STRATEGIC
FOCUS
Moving Forward with the 2018 Mid-termManagement Plan

1 Major Fiscal 2016 Results
2 Making Steady Progress
3 Growth Strategies for Fiscal 2018in Four Focus Business Domains
4 Strengthening the Front
5 Further Strengthening Lumada
6 Global Business Expansion
7 Deepening Our Engagement in theSocial Innovation BusinessIn fiscal 2016, Hitachi, Ltd. cleared its targets for revenues, adjusted operating income, EBIT, and net
income attributable to Hitachi, Ltd. stockholders.*1 The foundation is now clearly in place for furthergrowth into the future.
Building on the approaches put in place during fiscal 2016, the company will now pursue further
development of its Social Innovation Business, aiming to become an Innovation Partner for the IoT Era.

1 Major Fiscal 2016 Results
Promoting theEmpowerment of GrowthBusinesses

Launched Lumada IoT platform and reinforced in-house
implementation structure.
Strengthened on a priority basis four focus business domains.

Focus Business Domains

Business

Power/Energy

Power

Developed and started trial operation of 5.2 MW offshore wind power
generation system.
Accelerated the expansion of wind power business in Japan and Asia.

Social Infrastructure &Industrial SystemsRailway

Made smooth progress in integration of Hitachi Rail Italy S.p.A. andcontinued collaboration with Ansaldo STS S.p.A.
Implemented measures to achieve over 10% annual growth in global
railway business.

Social Infrastructure &Industrial Systems

Building

Completed development of standardized elevators for Asia and theMiddle East.
Expanded business by strengthening sales and maintenance bases in
Asia, the Middle East, and Europe.

Social Infrastructure &Industrial Systems

Financial

Utilized blocchain and other emerging technologies in Asia market.
Achieved steady growth of SI financial sector business in Japan.

Information &Telecommunication
Systems

Urban

Finance/Public/Healthcare

Business Segments

Selection andConcentration of HitachiBusinesses

Reviewed the capitalization policies of such Group companies asHitachi Transport System, Ltd., Hitachi Capital Corporation, andHitachi Koki Co., Ltd.

Business Structure
Reforms

Implemented of business structure reforms, such as closure andstreamlining of low profitability businesses (e.g., communication
products, overseas plant EPC* 2), resulting in an improvement ofapproximately 40 billion yen in operating income over fiscal 2015.

*1 Targets set for the first phase of the 2018 Mid-term Management Plan, with results measured as of May 2016.
*2 EPC: Engineering, procurement, and construction.

14Hitachi, Ltd. Integrated Report 2017

Revenues

Adjusted Operating IncomeRatio(trillion yen)

10.0

Net Income Attributable to
Hitachi, Ltd. Stockholders

(%)

(%)

Over
8.0

10.0

9.1

EBIT Ratio

6.3

Our Business Model

2 Making Steady Progress(billion yen)

Over
8.0

Over
400.0

6.4
5.3

5.2

231.2
172.1

FY 2018(target)FY 2015 FY 2016

Our Growing Front Business(Front Revenue Ratio)

FY 2018(target)Global Business Expansion(Overseas Revenue Ratio)(%)

364038FY 2015 FY 2016

Over5548

FY 2015 FY 2016

Stronger Cash Generation(Operating Cash-Flow Margin)*1(%)

Over
9.0

8.648

FY 2018(target)FY 2018(target)CEO Message

FY 2015 FY 2016

Asset Profitability
Improvement (ROA)*1 *2(%)

(%)

Over
5.0

7.1
3.3

FY 2015 FY 2016

FY 2018(target)FY 2015 FY 2016

FY 2018(target)FY 2015 FY 2016

FY 2018(target)FY 2015 FY 2016

Strategic Focus

2.6

FY 2018(target)Annual Exchange Rates
Average Annual Rate

FY 2015

FY 2016

FY 2018 (forecast)

JPY/USD120108110

JPY/EUR133

119120*1 Figures for Manufacturing, Services and Others.
*2 Return on assets (ROA) = [Net income] ÷ [Total assets (average from end of previous to end of current fiscal year)] × 100.

4,000.0 billion yen

8%(FY 2016 result)(FY 2018 target)(FY 2018 target)

Power/Energy

Industry/Distribution/Water

Urban

Finance/Public/Healthcare

Revenues (billion yen)

Revenues (billion yen)

Revenues (billion yen)

Revenues (billion yen)

1,460.0

1,320.0

1,238.6

1,083.8
495.7
FY 2016590.0

FY 2018(target)

We are addressing electric powerreforms in Japan, including retail market
liberalization and unbundling of power
generation and transmission, as well as
the distributed power and renewableenergy fields.

Platform/Products

703.0

770.0

FY 2016

FY 2018(target)We are engaging in plant optimization andrebuilding supply chains using digitaltechnologies.

Revenues (billion yen)

FY 2016

FY 2018(target)We aim to enhance quality of life by putting
digital technologies to use to achievecommunities with convenient, comfortable,and eco-friendly lifestyles.

Management & Governance

Adjusted operating income ratio

3,521.3 billion yen

FY 2016

FY 2018(target)We pursue growth through FinTech andsolutions ready for Japan’s “MyNumber” taxpayer ID system.

Adjusted operating income ratio

6,714.5

7,160.08%(FY 2016 result)(FY 2018 target)(FY 2018 target)
Hitachi, Ltd. Integrated Report 201715

Performance

Revenues

Front

Value Creation

3 Growth Strategies for Fiscal 2018 in Four Focus Business Domains

4 Strengthening the Front
To accelerate the global expansion of its Social Innovation Business, Hitachi is strengthening theFront functions of its operations, the point where it provides value directly to customers.
Establishment of the global front
Establish “global front” management organization launched in April 2017 to accelerate global expansion of Social
Innovation Business.

New employment
Consultants, system engineers, maintenance personnel, other resources newly employed (1,000 in Japan, 1,000
overseas in fiscal 2016).

Human resource training
Global front staffing increased, staff development accelerated through building of global certification system.

M&A to strengthen Front functions
Business growth through M&As to strengthen Front functions, targeting customer channels, maintenance sites,product business, and other areas.
Investments to Strengthen Front
Italy

Ansaldo STS

November 2015

Turnkey business entry, expansion of global business

TurkeyKurt & Kurt

April 2017

Medical device sales expansion in Europe, Middle EastUSA

Sullair

July 2017

Acquisition of US customer channels and business expansion

UK

Temple Lifts

April 2017

Elevator maintenance business entry in Europe

5 Further Strengthening Lumada
Hitachi is making full use of OT (operational technology) and IT as it builds out its Social
Innovation Business to provide advanced infrastructural systems on a global scale.
In May 2016, Hitachi began offering Lumada, its IoT platform that helps drive the Social
Innovation Business, to customers.
Strengthening
Our Digital andLumada Businesses
End-to-End, Integrated Solutions

Open Ecosystems

Global Front

Strengthening the Front
on a Global ScaleAmericas

Growth Strategies
in Four Focus Domains

Power/Energy		

EMEA/CIS

APAC

China

Industry/Distribution/
Urban
Water		Japan

Finance/Public/
Healthcare

Lumada represents a distillation of the deep OT- and IT-driven solutions that Hitachi hasbrought to market over many years.
Through collaborative creation with customers, we provide them with end-to-end solutions
covering everything from analysis of management issues to buildout planning, value verification,
rollout of equipment and systems, and operation and maintenance.
Furthermore, by building a track record of use cases with wide applicability, both from internal
company cases and from collaborative creation cases launched with customers and partnercompanies, we are accelerating our provision of value to customers.
16

Hitachi, Ltd. Integrated Report 2017

EuropeFY 2016 Revenues

FY 2018 Revenues

0.97 trillion yen

1.15 trillion yen

NorthAmerica
Automotive systems
Industrial products
Urban mobility

China
Elevators/escalators
Healthcare
Construction machinery

FY 2016 Revenues

FY 2018 Revenues

0.93 trillion yen

1.1 trillion yenAsia

FY 2016 Revenues

FY 2018 Revenues

1.14 trillion yen

1.46 trillion yen

Finance (FinTech)
Industrial products

FY 2016 Revenues

FY 2018 Revenues

0.93 trillion yen

1.22 trillion yen

CEO Message

Railway systems
Nuclear energy
Energy solutions

Our Business Model

6 Global Business Expansion

FY 2016 Revenues

FY 2018 Revenues

48% (actual)

55% (target)
Strategic Focus

Overseas Revenues Ratio

7 Deepening Our Engagement in the Social Innovation BusinessContributing to the Achievement of the SDGs* Through the Social Innovation Business

Management & GovernanceValue Creation

Hitachi will contribute to the achievement ofthe United Nations Sustainable Development
Goals (SDGs), which came into force inJanuary 2016, through its Social Innovation
Business by broadening our perspective oncommon global issues and gaining a deeper
awareness of those issues.
Initiatives have already begun, as various
business units (BUs) have launchedworkshops aimed at enhancing understanding
26–27 Value Creation Case 03: Waterof the SDGs.
As a company engaged in many different
businesses, we are in a good position to makea broad contribution to reaching the SDGs,
and we plan henceforth to undertake concretedeliberations on specific initiatives.
* Adopted by the United Nations in September 2015, the SDGs consist of 17

Hitachi, Ltd. Integrated Report 201717

Performancegoals and 169 targets.