Hitachi, Ltd. · TSE:6501

Hitachi — Investor Day (June 2018)

34 slides from Hitachi's investor day presentation, Jun 8, 2018

1. Slide 1: Hitachi IR Day 2018: Industry / Distribution / Water Field

   Industry / Distribution / Water Field Hitachi IR Day 2018 June 8, 2018 Masakazu Aoki Executive Vice President and Executive Officer General Manager of Industrial Equipment Management Division Hitachi, Ltd. Chairman of the Board Hitachi Industrial Equipment Systems Co., Ltd. © Hitachi, Ltd. 2018. All

2. Slide 2: Introduction: Scope of Business in Charge

   Introduction [Scope of Business in Charge] Masakazu Aoki Executive Vice President and Executive Officer Hitachi, Ltd. Chairman of the Board Hitachi Industrial Equipment Systems Co., Ltd. Industry / Distribution / Water Power / Urban Finance / Field Energy Social / Healthcare Front Industry & Water D

3. Slide 3: Overview of Industry & Distribution Field

   お客さま Overview of Industry & Distribution Field Providing digital solutions with the strength of Products × OT × IT Industry Distribution Maintenance / Service Needs (Smart Manufacturing) (Smart Logistics) (Smart Maintenance) Stable, efficient and optimized production Advanced logistics Higher mainte

4. Slide 4: Progress of the 2018 Mid-term Management Plan

   Progress of the 2018 Mid-term Management Plan  Creating synergy by Acquisition of Products × OT × IT Sullair  Obtaining customer base (e.g. North America) Expansion of  Strengthening with IoT platform Lumada digital solution  Collaborative creations with customers business mainly in the manufact

5. Slide 5: Toward the 2021 Mid-term Management Plan

   Toward the 2021 Mid-term Management Plan To be the Best Solution Partner for Customers in the Industry and Distribution Field  Provide products and digital solutions totally  Approach wide range of customers which have been accumulated by product and maintenance businesses Growth strategy  Expand

6. Slide 6: 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

7. Slide 7: Hitachi: Inspire the Next

   HITACHI Inspire the Next

8. Slide 8: Industrial Products Business Unit Business Strategy

   Industrial Products Business Unit Business Strategy Hitachi IR Day 2018 June 8, 2018 Masakazu Aoki Executive Vice President and Executive Officer General Manager of Industrial Equipment Management Division Hitachi, Ltd. Chairman of the Board Hitachi Industrial Equipment Systems Co., Ltd. © Hitachi,

9. Slide 9: Contents

   Industrial Products Business Unit Business Strategy Contents 1. Business Overview and Analysis of Current Status 2. Business Strategy 3. Business Performance Trends 4. Conclusion © Hitachi, Ltd. 2018. All rights reserved. 9

10. Slide 10: 1-1. Business Overview

    1-1. Business Overview Strong product business that contribute to industrial needs Resources and Energy Life Sciences Industry and Distribution Social Infrastructure Oil & Gas, Mining, Pharmaceuticals, Manufacturing, Water & Sewage, New Energy Food, Daily Goods Distribution, e-Commerce Roads, Railwa

11. Slide 11: 1-2. Positioning within the Hitachi Group

    お客さま 1-2. Positioning within the Hitachi Group Providing digital solutions with the strength of Products × OT × IT Industry Distribution Maintenance / Service Needs (Smart Manufacturing) (Smart Logistics) (Smart Maintenance) Stable, efficient and optimized production Advanced logistics ) Higher main

12. Slide 12: 1-3. Progress of 2018 Mid-term Management Plan

    1-3. Progress of 2018 Mid-term Management Plan Mass-production business: Accelerating global expansion of recurring business*1 with investment for growth Build-to-order business: Reviewing business scale and priority areas and improving profits, strengthening the base for regrowth Common: Strengthen

13. Slide 13: Contents

    Industrial Products Business Unit Business Strategy Contents 1. Business Overview and Analysis of Current Status 2. Business Strategy 3. Business Performance Trends 4. Conclusion © Hitachi, Ltd. 2018. All rights reserved. 13

14. Slide 14: 2-1. Market Trends and Measures

    2-1. Market Trends and Measures Strengthen approach to growing markets and sectors Nominal GDP by major regions* Priority markets (Unit: 1 trillion dollars) [Comparison with 2012] 5.6 Japan [119%] North Large-scale market with stable growth 5.1 24.6 Europe [127%] America Increasing demand for IoT so

15. Slide 15: 2-2. Vision

    2-2. Vision Strong product business that contribute to industrial needs  Expand priority businesses and accelerate global expansion Basic (recurring businesses) policy  Expand service and solution businesses by Products × OT × IT  Resource concentration and strategic investment in growing busines

16. Slide 16: 2-3. Business Portfolio

    2-3. Business Portfolio Expanding priority businesses and accelerating global expansion Enhancement  Accelerating growth by combining organic growth and alliances policy - Expansion of priority businesses and focusing on priority regions (North America and China) - （億円) ■ Revenues (by business) ■Ov

17. Slide 17: 2-4. Growth Strategy for Air Compressor Business (1)

    2-4. Growth Strategy for Air Compressor Business (1) Air compressor business revenues to exceed 100 billion yen in FY2018 Maximize Sullair & Hitachi synergies Enhance product line-up and regional complement (North America and China) Expand customer base and strengthen sales networks Optimize global

18. Slide 18: 2-4. Growth Strategy for Air Compressor Business (2)

    2-4. Growth Strategy for Air Compressor Business (2) Obtain new customers through acquisition of Sullair (US market examples) Strengthen expansion to “Products × digital solutions” by obtaining excellent customers Materials and resources Service and entertainment industries Rentals and retails chann

19. Slide 19: 2-4. Growth Strategy for Air Compressor Business (3)

    2-4. Growth Strategy for Air Compressor Business (3) Obtain new customers through acquisition of Sullair (China market examples) Strengthen expansion to “Products × digital solutions” by obtaining excellent customers Car manufacturing plants Oil & Gas EV manufacturing plants Mining (copper) © Hitach

20. Slide 20: 2-4. Growth Strategy for Air Compressor Business (4)

    2-4. Growth Strategy for Air Compressor Business (4) Aiming for the superior position in the connected product business Realize Smart Maintenance through proposals for maintenance and services Communication functions mounted as standard FitLive service Own terminal devices and connection services Co

21. Slide 21: 2-5. Growth Strategy for Marking System Business

    2-5. Growth Strategy for Marking System Business Expanding business domain and accelerating global growth strategy Obtaining major customers by expanding product portfolio Gaining new customers by launching new products through Sullair’s sales network Expanding product portfolio Strengthening self-d

22. Slide 22: 2-6. Business Strategy for Drive / Automation (1)

    2-6. Business Strategy for Drive / Automation (1) Developing high value-added customer products through collaborative creation Strengthening built-in type products attributes: Realize downsizing, higher efficiency, and quicker responding machines and devices Contributing to Hitachi Group’s priority

23. Slide 23: 2-6. Business Strategy for Drive / Automation (2)

    2-6. Business Strategy for Drive / Automation (2) Developing high value-added customer products through collaborative creation Strengthening built-in type product capabilities: more robust, more compact machines and devices and more advanced control Contributing to Hitachi Group’s priority businesse

24. Slide 24: 2-6. Business Strategy for Drive / Automation (3)

    2-6. Business Strategy for Drive / Automation (3) Integrate control (OT) and data (IT) via IoT controllers Market trend*1 Industrial IoT devices*2 are rapidly increasing: 3 billion units in FY2016 9.5 billion in FY2021 (CAGR 26%) Optimized production utilizing IoT controllers Example (Process Line)

25. Slide 25: 2-7. Expansion of IoT Solution Business (1)

    2-7. Expansion of IoT Solution Business (1) Strengthening expansion of product-led IoT / digital solutions Enhance initiatives for IoT solutions Smart Manufacturing Expand robot/Automation SI business Customer case (machining tool manufacturer) AMADA HOLDINGS CO.,LTD. T876 Factory, Toki Works Interl

26. Slide 26: 2-7. Expansion of IoT Solution Business (2)

    2-7. Expansion of IoT Solution Business (2) Strengthen expansion of product-led IoT / digital solutions Enhance initiatives for IoT solutions Smart Logistics Expand robot / Automation SI business Customer case (Distribution center) MonotaRO Co., Ltd. Achieving higher level of distribution center Kas

27. Slide 27: 2-8. Strengthen Cash Generation and Cost Strategy

    2-8. Strengthen Cash Generation and Cost Strategy Improve operation efficiency expense Mass Improve productivity per capita, Improvement point (comparison with FY2015) SG&A production reduce fixed costs 10 8.6 Build-to-order Reduce fixed costs by promoting Gross profit margin 6.8 production indirect

28. Slide 28: Contents

    Industrial Products Business Unit Business Strategy Contents 1. Business Overview and Analysis of Current Status 2. Business Strategy 3. Business Performance Trends 4. Conclusion © Hitachi, Ltd. 2018. All rights reserved. 28

29. Slide 29: 3-1. Business Performance Trends

    3-1. Business Performance Trends 売上収益 Revenues (Unit:（単位：億円） Billion yen) Acquisition of Sullair Acquisition of +11.8 395.0 372.3 Sullair +38.8 369.3 Foreign 344.4 Foreign Foreign Expanding exchange exchange exchange priority / global (7.0) Market deterioration +2.5 (2.6) businesses of resource and

30. Slide 30: 3-2. Business Performance Trends

    3-2. Business Performance Trends FY2015 (Results) FY2016 (Results) FY2017 (Results) FY2018 (Forecast) Overseas 27% 25% 29% 32% revenue ratio Revenues Adjusted operating income (Billion yen) / EBIT (Billion yen) 5,000 500 50 395.0 4,000 400 372.3 369.3 33.1 40 344.4 (8.4%) Mass 27.8 production (7.0%)

31. Slide 31: Contents

    Industrial Products Business Unit Business Strategy Contents 1. Business Overview and Analysis of Current Status 2. Business Strategy 3. Business Performance Trends 4. Conclusion © Hitachi, Ltd. 2018. All rights reserved. 31

32. Slide 32: 4. Conclusion: FY2018 Target

    4. Conclusion FY2018 Target Comparison with FY2018 FY2015 +22.7 billion yen Revenues 395.0 billion yen [+6.1%] Adjusted operating income [ratio] 33.1 billion yen [8.4%] +25.4 billion yen EBIT [ratio] 27.8 billion yen [7.0%] +22.8 billion yen Overseas revenue ratio 32% +5%  Expand priority businesse

33. Slide 33: 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

34. Slide 34: Hitachi: Inspire the Next

    HITACHI Inspire the Next

Hitachi — Investor Day (June 2018) on 6ix