Financial Section

Operating and Financial Review

Operating Results

Other income increased ¥48.1 billion to ¥57.5 billion andother expenses decreased ¥25.9 billion to ¥141.8 billion, as com-

Effective from April 1, 2015, the Power Systems segment has
been integrated to the Social Infrastructure & Industrial Systems
segment. Figures for the Social Infrastructure & Industrial Systems
segment, including figures for the year ended March 31, 2015,reflect the new segmentation.

compared with the year ended March 31, 2015. This mainly consisted of impairment losses recognized for certain assets as a

2015

2016

Percentchange¥9,774.9¥10,034.3

3%

534.0

531.0

–1%

Years ended March 31

Income fromcontinuing operations,
before income taxes
Net income attributable
to Hitachi, Ltd.
stockholders

Net loss on sales and disposal of fixed assets decreased ¥12.3
billion to ¥4.4 billion, as compared with the year ended March
Impairment losses increased ¥2.6 billion to ¥44.7 billion, as

Billions of yen

EBITdetails are as follows.

31, 2015.

Summary

Revenues

pared with the year ended March 31, 2015, respectively. The

result of business portfolio restructuring in the Information &Telecommunication Systems segment.
Net gain on business reorganization and others was ¥55.2 billion, as compared with net loss of ¥55.0 billion in the year ended
March 31, 2015. The net gain in the year ended March 31, 2016

518.9

517.0

0%

was due mainly to posting a gain on sales of shares of UniCarriers
Holdings Corporation by Hitachi Construction Machinery Co., Ltd.

217.4

172.1

–21%

in the Construction Machinery segment and sales of shares ofHitachi Tool Engineering, Ltd. by Hitachi Metals, Ltd. in the High
Functional Materials & Components segment as well as the reor-

Analysis of Statement of Operations
Revenues increased 3% to ¥10,034.3 billion, as compared withthe year ended March 31, 2015. This was due mainly to higher
revenues in the Information & Telecommunication Systems, Social
Infrastructure & Industrial Systems, High Functional Materials &Components and Automotive Systems segments, etc. This
increase was partially offset by lower revenues in the Construction
Machinery, Smart Life & Ecofriendly Systems and Others (Logistics
and Other services) segments, etc.
Cost of sales increased 4% to ¥7,459.0 billion, as comparedwith the year ended March 31, 2015, and the ratio of cost of
sales to revenues was 74%, which was the same level as the year
ended March 31, 2015. Gross profit was ¥2,575.2 billion, which
was the same level as the year ended March 31, 2015.
Selling, general and administrative expenses were ¥1,940.3
billion, which was the same level as the year ended March 31,
2015, and the ratio of selling, general and administrative
expenses to revenues was 19%, as compared with 20% for theyear ended March 31, 2015.

ganization of the air-conditioning systems business in the Smart
Life & Ecofriendly Systems segment.
Restructuring charges increased ¥10.1 billion to ¥36.8 billion,
as compared with the year ended March 31, 2015. This mainly
consisted of expenses for business restructuring in the
Information & Telecommunication Systems segment.
Expenses related to competition law and others decreased¥3.5 billion to ¥22.3 billion, as compared with the year ended
March 31, 2015.
Financial income (excluding interest income) increased ¥2.8
billion to ¥10.6 billion and financial expenses (excluding interest
charges) increased ¥27.0 billion to ¥30.2 billion, as comparedwith the year ended March 31, 2015, respectively. This was due
mainly to an increase in exchange loss from ¥23.9 billion to ¥26.5
billion, as compared with the year ended March 31, 2015.
Share of profits of investments accounted for using the equity
method decreased ¥46.5 billion to ¥0.1 billion due mainly todeterioration of profitability of overseas equity-method associates,
as compared with the year ended March 31, 2015.
EBIT decreased ¥3.0 billion to ¥531.0 billion, as compared withthe year ended March 31, 2015.

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Hitachi, Ltd. | Integrated Report 2016

Interest income decreased ¥0.5 billion to ¥12.0 billion andinterest charges decreased ¥1.6 billion to ¥25.9 billion, as
compared with the year ended March 31, 2015, respectively.
Income from continuing operations, before income taxes
decreased ¥1.9 billion to ¥517.0 billion, as compared with theyear ended March 31, 2015.
Income taxes increased ¥43.1 billion to ¥165.2 billion, as compared with the year ended March 31, 2015, due mainly to tax
expense recognized for partial transfer of shares of Hitachi
Transport System, Ltd. and Hitachi Capital Corporation.
Loss from discontinued operations increased ¥3.5 billion to¥57.0 billion, as compared with the year ended March 31, 2015.
Net income decreased ¥48.6 billion to ¥294.7 billion, as
compared with the year ended March 31, 2015.
Net income attributable to non-controlling interests decreased¥3.3 billion to ¥122.5 billion, as compared with the year ended
March 31, 2015.
As a result of the foregoing, net income attributable to
Hitachi, Ltd. stockholders decreased ¥45.3 billion to ¥172.1 billion,
as compared with the year ended March 31, 2015.

Operations by Segment
The following is an overview of results of operations by segment.
Revenues for each segment include intersegment transactions.
Segment profit is measured by EBIT.
(Information & Telecommunication Systems)
Revenues increased 4% to ¥2,109.3 billion, as compared with theyear ended March 31, 2015, due mainly to solid performances by
the system solutions business centered on financial systems andhigher revenues from the storage solutions business as a result of
the effects of foreign exchange rate fluctuations.
Segment profit increased ¥3.0 billion to ¥109.1 billion, as
compared with the year ended March 31, 2015, due mainly tohigher profits in the system solutions business resulting fromincreased revenues. This increase was partially offset by lower
profits in the platform business owing to the effect of reduction
in capital investment by Japanese telecommunications carriers in
the telecommunications & network business, to decreased
demand for high-end storage in North America and to posting
expenses related to business restructuring.
(Social Infrastructure & Industrial Systems)
Revenues increased 13% to ¥2,333.1 billion, as compared withthe year ended March 31, 2015, due mainly to significantly
increased revenues from the railway systems business resulting
from the acquisition of relevant businesses from Finmeccanica
S.p.A. and to solid performances by the power generation systems
business and the elevators and escalators business.
Segment profit decreased ¥81.2 billion to ¥29.1 billion, as
compared with the year ended March 31, 2015. This decrease
was due mainly to increased losses from Middle Eastern projects
in the infrastructure systems business, to a decrease in share of
profits of investments accounted for using the equity method, toposting expenses related to business restructuring and currency
exchange loss, and to the absence of net gain on business reorganization and others relating to Mitsubishi-Hitachi Metals
Machinery, Inc. posted in the year ended March 31, 2015.

59

Financial Section(Electronic Systems & Equipment)

Segment profit increased ¥29.6 billion to ¥153.5 billion, as

Revenues were ¥1,127.6 billion, which was the same level as thecompared with the year ended March 31, 2015. This increase wasyear ended March 31, 2015. Hitachi High-Technologies

due mainly to higher revenues, the effects of business restructur-

Corporation posted higher revenues due mainly to higher sales ofing and posting net gain on business reorganization and others

electron microscopes and clinical analyzers, and Hitachi Koki Co.,

related to the sale of a part of equity interest in Hitachi Tool

Ltd. also posted higher revenues due mainly to higher sales ofEngineering, Ltd. by Hitachi Metals, Ltd.

power tools in North America. These results were offset by lower
revenues at Hitachi Kokusai Electric Inc., which was affected by a(Automotive Systems)

drop in post-earthquake reconstruction demand following Great

Revenues increased 7% to ¥1,001.1 billion, as compared with theEast Japan Earthquake.

year ended March 31, 2015, due mainly to growth in sales driven

Segment profit increased ¥0.5 billion to ¥64.3 billion, as com-by robust demand for automobiles in North America and China.

pared with the year ended March 31, 2015. This increase was due

Segment profit increased ¥18.9 billion to ¥53.9 billion, as

mainly to non-recurring gain posted for the shift to defined con-compared with the year ended March 31, 2015, due mainly totribution pension plan at Hitachi High-Technologies Corporation,higher revenues, a decrease in expenses related to competition

and to improved profit in the healthcare business resulting fromlaw and others, and a decrease in exchange loss.

the effect of business restructuring. Hitachi Kokusai Electric Inc.
posted decreased profit owing to lower revenue, and Hitachi Koki

(Smart Life & Ecofriendly Systems)

Co., Ltd. also posted decreased profit owing to the effect of the

Revenues decreased 10% to ¥681.0 billion, as compared withforeign exchange rate fluctuations and economic slowdown inthe year ended March 31, 2015, due mainly to the effect of reor-

emerging countries and resource-producing countries.

ganization of the air-conditioning systems business. This decrease
was partially offset by solid performance in the home appliances(Construction Machinery)
Revenues decreased 7% to ¥758.3 billion, as compared with thebusiness such as refrigerators and washing machines.
Segment profit increased ¥7.4 billion to ¥41.9 billion, as com-

year ended March 31, 2015, due mainly to sluggish market con-pared with the year ended March 31, 2015, due mainly to theditions in Asia, in particular China, as well as Oceania and Russia.

net gain on business reorganization and others related to the

Segment profit decreased ¥34.7 billion to ¥25.8 billion, as

reorganization of the air-conditioning systems business, despitecompared with the year ended March 31, 2015, due mainly to

lower revenues.

lower revenues and to a higher proportion of compact models
with lower profitability in the product mix owing to exhaust emis-(Others (Logistics and Other services))sion regulations in Japan and changes in product mix for China

Revenues decreased 2% to ¥1,252.7 billion, as compared withmarket. This decrease was also attributable to disposal of invento-

the year ended March 31, 2015, due mainly to lower revenues ofries, foreign exchange losses owing to the depreciation of emerg-

optical disk drives business owing to weaker demand.

ing-market currencies, and posting expenses for business

Segment profit decreased ¥10.4 billion to ¥40.6 billion, as

restructuring. This decrease was partially offset by net gain on

compared with the year ended March 31, 2015, due mainly tobusiness reorganization and others related to the sale of shares of

expenses related to business restructuring in optical disk drives

UniCarriers Holdings Corporation.

business, despite increased profits at Hitachi Transport System, Ltd
resulting from improved profitability.

(High Functional Materials & Components)
Revenues increased 2% to ¥1,564.0 billion, as compared with the(Financial Services)year ended March 31, 2015. This increase was due mainly to the

Revenues increased 3% to ¥365.3 billion, as compared with theeffects of the consolidation of Waupaca Foundry Holdings, Inc. by

year ended March 31, 2015, due mainly to solid performance in

Hitachi Metals, Ltd. in November 2014 and of CSB Battery Co.,

Japan and strong performance in overseas business, particularly inLtd. by Hitachi Chemical Company, Ltd. in January 2015, and to

North America.

solid performances for automobile-related products. This increase

Segment profit increased ¥11.2 billion to ¥46.6 billion, as

was partially offset by the impact of slowdown in Chinese market

compared with the year ended March 31, 2015, due mainly toand decreased demand for electronics-related products.

higher revenues, the absence of expenses related to businessrestructuring posted in the year ended March 31, 2015, and theeffects of such business restructuring.

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Hitachi, Ltd. | Integrated Report 2016

Revenues by Geographic Area

(North America)
Revenues in North America increased 20% to ¥1,280.3 billion, as

The following is an overview of revenues attributed tocompared with the year ended March 31, 2015. This increase wasgeographic areas based on customer location.

due mainly to higher revenues in the High Functional Materials &Billions of yen

2015

2016

PercentchangeJapan¥5,220.3¥5,231.50%Overseas Revenues
Subtotal

4,554.5

4,802.75%

Asia2,178.2

2,112.3–3%

North America

Years ended March 31:

Components segment as a result of the effects of the consolidation of Waupaca Foundry Holdings, Inc. by Hitachi Metals, Ltd.,and in the Automotive Systems segment, despite lower revenues
in the Construction Machinery and Others (Logistics and Other

1,064.1

1,280.3

20%

Europe

841.9

951.1

13%

Other Areas

470.2

459.0

–2%

Total Revenues¥9,774.9¥10,034.3

3%

Japan
Revenues in Japan were ¥5,231.5 billion, which was the samelevel as the year ended March 31, 2015. This was due mainly tohigher revenues from the system solutions business centered on
financial systems in the Information & Telecommunication
Systems segment, and higher revenues from the power generation systems business and the infrastructure systems business in
the Social Infrastructure & Industrial Systems segment, despite
lower revenues in the High Functional Materials & Components
and Automotive Systems segments, etc.
Overseas

services) segments.
(Europe)
Revenues in Europe increased 13% to ¥951.1 billion, as comparedwith the year ended March 31, 2015. This increase was due mainly
to higher revenues in the Social Infrastructure & Industrial Systems
segment which reported increased revenues from the railway systems business, and in the Information & Telecommunication
Systems segment, despite lower revenues in the Construction
Machinery and Smart Life & Ecofriendly Systems segments.
(Other Areas)
Revenues in other areas decreased 2% to ¥459.0 billion, as compared with the year ended March 31, 2015. This decrease wasdue mainly to lower revenues in the Construction Machinery andSmart Life & Ecofriendly Systems segments, despite higher revenues
in the Social Infrastructure & Industrial Systems segment which
reported increased revenues from the railway systems business.

Overseas revenues increased 5% to ¥4,802.7 billion, as comparedwith the year ended March 31, 2015, and the ratio to total revenues was 48%, compared with 47% for the year ended March
31, 2015.
(Asia)
Revenues in Asia decreased 3% to ¥2,112.3 billion, as comparedwith the year ended March 31, 2015. This was due mainly to
lower revenues in the Smart Life & Ecofriendly Systems segment,
which was affected by the reorganization of the air-conditioning
systems business, and in the Construction Machinery segment
mainly because of decreased sales particularly in China, despite
higher revenues in the Automotive Systems and Social
Infrastructure & Industrial Systems segments, etc.

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Financial Section

Liquidity and Capital Resources
Our management considers maintaining an appropriate level ofliquidity and securing adequate funds for current and future business operations to be important financial objectives. Through efficient management of working capital and selective investment in
new plants and equipment, we are working to optimize the efficiency of capital utilization throughout our business operations.
We endeavor to improve our group cash management by centralizing such management among us and our overseas financial subsidiaries. Our internal sources of funds include cash flows

We receive debt ratings from Moody’s Japan K.K. (Moody’s),Standard & Poor’s Rating Japan (S&P), as well as Rating andInvestment Information, Inc. (R&I). Our debt ratings as ofMarch 31, 2016 were as follows.
Rating Company

Long-term

Short-term

A3

P-2

S&P

A–

A-2

R&I

A+

a-1

Moody’sWith our current ratings, we believe that our access to thegenerated by operating activities and cash on hand. Our manage-

global capital markets will remain sufficient for our financing

ment also considers short-term investments to be an immediately

needs. We seek to improve our credit ratings in order to ensure

available source of funds. In addition, we raise funds both in thefinancial flexibility for liquidity and capital management, and tocapital markets and from Japanese and international commercial

continue to maintain access to sufficient funding resources

banks in response to our capital requirements. Our management’s

through the capital markets.

policy is to finance capital expenditures primarily by internallygenerated funds and to a lesser extent by funds raised throughCash Flows

the issuance of debt and equity securities in domestic and foreign
capital markets. In order to flexibly access funding, we maintainour shelf registration with the maximum outstanding balance of¥300.0 billion.
We maintain commitment line agreements with a number ofdomestic banks under which we may borrow in order to ensure
efficient access to necessary funds. These commitment line agreements generally provide for a one-year term, renewable upon
mutual agreement between us and each of the lending banks, aswell as another commitment line agreement with a contract termof three years ending in July 2019. As of March 31, 2016, ourunused commitment lines totaled ¥553.0 billion, including theseof ¥400.0 billion which the Company maintained.

Billions of yen

2015

2016

Net cash provided by operating activities¥ 451.8¥ 812.2

Net cash used in investing activities(612.5)(730.7)

Net cash provided by (used in)financing activities

233.2(26.4)

Effect of exchange rate changes
on cash and cash equivalents

68.5(57.3)Net increase (decrease) incash and cash equivalents

141.0

(2.3)

Years ended March 31:

Cash and cash equivalents at
beginning of year
Cash and cash equivalents at end of year

560.6

701.7

¥ 701.7¥ 699.3(Cash Flows from Operating Activities)
Net income in the year ended March 31, 2016 decreased ¥48.6
billion, as compared with the year ended March 31, 2015.
Changes in working capital in the year ended March 31, 2016
from collection of receivables, a decrease in inventories andchanges in trade payables improved net cash flow by ¥148.3 billion, ¥160.6 billion and ¥16.4 billion, respectively. As a result of
the foregoing, net cash provided by operating activities was¥812.2 billion in the year ended March 31, 2016, an increase of¥360.4 billion compared with the year ended March 31, 2015.

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Hitachi, Ltd. | Integrated Report 2016

(Cash Flows from Investing Activities)
Proceeds from sales of investments in securities and other financial assets (including investments in subsidiaries and investments
accounted for using the equity method) increased by ¥16.2 billion
as compared with the year ended March 31, 2015. Net amountof investments related to property, plant and equipment*1 was¥652.3 billion in the year ended March 31, 2016, an increase of¥83.7 billion as compared with the year ended March 31, 2015.
Purchase of investments in securities and other financial assets(including investments in subsidiaries and investments accounted
for using the equity method) in the year ended March 31, 2016was ¥196.6 billion, an increase of ¥43.7 billion as compared withthe year ended March 31, 2015, due mainly to the acquisition of
relevant businesses from Finmeccanica S.p.A. and the acquisitionof Pentaho Corporation by Hitachi Data Systems Corporation. As
a result of the foregoing, net cash used in investing activities was¥730.7 billion in the year ended March 31, 2016, an increase of¥118.2 billion compared with the year ended March 31, 2015.
*1 The sum of the purchase of property, plant and equipment, the purchase ofintangible assets and the purchase of leased assets, less the proceeds fromsale of property, plant, equipment and intangible assets, the proceeds fromsale of leased assets and the collection of lease receivables(Cash Flows from Financing Activities)
Net cash outflow from a decrease in short-term debt increased by¥206.7 billion as compared with the year ended March 31, 2015.
Proceeds related to long-term debt*2 in the year ended March 31,
2016 was ¥180.6 billion, a decrease of ¥25.4 billion as comparedwith the year ended March 31, 2015. As a result of the foregoing, net cash used in financing activities was ¥26.4 billion in theyear ended March 31, 2016, an increase in net cash outflow of¥259.6 billion compared with the year ended March 31, 2015.
*2 The proceeds from long-term debt, less the payments on long-term debt

As a result of the above items, as of March 31, 2016, cash andcash equivalents amounted to ¥699.3 billion, net decrease of¥2.3 billion from March 31, 2015. Free cash flows, the sum of
cash flows from operating and investing activities, represented an
inflow of ¥81.4 billion in the year ended March 31, 2016, anincrease in net cash inflow of ¥242.1 billion from the year ended
March 31, 2015.

Assets, Liabilities and Equity
As of March 31, 2016, total assets amounted to ¥12,551.0 billion,
an increase of ¥117.2 billion from March 31, 2015. This was due
mainly to the effect of the acquisition of the signaling systems
and railway businesses of Finmeccanica S.p.A. and the acquisitionof Pentaho Corporation by Hitachi Data Systems Corporation,
and an increase in trade receivables associated with businessexpansion, especially for foreign markets, in the Financial Services
segment. This increase was partially offset by the effect of reorganization of the air-conditioning systems business, decreases in thevalue of assets denominated in foreign currency owing to theappreciation of yen, the effect of lower stock price and the effectof inventory reduction. Cash and cash equivalents as of March 31,
2016 amounted to ¥699.3 billion, a decrease of ¥2.3 billion fromthe amount as of March 31, 2015.
As of March 31, 2016, total interest-bearing debt, the sum ofshort-term debt and long-term debt, amounted to ¥3,604.4 billion, an increase of ¥47.0 billion from March 31, 2015. As of
March 31, 2016, short-term debt, consisting mainly of borrowings from banks and commercial paper, amounted to ¥871.4 billion, a decrease of ¥106.2 billion from March 31, 2015, due
mainly to the repayment of commercial paper by the Company.
As of March 31, 2016, current portion of long-term debt
amounted to ¥651.5 billion, an increase of ¥167.9 billion fromMarch 31, 2015. As of March 31, 2016, long-term debt (excluding current portion), consisting mainly of debentures, debentureswith stock acquisition rights, medium-term notes and loans principally from banks and insurance companies, amounted to¥2,081.5 billion, a decrease of ¥14.6 billion from March 31,
2015, due mainly to increased amount of debt maturing in theyear ending March 31, 2017, despite higher demand for funds inline with business expansion in the Financial Services segment.
As of March 31, 2016, total Hitachi, Ltd. stockholders’ equity
amounted to ¥2,735.0 billion, a decrease of ¥207.2 billion fromMarch 31, 2015, due mainly to a decrease in the accumulated
other comprehensive income owing primarily to the appreciationof yen, lower stock prices, and lower interest rates, despite posting of net income attributable to Hitachi, Ltd. stockholders. As aresult, the ratio of total Hitachi, Ltd. stockholders’ equity to total
assets as of March 31, 2016 was 21.8%, compared with 23.7%
as of March 31, 2015.
Non-controlling interests as of March 31, 2016 was ¥1,390.4
billion, an increase of ¥36.4 billion from March 31, 2015.
Total equity as of March 31, 2016 was ¥4,125.5 billion, adecrease of ¥170.7 billion from March 31, 2015. The ratio ofinterest-bearing debt to total equity increased to 0.87, comparedwith 0.83 as of March 31, 2015.
63