PERFORMANCE

48 Financial

46

48

Segment Information

50

Financial and Non-Financial Highlights

52

10-Year Financial Data

54

Operating and Financial Review

60

Consolidated Statement of Financial Position

62

Consolidated Statement of Profit or Loss

63

Consolidated Statement of Comprehensive Income

64

Consolidated Statement of Changes in Equity

65

Consolidated Statement of Cash Flows

Hitachi, Ltd. Integrated Report 201766

Summarized Consolidated Statement of Financial
Position by Manufacturing, Services and Othersand Financial Services

67

Summarized Consolidated Statement of Profit or
Loss by Manufacturing, Services and Others andFinancial Services

67

Summarized Consolidated Statement of Cash
Flows by Manufacturing, Services and Others andFinancial Services

Our Business Model
Value Creation

Strategic Focus

Toward a Low-Carbon Society
Realization of a Resource Efficient Society
Harmonized Society with Nature

74 Societal
Supply Chain Management
Labor Practices
Communicating CSR Initiatives
and Material Issues

Management & Governance

74
76
79

Hitachi, Ltd. Integrated Report 201747

Performance

69
72
73

CEO Message

68 Environmental

Segment Information
Revenues

Information & Telecommunication Systems

Main Products and Services

Revenues and Profit

Systems integration
Consulting
Cloud services
Servers
Storage
SoftwareTelecommunications & network
ATMs(Billions of yen)

Adjusted operating income ratio

Share of Revenues
FY 2016
7.7%

6.6%

6.7%

2,034.0

2,109.3

5.2%

5.2%

1,982.8

FY 2016
A storage system

Social Infrastructure & Industrial Systems

Main Products and Services

Revenues and Profit

Industrial machinery and plants
Elevators
Escalators
Railway systems
Thermal, nuclear and renewableenergy power generation
systems
Transmission & distribution
systems(Billions of yen)

A Class 800 train for the UK Intercity
Express Programme (IEP)Electronic Systems & Equipment

15

16

(FY)

2,331.9

2,066.2
5.3%

4.3%

14

3.5%

–0.9%

15

16

Revenues and Profit

Semiconductor manufacturing
equipment
Measurement and analysis
equipment
Advanced industrial products
Medical equipment(Billions of yen)
6.4%
5.6%
1,131.6

3.3%

1.2%

Main Products and Services

30

％

23

％

Overseas Revenue Ratio
FY 2016

(FY)

39

％

Share of Revenues
FY 2016
7.0%

5.9%
5.7%
1,127.6％

Share of Revenues
FY 2016

2,333.1

20

Overseas Revenue Ratio

3.9%

14

EBIT ratio

5.7%
1,170.3

12％

Overseas Revenue Ratio
FY 2016
Hokkaido University Hospital s particle
beam cancer therapy system

Construction Machinery

14

48

Hitachi, Ltd. Integrated Report 2017

16

(FY)

Main Products and Services

Revenues and Profit

Share of Revenues

Hydraulic excavators
Wheel loaders
Mining machinery(Billions of yen)

FY 2016

815.7

758.3

60
7

753.9

7.4%
7.3%

Hitachi Construction Machinery's
ultralarge hydraulic excavator andmining dump truck

15

14

3.4%
3.5%

Overseas Revenue Ratio

3.0%

3.0%

FY 2016

15

16

(FY)

70

％

％

％

Adjusted operating income ratio

High Functional Materials & Components

Main Products and Services

Revenues and Profit

Share of Revenues(Billions of yen)

FY 2016

Hitachi Metals Nd-Fe-B NEOMAX®
magnets

Semiconductor- anddisplay-related materials
Printed wiring boards andrelated materials
Automotive parts(molded plastic products, etc.)
Energy storage devices
Specialty steels
Magnetic materials andcomponents
High-grade casting components
Wires and cables

Automotive Systems

Main Products and Services

Revenues and Profit

Engine management systems
Electric powertrain systems
Drive control systems
Car information systems(Billions of yen)

1,529.4

1,564.0

1,464.6

9.8%
8.4%

8.1%
7.9%

8.1%

EBIT ratio

14

％

8.2%

FY 2016

16

(FY)

5.1%

992.2
6.6%
5.7%

FY 2016
3.7%

14

15

16

10

(FY)

Main Products and Services

Revenues and Profit

Share of Revenues

Refrigerators
Washing machines
Vacuum cleaners
Room air conditioners
Air-conditioning equipment(Billions of yen)

FY 2016

57
6

754.2
681.0
6.2%

％

Overseas Revenue Ratio

5.4%

Hitachi Automotive Systems motor fora hybrid vehicle％

Share of Revenues
FY 2016

1,001.1

57

557.3
5.7%

Strategic Focus

936.9

15

％

％
Value Creation

4.6%

Overseas Revenue Ratio

Hitachi Appliances robot cleaner
minimaru

3.5%

14

15

4.0%

16

FY 2016

(FY)

20

％

Financial Services*2

Revenues and Profit

Share of Revenues

Revenues and Profit

Share of Revenues(Billions of yen)

FY 2016(Billions of yen)

FY 2016

1,274.2

6

1,252.7

4.0%
4.2%
3.3%

3.2%

3.4%
3.2%
653.7

15

16

％
10.9%

Overseas Revenue Ratio
FY 2016

14

356.2

(FY)

26

12.8%

12.7%

12.4%

11.9%
179.2

FY 2016

14

15

16

％

Overseas Revenue Ratio

9.9%

％

2

365.3

Management & Governance

Others*1

3.8%

(FY)

36

％

*1 From fiscal 2016, the Others (Logistics and Other Services) has been renamed to the Others due to conversion of Hitachi Transport System, Ltd. into
an equity-method associate on May 19, 2016.
*2 As Hitachi Capital Corporation was converted into an equity-method associate as of October 3, 2016, there is no company which belongs to the Financial
Services Segment. Accordingly, only the result for the first half of fiscal 2016 was recorded in this segment for fiscal 2016.
Hitachi, Ltd. Integrated Report 201749

Performance

14

CEO Message

Overseas Revenue Ratio

6.2%

Smart Life & Ecofriendly Systems

Our Business Model

Revenues

Financial and Non-Financial Highlights

Revenues / Overseas sales ratio

Operating income (Adjusted operating income) /Operating income (Adjusted operating income) ratio / EBIT / EBIT ratio(Billions of yen)(%)

12,00060

800

810,000

50

600

6

8,000

40

400

4

6,000

30

200

2

4,000

20

0

0

2,000

10

–200

–2

0

–400

0

07

08

09

10

11

12

13

14

13

U.S. GAAP

14

15

16

(FY)

(Billions of yen)

07

(%)

08

09

IFRS

Asia
North America
Revenues ( Japan
Overseas sales ratio (right scale)

Europe

10

11

12

13

14

13

U.S. GAAP

Other Areas) (left scale)

14

15

–4

16 (FY)IFRS

Operating income (Adjusted operating income) (left scale)
EBIT (left scale)Operating income (Adjusted operating income) ratio (right scale)
EBIT ratio (right scale)

Return on equity (ROE) / Return on assets (ROA)

Cash flows(%)(Billions of yen)
900

30
20

450

10
0

0

–10
–20

–450

–30
–40
–50

07

08

09

10

11

12

13

14

13

U.S. GAAP
ROE

15

16 (FY)

–900

07

08

09

IFRS

10

11

12

13

14

13

U.S. GAAP

ROA

14

15

16 (FY)IFRSCash flows from operating activities
Free cash flows

Cash flows from investing activities

Capital expenditures*1 / Depreciation

R&D expenditures / R&D expenditures as a percentage ofconsolidated revenues(Billions of yen)(Billions of yen)

1,000

500

5

800

400

4

600

300

3

400

200

2

200

100

1

0

07

08

09

10

11

12

U.S. GAAP
Capital expenditures50

14

Depreciation

Hitachi, Ltd. Integrated Report 2017

13

14

13

14

15

IFRS

16

(FY)

0

07

(%)

08

09

10

11

U.S. GAAP

12

13

14

13

14

15

16 (FY)IFRS

R&D expenditures (left scale)R&D expenditures as a percentage of consolidated revenues (right scale)0CO2 emissions from factories and offices*3(%)（ kt-CO 2）
50

Our Business Model

Rate of reduction in CO2 emissions from use of products
and services*2

4,000

40

3,000

30
2,000

1,000

12

13

14

15

16

0

(FY)

12

13

14

15

Number of employees* 4*5

Global number and ratio of female managers*6

16

(FY)

(People)(People)(%)

40,0004,000

830,0003,000

620,0002,000

410,000

1,000

2

12

Male

Female

13

14

15

16

0

(FY)

12

Number (left)

Occupational accident rate at companies surveyed in Japan

13

14

15

16

(FY)

15

16

(CY)

0

Ratio (right)

Value Creation

0

Strategic Focus

100

CEO Message

20

Number of registered patents

300

15,0000.20

200

10,000

0.10

100

5,000

0

0

0

12

13

Occupational accident rate (left)

14

15

Companies surveyed (right)

16

(FY)

12

Japanese patents

13

14

Foreign patents*7*1 In line with IFRS standards, capital investment is stated exclusive of investment in lease assets classified as finance leases.
*2 This new indicator is calculated from fiscal 2016 onward as a percentage of the fiscal 2010 amount.
*3 Fiscal 2016 figure includes a materials company that became a consolidated member of the Hitachi Group that year. *4 Number of full-time employees*5 Hitachi, Ltd. *6 No data available for fiscal 2012. *7 Total number of patents registered in the United States, Europe, and China. The number of patents
registered in Europe is based on European patent applications under European Patent Convention (EPC).

Hitachi, Ltd. Integrated Report 201751

Performance

0.30

Management & Governance(%)

10-Year Financial Data

U.S. GAAPFor the year:

Revenues

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012FY 2013¥11,226,735 ¥10,000,369¥8,968,546¥9,315,807¥9,665,883¥9,041,071¥9,563,791

Operating income

345,516

127,146

202,159444,508

412,280

422,028

538,288

EBIT (Earnings before interest and taxes)

335,729(275,239)

77,815443,812573,218

358,015585,662

Net income (loss) attributable to
Hitachi, Ltd. stockholders(58,125)(787,337)(106,961)

238,869

347,179

175,326

264,975

Cash flows from operating activities

791,837

558,947

798,299

841,554447,155

583,508

439,406

Cash flows from investing activities(637,618)(550,008)(530,595)(260,346)(195,584)(553,457)(491,363)

Free cash flows

154,219

8,939

267,704

581,208

251,571

30,051(51,957)

Cash flows from financing activities(185,556)

284,388(502,344)(584,176)(167,838)(180,445)

32,968Cash dividends declared

19,947

9,971‒

36,13336,727

47,69050,711

Capital expenditures(Property, plant and equipment)

969,087

788,466

546,326

556,873649,234

742,537

849,877

Depreciation (Property, plant and equipment)

541,470

478,759441,697382,732

360,358

300,664

329,833

R&D expenditures

428,171416,517372,470

395,180

412,514341,310351,426

Total assets

10,530,847

9,403,709

8,964,464

9,185,629

9,418,526

9,809,230

11,016,899

Property, plant and equipment

2,653,918

2,393,946

2,219,804

2,111,270

2,025,538

2,279,964

2,342,091

Total Hitachi, Ltd. stockholders' equity

2,170,612

1,049,951

1,284,658

1,439,865

1,771,782

2,082,560

2,651,241

Interest-bearing debt

2,531,506

2,820,109

2,367,143

2,521,551

2,396,454

2,370,079

2,823,049

Number of employees

347,810

361,796359,746

361,745

323,540

326,240

320,725

Basic¥(17.48)¥(236.86)¥(29.20)¥52.89¥76.81¥37.28¥54.86

Diluted(17.77)(236.87)(29.20)

49.38

71.86

36.29

54.85

At year-end:

Per share data:
Net income (loss) attributable to
Hitachi, Ltd. stockholders:Cash dividends declared
Total Hitachi, Ltd. stockholders' equity

6.0

3.0

‒

8.0

8.0

10.0

10.5

652.95315.86287.13318.73382.26431.13549.02

5.6

Financial ratios:
Operating income ratio

3.1

1.3

2.3

4.8

4.3

4.7

EBIT ratio

3.0

‒2.8

0.9

4.8

5.9

4.0

6.1

Return on revenues

‒0.5

‒7.9

‒1.2

2.6

3.6

1.9

2.8

Return on equity (ROE)

‒2.5

‒48.9

‒9.2

17.5

21.6

9.1

11.2

Return on assets (ROA)

0.5

‒8.0

‒0.9

3.3

4.4

2.5

3.5

D/E ratio(Including non-controlling interests) (times)

0.76

1.29

1.04

1.03

0.86

0.75

0.73

Total Hitachi, Ltd. stockholders' equity ratio

20.6

11.2

14.3

15.7

18.8

21.2

24.1

Notes: 1 In order to be consistent with financial reporting principles and practices generally accepted in Japan, operating income is presented as total revenues lesscost of sales and selling, general and administrative expenses. The Company believes that this is useful to investors in comparing the Company's financial
results with those of other Japanese companies. Under accounting principles generally accepted in the United States of America, restructuring charges, net
gain or loss on sales and disposal of rental assets and other property and impairment losses for long-lived assets are included as part of operating income.
2 The restructuring charges mainly represent special termination benefits incurred with the reorganization of our business structures and as the result of theCompany and its subsidiaries reviewing and reshaping the business portfolio.
3 EBIT is presented as income before income taxes less interest income plus interest charges.
4 The Company has changed the number of employees to exclude temporary employees starting from the year ended March 31, 2010. The figures for the prioryears have been restated to reflect the current year's presentation.
5 Effective from fiscal 2014, a part of the thermal power generation systems business is classified as a discontinued operation in accordance with the provisionof ASC 205-20, Presentation of Financial Statements - Discontinued Operations, which was not transferred to MITSUBISHI HITACHI POWER SYSTEMS,
LTD. for the business integration in the thermal power generation systems with Mitsubishi Heavy Industries, Ltd. The results of the discontinued operation
are reported separately from continuing operations. In line with this classification, Revenues and Operating income for fiscal 2013 are reclassified.
6 ROA (Return on Assets) = Net income / Total Assets (Average between the end of current fiscal year and the end of previous fiscal year) x 100

52

Hitachi, Ltd. Integrated Report 2017

Our Business Model

IFRSMillions of yen

FY 2014

For the year:

FY 2013¥9,761,970

Revenues¥9,666,446

FY 2014

FY 2015

FY 2016¥9,774,930 ¥10,034,305¥9,162,264

600,479

Adjusted operating income

604,798

641,325

634,869

587,309551,018

EBIT

691,230

534,059

531,003475,182

241,301

Net income attributable to
Hitachi, Ltd. stockholders

413,877

217,482

172,155

231,261

447,348

Net cash provided by operating activities

306,777

451,825

812,226

629,582(610,255)

Net cash used in investing activities(550,179)(612,545)(730,799)(337,955)(162,907)

Free cash flows(243,402)(160,720)

81,427

291,627

250,335

Net cash provided by (used in) financing activities

228,840

233,206(26,467)(209,536)

57,944

Cash dividends declared

50,711

57,94457,93962,764

848,716

Capital expenditures(Property, plant and equipment)

491,170

431,201

528,551

377,545

349,614

Depreciation (Property, plant and equipment)

331,228

350,783

366,547

302,757

335,515

R&D expenditures

354,487

334,814

333,730

323,963

CEO Message

Millions of yen

Total assets

11,098,191

12,433,727

12,551,005

9,663,917

2,564,105

Property, plant and equipment

2,258,933

2,472,497

2,500,226

1,998,411

2,930,309

Total Hitachi, Ltd. stockholders' equity

2,668,657

2,942,281

2,735,078

2,967,085

3,354,616

Interest-bearing debt

3,033,985

3,557,356

3,604,455

1,176,603

333,150

Number of employees

323,919

336,670

335,244

303,887

Yen

Strategic Focus

At year-end:
12,395,379

Yen

Per share data:

Basic¥85.69¥45.04¥35.65¥47.9049.93

Diluted

85.66

45.00

35.62

47.88

12.0
606.87

Cash dividends declared
Total Hitachi, Ltd. stockholders' equity

10.5

12.0

12.0

13.0

552.62609.35566.48614.56%%

6.2

Adjusted operating income ratio

6.3

6.6

6.3

6.4

5.6

EBIT ratio

7.2

5.5

5.3

5.2

2.5

Return on revenues

4.3

2.2

1.7

2.5

8.6

Return on equity (ROE)

17.5

7.8

6.1

8.1

3.1

Return on assets (ROA)

5.0

2.9

2.4

3.0

0.78

D/E ratio(Including non-controlling interests) (times)

0.78

0.83

0.87

0.29

23.6

Total Hitachi, Ltd. stockholders' equity ratio

24.0

23.7

21.8

30.7

Management & Governance

Financial ratios:

Notes: 1 In order to be consistent with financial reporting principles and practices generally accepted in Japan, adjusted
operating income is presented as total revenues less cost of sales and selling, general administrative expenses.
The Company believes that this is useful to investors in comparing the Company's financial results with those ofother Japanese companies.
2 A part of the thermal power generation systems business is classified as a discontinued operation in accordancewith the provision of IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, which was nottransferred to MITSUBISHI HITACHI POWER SYSTEMS, LTD. for the business integration in the thermal power
generation systems with Mitsubishi Heavy Industries, Ltd. The results of the discontinued operation are reported
separately from continuing operations.
3 From fiscal 2013, capital investment is stated exclusive of investment in lease assets classified as finance leases.
4 ROA (Return on Assets) = Net income / Total Assets (Average between the end of current fiscal year and the endof previous fiscal year) x 100

Hitachi, Ltd. Integrated Report 201753

Performance¥49.97

Value Creation

Earnings per share attributable to
Hitachi, Ltd. stockholders:Operating and Financial Review

Operating Results
Effective from April 1, 2016, the Company changed thename of the Others (Logistics and Other services)segment to the Others segment.

Summary
Billions of yen
Years ended March 31:

Revenues

2016

2017

Percentchange¥10,034.3¥9,162.2

–9%

EBIT

531.0

475.1

–11%

Income fromcontinuing operations,
before income taxes

517.0

469.0

–9%

Net income attributable
to Hitachi, Ltd.
stockholders

172.1

231.2

34%

Analysis of Statement of Operations
Revenues decreased 9% to ¥9,162.2 billion, as comparedwith the year ended March 31, 2016. This was due mainly
to lower revenues in the Information & Telecommunication
Systems, High Functional Materials & Components, Smart
Life & Ecofriendly Systems, Others and Financial Services
segments. This decrease was partially offset by higher
revenues in the Electronic Systems & Equipment segment.
Cost of sales decreased 9% to ¥6,782.6 billion, as
compared with the year ended March 31, 2016, and theratio of cost of sales to revenues was 74%, which was thesame level as the year ended March 31, 2016. Gross profit
decreased 8% to ¥2,379.5 billion, as compared with theyear ended March 31, 2016.
Selling, general and administrative expenses decreased¥148.0 billion to ¥1,792.2 billion, as compared with the year
ended March 31, 2016, and the ratio of selling, general andadministrative expenses to revenues was 20%, ascompared with 19% for the year ended March 31, 2016.

54

Hitachi, Ltd. Integrated Report 2017

Other income increased ¥43.2 billion to ¥100.7 billion andother expenses increased ¥4.6 billion to ¥146.5 billion, as
compared with the year ended March 31, 2016. The details
are as follows.
Net gain on sales and disposal of fixed assets improvedby ¥19.5 billion, as compared with the year ended March
31, 2016, to a gain of ¥15.0 billion.
Impairment losses increased ¥23.8 billion to ¥68.5 billion,
as compared with the year ended March 31, 2016. This
mainly reflected impairment losses on software for sale andother intangible assets in the Information &Telecommunication Systems segment.
Net gain on business reorganization and others increased¥26.1 billion to ¥81.3 billion, as compared with the year
ended March 31, 2016, reflecting the partial sale of theshares of Hitachi Transport System, Ltd. in the Others
segment and the sale of Hitachi Koki Co., Ltd. shares in theElectronic Systems & Equipment segment.
Special termination benefits decreased ¥20.8 billion to¥24.6 billion, as compared with the year ended March
31, 2016.
Expenses related to competition law and others
decreased ¥15.5 billion to ¥6.7 billion, as compared with theyear ended March 31, 2016.
Financial income (excluding interest income)decreased ¥3.5 billion to ¥7.0 billion and financial
expenses (excluding interest charges) decreased ¥4.0
billion to ¥26.2 billion, as compared with the year ended
March 31, 2016.
Share of loss of investments accounted for using theequity method was ¥47.1 billion, a deterioration of ¥47.3
billion as compared with the year ended March 31, 2016,
mainly reflecting the posting of an impairment loss inconnection with the uranium enrichment business at an U.S.
equity-method associate in the Social Infrastructure &Industrial Systems segment.
EBIT decreased ¥55.8 billion to ¥475.1 billion, as
compared with the year ended March 31, 2016.

Our Business Model

Operations by Segment
The following is an overview of results of operations bysegment. Revenues for each segment include intersegment
transactions. Segment profit is measured by EBIT.

Strategic Focus

CEO Message(Information & Telecommunication Systems)
Revenues decreased 6% to ¥1,982.8 billion, as comparedwith the year ended March 31, 2016, due mainly to thenegative impact of foreign currency translation causing
lower sales from overseas subsidiaries and to lower sales
from ATMs for overseas markets.
Segment profit decreased ¥32.6 billion to ¥76.4 billion, as
compared with the year ended March 31, 2016, due mainly
to the posting of business structural reform expenses,
despite the effect of business structural reform centered on
the telecommunications & network business, improvementin profitability of the social infrastructure-related information
systems, among other positives.

Hitachi, Ltd. Integrated Report 2017Management & GovernanceValue Creation(Social Infrastructure & Industrial Systems)
Revenues were ¥2,331.9 billion, which was the same level
as the year ended March 31, 2016. This mainly reflected
decreases in revenues in the elevators and escalators
business due to the negative impact of foreign currencytranslation, and in the power and energy business becauseof the absence of a large project posted for the year ended
March 31, 2016, despite substantial revenue growth in therailway systems business due to the acquisition of thebusinesses of AnsaldoBreda S.p.A. (excluding a part of its
operations), the acquisition of Ansaldo STS S.p.A. (both ofwhich are in Italy), and an increase in revenues for the U.K.
Segment loss was ¥19.9 billion, a deterioration of ¥49.1
billion from the year ended March 31, 2016, due mainly tothe posting of an impairment loss regarding the uranium
enrichment business of an equity-method associate in the
U.S. and lower earnings in the elevators and escalators
business because of the negative impact of foreign
currency translation.

55

Performance

Interest income increased ¥0.8 billion to ¥12.9 billion
and interest charges decreased ¥6.9 billion to ¥19.0
billion, as compared with the year ended March 31,
2016.
Income from continuing operations, before income taxes
decreased ¥47.9 billion to ¥469.0 billion, as compared withthe year ended March 31, 2016.
Income taxes decreased ¥40.0 billion to ¥125.1 billion,
as compared with the year ended March 31, 2016, due
mainly to recording tax expenses in the year ended
March 31, 2016 in connection with the partial transfer ofshares of Hitachi Transport System, Ltd. and Hitachi
Capital Corporation.
Loss from discontinued operations decreased ¥51.1
billion to ¥5.9 billion, as compared with the year ended
March 31, 2016.
Net income increased ¥43.2 billion to ¥338.0 billion, as
compared with the year ended March 31, 2016.
Net income attributable to non-controlling interests
decreased ¥15.8 billion to ¥106.7 billion, as compared withthe year ended March 31, 2016.
As a result of the foregoing, net income attributable to
Hitachi, Ltd. stockholders increased ¥59.1 billion to ¥231.2
billion, as compared with the year ended March 31, 2016.

(Electronic Systems & Equipment)
Revenues increased 4% to ¥1,170.3 billion, as comparedwith the year ended March 31, 2016, due mainly toincreased revenues at Hitachi Koki Co., Ltd. because of theacquisition of Germany-based metabo Aktiengesellschaft,despite a decrease in revenues at Hitachi Kokusai ElectricInc. mainly owing to lower sales of telecommunicationequipment and video surveillance systems in Japan.
Segment profit increased ¥2.4 billion to ¥66.7 billion, as
compared with the year ended March 31, 2016, due
mainly to higher earnings at Hitachi High-Technologies
Corporation due to firm sales of semiconductor production
equipment and higher earnings at Hitachi Koki Co., Ltd.
because of the increased revenues, despite a decrease inearnings at Hitachi Kokusai Electric Inc. mainly because ofa decline in revenues and the posting of businessstructural reform expenses.
(Construction Machinery)
Revenues decreased 1% to ¥753.9 billion, as comparedwith the year ended March 31, 2016, due mainly to thenegative impact of foreign currency translation caused byappreciation of the yen, despite the recovery of demand forhydraulic excavators in China and India.
Segment profit decreased ¥3.1 billion to ¥22.7 billion, as
compared with the year ended March 31, 2016, due mainly
to the absence of a gain on business reorganization andothers related to the sale of shares of UniCarriers Holdings
Corporation recorded for the year ended March 31, 2016,
despite the effect of business structural reforms, decreases
in business structural reform expenses and an improvement
in exchange gain or loss.
(High Functional Materials & Components)
Revenues decreased 6% to ¥1,464.6 billion, as comparedwith the year ended March 31, 2016, due mainly to a fall inrevenues at Hitachi Metals, Ltd. due to the negative impactof foreign currency translation causing a fall in sales fromoverseas subsidiaries and a decline in demand associatedwith the slower economies in China and emerging countries
in Asia.
Segment profit decreased ¥30.2 billion to ¥123.3 billion,
as compared with the year ended March 31, 2016, due
mainly to the decrease in revenues and the absence ofgains on business reorganization and others related to thesales of equity interest in Hitachi Tool Engineering, Ltd. by
Hitachi Metals, Ltd. in the year ended March 31, 2016.

56

Hitachi, Ltd. Integrated Report 2017

(Automotive Systems)
Revenues decreased 1% to ¥992.2 billion, as comparedwith the year ended March 31, 2016, due mainly to negative
impact of foreign currency translation, despite sales growthparticularly in North America and China, where demand forautomobiles was firm.
Segment profit increased ¥11.8 billion to ¥65.8 billion, as
compared with the year ended March 31, 2016, due mainly
to posting of gain on sales and disposals of fixed assets
despite the decline in revenues.
(Smart Life & Ecofriendly Systems)
Revenues decreased 18% to ¥557.3 billion, as comparedwith the year ended March 31, 2016, due mainly to theeffect of reorganization of the air-conditioning systems
business with an equity-method associate that is a joint
venture with Johnson Controls Inc.
Segment profit decreased ¥10.1 billion to ¥31.8 billion, as
compared with the year ended March 31, 2016, due mainly
to the effect of a decline in revenues from the reorganizationof the air-conditioning systems business and the absence ofa gain on business reorganization and others in association
with the reorganization of the air-conditioning systems
business recorded in the year ended March 31, 2016.
(Others)
Revenues decreased 48% to ¥653.7 billion, and segment
profit decreased ¥19.9 billion to ¥20.6 billion, as comparedwith the year ended March 31, 2016, respectively. This wasdue mainly to the conversion of Hitachi Transport System,
Ltd. to an equity-method associate.
(Financial Services)
As Hitachi Capital Corporation was converted to an
equity-method associate as of October 2016, there is nocompany which belongs to the Financial Services
segment. Accordingly, only the results for the period inwhich said company was a consolidated subsidiary arerecorded. As a result, revenues decreased 51% to¥179.2 billion, and segment profit decreased ¥23.8
billion to ¥22.8 billion, as compared with the year ended
March 31, 2016, respectively.

2017

Percentchange¥ 5,231.5¥4,757.6–9%4,802.7

4,404.5–8%

Asia2,112.3

1,860.7–12%

North America

1,280.3

1,144.0–11%

Europe

951.1

972.6

2%

Other Areas

459.0

427.1

–7%

Total Revenues¥10,034.3¥9,162.2

–9%

Japan
Overseas Revenues
SubtotalJapan
Revenues in Japan decreased 9% to ¥4,757.6 billion, as
compared with the year ended March 31, 2016. This wasdue to lower revenues across all segments, particularly in
the Others segment, reflecting the conversion of Hitachi
Transport System, Ltd. to an equity-method associate andin the Financial Services segment in which Hitachi Capital
Corporation was converted to an equity-method associate.
Overseas
Overseas revenues decreased 8% to ¥4,404.5 billion, as
compared with the year ended March 31, 2016, and theratio to total revenues was 48%, which was the same level
as the year ended March 31, 2016.

Our Business Model
CEO Message

2016

Years ended March 31:(Europe)
Revenues in Europe increased 2% to ¥972.6 billion, as
compared with the year ended March 31, 2016. This wasdue mainly to higher revenues in the Social Infrastructure &Industrial Systems segment, reflecting substantial growth in
the railway systems business, and the Electronic Systems &Equipment segment, in which Hitachi Koki Co., Ltd.
recorded increased revenues due to the acquisition of
metabo Aktiengesellschaft, despite lower revenues in the
Others and the Financial Services segments, etc.

Strategic Focus

Billions of yen(Other Areas)
Revenues in other areas decreased 7% to ¥427.1 billion, as
compared with the year ended March 31, 2016. This wasdue mainly to lower revenues in the Smart Life & Ecofriendly
Systems and the Others segments, despite higher revenues
in the Social Infrastructure & Industrial Systems segment,
reflecting increased revenues in the railway systems
business, and the Electronic Systems & Equipment
segment, reflecting increased revenues by Hitachi HighTechnologies Corporation.

Value Creation

The following is an overview of revenues attributed togeographic areas based on customer location.

(North America)
Revenues in North America decreased 11% to ¥1,144.0
billion, as compared with the year ended March 31,
2016. This was due mainly to lower revenues in the
Information & Telecommunication Systems, High
Functional Materials & Components and Others
segments, despite higher revenues in the Social
Infrastructure & Industrial Systems segment.

Management & Governance(Asia)
Revenues in Asia decreased 12% to ¥1,860.7 billion, as
compared with the year ended March 31, 2016. This wasdue mainly to lower revenues in the Social Infrastructure &Industrial Systems segment, reflecting reduced revenues inthe elevators and escalators business, particularly in China,
the Others segment in which Hitachi Transport System, Ltd.
was converted to an equity-method associate, and the
Smart Life & Ecofriendly Systems segment due to thereorganization of the air-conditioning systems business,despite higher revenues in the Electronic Systems &Equipment and the Construction Machinery segments.

Hitachi, Ltd. Integrated Report 201757

Performance

Revenues by Geographic Area

Summary of Financial Condition, etc.
Liquidity and Capital Resources
Our management considers maintaining an appropriate levelof liquidity and securing adequate funds for current andfuture business operations to be important financial
objectives. Through efficient management of working capitaland 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 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 tobe an immediately available source of funds. In addition, weraise funds both in the capital markets and from Japaneseand international commercial banks in response to ourcapital requirements. Our management s policy is to financecapital expenditures primarily by internally generated funds
and to a lesser extent by funds raised through the issuanceof debt and equity securities in domestic and foreign capital
markets. In order to flexibly access funding, we maintain ourshelf registration with the maximum outstanding balance of¥300.0 billion.
We maintain commitment line agreements with a numberof domestic banks under which we may borrow in order toensure efficient access to necessary funds. These
commitment line agreements generally provide for a oneyear 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, 2017, ourunused commitment lines totaled ¥599.0 billion, includingthese of ¥400.0 billion which the Company maintained.

58

Hitachi, Ltd. Integrated Report 2017

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, 2017 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 to theglobal capital markets will remain sufficient for our financing
needs. We seek to improve our credit ratings in order toensure financial flexibility for liquidity and capitalmanagement, and to continue to maintain access to
sufficient funding resources through the capital markets.

Cash Flows
Billions of yen
Years ended March 31:

2016

2017

Net cash provided by operating activities¥ 812.2¥ 629.5

Net cash used in investing activities(730.7)(337.9)Net cash used in financing activities(26.4)(209.5)

Effect of exchange rate changes
on cash and cash equivalents(57.3)(16.1)

Change in cash and cash equivalents

(2.3)

65.9

701.7

699.3

¥ 699.3¥ 765.2

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

(Cash Flows from Operating Activities)
Net income in the year ended March 31, 2017 increased by¥43.2 billion, as compared with the year ended March 31,
2016. Trade payables increased by ¥111.5 billion in the year
ended March 31, 2017, as compared with the decrease of¥1.6 billion in the year ended March 31, 2016. However,change in trade receivables and change in inventories
decreased net cash flow by ¥143.7 billion and ¥67.0 billion,
respectively. As a result of the foregoing, net cash provided
by operating activities was ¥629.5 billion in the year ended
March 31, 2017, a decrease of ¥182.6 billion comparedwith the year ended March 31, 2016.

*1 The sum of the purchase of property, plant and equipment, thepurchase of intangible assets and the purchase of leased assets, lessthe proceeds from sale of property, plant, equipment and intangible
assets, the proceeds from sale of leased assets and the collection oflease receivables

equity amounted to ¥2,967.0 billion, an increase of ¥232.0
billion from March 31, 2016. This is due mainly to theposting of net income attributable to Hitachi, Ltd.
stockholders, despite the impact of converting Hitachi
Capital Corporation into an equity-method associate. As aresult, the ratio of total Hitachi, Ltd. stockholders equity tototal assets as of March 31, 2017 was 30.7%, comparedwith 21.8% as of March 31, 2016.
Non-controlling interests as of March 31, 2017 was¥1,129.9 billion, a decrease of ¥260.5 billion from March
31, 2016.
Total equity as of March 31, 2017 was ¥4,096.9 billion, adecrease of ¥28.5 billion from March 31, 2016. The ratio ofinterest-bearing debt to total equity was 0.29, comparedwith 0.87 as of March 31, 2016.

Value Creation

Strategic Focus

CEO Message

As of March 31, 2017, total assets amounted to ¥9,663.9
billion, a decrease of ¥2,887.0 billion from March 31, 2016.
This was due mainly to the conversion of Hitachi Capital
Corporation and Hitachi Transport System, Ltd. into equitymethod associates and the sale of Hitachi Koki Co., Ltd.
Cash and cash equivalents as of March 31, 2017 amounted
to ¥765.2 billion, an increase of ¥65.9 billion from theamount as of March 31, 2016.
As of March 31, 2017, total interest-bearing debt, thesum of short-term debt and long-term debt, amounted to¥1,176.6 billion, a decrease of ¥2,427.8 billion from March
31, 2016. As of March 31, 2017, short-term debt,
consisting mainly of borrowings from banks and commercial
paper, amounted to ¥196.3 billion, a decrease of ¥675.0
billion from March 31, 2016. As of March 31, 2017, current
portion of long-term debt amounted to ¥190.2 billion, adecrease of ¥461.2 billion from March 31, 2016. As of
March 31, 2017, long-term debt (excluding current portion),
consisting mainly of debentures, and loans principally frombanks and insurance companies, amounted to ¥790.0
billion, a decrease of ¥1,291.5 billion from March 31, 2016.
As of March 31, 2017, total Hitachi, Ltd. stockholders

Management & Governance(Cash Flows from Financing Activities)
The net cash outflow from a change in short-term debt
increased by ¥164.0 billion compared with the year ended
March 31, 2016. Proceeds related to long-term debt*2
were ¥115.5 billion, a decrease of ¥65.1 billion comparedwith the year ended March 31, 2016. As a result of theforegoing, net cash used in financing activities was ¥209.5
billion in the year ended March 31, 2017, an increase in net
cash outflow of ¥183.0 billion compared with the year
ended March 31, 2016.

Our Business Model

Assets, Liabilities and Equity*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, 2017,
cash and cash equivalents amounted to ¥765.2 billion, net
increase of ¥65.9 billion from March 31, 2016. Free cash
flows, the sum of cash flows from operating and investing
activities, represented an inflow of ¥291.6 billion in the year
ended March 31, 2017, an increase in net cash inflow of¥210.2 billion from the year ended March 31, 2016.

Hitachi, Ltd. Integrated Report 201759

Performance(Cash Flows from Investing Activities)
Net amount of investments related to property, plant andequipment*1 was ¥462.6 billion, a decrease of ¥189.7 billion
as compared with the year ended March 31, 2016.
Proceeds from sale of investments in securities and otherfinancial assets (including investments in subsidiaries andinvestments accounted for using the equity method)
increased by ¥111.1 billion compared with the year ended
March 31, 2016, reflecting partial sales of the shares ofHitachi Transport System, Ltd. and Hitachi Capital
Corporation, and the sale of all shares of Hitachi Koki Co.,
Ltd. Purchase of investments in securities and otherfinancial assets (including investments in subsidiaries andinvestments accounted for using the equity method) was¥177.3 billion, a decrease of ¥19.3 billion compared with theyear ended March 31, 2016, in which the acquisition of thebusinesses of AnsaldoBreda S.p.A. (excluding a part of its
operations), the acquisition of Ansaldo STS S.p.A., and theacquisition of Pentaho Corporation were conducted. As aresult of the foregoing, net cash used in investing activitieswas ¥337.9 billion in the year ended March 31, 2017, adecrease of ¥392.8 billion compared with the year ended
March 31, 2016.

Consolidated Statement of Financial Position
March 31, 2017 and 2016

Millions of yen

Assets2016

2017

699,315¥ 765,242

2,992,770

2,433,149

Current assets
Cash and cash equivalents
Trade receivables
Lease receivables¥

338,758

42,365

1,299,855

1,225,907

Other current assets

541,857

535,943

Total current assets

5,872,555

5,002,606

Investments accounted for using the equity method

676,960

691,251

Investments in securities and other financial assets

1,329,974

719,704

727,485

38,646

Property, plant and equipment

2,500,226

1,998,411

Intangible assets

1,070,403

919,201

Other non-current assets

373,402

294,098

Total non-current assets

6,678,450

4,661,311¥12,551,005¥9,663,917

Inventories

Non-current assets

Lease receivables

Total Assets

60

Hitachi, Ltd. Integrated Report 2017

Our Business Model

Millions of yen

Liabilities

2016

2017

871,417¥ 196,357

651,518

190,233

Current portion of long-term debt
Other financial liabilities¥

280,048274,270

Trade payables

1,451,918

1,402,233

Other current liabilities

1,739,315

1,657,766

Total current liabilities

4,994,216

3,720,859

Long-term debt

2,081,520

790,013

Other financial liabilities

115,155

53,422Retirement and severance benefits

783,670

635,684

Other non-current liabilities

450,874

366,944

Total non-current liabilities

3,431,219

1,846,063

8,425,435

5,566,922

Common stock

458,790458,790

Capital surplus

586,790

577,573

Total Liabilities

Strategic Focus

Non-current liabilities

Equity1,609,761

1,793,570

Accumulated other comprehensive income

83,543141,068

Treasury stock, at cost

(3,806)(3,916)

2,735,078

2,967,085

1,390,492

1,129,910

4,125,570

4,096,995¥12,551,005¥9,663,917

Total Hitachi, Ltd. stockholders' equity
Non-controlling interests
Total Equity
Total Liabilities and Equity

Management & Governance

Retained earnings

Value Creation

Hitachi, Ltd. stockholders' equity

Hitachi, Ltd. Integrated Report 201761

Performance

Short-term debt

CEO Message

Current liabilities

Consolidated Statement of Profit or Loss
Years ended March 31, 2017 and 2016

Millions of yen

2016

2017

¥10,034,305¥ 9,162,264

Cost of sales(7,459,073)(6,782,677)

Gross profit

2,575,232

2,379,587(1,940,363)(1,792,278)

634,869

587,309

Other income

57,539100,742

Other expenses(141,881)(146,568)

Financial income

10,615

7,091

Financial expenses(30,295)(26,206)

Revenues

Selling, general and administrative expenses
Adjusted operating income

Share of profits (losses) of investments accounted
for using the equity method

156(47,186)

531,003475,182

Interest income

12,02812,923

Interest charges(25,991)(19,014)517,040

469,091(165,206)(125,112)

351,834

343,979(57,081)(5,950)EBIT (Earnings before interest and taxes)

Income from continuing operations, before income taxes
Income taxes
Income from continuing operations
Loss from discontinued operations
Net income¥

294,753¥

338,029

Net income attributable to:62

Hitachi, Ltd. stockholders

172,155

231,261

Non-controlling interests

122,598

106,768

Hitachi, Ltd. Integrated Report 2017

Consolidated Statement of Comprehensive Income
Our Business Model

Years ended March 31, 2017 and 2016

Millions of yen

Net income

2016

2017

¥ 294,753¥338,029

Other comprehensive income (OCI)
Net changes in financial assets measured at fair value through OCI(50,323)59,934Remeasurements of defined benefit plans(140,844)

46,086(4,275)(1,887)(195,442)

104,133

Total items not to be reclassified into net income

Foreign currency translation adjustments(190,099)(64,761)

Net changes in cash flow hedges

32,78521,303

Share of OCI of investments accounted for using the equity method(26,239)

1,166

Total items that can be reclassified into net income(183,553)(42,292)

Other comprehensive income (OCI)(378,995)

61,841¥ (84,242)¥399,870

Hitachi, Ltd. stockholders(127,557)

299,397

Non-controlling interests

43,315

100,473

Comprehensive income (loss)

Strategic Focus

Items that can be reclassified into net income

Management & GovernanceValue Creation

Comprehensive income (loss) attributable to:

Hitachi, Ltd. Integrated Report 201763

Performance

Share of OCI of investments accounted for using the equity method

CEO Message

Items not to be reclassified into net income

Consolidated Statement of Changes in Equity
Years ended March 31, 2017 and 2016

Millions of yen

2016
Accumulated
otherTotal Hitachi, Ltd.
comprehensive Treasury stock, stockholders'
Non-controllingincomeat costequityinterests

Commonstock

CapitalsurplusRetainedearnings

As of March 31, 2015

¥458,790¥608,416¥1,477,517¥ 401,100¥(3,542)¥2,942,281¥1,354,061¥4,296,342

Reclassified into
retained earnings‒‒

18,030(18,030)

‒

‒

‒

‒

Total equity

Net income‒‒

172,155‒‒

172,155

122,598

294,753

Other comprehensive loss

‒

‒

‒

(299,712)‒(299,712)(79,283)(378,995)

Cash dividends‒‒(57,941)‒‒(57,941)(39,502)(97,443)

Changes in treasury stock

‒

(4)

‒

‒

(264)

(268)

‒

(268)

Equity transactions and
other

‒

(21,622)

‒

185

‒

(21,437)

32,618

11,181

Total changes in equity‒(21,626)

132,244(317,557)(264)(207,203)

36,431(170,772)

As of March 31, 2016

¥458,790¥586,790¥1,609,761¥ 83,543¥(3,806)¥2,735,078¥1,390,492¥4,125,570

Millions of yen

2017

64

Accumulated
otherTotal Hitachi, Ltd.
comprehensive Treasury stock, stockholders'
Non-controllingincomeat costequityinterests

Commonstock

CapitalsurplusRetainedearnings

As of March 31, 2016

¥458,790¥586,790¥1,609,761¥ 83,543¥(3,806)¥2,735,078¥1,390,492¥4,125,570

Reclassified into
retained earnings‒‒

10,486(10,486)

‒

‒

‒

‒

Net income‒‒

231,261‒‒

231,261

106,768

338,029

Other comprehensive
income (loss)

‒

‒

‒

68,136‒

68,136(6,295)61,841

Cash dividends‒‒(57,938)‒‒(57,938)(38,283)(96,221)

Changes in treasury stock

‒

(15)

‒

‒

(110)

(125)

‒

(125)

Equity transactions andotherTotal equity‒(9,202)

‒

(125)

‒

(9,327)(322,772)(332,099)

Total changes in equity‒(9,217)

183,80957,525(110)

232,007(260,582)(28,575)

As of March 31, 2017

¥458,790¥577,573¥1,793,570¥141,068¥(3,916)¥2,967,085¥1,129,910¥4,096,995

Hitachi, Ltd. Integrated Report 2017

Consolidated Statement of Cash Flows
Our Business Model

Years ended March 31, 2017 and 2016

Millions of yen

2016

2017

¥ 294,753¥ 338,029

Cash flows from operating activities
Net income
Depreciation and amortization

507,790415,183

Change in trade receivables(53,092)(196,824)

Change in inventories

44,342(22,731)

Change in trade payables(1,602)

111,589

Other

20,035(15,664)

812,226

629,582

Purchase of property, plant and equipment(369,494)(316,116)

Purchase of intangible assets(116,438)(101,034)

Purchase of leased assets(539,420)(292,943)

22,632

52,208Net cash provided by (used in) operating activities

CEO Message

Adjustments to reconcile net income to net cash provided by operating activities

23,834

14,539Collection of lease receivables

326,497

180,726

Proceeds from sale (purchase) of investments in securities andother financial assets (including investments in subsidiaries andinvestments accounted for using the equity method), net(58,756)

71,653Other(19,654)

53,012(730,799)(337,955)

81,427

291,627

Change in interest-bearing debt

110,821(118,314)

Dividends paid to stockholders(57,907)(57,935)

Dividends paid to non-controlling interests(41,671)(36,508)

Other(37,710)3,221(26,467)(209,536)

Effect of exchange rate changes on cash and cash equivalents(57,348)(16,164)

Change in cash and cash equivalents(2,388)65,927

701,703699,315¥ 699,315¥ 765,242

Net cash provided by (used in) investing activities
Free cash flows

Value Creation

Proceeds from sale of leased assets

Net cash provided by (used in) financing activities

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

Hitachi, Ltd. Integrated Report 2017Management & GovernanceCash flows from financing activities

65

Performance

Proceeds from sale of property, plant and equipment,
and intangible assets

Strategic Focus

Cash flows from investing activities

Summarized Consolidated Statement of Financial Position by
Manufacturing, Services and Others and Financial Services
Years ended March 31, 2017 and 2016
Billions of yen

2016
Manufacturing,Servicesand Others

Financial
Services¥4,995.6

2017

Total

Manufacturing,Servicesand Others

Financial
Services

Total¥1,256.8¥ 5,872.5¥5,002.6‒¥5,002.6

660.9

157.0

699.3

765.2

‒

765.2

2,472.0710.7

2,992.7

2,433.1‒

2,433.1

AssetsCurrent assets
Cash and cash equivalents
Trade receivables

45.6

311.9

338.7

42.3

‒

42.3

1,291.5

3.7

1,299.8

1,225.9‒

1,225.9

525.3

73.3

541.8

535.9

‒

535.9

4,922.3

1,834.6

6,678.4

4,661.3‒

4,661.3

Investments accounted for using
the equity method

676.3

20.4

676.9

691.2

‒

691.2

Investments in securities andother financial assets

681.6

675.9

1,329.9

719.7

‒

719.7

Lease receivables
Inventories
Other current assets
Non-current assets

38.2

729.8

727.4

38.6

‒

38.6

Property, plant and equipment

2,193.6307.5

2,500.2

1,998.4‒

1,998.4

Intangible assets

1,007.7

62.6

1,070.4

919.2

‒

919.2

324.6

38.1

373.4

294.0

‒

294.0

¥9,917.9¥3,091.4¥12,551.0¥9,663.9‒¥9,663.9¥4,095.5¥1,323.2¥ 4,994.2¥3,720.8‒¥3,720.8

Short-term debt

529.8

497.6

871.4

196.3

‒

196.3

Current portion of long-term debt

234.9

485.6

651.5

190.2

‒

190.2

Other financial liabilities

265.5

40.1

280.0

274.2

‒

274.2

1,379.0228.9

1,451.9

1,402.2‒

1,402.2
1,657.7

Lease receivables

Other non-current assets
Total Assets
Liabilities and Equity
Current liabilities

Trade payables

1,686.1

70.8

1,739.3

1,657.7‒

Non-current liabilities

2,038.0

1,421.1

3,431.2

1,846.0‒

1,846.0

Long-term debt

750.3

1,356.2

2,081.5

790.0

‒

790.0

Other financial liabilities

85.0

28.7

115.1

53.4

‒

53.4

Retirement and severance benefits

774.1

9.5

783.6

635.6

‒

635.6

Other current liabilities

428.5

26.6

450.8

366.9

‒

366.9

6,133.5

2,744.4

8,425.4

5,566.9‒

5,566.9

Hitachi, Ltd. stockholders' equity

2,540.8

201.3

2,735.0

2,967.0‒

2,967.0

Non-controlling interests

1,243.5

145.7

1,390.4

1,129.9‒

1,129.9

Total Equity

3,784.3

347.0

4,125.5

4,096.9‒

4,096.9

Total Liabilities and Equity¥9,917.9¥3,091.4¥12,551.0¥9,663.9‒¥9,663.9¥1,515.0¥2,339.5¥3,604.4¥1,176.6‒¥1,176.6

Total Hitachi, Ltd. stockholders'equity ratio

25.6%

6.5%

21.8%

30.7%

‒

30.7%

D/E ratio (including non-controllinginterests) (times)

0.40

6.74

0.87

0.29

‒

0.29

Other non-current liabilities
Total Liabilities

Interest-bearing debt

66

Hitachi, Ltd. Integrated Report 2017

Our Business Model

Summarized Consolidated Statement of Profit or Loss by
Manufacturing, Services and Others and Financial Services
March 31, 2017 and 2016
Billions of yen

2016
Financial
Services¥9,833.9¥365.3

2017

Total

Manufacturing,Servicesand Others

Financial
Services

Total¥10,034.3¥9,053.3¥179.2¥9,162.2

Adjusted operating income

586.8

45.2

634.8

566.8

21.3

587.3

EBIT

490.2

46.6

531.0

458.1

22.8

475.1

Income from continuing operations,
before income taxes

476.9

46.6

517.0

452.4

22.8

469.0

Net income attributable
to Hitachi, Ltd. stockholders

152.1

19.7

172.1

227.8

9.7

231.2

CEO Message

Revenues

Manufacturing,Servicesand Others

Summarized Consolidated Statement of Cash Flows by Manufacturing,Services and Others and Financial Services
March 31, 2017 and 2016
Billions of yen

2016

¥

Total

(7.4)

¥ 812.2¥ 638.7¥

Financial
Services

Total

2.2

¥ 629.5

Cash flows from investing activities(518.7)(218.8)(730.7)(153.2)(274.6)(337.9)

Free cash flows

324.4(226.2)

81.4

485.5

(272.4)

291.6

Cash flows from financing activities(262.7)265.4(26.4)(367.1)117.5(209.5)

Effect of exchange rate changes
on cash and cash equivalents(55.5)(1.8)(57.3)(14.0)(2.1)(16.1)

6.1

37.3

(2.3)

104.3

(157.0)65.9

Cash and cash equivalents
at beginning of year

654.7

119.7

701.7

660.9

157.0

699.3

Cash and cash equivalents
at end of year

¥ 660.9¥ 157.0¥ 699.3¥ 765.2‒¥ 765.2

363.5(264.8)

113.3

213.8

(109.2)

100.2

Change in cash and cash equivalents

Core free cash flows

Strategic Focus¥ 843.1

Financial
Services

Value Creation

Cash flows from operating activities

2017
Manufacturing,Servicesand Others

Hitachi, Ltd. Integrated Report 2017Management & GovernanceNotes: 1 The consolidated financial statements by Manufacturing, Services and Others and Financial Services represent
unaudited financial information prepared by the Company for the purpose of this supplementary information.
2 Total figures exclude inter-segment transactions.
3 As Hitachi Capital was converted into an equity‒method associate as of October 3, 2016, there is no company thatbelongs to Financial Services. Accordingly, there is no balance of total assets, total liabilities and total equity in thesummarized consolidated statement of financial position for Financial Services as of March 31, 2017.
In addition, only the results for the first half of fiscal 2016 were recorded in the summarized consolidated statement of
profit or loss for Financial Services and only the cash flows for the first half of fiscal 2016 and the decrease in cash
and cash equivalents owned by Hitachi Capital as of the date were recorded in the summarized consolidated
statement of cash flows for Financial Services.
4. Core free cash flows are operating cash flows plus collection of investments in leases less cash outflows forthe purchase of property, plant and equipment, intangible assets, software, and assets to be leased.

67

Performance

Manufacturing,Servicesand Others

Environmental Performance
The world’s population, which was 7.3 billion in 2015, is projected to grow to 9.7 billion by 2050 and to 11.2 billion
by 2100.* Global GDP is also continuing to expand, aggravating a host of environmental problems, including
global warming caused by higher CO2 emissions from fossil fuel consumption, the depletion of resources due toincreased demand, and ecosystem destruction. Global-scale efforts are being made to develop approaches thatlighten the burden on the environment so that a prosperous planet can be passed on to future generations.
Hitachi strives to achieve a more sustainable society by addressing environmental problems, which pose amajor challenge for society, based on its corporate mission of contributing to society through the developmentof superior, original technology and products.
* According to World Population Prospects: The 2015 Revision, published by the United Nations.

The Environmental Vision and Hitachi Environmental Innovation 2050
As global warming, resource depletion,
ecosystem destruction, and otherenvironmental issues grow more serious,
companies face increasing demands andexpectations to reduce the environmental
burden of their business activities.
The Intergovernmental Panel on
Climate Change (IPCC) concluded that
limiting global warming “below 2°C relative
to pre-industrial levels” would require “40
to 70% global anthropogenic GHG
emissions reductions by 2050 compared to2010.” The Paris Agreement adopted in
December 2015 at the 21st Conference of
the Parties (COP21) to the United Nations
Framework Convention on Climate
Change—and which came into force inNovember 2016—set ambitious targets,
including a global long-term target of
keeping global warming to below 2°C andefforts to limit the increase to 1.5°C.
Environmental targets have also been set in
the Sustainable Development Goals(SDGs)—the centerpiece of the 2030
Agenda for Sustainable Development,
adopted by the United Nations in 2015—
whose Goal 13 reads: “Take urgent action
to combat climate change and its impacts.”
In the light of these global trends andour own management policy, we created an
Environmental Vision to better define thekind of society that Hitachi envisions from along-term perspective. Our Environmental
Vision envisions a low-carbon society; aresource efficient society; a harmonizedsociety with nature. To achieve such asustainable society, we established a set oflong-term environmental targets called
Hitachi Environmental Innovation 2050.

68

Hitachi, Ltd. Integrated Report 2017

Hitachi Environmental Innovation 2050
http://www.hitachi.com/environment/vision/innovation2050.html

Our Business Model

Toward a Low-Carbon Society
We seek to reduce CO2 emissions by 80% compared to fiscal 2010 levels by fiscal 2050 to realize the drop in
global anthropogenic GHG emissions that was deemed necessary in the IPCC’s Fifth Assessment Report. We
will attain this target throughout our value chain. First, this will be achieved by decreasing emissions during
the usage stage of our products and solutions, which account for a substantial share of emissions in thevalue chain. We will contribute to our customers and to society by developing innovative technologies andsolutions, as well as enhancing the efficiency of our products and supplying low-carbon energy. At the sametime, we will also work to cut down on emissions at the production stage of our business activities.

Reduction of CO 2 Emissions During Use

35% CO2 emissions reduction rate by promoting environmentallyconscious designs and expanding sales of products and services
with high energy-saving functions.
Reduction in CO2 Emissions
FY 2010 (base year)
CO2
emissions
Functionsize*

From base year

100％ 35 %reduction＝

FY 2016CO2emissions
Function
size

65％

＝

Strategic Focus

Hitachi is improving the environmental performance of its products
and services with the hope of contributing to the resolution ofenvironmental challenges through the development andpopularization of products and services with high environmental
value. We strike a balance between improving functionality andreducing the environmental burden by using, as our index, thereduction rate per product and service function of CO2 emissions
during usage and of the volume of resources used during the life
cycle. The group of products that demonstrate a high level ofpotential in solving environmental issues are the targets of a planto achieve a 40% reduction in CO2 emissions by fiscal 2018(compared to fiscal 2010 products). In fiscal 2016, we attained a

CEO Message

Improved Environmental Performance in Products and Services* Major functions of products correlated to CO 2 emissions.

Environmentally Conscious Design Assessments
keeping abreast of environmental regulations and ascertaining theenvironment-related needs of our stakeholders. We conduct life
cycle assessments focusing on our main, priority products toquantitatively evaluate their burden on the global environment insuch areas as the consumption of mineral resources, fossil fuels,
and water resources, as well as their impact on global warming
and air pollution. The results of such life cycle assessments aredisclosed to our stakeholders and utilized in improving the designof next-generation products.

Value Creation

We conduct Environmentally Conscious Design Assessments for
all products and services involving a design process to ensure
environmentally conscious design and development. Thirty
environment-related areas are assessed for their impact on climatechange, resource depletion, and environmental pollution(ecosystem degradation) at each stage of the product life cyclewith a view to reducing the environmental burden. To meet the IEC
62430* criteria for environmentally conscious design, in addition to
implementing these assessments, we are advancing
environmentally conscious design and development by integrating
this process into our existing management system, such as by* The standard developed by the International Electrotechnical Commission
concerning environmentally conscious design for electrical and electronic products.

Products and Solutions that Help Create a Low-Carbon Society

An oil-immersed transformer (left) and molded transformer.

Energy savings

26

MWh/year* Comparison of loss between Hitachi’s silicon steel transformer andamorphous transformer (3,000 kVA capacity, 22 kV/6.6 kV, 50 Hz models
at 40% load factor).

Hitachi, Ltd. Integrated Report 201769

Performance

Transformers convert the high-voltage electricity produced at power
plants into low-voltage electricity that can be used more safely. Since
voltage is applied to the coil where electricity is flowing so thatelectricity can be used at any time, the occurrence of no-load loss
(standby power) in which power is lost even when electricity is not
being used cannot be avoided. Decreasing the no-load loss oftransformers that operate 24 hours a day, 365 days a year, over amean lifespan of about 25 years could lead to huge energy savings.
Hitachi Industrial Equipment Systems Co., Ltd. uses anamorphous alloy with outstanding magnetic properties in the ironcores around which coils are wound. This has resulted in an annual
reduction of about one-fifth in no-load loss compared with previous
silicon steel transformers* and an annual reduction of 26 MWh in
total loss, including load loss, during use.

Management & Governance

Reducing CO2 Emissions Through Energy Savings
Amorphous Transformers

Reducing CO2 Emissions with Renewable Energy
Down-wind Turbine System
Hitachi has installed 162 wind turbines in Japan (as of February
28, 2017) and is actively developing this business to contribute to
the growth of the renewable energy sector. In Hitachi’s originaldown-wind system, the rotor is on the downwind side of thetower. The system’s weather vane effect enables turbines toswitch to the free-yaw operation mode in blackout conditions,such as during storms, preventing the dangers posed by crosswind. The characteristic makes the down-wind system very safe.
Down-wind turbines also generate energy efficiently by capturing
upward blowing winds in mountainous and hilly areas.
At a new wind power plant of the Aoyama-Kogen Wind Farm
Corporation, located on the Aoyama plateau in Mie Prefecture,
Hitachi supplied 40 down-wind turbines. The output is 80 MW, thelargest in Japan.*1 Hitachi is also taking part in research for the
Fukushima Floating Offshore Wind Farm Demonstration Project of
the Agency for Natural Resources and Energy, Ministry of
Economy, Trade, and Industry.

A 5 MW floating wind turbine(courtesy of the Fukushima Offshore Wind Consortium).

330 kt-CO /year*

CO2 emissions
reduction amount22(amount for the 162 wind power
turbines installed by Hitachi)*1 According to a list of wind power generation facilities installed in Japan(as of March 31, 2016), compiled by the New Energy and Industrial
Technology Development Organization (NEDO).
*2 Comparison with LNG thermal power generation. Calculated from the life cycle
CO 2 emissions for each type of power generation listed in the Evaluation ofLife Cycle CO 2 Emissions of Power Generation Technologies, published by theCentral Research Institute of Electric Power Industry (July 2010).

Reducing CO2 Emissions During Transport
Railway Systems
Among the various modes of transportation, railways have among
the lowest CO2 emissions. As a comprehensive railway systems
integrator, Hitachi is a global provider of railcar and transportsystems, including signaling and train management systems, andwill continue to deliver total railway systems for greater efficiency
and environmental consciousness.
Hitachi’s aluminum A-train rolling stock is lighter thanstainless steel rolling stock, for example, enabling trains to run
at high speeds with less energy. Outside of Japan, A-train
production has also begun in a UK plant and additional orders
have been received for 63 AT-300 cars for a railway insouthwest England. Together with an order received in July
2015, the total is for 236 cars (36 trains).
The use of silicon carbide (SiC) in carriage inverters reduces
energy loss during operation and cuts mass and volume by 40%.
Energy savings are achieved through both lower electrical energy
use and the contribution of these inverters to lighter rolling stock.

An AT-300 train for a UK railway company.

CO2 emissions pertransport unit
(passenger)

Railway
emissionsare about

1
7

those ofautomobiles** From Ministry of Land, Infrastructure, Transport, and Tourism data on CO 2
emissions in the transportation sector.

Reducing CO2 Emissions by Improving Automobile Fuel Efficiency
Lithium-Ion Battery Packs
Automobile CO2 emissions are a major environmental issue, andfuel efficiency is being improved through various technologies.
Hitachi Automotive Systems, Ltd. has developed a 48Vlithium-ion battery pack for mild hybrid vehicles. An output density
1.5 times existing levels has been achieved by improving thematerial composition of the positive and negative electrodes andincreasing the amount of lithium that can be stored per unit ofweight. This not only enhances the motor’s torque performance forassisting acceleration but also enables the recovery of substantial
regenerative energy when decelerating and reduces energy loss.
Hitachi contributes to reduced CO2 emissions throughimproved automobile fuel efficiency by providing storage batteries
and other energy-saving automobile parts.

70

Hitachi, Ltd. Integrated Report 2017

A 48V lithium-ion battery pack for mild hybrid vehicles.

48V lithium-ion battery packenergy density

1.5

times previous
product

CEO Message

With these efforts the energy use per unit has been decreased
32% compared with fiscal 2010 at the company’s main plants in
Ibaraki Prefecture, contributing to a significant reduction in electric
power costs.

Tsuchiura Works East Building and the Hitachi UH03 hydraulic excavator,
which is included in the list of Japan’s Mechanical Engineering Heritage.

Energy use per unit

32

% reduction comparedwith fiscal 2010

Reduction in Energy Use per Unit

Activity
amount*2

From base year

100％ 12 %reduction＝

We are promoting the use of solar, wind, and other forms ofrenewable energy. During the 2016 fiscal year, Hitachi produced
2,925 MWh of renewable energy for its own use. Hitachi
Computer Products (America), Inc. proactively uses renewableenergy to power its factory, purchasing 8,769 MWh during fiscal
2016. In Japan, we contracted for 1,000 MWh/year of GreenPower through Japan Natural Energy Co., Ltd. to provide powerfor offices, showrooms, and exhibitions.

CO2 Emissions(kt-CO2/year)
5,000

4,000

3,845
3,453

3,355

3,311

3,085

＊

3,000

Management & Governance

FY 2005 (base year)
Energy used
1.75 GL*1

Introducing Renewable Energy

Value Creation

We are working to reduce energy use per unit—an indicator ofenergy efficiency—by systematically improving efficiency, such as
by installing high-efficiency equipment and devices, from LED
lighting to inverter air conditioners, at each facility. In fiscal 2016,
we achieved an improvement of 12% (from a base year of fiscal
2005), against a target of 15%. Part of the reason for not hitting
the target was because of a decline in sales in energy intensive
business divisions, which contracted the denominator in
calculating energy use per unit.
The increase in the total volume of CO2 emissions was due tothe fact that a materials company in the Americas newly became amember of the consolidated Hitachi Group in fiscal 2016. There
was a general decline in regions other than the Americas.
We will continue to harness our expertise in control and IT
technologies to actively pursue energy conservation measures at
our factories and offices and promote the efficient use of energy.

Strategic Focus

Reduction of CO 2 Emissions During the Production StageFY 2016
Energy used
1.95 GL
Activity
amount

88％

2,000

＝

*1 Energy volume used both in and outside the organization (SCOPE 1 and 2).
*2 A value closely related to the emission factor numerators (environmental
burden) of energy use from business activities (for example, production
quantity, output, building floor space, and number of employees).

1,000

0

2012

Japan

Rest of Asia

2013

2014

2015

China

Americas

2016

(FY)

Europe* Includes 958 kt-CO 2/year emitted by a materials company that became
a consolidated member of the Hitachi Group in fiscal 2016.
Notes:• The CO 2 electrical power conversion factor uses the 2005 emission
coefficients for individual countries published by the International Energy
Agency (IEA) in the 2010 edition of CO 2 Emissions from Fuel Combustion.
• Energy-related CO 2 emissions were 1,296 kt-CO 2 (SCOPE 1) and 2,549
kt-CO 2 (SCOPE 2).

Hitachi, Ltd. Integrated Report 201771

Performance

Hitachi Construction Machinery Co., Ltd. uses a network ofJapanese and international affiliates centered on four main plants
in Japan to produce construction machinery and its principal
components. Together with energy reductions during use as theseproducts switch to electric or hybrid power, efforts throughout the
network are also being made to reduce energy consumption in the
manufacturing stage.
The entire Hitachi Construction Machinery Group continues toimplement energy-saving measures and promote greater efficiency
in plant and office lighting and air-conditioning. Several locations
have also introduced IoT technology to further reduce energy
consumption and raise productivity. Specifically, by adopting theEnergy and Equipment Management Service, a key solution
concept under Hitachi’s Lumada IoT platform to comprehensively
control energy data and equipment across multiple businessfacilities, they are able to efficiently analyze and manage electric
power data gathered from equipment at each plant. Energy usage
by the machine tools, robots, and other production equipmentused in plants is finely controlled, reducing standby power andincreasing energy efficiency.

Our Business Model

Reducing CO2 Emissions Through Greater Efficiency with IoT
Building Eco-Factories with Lumada

Realization of a Resource Efficient Society
Together with our customers and society, Hitachi will do its utmost through its business operations to help
build a society that uses water and other resources efficiently. We will expand circulative uses of water byfurther advancing the entire range of water treatment technologies involved in water use from seawater
desalination and other forms of fresh water generation to sewage treatment.
We also aim to improve our usage efficiency of water and other resources by 50% compared to fiscal 2010
levels by fiscal 2050. To achieve this target, we will create products that last longer and use less resources,
make thoroughgoing efforts to collect and recycle used products, reduce the volume of water used in the
production process such as through purification and reuse, and engage in other efforts.

Improving Usage Efficiency of Water and Other Resources
Water Conservation

Reduction in Water Usage per Unit

Hitachi uses water in such production processes as cleaning,cooling, and painting. To reduce water usage through greater
efficiency, we are enhancing our level of water management byinstalling flow meters at more locations, introducing wastewater
treatment devices to increase the use of recycled water, andupgrading water supply facilities at our business sites.
Different countries and regions are affected by water-related
issues in different ways, so we devise appropriate
countermeasures for each region. Our business sites in China,
India, and the Philippines, for example, are striving to reducethe volume of water used by strengthening measures against
water leakage.

Reducing Waste Volume
For fiscal 2016, we set a target of a 12% reduction (from a baseyear of fiscal 2005) for waste and valuables generated per unit,
bettering this by achieving a 13% reduction. Every business site is
reducing waste through onsite recycling of byproducts and scrap
from the production process and efforts to curb use of packing
materials during transport. Under the Zero Emission initiative,
which seeks to minimize landfill disposal, 98 business sites
achieved their zero emission goal* as of fiscal 2016.

FY 2005 (base year)
Amountused 56.62
million m3
Activity
amountFY 2016
From base year

100％ 27 %reduction＝

Amountused 41.34
million m3
Activity
amount73％＝

Reduction in Waste and Valuables Generated per Unit
FY 2005 (base year)
Amountgenerated
1,518 kt
Activity
amountFY 2016
From base year

100％ 13 reduction＝%

Amountgenerated
1,336 kt
Activity
amount87％＝* Defined as a final disposal rate (landfill disposal/waste and valuables) of lessthan 0.5% in any given fiscal year.
Zero Emission Sites
http://www.hitachi.com/environment/activities/data/zeroemission.html

Creating a Resource Efficient Society Through Business
Water Solutions to Protect Global Water Resources
Water covers 70% of the earth’s surface, but only 0.01% of
it is potable. Demand for water, however, is on the rise
globally, with more than 40% of the world’s population
expected to face severe water shortages by 2050.
Hitachi has acquired an extensive record in the waterbusiness as it strives to become a comprehensive water
service provider. We have supplied equipment to around 700
water purification plants and 900 sewage treatment plants inJapan, and over 200 sites in some 40 countries and regions
around the world. We continue building on this experience toprovide a variety of water infrastructure globally.
We are currently moving forward on IoT-based,
optimized, and highly efficient water business solution
offerings, including water supply and sewage systems andseawater desalination plants. For example, our energy-

72

Hitachi, Ltd. Integrated Report 2017

efficient seawater desalination plant dilutes seawater withtreated sewage to lower the salt concentration, reducing thepump pressure required for the desalination process andcutting energy consumption by approximately 30%.

Our Business Model

Harmonized Society with Nature
We strive to minimize Hitachi’s impact on natural capital, which bestows the benefits of nature on humankind
by assessing ecosystem impact and advancing measures to minimize the burden at each stage of Hitachi’svalue chain. Moreover, we are preserving the ecosystem through our products and services, such as our air
and water purification systems and environmental monitoring systems. We also endeavor to minimize theenvironmental burden of our factories and offices.

Ecosystem Assessments and Their Implementation

CEO Message

the burden (negative impact) on the ecosystem caused bybusiness activities and maximizing the positive impact, such as byundertaking social contribution activities to protect nature andproviding products and services that preserve the ecosystem.
Regarding impact and other ecosystem preservationassessments, we are deliberating the matter not only within theGroup but also through our participation in activities outside thecompany, such as the biodiversity working group of four Japaneseelectrical and electronic industry associations* and the Japan
Business Initiative for Biodiversity (JBIB).
* The Japan Electrical Manufacturers’ Association (JEMA), Japan Electronics
and Information Technology Industries Association (JEITA), Communications
and Information Network Association of Japan (CIAJ), and Japan Business
Machine and Information System Industries Association (JBMIA).

Strategic Focus

In fiscal 2016 Hitachi created an Ecosystem Preservation Activities
Menu citing the specific activities to be undertaken to promote thepreservation of the ecosystem. We are encouraging each businesssite to advance their own initiatives. This menu was created byadding the pioneering activities of other corporations andorganizations to the list of items that had already been subject toassessment since 2010. It consists of 116 items covering all
aspects of our business operations, including the value chain.
Each business site selects those activities it plans to launch fromthe menu, and the total number of initiatives becomes Hitachi’starget for ecosystem preservation. In fiscal 2016, 144 new
initiatives were launched, far in excess of our initial goal of 30.
In the long term, we seek to minimize the impact on natural
capital and realize a harmonized society with nature by minimizing

Efforts Toward Building a Harmonized Society with Nature

Working together with employees and their families, the HitachiGroup participates in the Japanese Forestry Agency’s Corporate
Forest Program to preserve forests in several locations.
The Group has been conducting tree-planting activities
since 2007 in the Yuyu Forest in Ibaraki Prefecture. Each year
employees and their families gather to plant trees, clear
underbrush, prune, and perform other forest maintenanceactivities. They also take part in activities including environmental
education and handicraft classes using pruned materials.
The Hitachi High-Tech Yasato Forest embarked on a 60-year planin 2005 to cultivate trees. Employees and their families participate in
the work of pruning and thinning to grow a healthy forest.

Hitachi Power Solutions Co., Ltd.
employees at the Yuyu Forest.

Value Creation

Hitachi Group Forestation Activities

Hitachi High-Technologies Corporation
employees at the Yasato Forest.

Integrated Management System for Chemical Substances
Contained in Products
Suppliers

Environmental information
Survey/register

Integrated Management System for Chemical Substances Contained in Products

Registration database

Manage amounts of designatedchemical substances in a productby material and part

Collection database

Manage total amounts ofdesignated chemical substancesby product and businessCommunicate

Customer/society

Environmental information disclosure

Hitachi, Ltd. Integrated Report 201773

Performance

Working closely with suppliers and customers, we gather andmake available information on chemical substances across the
supply chain via the Integrated Management System for Chemical
Substances Contained in Products, which has been in operation
since fiscal 2005. As of March 31, 2017, chemical substanceinformation for more than 1.31 million parts and products was
registered under this integrated management system. In fiscal
2016, we upgraded our system to respond to the shared
information transmission scheme (chemSHERPA) on chemical
substances contained in products.

Management & GovernanceAppropriate Management of Chemical SubstancesSocietal Performance
Companies are increasingly being called upon to create a business framework to advance CSR initiatives
covering not only their own in-house activities but also their value chain.
Hitachi aims to continue fulfilling its social responsibilities throughout the value chain. We thus takemeticulous care in ensuring the compliance, ethical conduct, and fairness of our own activities and those of ourbusiness partners. We also seek to offer safe and rewarding workplaces for all employees based on the belief
that enabling them to fully realize their potential is the source of our sustainable growth.

Supply Chain Management
As a company that procures products and services from suppliers in regions and countries around the world,
we are reviewing our own CSR standards, and auditing and cooperating with the CSR initiatives of our
suppliers. Hitachi is also taking the lead in responding to the issue of conflict minerals by scrutinizing thecountries where raw materials are mined in order to prevent infringements on human rights by countries
engaged in conflict. Keeping abreast of global trends, we will continue to share and strengthen on a Groupwide basis our commitment to fulfilling our social responsibilities throughout the supply chain.

Creating and Sharing Procurement Policies
Our basic procurement policy is contained in the Hitachi
Guidelines for Procurement Activities, drafted in line with
the United Nations Global Compact and which call for theelimination of discrimination in employment andoccupation, the rejection of all forms of child and forcedlabor, and environmental protection activities. Suppliers are
selected strictly in accordance with the guidelines.
In fiscal 2016, we released the Hitachi Group CSR
Procurement Guidelines, a full revision of the 2009 HitachiGroup Supply Chain CSR Deployment Guidebook. This
revision incorporates the provisions of the HitachiGroup Codes of Conduct and also makes references toversion 5.1 of the Electronic Industry Citizenship Coalition(EICC) Code of Conduct, promulgated in January 2016. We
distribute the Guidelines to the approximately 30,000
suppliers of Hitachi business units and Group companies,
from whom we request acknowledgment of suppliers’
understanding in writing.

CSR Supply Chain Management Framework
CSR supply chain management and green procurement
policies and initiatives are discussed within Hitachi’s
Value Chain Integration Division, which is headed by thechief procurement officer (CPO) and reports directly tothe president of Hitachi, Ltd. Policies and initiatives
adopted by the division are shared throughout the Group
via the Hitachi Group CSR Green Procurement
Committee, which includes members from business units
and key Group companies.
In fiscal 2011, we appointed procurement officers tooversee local procurement in China, the rest of Asia,
Europe, and the Americas. We are expanding our suppliersin emerging nations while also strengthening our response
to CSR-related risks expected to arise from the global
expansion of our supply chain.
In fiscal 2015, we introduced a new initiative to provide
information directly to suppliers in a face-to-face format.
The January 2017 CSR and green procurement seminar
held in Shenzhen for Hitachi Group partners in China wasattended by 45 people from 32 companies.
74

Hitachi, Ltd. Integrated Report 2017

Supply Chain Management Organizational Structure
President
Development of CSR/green
procurement policy

Value Chain Integration Division
Procurement office conferences

Conferences for procurement managers

CPO Joint Committee(every two months)

Hitachi Group CSR
Green Procurement
Committee (biannual)Group procurement
strategy conference(biannual)

Regional procurement
conferences (China/Asia/
India: biannual; Europe/
Americas: annual)

Target price conference(biannual)

Implementation by
all procurement members
Business unit procurement members

Major Group company
procurement members

understanding of the challenges our suppliers face.
Starting in fiscal 2017, we will be asking our suppliers to
conduct CSR Monitoring using the updated checklists.
CSR Monitoring (Self-Check) Results
FY

Suppliersin JapanSuppliers
outside Japan

Checklists
collected

2012

57

41

98

2013

55

45

100

2014

0

200

200

2015

0

218

218

2016

198

118

316

Total*

310

724

1,034

CEO Message

To monitor how well Hitachi’s CSR supply chain
management philosophy has been adopted by our
suppliers, since fiscal 2007 we have asked key suppliers to
conduct CSR Monitoring (self-checks) using the JEITA
Supply Chain CSR Deployment Guidebook and detailed
checklists, and in fiscal 2016 we collected checklists from316 suppliers inside and outside Japan.
After analyzing the results, we provide feedback for thebusiness operations related to the suppliers, and then workwith those involved in the operations to resolve supplierrelated issues.
Alongside the revisions made to the Hitachi Group CSR
Procurement Guidelines, the checklists have also been fully
updated to allow us to obtain a more detailed

Our Business Model

Implementation of CSR Monitoring (Self-Checks)* Total also includes self-check results from fiscal 2011.

Implementation of CSR Audits
No major infringements were found at the 20 Asian
suppliers audited in fiscal 2016, but some small areas
needing improvement were noted, such as overtime work
exceeding stipulated rules (19 suppliers), failure to conductperiodic inspections of machinery and equipment (6), andinsufficient management of hazardous waste (9). We havemandated that suppliers affected by these issues submit
improvement action plans and will be working with andadvising them until they complete the planned improvements.

Strategic Focus

Since July 2012, the Hitachi Group Procurement Division
has been auditing the manufacturing bases of suppliers in
China and the rest of Asia. Our audits are based on theinternational SA8000 certification standard developed bySocial Accountability International (SAI), an American CSR
evaluation institution, and are conducted by an EICCrecognized auditor, who checks suppliers’ CSR initiatives
from such perspectives as labor and human rights, healthand safety, the environment, and ethics.

Human Rights Due Diligence in Procurement

Management & GovernanceValue Creationcompanies and the CSR division of Hitachi Asia. The
working group has evaluated human rights risks within the
supply chain, set priorities, and considered measures for
reducing risks.
In fiscal 2016, we published the revised Hitachi GroupCSR Procurement Guidelines based on results obtained
from activities in fiscal 2015 as well as input from a rangeof sources and perspectives, including Hitachi Europe Ltd.,
Hitachi (China), Ltd., and outside experts.

Response to the Conflict Minerals Issue
Each Hitachi Group company is investigating and responding to the issue of conflict minerals in line with our customers’
requests based on Hitachi’s conflict mineral policy.

Hitachi, Ltd. Integrated Report 201775

Performance

Starting in fiscal 2015, the Hitachi Group Procurement
Division began implementing human rights due diligencebased on the Hitachi Group Human Rights Policy. With theconsulting assistance of the nonprofit organization Shift,
we have created a working group centered on the
procurement and CSR divisions at Hitachi, Ltd.—which
serve as the corporate divisions overseeing activities
throughout the Group—and also including the procurement
and CSR divisions of two in-house and four GroupLabor Practices
Hitachi has a human resource strategy that emphasizes the concept of “decent work” (that is, work that ishumane and fulfilling). We make a thoroughgoing and meticulous effort to realize this ideal, actively
pursuing dialogue with all employees on their basic rights and career development and setting up avariety of consultation opportunities as well as mechanisms—just in case—to report compliance abuses.
We also implement a variety of initiatives reflecting the globalization of our business, from promoting
diversity and inclusion in our human capital to globally implementing fair employee evaluation systems
and working conditions.

Global Human Capital Development
Advancing Global Human Capital
Our global human capital management strategy optimizes
both human and organizational performance. One example
of our initiatives is the Global Human Capital Database
covering all Hitachi Group employees, excluding factory
workers outside Japan. This database enables us to fully
ascertain the status of worldwide Group human capital. We
have also built a global grading system that applies to all
managers in the Hitachi Group worldwide, using it as acommon platform for job evaluations throughout the Groupand as a common standard for assessing the value ofmanagement duties.
We began to thoroughly revise our training ofmanagement candidates in fiscal 2015, implementing the
Global Advanced Program for Key Positions (GAP-K) to

Conducting a Global Employee Survey
Since fiscal 2013, we have been conducting an annual
global employee survey called Hitachi Insights as a way ofmeasuring employee engagement.* In September 2016,
the survey was administered for the fourth time. Around
210,000 employees worldwide were sent the survey in oneof 14 different languages, and roughly 180,000 responses
were received.
The results for internal awareness and understandingof the 2018 Mid-term Management Plan and employee
attitudes toward Hitachi’s corporate culture improved in all
14 categories, including those concerning the plan’stargets, compared to the findings of the previous fiscal
year’s survey.

Career Development Initiatives
Hitachi believes that the starting point of careerdevelopment is the work that employees perform on a daily
basis. Based on Hitachi’s Global Performance
Management (GPM), we implement a cycle aimed at thegrowth of each employee through a process in which goals
for daily tasks are set and then pursued, followed by theevaluation of the results to formulate the next objectives.
Along with our workplace-centered initiatives, we also
provide direct support for individual employees through ourcareer development programs. In fiscal 2002 we launchedthe Hitachi Career Development Workshop (H-CDW) as a
76

Hitachi, Ltd. Integrated Report 2017accelerate their development. In fiscal 2016, 23 people
were selected to participate in GAP-K over a three-month
period. Additionally, Hitachi has held the Global Advanced
Program for Leadership Development (GAP-L) in Singapore
every year since fiscal 2012. The program mainly targets
local human resources with potential for leadership at therespective subsidiaries outside Japan. In fiscal 2016, 24
leaders from around the world took part in the program.
Starting in fiscal 2014, we also initiated a globally
standardized training course for general managers and new
managers. To date, around 7,200 people worldwide havetaken part in this course across our Group.

Scores were particularly high for “pride in your company”
and “teamwork,” but those for “resources and support”
remained low from fiscal 2015. Employees may haveexpected Hitachi to do better on the level of staffing as well as
information and resource tools—a situation we will continue
to address by reforming working patterns, introducing new
tools, and deepening communication with employees.
* Hitachi uses the term “engagement” to refer to employees’ understanding of
the company’s strategies and policies, as well as their job satisfaction anddesire to take actions on their own initiative to bring about results.

Group-wide initiative in Japan. Around 9,700 people haveparticipated in the program so far (as of March 31, 2017),
with a focus on technicians, managers, and researchers intheir thirties. According to the January 2016 survey
conducted of the most recent participants, about 80% of
the 422 answers received from group managers and about
70% of the 277 answers from section chiefs agreed that
“H-CDW has been helpful to my career development andwork.” Of the responses from section chiefs, about 60%
reported making use of their workshop experiences inmanaging subordinates.

Developing Women’s Careers
Hitachi, Ltd. has created two key performance indicators(KPIs), announced in fiscal 2013, to enable as many female
employees as possible to take up leadership positions andto participate in management decision making. We
organize a variety of seminars to boost women’s motivation
and also take steps to enhance awareness and create awomen-friendly corporate culture in workplaces as awhole—including managers and male employees.
Employee compensation is set according to eachindividual’s roles and achievements, with no divisions or
differences based on gender or age.

CEO Message

an environment where women and other members of ourvaried workforce can use their skills in leadership andbusiness management. In October 2016, we introduced an
Allowance for Balancing Child Care and Work to further
promote balance between work and child care.
The Diversity Development Project, launched in fiscal
2006 under the president’s direct leadership, was replacedin fiscal 2009 with the Diversity & Inclusion Development
Center, which currently operates under the directsupervision of the Human Capital Group.
Additionally, Hitachi and 17 Group companies jointly
operate the Advisory Committee and the Diversity
Development Council to accelerate awareness acrossHitachi as a whole, including support for diverse humancapital and work-life management.

In November 2016, we hosted the first Global Women’s
Summit for female employees of the Hitachi Group. Held in
the United Kingdom, the event was attended by more than
120 staff members from 25 Group companies around theworld and featured a keynote speech from an external
speaker and workshops on topics ranging fromunconscious bias to individual career development. The
participants also shared stories about their careers and theissues they faced at their workplace.

Strategic Focus

Promoting Diversity and Inclusion
Diversity is the wellspring of innovation and our growthengine. Hitachi regards personal differences—gender,
nationality, work history, age, sexual orientation, andphilosophy—as facets of people’s individuality. By
respecting our employees’ individualities and positioning
them as an advantage, Hitachi frames its diversity andinclusion as conducive to both the individual’s and thecompany’s sustainable growth.
Since the 1990s, we have been at the social forefrontin supporting women and other members of ourmultifaceted workforce. This includes setting up systems tohelp balance work with child and nursing care. Entering
Phase 3 of our diversity management roadmap, we areembracing diversity as a management strategy under theslogan of “Diversity for the Next 100.” This means creating

Our Business Model

Diversity and Inclusion

Goals for Hitachi, Ltd. (KPIs)

Hitachi, Ltd. Integrated Report 2017Management & Governancecompanies, with 40% of senior management positions heldby European personnel. The CEO of global operations is a
London local who has since become an executive officer at
Hitachi, Ltd.

77

Performance

Recruiting Human Capital in Europe
The railway business, which is an important business fieldfor Hitachi, is promoting the recruitment of local humancapital. We shifted the primary site of our railway businessto London in 2014 and built a global operations framework
managed by Hitachi, Ltd. and several other Group

Value Creation

Appoint female executives by fiscal 2015 by promoting from within (including the CSR and Environmental
Strategy Division chief as a corporate officer in April 2015).
Increase the number of female managers in Japan to 1,000 by fiscal 2020 (2.5 times more than at the end of
fiscal 2012).

Occupational Health and Safety
Fundamental Idea for Occupational Health and Safety
Ensuring the health and safety of all employees is the basic principle underlining the Hitachi Group Health and Safety Policy.
This policy is shared by all Hitachi Group companies around the world. Employees work together to create safe, secure
work environments that aim to be accident free.

Hitachi Group Health and Safety Policy
Principle
Policies“Health and Safety Comes First.”
In accordance with our mission, “Contribute to society through the development of superior,original technology and products,” the Hitachi Group will endeavor to ensure safe and healthy
workplaces under the principle of “Health and Safety Always Comes First.”

To accomplish this, we will:
1. Continually be involved in health and safety activities in order to prevent work-related injuries and sickness bydesignating the health and safety of employees as management’s top priority.
2. Comply with the local laws and regulations in each company regarding health and safety.
3. Develop a safe and comfortable work environment by encouraging employees to maintain their own health and taking
a proactive stance on health and safety activities in the workplace.
4. Require an understanding of Hitachi’s principle and the promotion of health and safety awareness from all business
partners of the Hitachi Group.
5. Contribute to the creation of a safe and pleasant society by emphasizing activities that make health and safety a toppriority in all of Hitachi’s business activities.
Revised November 2013

Framework for Promoting Health and Safety
Hitachi views occupational health and safety as vital
preconditions for advancing our business. Manufacturingand maintenance are particularly accident-prone lines ofwork, and we have around 36,000 employees performing
work of this type in Japan. We promote a range of Groupwide occupational health and safety activities globally that
include preventing workplace accidents by setting andapplying minimum safety standards to be observed byGroup manufacturers as well as taking additional measures
tailored to the specific conditions at each company. We
respond quickly when an accident occurs and use lessons
from the incident to make improvements and boost ourlevels of health and safety management.
In accordance with Japanese law, a health and safetycommission—composed of company representatives,
labor-union officials, and employees—is convened every
month to discuss and share information related to such
issues as workplace accident causes and78

Hitachi, Ltd. Integrated Report 2017

countermeasures, the situation regarding employees who
have taken sick leave, and other points of concern. In
2016, we recorded one fatal workplace accident in Japanand two in the rest of Asia.
We built the Hitachi Group Health and Safety Portal
System in 2012 to ensure that the health and safety
performance of every Hitachi Group company in Japan isshared by the entire Hitachi Group. Group-wide information
on work accidents is registered in the system so thatcompanies can track causes and see what preventive
measures have been initiated. To help prevent recurrences,
statistics are kept on types of accidents. Since 2014, wehave carried out initiatives to share information on
workplace accidents globally, including one that tracks andprovides feedback on accidents occurring at Group
companies outside of Japan.

Our Business Model

Communicating CSR Initiatives and Material Issues
Building positive ties with our various business stakeholders is an important management issue that
contributes to achieving not only a sustainable society but also to Hitachi’s sustainable growth.
Hitachi views CSR as being centered on stakeholder engagement and continually implements initiatives inaccordance with a nine-item framework for CSR management. We communicate our achievements throughchannels including the Hitachi Sustainability Report and also engage in stakeholder dialogue to build an evenbetter relationship with society.
Items Covered in the Hitachi Sustainability Report
ThemesMaterial issues

GRI Standards

Realizing sustainable, innovative management

GRI 203: Indirect economic impacts

CEO Message

1 Recognition of social responsibility
Understanding issues through dialogue and taking partin initiatives
2 Corporate governancePursuing management transparency and efficiency
Sharing the Hitachi Group Identity

GRI 205: Anti-corruption
GRI 419: Socioeconomic compliance

Advancing risk management on multiple fronts
Respect for human rights throughout the value chain

GRI 412: Human rights assessment
GRI 408: Child labor
GRI 409: Forced or compulsory labor
GRI 410: Security practices
GRI 411: Rights of indigenous peoples
GRI 414: Supplier social assessment

Respect for workers’ rights

GRI 402: Labor/management relations
GRI 406: Non-discrimination
GRI 407: ‌Freedom of association and collective
bargaining

4 Labor practices

Strategic Focus

3 Human rights

GRI 401: Employment
Achieving a fair and equitable work environment

GRI 402: Labor/management relations
GRI 202: Market presence

Promoting diversity and inclusion

GRI 405: Diversity and equal opportunity

Promoting occupational health and safety

GRI 403: Occupational health and safety

A strategy for growing together with our global humancapitalGRI 404: Training and education

Promoting environmental management

GRI 201: Economic performance

Enhancing environmental management on an ongoingbasis

GRI 302: Energy
GRI 305: Emissions
GRI 306: Effluents and waste
GRI 307: Environmental compliance
GRI 308: Supplier environmental assessment
GRI 404: Training and education

Responding to environmental risks and opportunities

GRI 201: Economic performance

Achieving a low-carbon society

GRI 301: Materials
GRI 302: Energy
GRI 305: Emissions

Achieving a resource efficient society

GRI 303: Water
GRI 306: Effluents and waste

Achieving a harmonized society with nature

GRI 304: Biodiversity

Management & Governance

6 Fair operating practices

Value Creation

5 Environment

GRI 419: Socioeconomic compliance
Promoting work practices in line with international
ethics codes

GRI 205: Anti-corruption
GRI 206: Anti-competitive behavior
GRI 415: Public policy

Engaging in responsible procurement

GRI 204: Procurement practices
GRI 414: Supplier social assessment
GRI 308: Supplier environmental assessment

Pursuing customer satisfaction

GRI 417: Marketing and labeling

Ensuring accessibility to products and services

GRI 417: Marketing and labeling

Ensuring thorough management of quality and safety

GRI 416: Customer health and safety
GRI 418: Customer privacy
GRI 419: Socioeconomic compliance

Promoting sustainable community involvement anddevelopment

GRI 413: Local communities

7 Customers (consumer issues)

9 Review and improvement of CSR activities
Enhancing CSR management
Hitachi, Ltd. Integrated Report 201779

Performance

8 Community involvement and development