Hitachi, Ltd. · TSE:6501
Hitachi — Investor Day (June 2019)
38 slides from Hitachi's investor day presentation, Jun 4, 2019
Slide 1: Energy Sector - Hitachi IR Day 2019
Energy Sector Hitachi IR Day 2019 June 4, 2019 Toshikazu Nishino Executive Vice President and Executive Officer Atsushi Oda Senior Vice President and Executive Officer Hitachi, Ltd.
Slide 2: Key Messages Today
Key Messages Today The expanding energy market Grow the energy business and improve earning power Expansion of the service solution business Turning into a true global player Contribution to SDGs © Hitachi, Ltd. 2019. All rights reserved. 2
Slide 3: Contents
Energy Sector Contents 1. Direction of Hitachi’s energy business 2. Business structure and market trends 3. Review of 2018 Mid-term Management Plan and Targets for 2021 Mid-term Management Plan 4. Growth strategies 5. Conclusion and matters for the creation of new values 6. Result data and terminolo
Slide 4: Paradigm Shift in the Energy Field
1-1. Paradigm Shift in the Energy Field Changes in The trend is shifting power suppliers towards renewable energy 33 trillion yen Renewable energy-related investment amount in 2018*1 Photo：Ichigo Showamura Ogose ECO Power Plant(Ichigo ECO Energy Co., Ltd.) Changes in Expansion of data center scale,
Slide 5: Expectations for the Energy Field to Achieve SDGs
1-2. Expectations for the Energy Field to Achieve SDGs Solutions to energy access and poverty problems • Over 1 billion people live without electricity in the world • Growing shortage of electricity in developing countries 63 trillion ~ 95 trillion yen/year (unstable supply) Amount required for inve
Slide 6: Hitachi's Next Step Forward by M&A in the ABB PG Business
1-3. Hitachi’s Next Step Forward by M&A in the ABB PG Business More than 1.8 billion people Over 60% 1 million companies Stable supply of energy Leads to the The number of around the world globalization goal of Hitachi Group ABB’s customers*1 (Overseas revenue ratio) Utilize the regional business Be
Slide 7: Contents
Energy Sector Contents 1. Direction of Hitachi’s energy business 2. Business structure and market trends 3. Review of 2018 Mid-term Management Plan and Targets for 2021 Mid-term Management Plan 4. Growth strategies 5. Conclusion and matters for the creation of new values 6. Result data and terminolo
Slide 8: Positioning of Energy Sector
8 © Hitachi, Ltd. 2019. All rights reserved. Defense Systems BU ＩＴ Social Infrastructure Systems BU Financial Institutions BU Energy BU Energy Nuclear Energy BU Services & Platforms BU Product Business Industry Water & Environment BU 2-1. Positioning of Energy Sector Industry & Distribution BU Healt
Slide 9: Business Structure of the Energy Sector
2-2. Business Structure of the Energy Sector Nuclear Energy Energy Business Unit Business Unit 41% Power Grid 15% 59% FY2018 Revenues Nuclear Power Plant (ABWR) Energy Sector %41 Substation, Breakers, Transformer 423.5 billion yen Services 26% Remotely Operated Control system Vehicle*1 Renewable mai
Slide 10: Growth Potential of the Markets
2-3. Growth Potential of the Markets Generation capacity in renewable energy and digitization are expanding while investment in renewable energy and grid remain strong Generation capacity Digitalization forecast Investment record Transmission and distribution Global European market grid edge area +
Slide 11: Contents
Energy Sector Contents 1. Direction of Hitachi’s energy business 2. Business structure and market trends 3. Review of 2018 Mid-term Management Plan and Targets for 2021 Mid-term Management Plan 4. Growth strategies 5. Conclusion and matters for the creation of new values 6. Result data and terminolo
Slide 12: Review on 2018 Mid-term Management Plan (Summary)
3-1. Review on 2018 Mid-term Management Plan (Summary) The adjusted operating income ratio exceeds the original target and profitability increases drastically FY2018 • Expansion of collaborative creation energy 7.5% Increased earning solution business 423.5 billion yen power • Enhanced high-value ［7
Slide 13: Review on 2018 Mid-term Management Plan (Major Achievements)
3-2. Review on 2018 Mid-term Management Plan (Major Achievements) The energy solution business and service business are growing steadily Collaborative High value-added services creation energy solution business (Problem solution type) Joint investment in wind power generation Provision of distribute
Slide 14: Target of 2021 Mid-term Management Plan
3-3. Target of 2021 Mid-term Management Plan Aim to achieve an adjusted operating income ratio of over 10% by expanding the service and solution business Over 10% Adjusted operating income ratio 7.5% Over 1,700.0 Revenues 423.5 (billion yen) Overseas revenue ratio 8% 80% ROIC (Return on Invested Cap
Slide 15: Targeted Presence (Targeted Position)
3-4. Targeted Presence (Targeted Position) Expand its energy business to become a global leader Size of circle represents Revenue : more than 1,700.0 billion JPY scale of profit. Adjusted operating income ratio : Schneider Hitachi more than 10% 10 FY2021 Mitsubishi Heavy Siemens FY2018 Industries 5
Slide 16: Contents
Energy Sector Contents 1. Direction of Hitachi’s energy business 2. Business structure and market trends 3. Review of 2018 Mid-term Management Plan and Targets for 2021 Mid-term Management Plan 4. Growth strategies 5. Conclusion and matters for the creation of new values 6. Result data and terminolo
Slide 17: Restructuring of Energy Business
4-1. Restructuring of Energy Business Innovation for a “Profitable Business,” and realizing an adjusted operating Income ratio exceeding 10% Centered on the high value-added service business and the energy solution business Transfer to and acceleration of the service solution business Concentratin
Slide 18: Energy Solution Offered by Hitachi
4-2. Energy Solution Offered by Hitachi Accelerating new innovations by a combination of ABB PG business and Lumada Collaborative creation of solutions with all the users and partners related to energy Global development using products, software, and footprints of the ABB PG Business Data OT for
Slide 19: Concentrating on Growing Fields (1)
4-3. Concentrating on Growing Fields (1) Centralizing of high value-added service businesses and energy solution business Expansion of energy solutions × Lumada Transfer to High value-added service business and acceleration of Building and N-fold multiplication of service platform using the servic
Slide 20: Concentrating on Growing Fields (2)
4-4. Concentrating on Growing Fields (2) The power grid business is expanding as a growing field Enhancement of business for industry field Expanding solution business for expanding data centers, factory electrification, and EV-related business Enhancement of the power grid business Further expans
Slide 21: Concentrating on Growing Fields (Initiative Cases)
4-5. Concentrating on Growing Fields (Initiative Cases) Steady progress on the growth business for improving customer value Power grid Energy solutions × Lumada Construction of the system that uses self- Increased inspection/maintenance work exciting converter by combining the efficiency and improve
Slide 22: Cost Structure Reform
4-6. Cost Structure Reform Promotion of business structure reform and improvement of asset efficiency Focusing on highly profitable products and services Focus on Focus on large-scale/extra-high voltage transformers, UHV in and enhancement of China and services high value-added products Expand p
Slide 23: Road Map
4-7. Road Map ～FY2018 FY2019 FY2020 FY2021 FY2022 2021 Mid-term Management Plan Acquisition of ABB PG Business Prepare for business integration Phase 1 (Establishment of joint venture company) High-value Added Services Business Strengthen Expand and develop global business Concentrating on Growing F
Slide 24: Change Factor of the Adjusted Operating Income Ratio
4-8. Change Factor of the Adjusted Operating Income Ratio Cost structure reform Concentrating on growing fields Over +0.3% 10 % +0.9% +0.5% +0.6% 7.5% (1.0)% +0.8% +0.4% Promote nuclear energy business Expand Structure power grid business reform Strengthen energy solution business and overseas expan
Slide 25: Contents
Energy Sector Contents 1. Direction of Hitachi’s energy business 2. Business structure and market trends 3. Review of 2018 Mid-term Management Plan and Targets for 2021 Mid-term Management Plan 4. Growth strategies 5. Conclusion and matters for the creation of new values 6. Result data and terminolo
Slide 26: Towards the Creation of New Value in the Energy Field
5-1. Towards the Creation of New Value in the Energy Field Open innovation in the energy field through academic-industrial collaborative creation Hitachi the University Hitachi The University of Tokyo of Tokyo Laboratory Advanced research Social innovation business Creation of vision and innovation
Slide 27: Contribution to SDGs
5-2. Contribution to SDGs Social values Environmental values Economic values Energy solutions × Lumada Grid and renewable energy solutions, energy management, energy saving and decarbonization solutions, etc. E.g. Managing 25% of the world’s substations and supplying stable energy to about 1.8 billi
Slide 28: Conclusions: Targets for FY2021
5-3. Conclusions: Targets for FY2021 Transform into a “Profitable Business,” and become a global leader Revenues Profitability (Adjusted operating income ratio) Over 1,700.0Billion yen Over 10 % ROIC Globalization (Return on Invested Capital) (Overseas revenue ratio) 7.5 % 80 % Society 5.0 Supportin
Slide 29: Contents
Energy Sector Contents 1. Direction of Hitachi’s energy business 2. Business structure and market trends 3. Review of 2018 Mid-term Management Plan and Targets for 2021 Mid-term Management Plan 4. Growth strategies 5. Conclusion and matters for the creation of new values 6. Result data and terminolo
Slide 30: FY2018 Results (Power and Energy Business)
6-1. FY2018 Results (Power and Energy Business) FY2018 FY2018 Difference FY2017 *1 FY2018*2 (Initial Forecast) (1) (2) (2)-(1) Revenues 450.9 billion yen 456.0 billion yen 423.5 billion yen (32.5) billion yen 456.6 billion yen Overseas Revenue 9% 11% 8% - - Ratio Adjusted Operating 25.6 billion yen
Slide 31: Business Forecast and Target (Energy Sector)
6-2. Business Forecast and Target (Energy Sector) Orders Received 427.3 billion yen 379.0 billion yen Order Backlog 682.6 billion yen 690.6 billion yen Overseas Revenue Ratio 8% 18% 75% 80% ROIC (Return on 5.8%*1 6.0% 7.0% 7.5% Invested Capital) Over 1,700.0 Over 1,200.0 Over 170.0 500.0 [Over 10%]
Slide 32: Revenues by Business Unit
6-3. Revenues by Business Unit FY2018 Results FY2018 FY2018 Difference FY2018 FY2017 (Initial forecast)*1 (Results)(2) (2)-(1) (Results)*2 (1) Nuclear Energy 187.5 182.0 171.6 (10.4) 171.6 Business Unit billion yen billion yen billion yen billion yen billion yen Energy 273.1 284.0 271.5 (12.5) 304.2
Slide 33: Business Forecast and Target (Nuclear Energy Business Unit)
6-4. Business Forecast and Target (Nuclear Energy Business Unit) Revenues (billion yen) 200.0 Over 180.0 171.6 Over 170.0 153.0 100.0 0.0 FY2018 FY2019 FY2020 FY2021 (Results) (Forecast) (Forecast) (Target) Including the control systems business recorded in IT segment. © Hitachi, Ltd. 2019. All righ
Slide 34: Revenue Breakdown (Energy Business Unit)
6-5. Revenue Breakdown (Energy Business Unit) Over 1,520.0 Over 1,030.0 Revenues (billion yen) Power Grid 300.0 81% 86% Business 271.5 その他 of ABB 9% 246.9 送変電 13% システム 200.0 27% 1% Others 2% Renewable 29% Energy 5% Solutions 24% 6% Business 15% Grid solutions 100.0 3% 2% Business サービス Services 40% 4
Slide 35: Terminology
6-6. Terminology ABWR : Advanced Boiling Water Reactor CAGR : Compound Average Growth Rate CCC : Cash Conversion Cycle EBIT : Earnings Before Interest and Taxes EV : Electric Vehicle GIS : Gas Insulated Switchgear GW : Giga Watt HVDC : High Voltage Direct Current IoT : Internet of Things O&M : Opera
Slide 36: Cautionary Statement
Cautionary Statement Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such “forward-looking statements” reflect management’s current views with respect to certain future events and financial
Slide 37: Hitachi Social Innovation is POWERING GOOD
Hitachi Social Innovation is POWERING GOOD
Slide 38: HITACHI - Inspire the Next
HITACHI Inspire the Next