2015 Mid-term Management Plan
- Achieving Growth and Hitachi’s Transformation -May 16, 2013

Hiroaki Nakanishi
President
Hitachi, Ltd.
© Hitachi, Ltd. 2013. All rights reserved.

2015 Mid-term Management Plan Management Focus

2015 Mid-term Management Plan
- Achieving Growth and Hitachi’s Transformation -Innovation

GlobalTransformation

Strengthen service

Deliver Innovation toTransform Hitachi:

businesses that maximize
the utilization of IT and

Customers and Society
globally

To deliver innovation bystandardized and speedy

bring about innovation

operation© Hitachi, Ltd. 2013. All rights reserved.

2

2015 Mid-Term Management Plan
- Achieving Growth and Hitachi’s Transformation -Contents
1. Performance Overview of 2012 Mid-term Management Plan
2. Hitachi’s Vision and 2015 Mid-term Management Plan
3. Global Expansion of the Social Innovation Business
4. Solutions Examples
5. Promoting Transformation
6. As a Global Major Player© Hitachi, Ltd. 2013. All rights reserved.

3

2015 Mid-Term Management Plan
- Achieving Growth and Hitachi’s Transformation -Contents
1. Performance Overview of 2012 Mid-term Management Plan
2. Hitachi’s Vision and 2015 Mid-term Management Plan
3. Global Expansion of the Social Innovation Business
4. Solutions Examples
5. Promoting Transformation
6. As a Global Major Player© Hitachi, Ltd. 2013. All rights reserved.

4

1. Performance Overview of 2012 Mid-term Management Plan
Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2012
Target*1

Revenues

9,315.8 billion
yen9,665.8 billion
yen

9,041.0 billion
yen

10 trillion yen

Operating income ratio

4.8%

4.3%

4.7%

Over 5%
Consistently
generate at least
200 billion yen

Net income
attributable to
Hitachi, Ltd.
stockholders
D/E ratio*2(Manufacturing,
services & others)
Total Hitachi, Ltd.
stockholders’ equity ratio(Manufacturing,
services & others)

Exchange rate

238.8 billion yen

347.1 billion yen

175.3 billion yen

1.03 times

0.86 times

0.75 times(0.68 times)(0.56 times)(0.47 times)

15.7%

18.8%

21.2%

(17.0%)(20.5%)(23.2%)

86 yen/U.S. dollar
113 yen/euro

79 yen/U.S. dollar
109 yen/euro

83 yen/U.S. dollar
107 yen/euro

0.8 times or
below

20%
80 yen/U.S. dollar
110 yen/euro*1 As of June 9, 2011 (revised to reflect HDD business transfer), assumed exchange rate.
*2 Including noncontrolling interests, and also including liabilities associated with the consolidation of securitized entities.
© Hitachi, Ltd. 2013. All rights reserved.

5

2015 Mid-Term Management Plan
- Achieving Growth and Hitachi’s Transformation -Contents
1. Performance Overview of 2012 Mid-term Management Plan
2. Hitachi’s Vision and 2015 Mid-term Management Plan
3. Global Expansion of the Social Innovation Business
4. Solutions Examples
5. Promoting Transformation
6. As a Global Major Player© Hitachi, Ltd. 2013. All rights reserved.

6

2-1. Society, Market Change and Hitachi’s Vision
Macro Trend in Society
Shifting from a society centered on “concentration,
ownership and consumption” to “distribution, sharing
and recycling”

Global market growth led by emerging
countries

Expansion of free trade zones
Energy shift drive to reorganize industry and market change(Growing presence of the U.S., Sub-Saharan Africa and South
Africa, South America, etc.)

 地球温暖化、水・大気汚染問題
Achieving a Sustainable society 既存インフラの老朽化
Securing water resources,
Replacement ofenergy and foodaging infrastructure systems

Improving transportation systems

Responding to lower birthrate and aging

Reduction of CO2
Promoting material recycling

etc.

What the Hitachi Group aims to become

Hitachi’s Vision
Hitachi delivers innovations that answer society’s challenges.
With our talented team and proven experience in global
markets, we can inspire the world.
© Hitachi, Ltd. 2013. All rights reserved.

7

2-2. 2015 Mid-term Management Plan

Realizing Hitachi’s Vision
Society and Customer
Business to Society

Business to BusinessSocial Innovation Business● Identify issues from customer perspectives and work on solutions together withcustomers, as “One Hitachi”● Realize innovations by providing solutions that combine products, services
and highly sophisticated IT (Cloud)

Solutions
Services
Deliver solution to ourcustomers from maintenance
operation and outsourcing tomanagement support

Service Platform on the Cloud

Create solution throughanalysis and evaluation ofcollected data using
cutting-edge IT

Products

Provide base of solution
with broader systems
expertise and technologies© Hitachi, Ltd. 2013. All rights reserved.

8

2015 Mid-Term Management Plan
- Achieving Growth and Hitachi’s Transformation -Contents
1. Performance Overview of 2012 Mid-term Management Plan
2. Hitachi’s Vision and 2015 Mid-term Management Plan
3. Global Expansion of the Social Innovation Business
4. Solutions Examples
5. Promoting Transformation
6. As a Global Major Player© Hitachi, Ltd. 2013. All rights reserved.

93-1. Accelerating Social Innovation Business
Innovation through cloud-based services
FY2015 Target:< Service revenue ratio* 30% ⇒ over 40% >＊Including systems solutions

Services• Improving management excellence• Visualization of management risk

Outsourcing andOperating services• Improvement of operational
efficiency and quality

Equipment
maintenance services•Improving asset efficiency•Visualize operating information

R&D as Key Driver for Global Growth

Utilize business intelligence

Expansion of the service business scopeManagement
support services

Service platform on the Cloud
Formulate management
initiatives
Use collected data and forecast data to
support management decision-making

Analyze and evaluate
Market Intelligence

Collect and store
Collect operating information, etc
with sensing and other technologies

Rigorous strengthening ofproduct businesses© Hitachi, Ltd. 2013. All rights reserved.

103-2. Growth in the Global Market
Growth Through our Global Social Innovation Business
Strengthen capabilities for comprehending
customers’ issues and providing solutions

Delivering solutions and services

Expand sales, consulting, marketing andengineering functions in each area

Strengthen project management, plant
construction and service provision by
utilizing cloud service

Main countries and regions
for offering solutions

North
America

U.K.
EasternEuropeProvide optimum solutions that meet regional needs

China
India,
ASEAN

Japan

EnergyCity management

Transport

Healthcare

Water
Natural resources

Logistics

Big data （ＩＴ）

Finance

BrazilSub-SaharanSouth Africa

Australia© Hitachi, Ltd. 2013. All rights reserved.

11

3-3. R&D: Key Driver for Global Growth
Expand the Social Innovation Business globally- Leveraging R&D capability and global network Promote open innovation with customers and business
partners for contributing to solve customers’ issues

Closely tied to customers locally providing R&D capabilities
Develop the world-class cutting-edge R&D
with combining systems, products and IT on the Cloud

Increase and enhance global R&D bases

EuropeNorth America

China
Hitachi China Materials
Technology Innovation
Center (2013/4)

European RailResearch Centre（2012/10)

Japan•Central Research Lab.
•Hitachi Research Lab.
•Yokohama Research Lab.
•Design Division

India

Asia

U.S. Big Data Laboratory(2013/4)
Hitachi Brasil Ltda.
R&D Division (2013/6)

New© Hitachi, Ltd. 2013. All rights reserved.

123-4. Expanding Global Business
FY2015 Target : Overseas revenue ratio 41% ⇒ over 50%
Overseas Revenue Ratio[ ]: % ratio【Revenues by Region】
Asia and others

Asia and others

[20]

[16]
China Emerging[9]

countries

Europe[7]

Emerging
countries

Japan

[59]

China

Overseas
Revenue
Ratio
41%

[12]

Overseas
Revenue
Ratio
Over 50%

Japan

[50]

EuropeNorth
America

[8]

[9]

North
America[10]〔FY2012 Results〕

Headcount

208k

Japan

200k

Overseas

150k

Total

350k

118k
326k

[36%]

〔FY2015〕[43%]© Hitachi, Ltd. 2013. All rights reserved.

13

2015 Mid-Term Management Plan
- Achieving Growth and Hitachi’s Transformation -Contents
1. Performance Overview of 2012 Mid-term Management Plan
2. Hitachi’s Vision and 2015 Mid-term Management Plan
3. Global Expansion of the Social Innovation Business
4. Solutions Examples
5. Promoting Transformation
6. As a Global Major Player© Hitachi, Ltd. 2013. All rights reserved.

144-1. Solutions Examples <U.K., India, Thailand, etc.: Transport>
Total Transport Solution
U.K. / Intercity Express Programme (IEP)

Total transport solution concept

・Begin construction of a U.K. manufacturingbase in 2013
・Manufacturing, maintaining and leasing ofrolling stock

Integrate services leveraging infrastructure
control systems and IT systems

Seat
reservations
Communications

韓国西部発電株式会社 泰安火力発電所 配置計画図

Aim to expand our business area
based on track record of IEP
Traffic management systems, control systems,
and traffic management simulators
Provide total engineering from rolling stock
manufacture to traffic management
and maintenanceOn-board
guidancesystemTransport
plan

Control Systems

Digitalsignage

Traffic
control
MaintenanceIT
IC cards

Product sales
Electronic money

Urban transport
services

Provide total transport solution
from train service to customer service© Hitachi, Ltd. 2013. All rights reserved.

15

4-2. Solutions Examples

Sub-Saharan, South Africa, Australia, etc.:
Big Data (IT)Leverage cloud services to improve customer’s asset operating efficiency
More efficient operation of construction machineryby tracking movement information and breakdown information

Worksite

Global e-Service on TWX-21 cloudservice for enterprise・ Present position
・ Movement information
・ Breakdown information ・・・

Improved operating
efficiency

Construction machinery manager

Enhanced productivity
and reliability

・Real-time movement status
・Maintenance proposals

Collect and amass

・ Movement, movement history
・ Maintenance history
・ Breakdown information
・ Technology information
Knowledge extraction

Predict market trends inproducts, machinery, regions,etc. and breakdown
occurrence
Analyze and evaluate© Hitachi, Ltd. 2013. All rights reserved.

16

4-3. Solutions Examples <North America: Energy ･ IT>
Energy Cost Saving Solution “Energy Saving as a Service”- With North American infrastructure and industrial companies•Find solutions by Hitachi’s consulting capabilities
Contribution to reduction
in energy consumption•Deliver energy saving solutions as “One Hitachi”

Deliver Solutions as “One Hitachi”
Identify energy initiatives*1*2

Hitachi’s broad expertise
Services•Consulting•Financing

Maintenanceand support

Technology
to deliver savings

Products• Air-Side Free Cooling• IT-Facility Linkage
System• RefAssist Cooling• Highly efficient Motors• LEDs• BEMS*1• CEMS*2

Manageprojects

Fundenergy initiatives

R&D•Energy Management

Ｂｕｉｌｄｉｎｇ Ｅｎｅｒｇｙ Ｍａｎａｇｅｍｅｎｔ Ｓｙｓｔｅｍ
Ｃｏｍｍｕｎｉｔｙ Ｅｎｅｒｇｙ Ｍａｎａｇｅｍｅｎｔ Ｓｙｓｔｅｍ© Hitachi, Ltd. 2013. All rights reserved.

17

4-4. Solutions Examples

Contributing to U.K. Energy Policy andStable Supply● Concerns about North Sea oil field depletion● Challenges developing renewable energies● Global environmental issues● National budget constraint● Utilize private-sector funds

Maintain nuclear power generation ratio
Utilize Public Private PartnershipGreen electricity procurement system(Strike Price)

Hitachi’s Solution: Business to Society
Provide solution in U.K. through theacquisition of Horizon Nuclear Power

Provide ABWR
(Advanced Boiling Water Reactor),
the most advanced modelwith an operating history© Hitachi, Ltd. 2013. All rights reserved.

18

4-5. Solutions Examples <India and ASEAN: Water･Resources>
Effectively utilize water resources and contribute to water business efficiency(Smart community business centered on Dahej sea water desalination project and Maldives water management business, etc.)

Wide-area management

Optimizewater resources

Effective use of treatedwater for reuse

Solution to improve efficiency of domestic water businesses, promote proposals for intelligent water systems globally

Dahej sea water desalination project
Supply industrial water by desalinating sea water

IT-based intelligent water systems for effective use ofwater resources and improving management efficiency

Waste
water

Treatment
Industrywater supply
Reuse

Seawater desalination system
Water purification

Waste
water

Households

Plant

Wastewater recycling
and treatment

Industrial
wastewater treatment
Information and control systems

Sewage treatment© Hitachi, Ltd. 2013. All rights reserved.

19

2015 Mid-Term Management Plan
- Achieving Growth and Hitachi’s Transformation -Contents
1. Performance Overview of 2012 Mid-term Management Plan
2. Hitachi’s Vision and 2015 Mid-term Management Plan
3. Global Expansion of the Social Innovation Business
4. Solutions Examples
5. Promoting Transformation
6. As a Global Major Player© Hitachi, Ltd. 2013. All rights reserved.

20

5-1. Transformation <Operation and Global Talent>
Global Shift and Business Reform

GlobalOperation

 Rebuild SCM* for operation efficiency and quick
response to market
 Leverage business intelligence (BI) capability
 Optimize working capital and balance sheet
leveraging financial expertise for Hitachi’stransformation＊SCM：Supply Chain Management

Leverage Global Talent to lead business

Global Talent Global Grading system
 Assignment through global job rotation
 Appoint leaders from global talent pool

© Hitachi, Ltd. 2013. All rights reserved.

21

5-2. Transformation <Hitachi Smart Transformation Project>
Accelerate the Hitachi Smart Transformation Projectand establish global operation standard
Establish a foundation for cost structure reform2012
Mid-term
Management
Plan

Main measures•Globalized, integrated design and manufacturing base
•Strengthened global procurement systems and bases•Reduce logistics costs (warehouse & packaging materials integration, etc.)•Integrated operations & expenses (indirect costs and offices, etc.)
Achievement

FY2011: 35.0 billion yen FY2012: 75.0 billion yen

Continue focus on reforming operating structure and on-going measures

2015
Mid-term
Management
Plan

Main measures•Simplify the group structure (eliminate waste by clarifying roles)•Expand global usage of shared services•Global standardization and integration of IT & operational systems
Estimated effect

FY2013 : 100.0 billion yen FY2011-15 total : 400.0 billion yen© Hitachi, Ltd. 2013. All rights reserved.

22

5-3. Transformation <Employ Six Group structure>
Transform to Market Driven Structure
Trillion yen
Market; Manufacturer・Public sector・
Urban Infrastructure・Transportation

10.0

１０.０
９.０

Revenues

Market; Financial・Public・Industry・Retail・Telecommunication

Market; Power Producer ・Power transmission and distributor

Market; Construction・Mining

5.0

Market; Machinery・Electric Components

0

Others～～ FY2015
FY2012Market; Automotive© Hitachi, Ltd. 2013. All rights reserved.

23

5-4. Accelerate Transformation of Business Portfolio
Strengthening the Social Innovation Business2010/12
Made Sierra Atlantic a
subsidiary (consulting
business)
2011/1
Made Aloka a subsidiary(medical equipment business)

2012/12Acquired Celerant
Consulting Investments

2011/4
Made Vantec a
subsidiary(transport business)

Agreed to establish thermal power
generation business JV
2013/7
2012/3
Hitachi Metals
Transferred small- and mid&Hitachi Cable
sized LCD businesswill be merged
2012/3
2012/8Transferred
Stopped in-house
HDD business TV production

2010/6Formed mobile phone
Business JVFY2010FY2011FY2012

Select&concentrate

Rebuilding initiatives

2012/11
Acquired a U.K. nuclear
power business2013/4Formed overseas
power transmission &distribution business2011/10
JV with TEPCOFormed hydroelectric
2013/4power generation
Mergedbusiness JV
2012/10 Hitachi Plant

ExpandbusinessStrengthening initiatives

2011/9Acquired BlueArc(storage solution business)

FY2013© Hitachi, Ltd. 2013. All rights reserved.

24

5-5. Transformation <Thermal Power Generation Systems Business Integration >Thermal power systems businessas a Global Leading BusinessAccelerate transformation to a global leading businessthrough the integration with Mitsubishi Heavy Industries, Ltd.

Mitsubishi-Hitachi JV to be global top

Hitachi's power business synergizedwith the JV

Leverage strength of

Hitachi transform to the Power
Solution provider･Complementary product lines･Complementary operating region･Hitachi’s IT (cloud) and services･ Utilize JV’s competitive systems
and products･ Provide solution that combining
Systems, Product and IT,
including Smart Grid

© Hitachi, Ltd. 2013. All rights reserved.

25

5-6. Transformation <Position Chart by Six Groups>
FY2012 Results
Operating income(Billion yen)High Functional
Materials & Components

200

Information &Telecommunication
Systems

Circle size indicatesrevenue size

Infrastructure

100
Construction
Machinery10.0 Operating income ratio(%)

5.0Power Systems

Strengthening Solutions-Services, Clouds and Products-

FY2015 Target

Automotive Systems

Expanding Global Business

Promoting Transformation

Infrastructure

Information &Telecommunication
Systems

300

Operating income(Billion yen)

Construction
Machinery

200
100
Power Systems

High Functional
Materials & Components

5.0 Automotive Systems

10.0

Operating income ratio(%)© Hitachi, Ltd. 2013. All rights reserved.

26

2015 Mid-Term Management Plan
- Achieving Growth and Hitachi’s Transformation -Contents
1. Performance Overview of 2012 Mid-term Management Plan
2. Hitachi’s Vision and 2015 Mid-term Management Plan
3. Global Expansion of the Social Innovation Business
4. Solutions Examples
5. Promoting Transformation
6. As a Global Major Player© Hitachi, Ltd. 2013. All rights reserved.

27

6-1. FY2015 Management Target
FY2015 Target*１

Average of
FY2010-2012

Revenues

10 trillion yen

9,340.9 billion yen

EBIT*2 （Operating income） ratio

Over 7% （Over 7%）

4.9%(4.6%)

Net income attributable to
Hitachi, Ltd. stockholders

Over 350 billion yen

253.7 billion yen

Net income attributable to
Hitachi, Ltd. stockholders per share

Over 70 yen

55 yenManufacturing, services & others
Total Hitachi, Ltd. stockholders’ equity ratio＊１＊２

Assumed exchange rate: 90 yen to the U.S. dollar
EBIT： Earnings before Interest and Taxes

Over 30%

As of March 31, 201323.2%

115 yen to the euro

© Hitachi, Ltd. 2013. All rights reserved.

28

6-2. Accelerating Transformation as a Global Major Player

Serving the World with
Our Social Innovation Business
SOCIAL INNOVATION‐IT’S OUR FUTURE© Hitachi, Ltd. 2013. All rights reserved.

29

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 performance and include any statement that does not directly relate to any historical or
current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends may identify“forward-looking statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ
materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain “forward-looking statements” are based upon current assumptions of future
events which may not prove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are not limited to:• economic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe, as well as
levels of demand in the major industrial sectors Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;• exchange rate fluctuations of the yen against other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly against the
U.S. dollar and the euro;• uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;• uncertainty as to general market price levels for equity securities, declines in which may require Hitachi to write down equity securities that it holds;• the potential for significant losses on Hitachi’s investments in equity method affiliates;• increased commoditization of information technology products and digital media-related products and intensifying price competition for such products, particularly in the Digital Media &Consumer Products segments;• uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptance forsuch products;• rapid technological innovation;• the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue fromsales;• fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth
minerals, or shortages of materials, parts and components;• fluctuations in product demand and industry capacity;• uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials or
shortages of materials, parts and components;• uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;• uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitiveness;• uncertainty as to the success of cost reduction measures;• general socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States andEurope, including, without limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract
terms and conditions and labor relations;• uncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design and development of certain key
products;• uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies;• uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or
may become parties;• the possibility of incurring expenses resulting from any defects in products or services of Hitachi;• the possibility of disruption of Hitachi’s operations by earthquakes, tsunamis or other natural disasters;• uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information or that of its customers;• uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its significant employee benefit-related costs; and• uncertainty as to Hitachi’s ability to attract and retain skilled personnel.
The factors listed above are not all-inclusive and are in addition to other factors contained in other materials published by Hitachi.

© Hitachi, Ltd. 2013. All rights reserved.

30

© Hitachi, Ltd. 2013. All rights reserved.