Establishing a stable earnings structure through focused allocation to the Social Innovation Business

「By focusing on providing social innovation businesses in three areas, the environment, resilience, and safety and security, we will resolve social issues and improve people’s QoL.」

「Specifically, we will strengthen the provision of solutions in areas where the Hitachi Group has strengths, including factory automation, supply chain optimization, the use of data in the public, social infrastructure, and healthcare fields, and support for work-style reform such as remote work enabled by IT.」

「The Company reviewed its business structure to accelerate its social innovation businesses and enhance customers’ social, environmental, and economic value, and has been reorganizing its business groups from the beginning of the current consolidated fiscal year.」

「Through the provision of social innovation businesses, we will enhance three types of value for customers: social value, through solutions to social issues; environmental value, including reductions in greenhouse gas emissions; and economic value, including improved business performance, thereby contributing to improving people’s quality of life.」

「To expand and strengthen its Energy Solutions business globally, the Company decided on 17 December 2018 to acquire ABB Ltd’s power grids business and entered into an acquisition agreement with ABB Ltd. The Company plans to make an 80.1% investment in the power grids business company to be spun off from ABB Ltd by the first half of 2020, making it a consolidated subsidiary. The consideration for the acquisition is expected to be US$6.4 billion (approximately ¥710.4 billion).」

「Revenue increased 3% year on year to ¥4,491.8 billion, reflecting higher revenue in the High Functional Materials segment, which includes Hitachi Chemical Co., Ltd. and Hitachi Metals, Ltd., following their acquisitions, increased European sales in the Railway Systems business, and higher revenue in the Social Infrastructure & Industrial Systems segment following the acquisition in July of the previous year of the Sullair-branded air compressor business, as well as higher revenue in the Construction Machinery segment, particularly overseas.」

「Revenue increased 8% year on year to ¥518.3 billion, due mainly to higher sales of railway systems in Europe and increased revenue in the Industrial Equipment business following the acquisition of the Sullair business. Adjusted operating profit increased by ¥7.5 billion year on year to ¥20.9 billion, despite the impact of lower average selling prices in the elevator business in China, mainly because profitability improved in the Power & Energy business and businesses serving the industrial and distribution sectors.」

「The current consolidated fiscal year marked steady progress toward the targets set out in the “2018 Mid-term Management Plan,” including an adjusted operating margin of more than 8%, profit for the year attributable to owners of the parent of more than ¥400.0 billion, and ROA of more than 5%, as the Group achieved a gear shift toward growth.」

「Operating income increased by ¥20.9 billion year on year to ¥57.5 billion, mainly due to improved profitability in businesses serving the industrial and distribution sectors, the Industrial Equipment business, and the Power & Energy business.」

「To expand its industrial businesses globally, the Company entered into a share and business transfer agreement on 25 April 2017 with Accudyne Industries Borrower, S.C.A. (“Accudyne”) to acquire the Sullair business, which was operated through Accudyne’s subsidiaries and assets and manufactures and sells Sullair-branded air compressors, primarily in North America. On 12 July 2017, the acquisition date, the Company and its subsidiary Hitachi America, Ltd. acquired the Sullair business by acquiring all shares of several holding companies comprising the business.」

「Under the “2018 Mid-term Management Plan,” the Group aims to achieve sustainable growth by leveraging its accumulated business foundations to the fullest and globally developing social innovation businesses that provide solutions through co-creation with customers in fields including Power & Energy, Industry, Distribution & Water, Urban, and Finance, Public, and Healthcare.」

「The amount of capital investment planned for the current consolidated fiscal year as of the end of the previous consolidated fiscal year, including new construction and expansion and based on additions to property, plant and equipment and investment property, was as shown in the table below as of the end of the third quarter of the current consolidated fiscal year-to-date period. Total 4,250 4,175」

「To strengthen its financial functions and accelerate the concentration of management resources on its social innovation businesses, the Company entered into an agreement on 13 May 2016 to transfer to Mitsubishi UFJ Financial Group, Inc. and Mitsubishi UFJ Lease & Finance Company Limited a portion of the common shares it held in its subsidiary Hitachi Capital Corporation, which belonged to the Financial Services segment. The transfer under the agreement was completed on 3 October 2016.」

「To expand the scope of its social innovation businesses, including by enhancing its logistics platform, the Company entered into an agreement on 30 March 2016 to transfer to SG Holdings Co., Ltd. a portion of the common shares of its subsidiary Hitachi Transport System, Ltd. (included in “Other” in the classification of reportable segments). The transfer under the agreement was completed on 19 May 2016.」

「As part of its business strategy, the Group aims to establish a stable and highly profitable business structure, primarily by strengthening its social innovation businesses. To strengthen these businesses, the Group plans to allocate management resources, including capital investment and research and development, on a focused basis, and is also investing in acquisitions and new projects.」