Hitachi, Ltd. · TSE:6501
Hitachi — Investor Day (November 2024)
55 slides from Hitachi's investor day presentation, Nov 18, 2024
Slide 1: Hitachi Rail Investor Days
Hitachi Rail Investor Days Company & Strategy Presentation 18 November 2024 © Hitachi, Ltd. 2024. All rights reserved.
Slide 2: 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 3: Agenda
Agenda Company and Strategy Presentation Rail at the center of the evolving Mobility space The new Hitachi Rail GTS acquisition and integration Focus on 2024 Financials Our vision & key strategic priorities Sustainability People Page 2 2
Slide 4: Agenda
Agenda Company and Strategy Presentation Rail at the center of the evolving Mobility space The new Hitachi Rail GTS acquisition and integration Focus on 2024 Financials Our vision & key strategic priorities Sustainability People Giuseppe Marino Senior VP and Executive Officer, Director of Page 3 Hit
Slide 5: Rail will grow further as the backbone of future transportation
Rail will grow further as the backbone of future transportation Non-exhaustive Rail most sustainable transportation with ….with adoption planned to grow, up to 87% less CO2 emissions vs cars… becoming mass transportation pillar Well-to-Wheel CO2 emissions by mode Rail modal share (2022, gCO2-eq/pass
Slide 6: Mobility moving towards Intermodality, Green & Digital
Mobility moving towards Intermodality, Green & Digital More people to move… …in a more sustainable …with new digitalised & way… interconnected means Increasing population and economic As transport is the second largest contributor Mobility will be increasingly intermodal and development will scale-u
Slide 7: Rail investments will keep growing mid-long term
Rail investments will keep growing mid-long term Large and growing Hitachi Rail reference market… …solidly backed by global large-scale investments '23-'27 Hitachi Rail reference market (T¥) CAGR '23-'27 +4.1% 11.5 9.8 3.0% 3.1 Rail Control 2.8 8.4 4.5% Vehicles 7.0 2023 2027 RC Services as % of tot
Slide 8: Agenda
Agenda Company and Strategy Presentation Rail at the center of the evolving Mobility space The new Hitachi Rail GTS acquisition and integration Focus on 2024 Financials Our vision & key strategic priorities Sustainability People Page 7 7
Slide 9: New Hitachi Rail plays among the Global Rail Leaders
New Hitachi Rail plays among the Global Rail Leaders Hitachi Rail having the highest exposure to Rail Control, …strengthening traits shared a software-based business… by Global Rail Leaders Revenues Strategic positioning C 1 Global footprint B Global A Rail Leaders 2 Full product portfolio Rail Rail
Slide 10: New Hitachi Rail at a glance
New Hitachi Rail at a glance Our business in numbers Our team & global presence ≈1.1 T¥ >50 >300 ≈24k ≈12k ≈7.3 B€ Country coverage (o/w 5 domestic Worldwide customers Employees worldwide Engineers & technical experts Revenues markets) (2024F) >26k km >4k km >16k 25 10 Mainline signalling Urban sign
Slide 11: Hitachi Rail improving on all KPIs in 2024
Hitachi Rail improving on all KPIs in 2024 Overall figures including GTS from June '24 FX rates as per relevant FY reporting Charts not in scale Order intake (T¥) Revenues (T¥) Backlog (T¥) Adj. EBITA (%) Backlog GM improvement1 +0.2% +1.2% 1.7 1.1 5.8 8.5% GTS 0.3 GTS 4.9 GTS 0.8 7.5% 0.3 6.5% incl
Slide 12: We are close to our customers thanks to a global footprint
We are close to our customers thanks to a global footprint Hitachi Rail Global Footprint Our manufacturing sites Domestic markets1 Served markets2 Reggio Calabria, ITA Tito, ITA Pistoia, ITA Naples, ITA Kasado, JAP Mito, JAP Newton Aycliffe, UK Arnstadt, GER Batesburg, US Hagerstown, US Service & Of
Slide 13: We have a full product portfolio focused on high value segments
We have a full product portfolio focused on high value segments xx% Revenue mix 2024 Rail control 40-45% Vehicles 30-35% Urban signalling equipment Light Rail Light Metro Heavy Metro Mainline signalling equipment Regional / Commuters Intercity Very High Speed Turnkey solutions Key Monorail Light rai
Slide 14: We deliver Rail Control & Vehicles projects worldwide
We deliver Rail Control & Vehicles projects worldwide Not exhaustive Hitachi advances global mobility by Rail Control + Vehicles Rail Control country coverage country coverage delivering pioneering rail signalling solutions, and providing state-of-the-art rolling stock for both urban and mainline tr
Slide 15: We have a global and diverse organisation and human capital
We have a global and diverse organisation and human capital Hitachi Rail workforce distribution by Region (HC, %) Total HC 23,661 >50 Country coverage 10 domestic markets N. AMERICA EUROPE HC 2,368 HC 14,491 JAPAN % of total ≈10% % of total ≈61% HC 3,172 % of total ≈13% APAC MEA HC 2,130 LATAM HC 1,
Slide 16: Safety: Putting our people at the heart of everything we do
Safety: Putting our people at the heart of everything we do Total Recordable Injury Rate (2023-2030) Annual average trend, Hitachi Rail employees and contractors 1 Strategic actions to further improve HSE 0.66 0.63 We are applying a systematic approach Risk to proactively prevent incidents by Impact
Slide 17: Agenda
Agenda Company and Strategy Presentation Rail at the center of the evolving Mobility space The new Hitachi Rail GTS acquisition and integration Focus on 2024 Financials Our vision & key strategic priorities Sustainability People Giuseppe Marino Senior VP and Executive Officer, Director of Page 16 Hi
Slide 18: GTS acquisition focused on strategic objectives
GTS acquisition focused on 4 strategic objectives Gain global scale Get access to new Shift revenue mix Build on GTS to expand advantage attractive geographies towards SW-based competences businesses Hitachi Rail is now a major Rail Hitachi Rail to build upon GTS' Hitachi Rail to build on GTS Hitach
Slide 19: We have a proven track record in transformational M&A
We have a proven track record in transformational M&A 1853 1880 1881 1886 1913 1920 1986 1988 2012 2015 2024 Japan Hitachi Ltd. Hitachi Rail Breda Italy （Rolling Stock） Ansaldo 1886 （Signalling, Rolling Stock） 1853 2015 USA Union Switch & Signal Westinghouse （Signalling） 188１ 1988 France Alcatel/CGE
Slide 20: Integration is on track: completed first two phases
Integration is on track: completed first two phases Confirmed synergy potential of 14 B¥/year in adj. EBITA1 Day 1 3 months 6 months Integration 1 Continuity 2 Alignment phases 3 Transformation Status Completed Completed Ongoing • Ensure GTS’ flawless • Design synergy initiatives and • Deliver the n
Slide 21: Agenda
Agenda Company and Strategy Presentation Rail at the center of the evolving Mobility space The new Hitachi Rail GTS acquisition and integration Focus on 2024 Financials Our vision & key strategic priorities Sustainability People Antonio Coluccia Chief Financial Officer, Hitachi Rail Page 20 20
Slide 22: Key Assumptions
Key Assumptions • EUR/JPY exchange rates fluctuate yearly Exchange • Order Intake, Revenues, and EBITA, are reported applying the average Rates FX rate for the year • Backlog is reported applying the FX rate at the end of the year • Budget figures were developed pre-closing based on preliminary info
Slide 23: Solid topline growth from organic expansion & GTS
Solid topline growth from organic expansion & GTS Overall figures including GTS from June '24 FX rate as per specific FY Vehicles and Rail Control GTS Charts not in scale Order Intake (B¥) Revenues (B¥) Backlog (B¥) +64% +49% +34% +7% +19% 13% 1,699 1,147 5,796 1,075 5,128 278 276 4,869 829 856 249
Slide 24: Positive industrial performance vs BDG and 2023
Positive industrial performance vs BDG and 2023 Overall figures including GTS from June '24 Excluding FX Impact Vehicles and Rail Control GTS Charts not in scale Order Intake (B¥) Revenues (B¥) Backlog (B¥) +64% +42% +33% +2% +29% 13% 1,619 1,075 1,097 5,796 264 5,128 829 827 249 262 4,503 633 1,139
Slide 25: +50% orders vs BDG from S&M, leading to 1.5 book-to-bill
+50% orders vs BDG from S&M, leading to 1.5 book-to-bill Overall figures including GTS from June '24 FX rate as per specific FY Order Intake Breakdowns (B¥) Breakdown by Line of Business Breakdown by Geography Breakdown by Business Type Vehicles Rail Control GTS EMEA Americas APAC RoW OEM Service &
Slide 26: Revenue shift toward Rail Control with GTS acquisition
Revenue shift toward Rail Control with GTS acquisition Overall figures including GTS from June '24 FX rate as per specific FY Revenues Breakdowns (B¥) Breakdown by Line of Business Breakdown by Geography Breakdown by Business Type Vehicles Rail Control GTS EMEA Americas APAC RoW OEM Service & Mainte
Slide 27: Solid and growing backlog, driven by Service business
Solid and growing backlog, driven by Service business Overall figures including GTS from June '24 FX rate as per specific FY Backlog Breakdowns (B¥) Breakdown by Line of Business Breakdown by Geography Breakdown by Business Type Vehicles Rail Control GTS EMEA Americas APAC RoW OEM Service & Maintena
Slide 28: EBITA Margin confirmed at 8.5%, +1 pp vs 2023
EBITA Margin confirmed at 8.5%, +1 pp vs 2023 Overall figures including GTS from June '24 FX rate as per specific FY EBITA Adjusted (B¥) • Margin Improvement: EBITA margin 7.5% 8.5% 8.5% EBITA margin rises from 7.5% in 2023 to 8.5% in 52% 7% 2024, reflecting stronger profitability through organic 97
Slide 29: Enhanced Capex efficiency with focus on sustainability
Enhanced Capex efficiency with focus on sustainability Overall figures including GTS from June '24 FX rate as per specific FY Capex Overview (B¥, %) • Improved Capex Efficiency: Capex-to- 2.5% revenue ratio down from 2.3% 2.3% 2.5% to 2.3%, highlighting enhanced capital efficiency • Rising focus on
Slide 30: Core CF in line with BDG, significantly improving vs '23
Core CF in line with BDG, significantly improving vs '23 Overall figures including GTS from June '24 FX rate as per specific FY Core Cash Flow (B¥) • Core Cash Flow on Budget: Core CF aligns with FY24 budget Core CF/ EBITA Adj 0.16 0.68 0.65 expectations, showing a major increase vs 2023 • Post-FY23
Slide 31: 48B¥ cumulated synergies by 2027 from GTS integration
48B¥ cumulated synergies by 2027 from GTS integration GTS Integration Synergies and Costs (B¥) Sales & Bids 48 New pipeline unlocked and margin increment with new capabilities +23 25 Products & Technology Selective portfolio integration and joint R&D roadmap Procurement Cumulated EBITA Cumulated Int
Slide 32: Agenda
Agenda Company and Strategy Presentation Rail at the center of the evolving Mobility space The new Hitachi Rail GTS acquisition and integration Focus on 2024 Financials Our vision & key strategic priorities Sustainability People Giuseppe Marino Senior VP and Executive Officer, Director of Page 31 Hi
Slide 33: Hitachi Rail Grand Vision
Hitachi Rail Grand Vision Becoming a sustainable global mobility player From… To… Sustainable, digitally enabled and service-oriented player… Traditional provider of original Gradually shifting business model towards recurring revenues… technology and products Staying at the forefront of innovation
Slide 34: We aim to grow revenues up to 1.3-1.4 T¥ by 2027
We aim to grow revenues up to 1.3-1.4 T¥ by 2027… Hitachi Ltd mid-term plan Rail to be a key pillar in supporting Hitachi Growth approval process still ongoing +15-30% CAGR: 5-8% +34% 1.3 – 1.4 1.1 0.9 Hitachi Rail 0.7 0.6 ambition (Revenues in T¥) 2021A 2022A 2023A 2024 FCT 2025 2026 2027 Hitachi R
Slide 35: Increasing recurring and SW-based revenues to >75%
…Increasing recurring and SW-based revenues to >75%... Vehicles Rail Control Service & Digital Hitachi Ltd. mid-term plan approval process still ongoing Recurring and SW- based Revenues <55% ≈60% ≈70% >75% 1.3 – 1.4 1.1 Hitachi Rail 25-30% 25-30% 25-30% 30-35% shifting Revs 0.9 0.7 20-25% mix toward
Slide 36: Growing our profitability towards 10-13% ambition
…and growing our profitability towards 10-13% ambition Vehicles Rail Control Service & Digital Hitachi Ltd. mid-term plan approval process still ongoing Recurring and SW- based Revenues <55% ≈60% ≈70% >75% 1.3 – 1.4 1.1 Hitachi Rail 25-30% 25-30% 25-30% 30-35% shifting Revs 0.9 0.7 20-25% mix toward
Slide 37: 4 drivers supporting our sustainable profitability journey
4 drivers supporting our sustainable profitability journey Illustrative Adj. EBITA bridge 2024F vs Ambition (%) Key value drivers Integration costs 10-13% Completion of GTS integration, netting the required integration costs Volume scale-up Scale effect with benefits on profitability from SG&A dilut
Slide 38: Key business and foundational priorities for value creation
Key business and foundational priorities for value creation A.1 Unlock GTS synergy potential Successfully deliver GTS integration to capitalise on combined efficiencies A. Ensure timely backlog conversion BUSINESS A.2 Capitalise on record-high backlog by (i) Ensuring delivery excellence; (ii) Maximi
Slide 39: Digital: HMAX differentiator to address major client challenges
A.3 Digital: HMAX differentiator to address major client challenges Up to 50% 01 Integrated operation and maintenance workstation of Client's TCO spent for Maintenance & Energy HMAX Services Cybersecurity Clients' expenses can be optimised 02 Vehicle Condition Signalling Condition Other Condition wi
Slide 40: Digital: Partnerships with Hitachi Digital and NVIDIA
A.3 Digital: Partnerships with Hitachi Digital and NVIDIA Strategic partnerships with Hitachi Digital and NVIDIA will provide HMAX Strong client interest following HMAX with AI capabilities and computing solutions on trains and assets, coverage at InnoTrans 2024 enabling extensive use case developme
Slide 41: Hitachi Rail strongly contributing to Group value creation
Hitachi Rail strongly contributing to Group value creation Hitachi Rail contributes to …While leveraging on the Group value creation… full Group ecosystem Supports Group growth with strong Digital Excellence order trend and backlog, capturing • Cybersecure end-to-end solutions market potential in ke
Slide 42: Company & Strategy Presentation: Key takeaways
Company & Strategy Presentation: Key takeaways Rail market is supported by Green and Digital trends Rail market Mobility is evolving, driven by Sustainability and Digital trends, with Rail playing an increasingly central role as the backbone of mass transportation Rail investments to keep growing in
Slide 43: Agenda
Agenda Company and Strategy Presentation Rail at the center of the evolving Mobility space The new Hitachi Rail GTS acquisition and integration Focus on 2024 Financials Our vision & key strategic priorities Sustainability People Maiya Shibasaki Chief Sustainability and Diversity, Equity & Inclusion
Slide 44: Our holistic approach to sustainability
Our holistic approach to sustainability I II III Our Products & Solutions contribute to reduce GHG emissions, supporting Rail a sustainable transport Focus next Focus next mode Supply Chain Engineering Facilities Sustainability-by-design solutions We collaborate with our We are committed to develop
Slide 45: Our commitment to make our existing products greener
II Our commitment to make our existing products greener Selected examples We adopt Eco-design principles… …consistently across our vehicle product portfolio Improved Efficient power aerodynamical units1 performance Very High-Speed train Battery train Weight Systems' reduction efficiency Regional/Com
Slide 46: Our sustainability-by-design solutions
II Our sustainability-by-design solutions Battery-powered trains Masaccio AT300 Green CBTC5 Tri-mode hybrid train Battery-powered train Europe's first tri-mode United Kingdom's first Set of algorithms within our hybrid train (Electric, intercity battery-powered CBTC software that allows Battery or D
Slide 47: Our commitment & achievements for sustainable facilities
III Our commitment & achievements for sustainable facilities Selected KPIs Monitored KPIs Status Target Scope 1 & 2 CO2 emissions 40% reduction Carbon Decarbonisation vs '10 baseline Neutrality reduction by 2030 Number of main 0% landfill Resource ≈60% of manufact. manufacturing sites sites with 0%
Slide 48: Hagerstown: the green factory of the future
III Hagerstown: the green factory of the future LEED Solar PV Covering Trellis/ Vines 0 t CO2 certificate on rooftop Emissions also thanks to self Live plants mechanical in mfg. areas produced renewable energy areas Electrical heating system 100% electric plant equipment 400+ Lobby & trees, vines, a
Slide 49: Hitachi Rail is committed to fostering a DE&I environment
IV Hitachi Rail is committed to fostering a DE&I environment Strategic pillars Selected initiatives Female representation • Increase diverse talent in development program in Senior Management • (% of total) Attract diverse • Change systems to include diversity in talent pool Develop Diverse Talent A
Slide 50: Agenda
Agenda Company and Strategy Presentation Rail at the center of the evolving Mobility space The new Hitachi Rail GTS acquisition and integration Focus on 2024 Financials Our vision & key strategic priorities Sustainability People Rob Luijten Chief Human Resources Officer, Hitachi Rail Page 49 49
Slide 51: Our People at the heart of Hitachi Rail
Our People at the heart of Hitachi Rail Talent Integrated organisation Culture & competences & processes & engagement We focus on continuous learning, We foster integrated organisation We promote a common mission, structured career paths, and and processes, leveraging cross- employee engagement, inc
Slide 52: We have a global and diverse organisation and human capital
We have a global and diverse organisation and human capital Hitachi Rail workforce distribution by Region (HC, %) Total HC 23,661 >50 Country coverage 5 domestic markets N. AMERICA EUROPE HC 2,368 HC 14,491 JAPAN % of total ≈10% % of total ≈61% HC 3,172 % of total ≈13% APAC MEA HC 2,130 LATAM HC 1,0
Slide 53: Hitachi Rail employees satisfied about their workplace
Hitachi Rail employees satisfied about their workplace Hitachi Rail employees' engagement survey Our ongoing commitment ('22-'24, score 0-100) Accelerate capability development Participation rate 73% 84% 84% • Technical and digital competences • First line leadership capability 75.3 • Talent develop
Slide 54: Our capability to manage and develop competences
Our capability to manage and develop competences Competency Management Model Learning Management Model • Managing expertise for 12,000 engineers and • Combining global and local learning needs technical experts • Personalised learning plans, focus on hard & soft • Accelerating Digital & (Generative)
Slide 55: Hitachi
HITACHI Inspire the Next