Hitachi Appliances
Business Strategy
Hitachi IR Day 2013

June 13, 2013

Takanori Ninomiya
President and Director
Hitachi Appliances, Inc.

© Hitachi, Ltd. 2013. All rights reserved.

Hitachi Appliances Business Strategy

Contents
1. Position of Hitachi Appliances, Business Overview and
FY2012 Business Performance
2. Growth Strategy
3. Business Performance Plan

© Hitachi, Ltd. 2013. All rights reserved.

1-1. Position within Hitachi GroupFY2012 consolidated revenues

Hitachi Appliances,Inc. 569.9 billion yen

9,041 billion yen--- Accounts for 70% of entire Digital Media& Consumer Products Segment[ ]:Composition ratio(%)[ Value Chain ]Others [11]Digital Media &Consumer Products
818.5 billion yen [8]Information &Telecommunication
Systems [18]

R&D andmanufacturing

Financial
Services [3]Hitachi, Ltd. laboratories, etc.

HitachiAppliances, Inc.

OthersPower
Systems [9]Social Infrastructure& Industrial
Systems [13]High Functional
Materials &Components [13]Construction
Machinery [7]Customers

Electronic Systems& Equipment [10]Sales andservices

Automotive
Systems [8]HitachiConsumerMarketing,Inc.

B to B

B to C© Hitachi, Ltd. 2013. All rights reserved.

31-2. Hitachi Appliances Business Overview
New environmental technologies*

Hitachi Appliances, Inc.
Supply eco-friendly, comfortable home
appliances and air-conditioning products basedon cutting-edge technologies to the world

Home
use

FY2012
Electricalconsolidated
homeappliances
revenues
569.9 billion yen
Commercial
useHome appliancesbusiness(49%)

Air conditioning
business(51%)

A key element of the Social Innovation
Business through social and homeinfrastructure products
Spread the Hitachi brand to the world

Growing
emerging
nations markets

A corporation that contributes
to the global environment
Risingenvironmental
consciousness* LED lighting, Solar power generation systems, IH cooking heaters, Heat-pump water heaters, fluorescent lamps, etc.
© Hitachi, Ltd. 2013. All rights reserved.

41-3. FY2012 Business Performance
FY 2012 Business Performance (Vs. Previous forecast and FY2011)(Billion yen)
FY2011(Results)

FY2012(Previous forecast)

FY2012(Results)

Compared toprevious forecast

YoY

546.1

560.0

569.9

104%

102%

Air conditioning
business
Home appliancesbusiness

291.5

290.0

288.8

99%

100%

254.6

270.0

281.1

110%

104%

Overseas revenue ratio

32%

31%

32%

±0

+1point

Operating income ratio

1.0%

2.5%

1.3%

+ 0.3point-1.2point

EBIT ratio

1.7%

2.7%

2.2%

+ 0.5point-0.5point

Revenues

Achieved initial plans for revenues and overseas revenue ratio, but theoperating income ratio was lower than forecast due mainly to fiercer electricalhome appliance competition in Japan and the impact of a fire in India.
EBIT: Earnings before Interest and Taxes© Hitachi, Ltd. 2013. All rights reserved.

5

Hitachi Appliances Business Strategy

Contents
1. Position of Hitachi Appliances, Business Overview and
FY2012 Business Performance
2. Growth Strategy
3. Business Performance Plan

© Hitachi, Ltd. 2013. All rights reserved.

2-1. Market Trends
Market Trends

Over the next 3 years

Market＊1

expansion of more than 1 trillion yen

Growing emerging
nations markets

Rising environmental
consciousness

・ Emerging nations
economic growth・ Growing middle-income
group・ Expanding lower power
consumption needs
・ Widening global applicationof energy-saving andrefrigerant regulations[Growing Middle-income Group*2 in Asian Belt Zone]

1 million
householdMiddle East*3

13

17

23

2011 2015 2020

China
185
132

337

～
～

Approx. 100 million householdincrease over the next 3 years

India
23

38

71

2011 2015 20202011 2015 2020

41

+1.2
Home
appliances

Emerging
nations
marketsAir
conditioning

6.9 -- China
India

5.9

- Southeast
Asia- Middle East
- BrazilHomeappliancesAir
conditioning

2012

2015

[Widening Application of Energy-saving and Refrigerant
Regulations in Emerging Nations Markets] HCFC:Hydro Chloro Fluoro Carbon
Country or Region

StatusMalaysia

More stringent energy-saving regulations(2013～)
Prohibits production and import of
HCFC equipment(2015～)

ThailandMore stringent energy-saving regulations(2013～)

96*2 No. of households earning at least US$10,000 a year
Source: IMF, United Nations
2011 2015 2020
*3 Middle East: total of Saudi Arabia, UAE, Egypt, and Israel*4 ASEAN: total of Thailand, Vietnam, Malaysia, Indonesia, the Philippines and Singapore

11.6

10.4

India

ASEAN*465[Global Air Conditioning and Home Appliance Demand]*1

Trillion yen*1 Target markets (Air conditioning (worldwide); home
appliances (total of Japan, China, India, Southeast Asia,
Middle East)
Hitachi Appliances estimate

Energy-saving
regulations(2010～)
省エネ規制(2010年～)

Saudi Arabia

More stringent energy-saving regulations(2013～)
Prohibits production and import of
HCFC equipment (2015～)

BrazilMore stringent energy-saving regulations(2012～)© Hitachi, Ltd. 2013. All rights reserved.

7

2-2. Hitachi Appliances Strategy
Growth Strategy
Actively business expansionin emerging nations markets

Invest a further
24 billion yen
over the next 3 years
mainly in existingproduction and sales
infrastructure

Promote environmental
technology

Promote local production
for local consumption
with cutting-edge
environmental technologies
originating in Japan, in
association withlaboratories, in line withindividual country needs
and regulations

Develop and use resources
Promote sales strategy
together with Hitachi
Consumer Marketing
Utilize Hitachi’s collective
capabilities, including
Infrastructure Systems Group
Explore use of outside resources

Promote Social Innovation Businessby providing competitive products

Expand business by at least
100 billion yen,

Solutionsmainly in emerging nations markets

Services

Products+
Strengthen
earnings
base

Hitachi Smart Transformation Project
Cost structure reform

Global business reform

Improve cash flows© Hitachi, Ltd. 2013. All rights reserved.

8

Japan-originated Cutting-edge
2-3. Promoting
Energy-saving Technologies Worldwide

Won the FY 2012 “Energy Conservation Grand Prize” for two products
Large-capacity refrigerator

Multi-split air conditioners
*3

*1

*5
Approx. 19% reduction※4

Approx. 12% reduction*2

in annual power consumption
thanks to industry-leading*4※5
APF (Annual Performance
Factor) in Japanin annual power consumption
with Hitachi’s own energysaving technologies

RAS-AP280DG1
R-C6700*1 Of the 14 models in the Shinku-chilled SL series,
11 models, including R-C6700, won awards.
*2 R-C6700 compared with R-B6700, the company’s previous model (FY2011 model)*3 All 17 high-efficiency models, including RAS-AP280DG1, won awards*4 As of January 24, 2013. For models eligible to display APF.
Company high-efficiency models eligible to display APF:
System capacity: 14 kW, 16 kW, 22.4 kW, 28 kW, 33.5 kW*5 Comparison with RAS-AP280GS, the company’s previous model(FY2008 high-efficiency model)

Promoting Cutting-edge Energy-saving Technologies Worldwide© Hitachi, Ltd. 2013. All rights reserved.

9Strategy: Targeting the Asian Belt Zone
2-4. Sales
Through Cooperation Between Manufacturing and Sales
Hitachi Consumer Marketing, Inc.

Hitachi Appliances, Inc.

Strengthen sales capabilities by bolstering sales teamMiddleEast

Established sales company in Dubai
Step up sales in UAE and Saudi Arabia

Step up market presence with sales base
Southeast
expansion
Asia

Establish development system and ramp up
production of premium products

×Develop products for local consumption using
Japanese technologies (refrigerators, washing machines,

Development

vacuum cleaners, room air conditioners, packaged air conditioners,
and chillers)

Production

Ramp up production(Indonesia, Vietnam, Myanmar, etc.)

Shift TV sales resources toelectrical home appliances
and air conditioning business

Advertising(India, Thailand, Malaysia, etc.)

Asia and Middle East campaign
Promote Hitachi brand strategy
Sales bases
Manufacturing bases

China
Middle East・Accelerate sales expansion centered on
Hitachi Sales Middle East FZE(established in April 2013)

・Expand leveraging “Made in Japan”
premium products
・Drive further expansion of the sales
and service networks for commercial
packaged air conditioners

India
・ Establish and bolster sales andservice network covering thewhole of India
・ Use air conditioner sales
channels to expand therefrigerator business

Qingdao
Shanghai

Delhi
Dubai

Wuhu

Kadi

Guangzhou

TaiwanTaga
Tochigi
Shimizu
Tsuchiura

Southeast Asia

Kabinburi Macau Hong Kong

・ Strengthened Indonesian sales
company network

Ho Chi Minh

(Branches established in Bandungand Makassar in March 2013)

Bangkok
Kuala Lumpur

Singapore
Jakarta・ Vietnam office established in
November, 2012.
・ Use home appliance sales
channels to expand commercial
packaged air conditioners

Asian belt zone revenues: increase from 140.0 billion yen (FY2012) to 210.0 billion yen (FY2015)© Hitachi, Ltd. 2013. All rights reserved.

102-5. Strategy by Business / Air Conditioning (1)Targets
100○：Overseas revenue
ratio(%)□：Growth rate with
FY2012 as the baseyear of 100

288.8

Asian Belt
Zone

Japan

Billion yen / year

132
380.0

Comprehensive air conditioning strategy

150

Overseas

54
100

43
FY2012- China- India- Southeast
Asia- Middle East

Home use Commercial use (Shops,Buildings,etc) Industrial use
Room
air conditioners

Room airconditioners

Packaged
air conditioners

Packaged air
conditioners

Absorption &Centrifugal chillers

Absorption
chillers

Centrifugal
chillers

FY2015

Basic Strategy
Comprehensive
air conditioning
strategy

Support customers with a broad lineup
ranging from home-use air conditioners tobuilding- and industrial-use air conditioners

Product
Strategy

Launch No.1 energy-saving products
compliant with environmental regulations ineach area

Regional
Strategy

Outstanding technological capabilities
and a broad lineup

Concentrate investments into manufacturing
and sales channel in emerging nations markets
・Invested 13 billion yen during FY2010-FY2012 period andplan to reap the benefits going forward
・Plan to invest a further 14 billion yen in FY2013-FY2015
periodMulti-split air conditioners

Chiller units for air conditioning

Respond to various
air conditioning needs
Provide air conditioning solutions compliant
with environmental regulations andother requirements in each area
Procurement, manufacturing
and sales synergies© Hitachi, Ltd. 2013. All rights reserved.

112-6. Strategy by Business / Air Conditioning (2)Product Strategy
Japan

Develop high-performance,energy-saving products
R134a
Chiller units for
air conditioning

Regional Strategy
Aggressively target emerging nations markets leveraging
existing manufacturing and sales infrastructure

Large, highly efficientchillers[Examples of Initiatives in Key Countries](Absorption/Centrifugal)

India

Industry-leading APF

Expand commercial-use air conditioner
business leveraging existing sales and service
networks

M

Successively launch newcommercial-use products

January 2013 commence
operations at new plant(Annual Performance Factor) in Japan*

Overseas

Launch No.1 energy-saving products
compliant with environmental regulations in each area

andS Establish
bolster sales
and service
network
covering thewhole of India

Invest 2 billion yen (FY2013-2015)
M : Manufacturing S : Sales

China

India

BrazilSoutheast
Asia

Accelerate growth with a broad lineup ranging
from home-use air conditioners to industrial-use
air conditioners

M

Commence operationsat Manaus factory

June 2013 commence
operations at new plant

new sales
S Targetchannels with abroad lineup

BrazilInvest 3 billion yen (FY2013-2015)

・・・Europe*Packaged Air Conditioning System for Stores and Offices: as of March 27, 2013.
High-efficiency multi-split air conditioners: as of January 24, 2013. In some products.

© Hitachi, Ltd. 2013. All rights reserved.

122-7. Strategy by Business / Home appliances business
Targets*1 New environmental technologies excludes
fluorescent lamps and lighting equipment

100
281.1
100*1

114
320.0
150*1

○： Electrical home
appliances
Overseas revenue
ratio(%)□： Growth rate with
FY2012 as the baseyear of 100

Japan

Overseas

140
100

25

32

FY2012[Electrical home*3
appliances share]%

FY2015*2 Premium strategy: create a high-end brand by developing premium products in eachregion that are fun to use and offer high energy-saving performance

26
（FY）

2010

2011

2012

Source: JEMA (Terms of monetary
shipping amounts)*3 Electrical home appliances(5 main products)
Refrigerators,washing machines,vacuum clearners,microwave ovens,and rice cookers

Provide premium products matching market

Overseas characteristics and preferences in eachregionSemi-globalization*2

Develop premium strategy according to the market
Target Asian belt zone leveraging the domestic business

Regional
Strategy

28
24- China- India- Southeast
Asia- Middle East

Basic Strategy
Product
Strategy

Promote project-based development for
producing a string of hit products

Asian Belt
Zone

Japan

Electrical home
appliances

Billion yen / yearNew
environmental
technologies

Product Strategy

Asia

Middle East

China

Hong Kong

Taiwan area

Increase production capacity of core Thai manufacturing bases

Unique FlagshipJapan Quality

Made in Japan

Toward FY2015: refrigerators 1.4 times,

washing machines 1.3 times (Vs. FY2012), etc.
New
Strengthen LED lighting and solar power generation
environmental
technologies systems business© Hitachi, Ltd. 2013. All rights reserved.

132-8. Strengthening New Environmental Technologies business
LED lighting

Solar power generation systems

Premium LED ceiling lights

Power conditioners

 Creates a quality ambiance with topclass brightness

LED light bulbs
 Achieves brightness equivalent to 100
W incandescent bulbs with Hitachi’s
unique brightness technology

 Broad lineup ranging fromhigh brightness to energysaving products
For homes

FY2012 ⇒FY2013lightbulbs

153 17

Solar cell modules
 High output,
high efficiency

Facility-use LED lighting

No. of LED
124
models Proprietary control forminimizing the impactof partial shading Top-class power
conversion ratio of
96%

Installation
 Install on roofs of any
shape

Solar power generation systems
that can provide customers with even more electricity

Facility-use

24 453989

600 ⇒ 1,200models(Forecast)[Full Utilization of Sales Resources]
 BtoC : Integrated sales expansion with electrical home
appliances BtoB : Sales promotion of air conditioning and lighting
together[Maintain installation quality andexpand sales with installation certification system] ＨＳＳ* Adviser・・・Store staffs：2,563
 ＨＳＳ Installation certifiers･･･Installers：1,043
 ＨＳＳ Master･･･Hitachi staffs：650
as of April 30, 2013
* HSS：Hitachi Solar Systems

Expand sales by fully utilizing sales and business resources cooperation with Hitachi Consumer Marketing© Hitachi, Ltd. 2013. All rights reserved.

142-9. Initiatives for Expanding Solutions and Services Business
Provide solutions and services integrated with the Hitachi group companies in Infrastructure Systems Group

Information &Telecommunication
Systems Group

Infrastructure Systems Group

Solutionsand Services

Building energy-saving systems, Transportation systems, Urban systems ・・・

Energy-saving support

Maintenance

Infrastructure Systems
Company

Operation

Rail Systems Company

Create environmentally friendly and comfortable spaces with control

Engineering

Equipment control
knowhow

Standard interface

Urban Planning andDevelopment Systems
Company
・・・・・・

Hitachi Appliances, Inc.
Homes and living infrastructure

Social infrastructure Industry, buildings, stores

New environmental technologies

Components

Absorption
chillers

Packaged air
conditioners
Centrifugal
chillers

Chiller units for air
conditioning

Multi-split air
conditioners

Room airconditioners
Facility-use LED
lighting

LED ceilinglights

IH cooking
heaters

Heat-pump water
heaters(Commercial use,
Home use)

Refrigerators
Microwave
ovens

Solar power
generation
systems
Vacuumcleaners

Washing
machines© Hitachi, Ltd. 2013. All rights reserved.

15

2-10. Strengthening the Earnings Base‐FY2015 Targets
Operating Income Ratio Comparison％( )*From each company’s earnings releases

Company A

Hitachi Appliances
5
Company B

FY2015
Revenues：700 billion yen
EBIT ratio:over 5%(Operating income ratio:over 5%)
Overseas revenue ratio:over 40%

Company C

2.2
1.0

1.3
(EBIT ratio 2.2％)
Company D

2011

2012

～

2010

2015

(FY)

Aim to achieve targets by strengthening the earnings base through the Hitachi Smart Transformation Project© Hitachi, Ltd. 2013. All rights reserved.

16

2-11. Hitachi Smart Transformation Project2012 Mid-term Management Plan

2015 Mid-term Management Plan

FY2015 total benefits: 27 billion yen［Main Initiatives］

Cost
structurereformPromoted VEC and global procurement
Developed technologies for using noor less rare earths
Reduced indirect expenses
Promoted modular design

Implementation centeredon mother factories［Main Initiatives］

Globalbusinessreform

Improvecash
flows［Main Initiatives］･･･In addition to existing initiatives［Main Initiatives］

Produce more key components internally,
reduce costs
Centralize purchasing to achieve lowest costprocurement worldwide
Improve production efficiency by utilizing MODAPTS

Expand measures globally
Promote business reforms with Hitachi
Consumer Marketing (orders, logistics, services, etc.)
Promote measures to expand the services business
Utilize procurement schemes linked with Hitachi
Transport System,Ltd. and other Hitachi Group companies
Standardize and centralize IT and business systems,
utilize shared services
Visualized global human resources, and strategicallyassign and develop
Reduce inventories through global TSCM reform
Introduce trade finance linked with Hitachi Capital
Corporation and other Hitachi Group companies

VEC : Value Engineering for Customers
MODAPTS : Modular Arrangement of Predetermined Time Standards
TSCM : Total Supply Chain Management© Hitachi, Ltd. 2013. All rights reserved.

17

Hitachi Appliances Business Strategy

Contents
1. Position of Hitachi Appliances, Business Overview and
FY2012 Business Performance
2. Growth Strategy
3. Business Performance Plan

© Hitachi, Ltd. 2013. All rights reserved.

3-1. Business Performance Plan Overview
Over 40%～

Overseas revenue ratio

34%

Revenues(Billion yen) 32%

32%

EBIT
(Billion yen)

32%

800
600

502.6

569.9

546.1

610.0

Over
5% 20

19.5
12.6
2.5%

2.2%

1.7%
FY2011
Air
conditioning

3.2%

FY2012Home
appliances

FY2013
Forecast
EBIT～

FY2010

12.5

9.3

～

200

40
30

400

0

700.0
35.0

10

FY2015
Target0

EBIT ratio

Aim for global growth and a stronger earnings base© Hitachi, Ltd. 2013. All rights reserved.

193-2. FY2013 Business Performance Forecast
FY2013 Business Performance Forecast(Billion yen)

FY2012(Results)

FY2013(Forecast)

YoY

569.9

610.0

107%

Air conditioning
business
Home appliancesbusiness

288.8

320.0

111%

281.1

290.0

103%

Overseas revenue ratio

32%
2.2%

34%
3.2%

+ 2point+ 1point

Revenues

EBIT ratio

Seize opportunities toexpand business globally

Risk factor
Higher procurement costs
due to a weaker yen
Reap benefits through the Hitachi Smart
Transformation ProjectOvercome with higher exports of “Made in Japan”
products

Steadily achieve targets in first year of 2015 Mid-term Management Plan
© Hitachi, Ltd. 2013. All rights reserved.

20

3-3. Conclusion

FY2015 Targets
Revenues: 700 billion yen(overseas revenue ratio: over 40%)
EBIT (operating income) ratio: over 5%Gross margin 2.4 point improvement (Vs. FY2012)
SG&A expense ratio 1.3 point improvement(Vs. FY2012)
Growing
emerging
nations markets

A corporation that contributes
to the global environment
Risingenvironmental
consciousness© Hitachi, Ltd. 2013. All rights reserved.

21

Cautionary Statement
Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such “forward-looking statements”
reflect management’s current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words
such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends may identify “forward-looking
statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from thoseprojected or implied in the “forward-looking statements” and from historical trends. Certain “forward-looking statements” are based upon current assumptions of future events which may notprove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are not limited to: economic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe, as well as levels of
demand in the major industrial sectors Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;
 exchange rate fluctuations of the yen against other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly against the U.S.
dollar and the euro; uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing; uncertainty as to general market price levels for equity securities, declines in which may require Hitachi to write down equity securities that it holds;
 the potential for significant losses on Hitachi’s investments in equity method affiliates;
 increased commoditization of information technology products and digital media-related products and intensifying price competition for such products, particularly in the Digital Media &Consumer Products segments;
 uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptance for suchproducts;
 rapid technological innovation;
 the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue from sales; fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, orshortages of materials, parts and components;
 fluctuations in product demand and industry capacity; uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials or shortagesof materials, parts and components;
 uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;
 uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitiveness;
 uncertainty as to the success of cost reduction measures;
 general socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States and Europe,
including, without limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract terms andconditions and labor relations; uncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design and development of certain key products;
 uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies;
 uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or may
become parties;
 the possibility of incurring expenses resulting from any defects in products or services of Hitachi;
 the possibility of disruption of Hitachi’s operations by earthquakes, tsunamis or other natural disasters;
 uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information or that of its customers;
 uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its significant employee benefit-related costs; and uncertainty as to Hitachi’s ability to attract and retain skilled personnel.
The factors listed above are not all-inclusive and are in addition to other factors contained in other materials published by Hitachi.

© Hitachi, Ltd. 2013. All rights reserved.

22