Operating Results
Summary
Billions of yen
Years ended March 31:

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

2017

2018

Percentchange¥9,162.2
475.1¥9,368.6
644.2

2%
36%

469.0

638.6

36%

231.2

362.9

57%

Analysis of Statement of Operations

Revenues increased 2% to ¥9,368.6 billion, as comparedwith the year ended March 31, 2017, despite the effect ofthe move to transform the business portfolio such as
conversion of Hitachi Capital Corporation and Hitachi
Transport System, Ltd., into equity-method affiliates anddeconsolidation of Hitachi Koki Co., Ltd. (now Koki HoldingsCo., Ltd.) in the year ended March 31, 2017. This increase
was due mainly to higher revenues in the Construction
Machinery segment, in which overseas sales increased
mainly in China, and in the High Functional Materials &Components segment, in which sales of electronics- andautomotive-related products increased.
Cost of sales increased 1% to ¥6,866.5 billion, ascompared with the year ended March 31, 2017, and theratio of cost of sales to revenues was 73%, a decrease of1% from the year ended March 31, 2017. Gross profit
increased 5% to ¥2,502.0 billion, as compared with theyear ended March 31, 2017.
Selling, general and administrative expenses were
¥1,787.4 billion, which was the same level as for the year
ended March 31, 2017, and the ratio of selling, generaland administrative expenses to revenues was 19%, ascompared with 20% for the year ended March 31, 2017.
Adjusted operating income increased by ¥127.3 billion to¥714.6 billion yen, as compared with the year ended March31, 2017. The increase was due mainly to higher profits
owing to increased revenues in the Construction Machinery
segment, profitability improvement for the industry &distribution field, the power and energy business, and theindustrial equipment business in the Social Infrastructure &Industrial Systems segment. The increase was also
attributable to higher profits in the Information &Telecommunication Systems segment owing to animprovement in the profitability of the system integration
business in Japan and the effect of the structural reform
implemented in the year ended March 31, 2017.
Other income decreased ¥88.6 billion to ¥12.0 billion
and other expenses decreased ¥5.8 billion to ¥140.6 billion,
as compared with the year ended March 31, 2017,
respectively. The details are as follows. Net gain on sales
and disposal of fixed assets worsened by ¥17.6 billion andturned to a loss of ¥2.5 billion, as compared with the year
ended March 31, 2017. Impairment losses decreased¥19.9 billion to ¥48.6 billion, as compared with the year
ended March 31, 2017. This mainly reflected impairment
losses on intangible assets, etc., in the Information &Telecommunication Systems segment. Net gain on
business reorganization and others decreased ¥71.5 billion
to ¥9.7 billion, as compared with the year ended March31, 2017, due mainly to the absence of the partial sale ofthe shares of Hitachi Transport System, Ltd. and the saleof Hitachi Koki Co., Ltd. shares recorded in the year ended
March 31, 2017. Special termination benefits decreased¥8.9 billion to ¥15.7 billion, as compared with the yearended March 31, 2017. Expenses related to competition
law and others increased ¥7.5 billion to ¥14.2 billion, ascompared with the year ended March 31, 2017.
Financial income (excluding interest income) was ¥7.0
billion, the same level as for the year ended March 31,2017, and financial expenses (excluding interest charges)
decreased ¥14.9 billion to ¥11.2 billion, as compared withthe year ended March 31, 2017.
Share of profits of investments accounted for using theequity method was ¥62.4 billion, an improvement of ¥109.6
billion from the year ended March 31, 2017, for which animpairment loss for the uranium enrichment business at aU.S. equity-method associate was posted in the Social
Infrastructure & Industrial Systems segment.
As a result of the foregoing, EBIT increased ¥169.0billion to ¥644.2 billion, as compared with the year ended
March 31, 2017.
Interest income increased ¥2.0 billion to ¥14.9 billion andinterest charges increased ¥1.5 billion to ¥20.5 billion, ascompared with the year ended March 31, 2017, respectively.
Income from continuing operations, before income taxes
increased ¥169.5 billion to ¥638.6 billion, as compared withthe year ended March 31, 2017.
Income taxes increased ¥6.5 billion to ¥131.7 billion, ascompared with the year ended March 31, 2017, due mainly
to increased income from continuing operations, before
income taxes.
Loss from discontinued operations increased ¥10.0billion to ¥16.0 billion, as compared with the year ended
March 31, 2017.
Net income increased ¥152.8 billion to ¥490.9 billion, ascompared with the year ended March 31, 2017.
Net income attributable to non-controlling interests
increased ¥21.1 billion to ¥127.9 billion, as compared withthe year ended March 31, 2017.
As a result of the foregoing, net income attributable toHitachi, Ltd. stockholders increased ¥131.7 billion to ¥362.9billion, as compared with the year ended March 31, 2017.

Revenues by Geographic Area

The following is an overview of revenues attributed togeographic areas based on customer location.
Billions of yen
Years ended March 31:

2017

2018

Percentchange

Japan
Overseas Revenues
SubtotalAsia
North AmericaEurope
Other Areas
Total Revenues¥4,757.6¥4,643.0-2%4,404.5
1,860.7
1,144.0
972.6
427.1¥9,162.2

4,725.5
2,081.1
1,177.5
964.4
502.3¥9,368.6

7%
12%
3%
-1%
18%
2%

79

Results of Value Creation

Operating and Financial ReviewJapanRevenues in Japan decreased 2% to ¥4,643.0 billion, as
compared with the year ended March 31, 2017. This wasdue mainly to reduced revenues in the Social Infrastructure& Industrial Systems segment, etc. and due to theconversion of Hitachi Transport System, Ltd. and Hitachi
Capital Corporation to equity-method associates in theprevious fiscal year, despite increased revenues in the High
Functional Materials & Components segment.
Overseas(Asia)
Revenues in Asia increased 12% to ¥2,081.1 billion, ascompared with the year ended March 31, 2017. This wasdue mainly to higher revenues in the Electronic Systems &Equipment segment, Construction Machinery segment,and High Functional Materials & Components segment,etc., despite reduced revenues as a result of theconversion of Hitachi Transport System, Ltd. and Hitachi
Capital Corporation to equity-method associates.
(North America)
Revenues in North America increased 3% to ¥1,177.5
billion, as compared with the year ended March 31, 2017.
This was due mainly to the higher revenues in the Social
Infrastructure & Industrial Systems segment gained by theindustrial products business expansion by acquisition andhigher revenues in the Construction Machinery segment,
despite reduced revenues in the Electronic Systems &Equipment segment due to the impact of thedeconsolidation of Hitachi Koki Co., Ltd.
(Europe)
Revenues in Europe decreased 1% to ¥964.4 billion, ascompared with the year ended March 31, 2017. This wasdue mainly to the impact of deconsolidation of Hitachi Koki
Co., Ltd. and the conversion of Hitachi Capital Corporation
to an equity-method associate. This decrease was almost
partially offset by higher revenues in the Social Infrastructure& Industrial Systems segment, reflecting substantial sales
growth in the railway systems business, and higher
revenues in the High Functional Materials & Components
segment due mainly to acquisitions.
(Other Areas)
Revenues in other areas increased 18% to ¥502.3 billion,
as compared with the year ended March 31, 2017.
This was due mainly to higher revenues in Construction
Machinery segment owing to acquisitions, etc.
As a result of the foregoing, overseas revenues increased
7% to ¥4,725.5 billion, as compared with the year ended
March 31, 2017, and the ratio to total revenues was 50%,
which was 2% increase as compared with the year ended
March 31, 2017.

80

Summary of Financial Condition, etc.
Liquidity and Capital Resources

Our management considers maintaining an appropriate levelof liquidity and securing adequate funds for current and futurebusiness operations to be important financial objectives.
Through efficient management of working capital andselective investment in new plants and equipment, we areworking to optimize the efficiency of capital utilization
throughout our business operations. We endeavor to
improve our group cash management by centralizing suchmanagement among us and our overseas financial
subsidiaries. Our internal sources of funds include cash
flows generated by operating activities and cash on hand.
Our management also considers short-term investments
to be an immediately available source of funds. In addition,
we raise funds both in the capital markets and fromJapanese and international commercial banks in response
to our capital requirements. Our management policy is tofinance capital expenditures primarily by internally generated
funds and to a lesser extent by funds raised through theissuance of debt and equity securities in domestic andforeign capital markets. In order to flexibly access funding,we maintain our shelf registration with the maximum
outstanding balance of ¥300.0 billion.
We maintain commitment line agreements with anumber of domestic banks under which we may borrow inorder to ensure efficient access to necessary funds.
These commitment line agreements generally provide fora one-year term, renewable upon mutual agreement between
us and each of the lending banks, as well as anothercommitment line agreement with a contract term of three
years ending on July 29, 2019. As of March 31, 2018, ourunused commitment lines totaled ¥503.2 billion, including
those of ¥400.0 billion which the Company maintained.
We receive debt ratings from Moody s Japan K.K.
(Moody s), Standard & Poor s Rating Japan (S&P), as wellas Rating and Investment Information, Inc. (R&I). Our debt
ratings as of March 31, 2018 were as follows:
Long-term

Short-term

Moody sRating Company

A3

P–2

S&P

A–A–2

R&I

A+

a–1

With our current ratings, we believe that our access tothe global capital markets will remain sufficient for ourfinancing needs. We seek to improve our credit ratings inorder to ensure financial flexibility for liquidity and capitalmanagement, and to continue to maintain access tosufficient funding resources through the capital markets.

Billions of yen
Years ended March 31:

2017

2018

Net cash provided by operating activities¥ 629.5¥ 727.1

Net cash used in investing activities(337.9)(474.3)

Net cash used in financing activities(209.5)(321.4)

Effect of exchange rate changes
on cash and cash equivalents(16.1)

1.3

Change in cash and cash equivalents

65.9(67.2)Cash and cash equivalents at
beginning of year
Cash and cash equivalents at end of year

699.3765.2¥ 765.2¥ 697.9(Cash Flows from Operating Activities)
Net income in the year ended March 31, 2018 increased by¥152.8 billion, as compared with the year ended March 31,
2017. Net cash outflow from a change in inventories
increased by ¥158.4 billion, as compared with the yearended March 31, 2017. Net cash flow from a change intrade payables deteriorated by ¥13.6 billion. Net cash flowfrom a change in trade receivables improved by ¥244.0
billion. As a result, net cash outflow from changes inworking capital decreased. As a result of the foregoing, netcash provided by operating activities was ¥727.1 billion in
the year ended March 31, 2018, an increase of ¥97.5 billion
compared with the year ended March 31, 2017.
(Cash Flows from Investing Activities)
Net amount of investments related to property, plant andequipment*1 was ¥406.4 billion, a decrease of ¥56.1 billion
as compared with the year ended March 31, 2017.
Proceeds from sales of investments in securities and otherfinancial assets (including investments in subsidiaries andinvestments accounted for using the equity method)
decreased by ¥70.7 billion compared with the year ended
March 31, 2017 for which partial sales of the shares ofHitachi Transport System, Ltd. and Hitachi Capital
Corporation, and the sale of all shares of Hitachi Koki Co.,
Ltd. were conducted. Purchase of investments in securities
and other financial assets (including investments insubsidiaries and investments accounted for using the equitymethod) increased ¥65.8 billion, compared with the year
ended March 31, 2017, due mainly to payment for theacquisition of “Sullair" air compressor business. As a resultof the foregoing, net cash used in investing activities was¥474.3 billion in the year ended March 31, 2018, anincrease of ¥136.3 billion compared with the year ended
March 31, 2017.
*1 The sum of the purchase of property, plant and equipment, thepurchase of intangible assets and the purchase of leased assets,less the proceeds from sale of property, plant, equipment andintangible assets, the proceeds from sale of leased assets and thecollection of lease receivables(Cash Flows from Financing Activities)
The net cash outflow from a change in short-term debt
decreased by ¥128.9 billion compared with the year ended
March 31, 2017. Payments related to long-term debt*2 inthe year ended March 31, 2018 were ¥113.5 billion, ascompared with ¥115.5 billion of proceeds related to longterm debt in the year ended March 31, 2017. As a result ofthe foregoing, net cash used in financing activities was¥321.4 billion in the year ended March 31, 2018, an
increase of ¥111.9 billion compared with the year ended
March 31, 2017.
*2 The proceeds from long-term debt, less the payments onlong-term debt

As a result of the above items, as of March 31, 2018,
cash and cash equivalents amounted to ¥697.9 billion,a decrease of ¥67.2 billion from March 31, 2017. Free cash
flows, the sum of cash flows from operating and investing
activities, were an inflow of ¥252.8 billion in the year ended
March 31, 2018, a decrease of ¥38.7 billion from the year
ended March 31, 2017.

Assets, Liabilities, and Equity

As of March 31, 2018, total assets amounted to ¥10,106.6
billion, an increase of ¥442.6 billion from March 31, 2017.
This was due mainly to the acquisition of “Sullair" aircompressor business in the Social Infrastructure & IndustrialSystems segment and corporate acquisitions undertaken by
Hitachi Chemical Company, Ltd. in the High Functional
Materials & Components segment. Cash and cash
equivalents as of March 31, 2018 amounted to ¥697.9billion, a decrease of ¥67.2 billion from the amount as ofMarch 31, 2017.
As of March 31, 2018, total interest-bearing debt, thesum of short-term debt and long-term debt, amounted to¥1,050.2 billion, a decrease of ¥126.3 billion from March 31,2017 as a result of bond redemption and repayment ofborrowings. As of March 31, 2018, short-term debt,
consisting mainly of borrowings from banks and commercial
paper, amounted to ¥121.4 billion, a decrease of ¥74.9
billion from March 31, 2017. As of March 31, 2018, current
portion of long-term debt amounted to ¥117.1 billion,a decrease of ¥73.0 billion from March 31, 2017. As ofMarch 31, 2018, long-term debt (excluding current portion),
consisting mainly of debentures, and loans principally frombanks and insurance companies, amounted to ¥811.6
billion, an increase of ¥21.6 billion from March 31, 2017.
As of March 31, 2018, total Hitachi, Ltd. stockholders
equity amounted to ¥3,278.0 billion, an increase of ¥310.9
billion from March 31, 2017. This is due mainly to postingnet income attributable to Hitachi, Ltd. stockholders.
As a result, the ratio of total Hitachi, Ltd. stockholders
equity to total assets as of March 31, 2018 was 32.4%,
compared with 30.7% as of March 31, 2017.
Non-controlling interests as of March 31, 2018 were¥1,233.6 billion, an increase of ¥103.7 billion fromMarch 31, 2017.
Total equity as of March 31, 2018 was ¥4,511.6 billion,
an increase of ¥414.6 billion from March 31, 2017. The ratio
of interest-bearing debt to total equity was 0.23, comparedwith 0.29 as of March 31, 2017.
81

Results of Value Creation

Cash Flows