IHI (7013.T): Conf. Call Takeaways: 1Q in line with company expectations; full-year ¥20 bn buffer to be allocated to structural reforms; Neutral

On the morning of September 10, we hosted a conference call for domestic and international investors with IHI's Ms. Hiromi Oshima, Managing Executive Officer and General Manager of Finance & Accounting. IHI said 1Q results were in line with company guidance; the impact of the Middle East situation was barely visible in the civil aero engine business, and while construction delays affected life cycle business (LCB) projects in the land-based businesses, the company-wide impact was limited. Full-year guidance is unchanged from the initial plan and will be reassessed alongside 2Q results. The company disclosed that nearly the entire ¥20 bn risk buffer in initial guidance is expected to be allocated to structural reform costs at overseas subsidiaries in the energy business, so an upside to full-year operating profit from the buffer going unused is unlikely. In civil aero engines, maintenance costs were booked at a relatively heavy level in 1Q but should return to the full-year trajectory f