Progress of the 2018 Mid-term Management Plan
In fiscal 2017, Hitachi posted record earnings* in terms of adjusted operating income, EBIT, and net
income attributable to Hitachi, Ltd. stockholders.
In fiscal 2018, through global expansion and other initiatives, Hitachi is targeting adjusted operating
income and EBIT ratios of over 8%, respectively, and net income attributable to Hitachi, Ltd. stockholders of more than ¥400 billion.
* Since introduction of consolidated accounting in fiscal year ended March 1987

Overview of 2018 Mid-term Management Plan Initiatives
Designating fiscal 2017, the second year of the 2018 Mid-term Management Plan, as the year to “change gears toward growth,”
Hitachi targeted global expansion through M&A while strengthening the Lumada business by increasing collaborative creation withcustomers. Business restructuring also continued through efforts to improve the earnings of unprofitable operations, including
downsizing and withdrawal. In addition, over the two-year period ended March 31, 2018, Hitachi reorganized businesses generating
revenues of around ¥1.5 trillion, focusing mainly on publicly listed subsidiaries. These efforts led to significant year-on-year
improvements in earnings in fiscal 2017, of ¥127.3 billion for adjusted operating income, ¥169.0 billion for EBIT, and ¥131.7 billion
for net income attributable to Hitachi, Ltd. stockholders. Other profitability and cash generation metrics improved, also, with theoperating cash-flow margin rising to 7.8% and ROA increasing to 5.0%.
Fiscal 2018 is the final year of the plan. Positioned as the year of achieving the plan targets and becoming a globally integrated
enterprise, it features measures to achieve specific targets and create further growth.

FY2016FY2017FY2018Prepare for growth

Change gears
toward growth

Achieve Mid-termManagement Plan
to be a globally
integrated enterprise3-level structure

Expanded global businessthrough M&As

Expand global business(Front, Platform, Products)

Introduced Business
Unit system
Activated Lumada

Enhanced Lumada

Expand digital businessusing Lumada

Expanded collaborative
creation

Continued business restructuring
1

Structural reforms
Improvement (YoY) of ¥38.0 billion in adjusted
operating income via downsizing and withdrawal from
unprofitable businesses
Withdrawal from large-scale industrial EPC* business
Gains from restructuring in FY2017: ¥15.0 billion (YoY)* EPC: Engineering, Procurement and Construction

142 Selection and concentration of businesses

Reorganization of businesses generating revenues ofapprox. ¥1.5 trillion over FY2016-2017
FY2016FY2017

Logistics service(Hitachi Transport System)

Semiconductor manufacturing
equipment, etc.
(Hitachi Kokusai Electric)

Financial service(Hitachi Capital)

Passenger transportation service(Hitachi Dentetsu)

Electric tools(Hitachi Koki
(now Koki Holdings Co., Ltd.))

Network devices(ALAXALA Networks)

Others(LCD Panel manufacturingequipment, etc.)

Forged steel roll business

Revenues*1

Adjusted Operating Income Ratio(trillion yen)

9.2

10.0

9.4

Net Income Attributable toHitachi, Ltd. Stockholders

EBIT Ratio

(%)

9.4

7.6

(billion yen)

(%)

8.0

Over 8.0

Over 8.0

8.0

362.9

6.9

6.4
5.2

2016

2017

2018
(target)2018(FY)(forecast)Global Business Expansion(Overseas Revenue Ratio)
48

2017

2018
(target)2018(FY)(forecast)

2016

Stronger Cash-generating(Operating Cash-Flow Margin)*2(%)

Over 5550

2016

7.1

231.2

2017

2018
(target)2018(FY)(forecast)

2016

CCC
(Cash Conversion Cycle)(%)

Over 9.0

Over 400.0 400.0

2017

2018
(target)2018(FY)(forecast)

Asset Profitability
Improvement (ROA)*2 *3(days)

7.8

72.2

69.7(%)
5.0

Over 5.0

2017

2018
(target)

70.0
3.3

2016

2017

2018
(target)

(FY)

2016

2017

Average FX Rate

(FY)

2018
(target)

2016

2017

(FY)

2018
(target)

2016

2016

2017

2018 (forecast)

JPY/USD

108111105

JPY/EUR

119130130

(FY)

(FY)

*1 Rounded to the nearest hundred billion.
*2 Figures for Manufacturing, Services and Others.
*3 Return on assets (ROA) = Net income / Total Assets (Average between the end of current fiscal year and the end of previous fiscal year) x 100.

Global Business Expansion
YoY:

113 %

Overall global revenues in FY2017

YoY:

114 %

YoY:

113%
YoY:

108 %

FY2016 Revenues*

FY2017 Revenues

FY2016 Revenues*

FY2017 Revenues

FY2016 Revenues*

FY2017 Revenues

0.85 trillion yen

0.96 trillion yen

0.91 trillion yen

1.04 trillion yen

1.09 trillion yen

1.18 trillion yen

EuropeElevators/Escalators
Automotive products
Construction machinery
High functional materials &components

China

Railway
Construction machineryHigh functional
materials & components

Regions except for thoselisted above (including Japan):
FY2016 Revenues*

FY2017 Revenues

5.04 trillion yen

5.15 trillion yen

RailwayIndustrial equipment/solutions
IT products
Construction machinery
High functional
materials & components

Asia
YoY:

114 %

FY2016 Revenues*

FY2017 Revenues

0.91 trillion yen

1.04 trillion yen* Figures reflecting adjustments based on currently existing businesses.
(Revenues of Hitachi Transport System, Hitachi Capital, and Hitachi Koki wereexcluded from the actual result in FY2016)

NorthAmerica

Elevators/EscalatorsAutomotive products
Construction machinery
15

Strategy for Value Creation

Making Steady ProgressToward Future Global Growth Using Digital Technology
The targeted model for Hitachi’s future growth involves Front and Platform business divisions selecting products and supplying
services in line with the changing needs of customers.
Product business divisions will focus on supplying globally competitive products.
Industry/
Distribution/
Water

Power/
EnergyCustomer

Finance/
Social/Healthcare

Urban
Directly provide
platform tocustomer

Provide servicesby collecting
products

Front-line
Consulting

Pre-engineering

SIEngineering

In-house use ofLumadaPlatform

Products
Providecompetitive
products

Powerproducts

Elevators
Escalators

Railway

Automotive
products

Home
appliances

Industrial
equipmentIT
products

Directly
provideproducts tocustomer

Productsof othercompanies

Policies for Growth
Investments in Focused Business Fields
Our investments across all global regions (North America, Asia, China, and Europe) are targeted towards four business fields withthe aim of expanding global operations, expanding digital service businesses, and responding to a sustainable society.

Investment Direction
Expand global business: Enhancement of regional sales channel, etc.
Expand digital service business: Financial payment system, e-Government, etc.
Respond to sustainable society: Carbon free (e.g. renewable energy, energy management, electric vehicles), etc.

Industry/
Distribution/
Water

Power/Energy

Investment fields

Renewable energy
Distributed power solution

Manufacturing solutions
Industrial equipment(North America/Asia)

Urban
Railway
Turnkey/signaling system
Elevators/Escalators
New installations/maintenance(China/other countries & regionsof Asia)

Finance/
Social/Healthcare
Japan and global
Financial payment system (Asia)
e-Government (Asia)

Automotive
Electric power trains,autonomous driving products
Mobility as a Service

Improvement of Asset Profitability
Led by the Investment Strategy Division established in April 2017, Hitachi is working to generate higher profits from assets byprioritizing investment in markets with growth potential and businesses that can generate higher ROA, and by downsizing or
substituting existing assets through reduction of exposure to low-margin assets or the sale of equity holdings. In addition,
Hitachi is working to make more effective use of capital, including financing efforts that utilize external capital.

16Strategy for Value Creation

Direction of Assets Holdings
HighExpansionof profitableassetsReduction of existing assets
ROA

Maintainassets scale

MiddlePrioritized investment in high growthand profitable (ROA) business domains
Railway turnkey/signaling business, industrial
equipment, etc.

(Investment withincash flows)

Effective use of capital

Reductionof assets

Low

Reduction of low-profit assets
Network devices, overseas industrial EPC
business, etc.
Sale of holding shares
Maxell Holdings, Ltd. (Dec. 2017), etc.

(Prioritizedinvestment)

Prioritization of investments

Financing by utilizing external capital
Hiring investment and fundingspecialists

LowMiddleHigh
Growth potential of global market

Growing the Social Innovation Business Using Digital Technology
Hitachi’s aim is to realize better quality of lives for people through the global supply of advanced social infrastructure using
digital technology. In fiscal 2017, we laid the foundation to expand businesses that utilize digital technologies such as Lumada.
Specific measures included construction of a global support set-up, front-line HR foundation, and the development of Lumada
software to enable rapid, simple systems deployment. In fiscal 2018, we plan to accelerate the global supply of solutions throughHitachi Global Digital Holdings Corporation, which was established in April 2018.
Please see “Expanding the Supply of Lumada Digital Solutions” (p. 18) for more details.

Human Resources for Growth
Hitachi is investing to strengthen human resources to realize growth through digital technology on a global scale. These efforts areunderpinned by the appointment of three talented global executives to head up the relevant business units and group companies,
along with our Chief Commercial Officers to provide specialized management expertise in North America, Europe, and Asia. In addition,
we have recruited around 30 top-level managers from global firms in the IoT sector to manage operations in each field. We arealso looking to strengthen Hitachi’s capacity to create innovations through the recruitment of a diverse array of talent. As of April
1, 2018, the ratios of women and non-Japanese in executive and corporate officers within Hitachi, Ltd. were 2.5% and 6.4%,
respectively. By fiscal 2020, we aim to increase each of these figures to 10%.
Please see “Message from the Chief Human Resources Officer” (p. 31) for more details.

R&D and New Business Creation
As part of originating world-leading products and services, Hitachi is focused on the development of innovative technologies andthe creation of new businesses. Specific areas of focus where we are increasing our investments in technical development include
blockchain, autonomous driving, smart manufacturing, AI, and robotics. In March 2018, as part of a program aimed at creating
disruptive technologies based on an open innovation approach, we invested in funds managed by the venture capital firm
Geodesic Capital.
Please see “Message from the Chief Technology Officer” (p. 35) for more details.

Accelerate Management Speed, Improve Operational Efficiency
As part of measures aimed further at improving profitability by strengthening the business foundation and reforming businessprocesses, we are promoting measures for (1) increased efficiency of indirect operations, (2) reduced number of subsidiaries,and (3) digital transformation through increased visibility of management data. Through such measures, we aim to reduce costsby more than ¥100 billion by fiscal 2021.
Management issues

Improvement themes

Reform projects
Increased efficiencyof indirect operations

Reduced number ofsubsidiaries

Increased visibilityof management data

Simplify organizational structures
Increase speed

Reorganize system and rules
Reorganize work processes

Increase
operational
efficiency

Enhancement of complianceCentralize management information

17