufacturing, sales, and services for Vehicular Turbochargers, Parking (Mechanical Parking Systems), Rotating Machinery (Compressors, Separators & Marine Turbochargers), Heat & Surface Treatment, transport machinery, Logistics & Industrial Systems (Logistics Systems & Industrial Machinery), and more. It offers a diverse product lineup for domestic and international industrial customers and is positioned as a "core business" of the IHI Group responsible for generating stable cash flow. Against the backdrop of carbon neutrality initiatives and labor-saving needs, the company is concentrating management resources on businesses with expected medium- to long-term market growth. Key affiliated companies include IHI Transport Machinery Co., Ltd., IHI Hauzer Techno Coating B.V., and Indigo TopCo Limited, with a broad network of group companies both domestically and overseas.

Recent Overview

Revenue declined, but segment profit margin improved significantly from 2.2% to 6.8%

Revenue for FY2026 (ending March 2026) was ¥450,526 million (versus ¥484,852 million in the prior fiscal year), representing a decline, while segment profit expanded approximately 2.9-fold to ¥30,778 million (versus ¥10,800 million in the prior fiscal year), with the profit margin improving significantly to 6.8%. The transfer of certain businesses as part of business portfolio reform may have contributed to the decline in revenue. Impairment losses increased to ¥3,794 million (versus ¥616 million in the prior fiscal year). Note that the prior fiscal year's depreciation and amortization figures were corrected in connection with the reclassification of the Urban Development segment, with the Social Infrastructure segment's figures being revised (no change to this segment's figures).

Key Products

Growth Drivers

• Expanding demand for vehicular turbochargers and improved price pass-through (particularly in the Asian and North American markets)
• Improved profitability in the parking business (maintenance and renewal demand for mechanical parking systems)
• Expanding opportunities in the logistics and industrial systems business amid growing needs for logistics automation and labor-saving
• Scale expansion through the transfer of Sumitomo Heavy Industries Transport Systems' mechanical parking business (effective expected November 2025)
• Expansion of aftermarket services in heat & surface treatment and rotating machinery amid growing carbon-neutrality needs
• Concentration of management resources on more profitable businesses through business portfolio reform

Risks

• Risk of medium- to long-term decline in demand for vehicular turbochargers due to the progress of EV adoption (particularly in the European market)
• Uncertainty in market conditions due to economic slowdown in China and Europe and changes in the international supply chain
• Cost pressure from the persistent rise in material prices and labor costs
• Temporary decline in revenue due to business portfolio reform (transfer of transport machinery, lawn care equipment, and other businesses)
• Reputational risk and compliance response costs associated with an antitrust violation finding in the mechanical parking systems business
• Risk of deteriorating profitability of certain assets, as indicated by the increase in impairment losses (¥3,794 million in FY2026 (ending March 2026))

Business Details

Composed of three businesses: aero engines (development, mass production, and aftermarket maintenance of best-selling commercial engines ranging from small to large classes), Rocket Systems & Space Utilization (including satellite constellations), and Defense Equipment Systems. The main customer is the International Aero Engines Association (Japan). Positioned as a "growth business" in the medium-term management plan "Group Management Policies 2023," this segment is a core driver of profit growth for the entire group. Segment revenue for the current fiscal year (including intersegment transactions) of ¥651,718 million accounts for 40.5% of the total of reportable segments, representing a substantial year-on-year increase of 17.3%.

Recent Overview

Revenue expanded 17.3% year on year to ¥651,718 million, while segment profit declined 8.4% year on year to ¥112,429 million

In FY2026 (ending March 2026) (the current consolidated fiscal year), revenue for the Aero Engine, Space & Defense segment (including intersegment transactions) achieved substantial growth to ¥651,718 million (versus ¥555,704 million in the prior fiscal year). Meanwhile, segment profit declined to ¥112,429 million (versus ¥122,791 million in the prior fiscal year). Capital expenditures continued at an aggressive pace, reaching ¥49,082 million (versus ¥38,609 million in the prior fiscal year). Note that the prior fiscal year figures are on a restated basis reflecting the change in the Urban Development reporting segment (from Social Infrastructure to Others). In addition, a change in the method of recording selling, general and administrative expenses has affected profit for the current period.

Key Products

Growth Drivers

• Medium- to long-term expansion of the aftermarket (spare parts sales and maintenance) for commercial aero engines
• Order and revenue growth in the defense business against the backdrop of substantial increases in the defense budget
• Growth in the space industry market (including satellite constellations)
• Accelerated capture of parts repair demand through the new repair building at the Tsurugashima Plant (scheduled to begin operations in FY2026)
• Improved productivity and increased production capacity through automation and advanced digital transformation

Risks

• Continued increase in maintenance costs and compensation expenses associated with the PW1100G-JM engine additional inspection program
• Profit pressure from increased maintenance costs for commercial aero engines
• Rising production costs due to supply chain disruptions and inflation
• Uncertainty in the business environment due to geopolitical risks such as policy changes following the change of administration in the United States
• Impact on profit from the change in the method of recording administrative department costs (recorded as SG&A expenses) in the aero engine, space, and defense business
• Impact on revenue and profit from foreign exchange fluctuations (yen depreciation/appreciation)

Business Details

The "Others" segment is composed of businesses not included in the reportable segments (Resources, Energy & Environment; Social Infrastructure; Industrial Systems & General-Purpose Machinery; and Aero Engine, Space & Defense). It includes the Inspection & Measurement Business, Urban Development (Real Estate Sales & Leasing), and Trading & Services, and encompasses companies such as IHI Escube, IHI Trading, IHI Business Support, IHI Inspection & Instrumentation, and Toyosu Energy Service, as well as overseas locations such as IHI Europe Ltd. and IHI INC. A notable feature is the profit contribution from Equity-Method Investments (Japan Marine United, etc.).

Recent Overview

Segment profit expanded significantly, up 113% year on year to ¥35,881 million, driven by a surge in equity-method investment gains

In the "Others" segment for FY2026 (ending March 2026), revenue from external customers saw modest growth to ¥53,254 million (up 5.6% year on year), while segment profit surged approximately 2.1-fold year on year to ¥35,881 million (versus ¥16,829 million in the prior fiscal year). The primary driver was a substantial increase in equity-method investment income to ¥8,644 million (versus ¥5,030 million in the prior fiscal year). Note that, per the correction dated May 25, 2026, the prior fiscal year's (FY2025, ended March 2025) depreciation and amortization figures were reclassified between the Social Infrastructure segment and the Others segment, with the Others segment's depreciation figure revised from ¥1,753 million (pre-correction) to ¥8,041 million. Segment assets declined significantly to ¥259,774 million from ¥349,917 million at the end of the prior fiscal year.

Key Products

Growth Drivers

• Increased profit contribution from equity-method affiliates (JMU, etc.) (FY2026 (ending March 2026): ¥8,644 million, up 71.8% year on year)
• Maintenance and expansion of segment scale through the reclassification of the Urban Development business from the Social Infrastructure segment
• Steady performance in the manufacturing, sale, and services of the inspection & measurement business
• Global service deployment through overseas locations (IHI Europe Ltd., IHI INC., etc.)

Risks

• Potential decrease in future equity-method investment income due to the partial transfer of equity in an equity-method affiliate (JMU) (voting rights ratio declining from 35% to 20%)
• Inherent risk of fluctuations in real estate market conditions for the urban development business
• Relatively large swings in profit given the segment's small overall revenue scale (approximately 3.2% of group revenue)
• Risk of reduced orders during economic downturns, as the inspection & measurement business depends on capital expenditure trends among customer industries
• Potential changes in segment composition as the group's business portfolio reform progresses