ʻGroup Management Policies 2023ʼ
May.9.2023

President and Chief Executive Ofﬁcer
Hiroshi Ide
Copyright © 2023 IHI Corporation All Rights Reserved.

After amendments

ContentsReview of ʻProject ChangeʼʻGroup Management Policies 2023ʼ
Review on actions of ʻProject Changeʼ

Business Transformation to Achieve Strong Sustainable Growth
Growth Business : Aero Engines and Space
Development-focus Business : Clean Energy
Core Businesses :Growth Strategy Centered on Exploit and Evolution of LCB
Thorough Business Structure Reform
Capability of Realizing Transformation
Resource Allocation and Management Targets

Copyright © 2023 IHI Corporation All Rights Reserved.

Review of ʻProject Changeʼ

Copyright © 2023 IHI Corporation All Rights Reserved.

3

Results of ʻProject Changeʼ●Given the impact of COVID-19 pandemic, we have been working on returning to growth trajectory
positioning it as a preparation period for reforming businesses in response to operating climatechanges. We posted record-high operating proﬁt by transforming the business model from product andservice businesses to Lifecycle businesses and strengthening the cost structure.
(Operating proﬁt margin)
10.0%(Billions of yen)
1,500.0

1,352.9
1,263.1
1,172.9

8.0%

1,112.9

8.0%

6.9%
6.1%

100.0

6.0%

Operating proﬁt margin(ʻProject Changeʼ)Operating proﬁt margin(Results)

3.8%
4.0%

(Reference)
50.0

2.5%
81.4

81.9

Revenue (Results)
Operating proﬁt (Results)

2.0%

47.8
27.9
00.0%
FY2019FY2020

FY2021

FY2022

ROIC

4.1%

2.2%

6.4%

6.3%

FX rate109.19yen

106.40yen

112.68yen

134.32yen

Copyright © 2023 IHI Corporation All Rights Reserved.

ROIC (after tax) : (Operating proﬁt +Interest and dividend income) after
tax / (Equity attributable to ownersof parent + Interest-bearingliabilities)4Results of ʻProject ChangeʼFactors in operating proﬁt changes (FY2020～FY2022）
61.0（Billions of yen）
100

81.9
80
60
40

27.9
200-20

FY2020

ReboundBusinessfrom sales
environmentof large assetschangeRecovery
from COVID-19

Expansion Reinforcement Reformation Change in SG&Aof Lifecycle of cost structure of businessbusinesses
structure

Change inFX rate

Change in otherincomeandexpenses

FY2022

Performance recovery driver

Change in LCB revenue(*)Excluding Aero Engine, Space & Defense business ﬁelds＋35%

LCB revenue

Achieved the target (increaseof 30% or more compared toFY2019) of ʻProject ChangeʼLCB growth rate (compared to FY2019)

＋17%
＋13%

FY2019Copyright © 2023 IHI Corporation All Rights Reserved.

FY2020

FY2021

FY20225

ʻProject Changeʼ Initiatives

CarbonCarbonsolutions
solutions

IHI Achieves Worldʼs First CO2-free Power
Generation with a Gas Turbine Completely Fueled
Using Liquid Ammonia●●●

Realized CO2-free power generation using a 2,000 kW-class gas turbinethat uses only liquid ammonia as fuelSucceeded in reducing greenhouse gas emissions during combustion by over 99%
Aiming for practical use in 2025 by improving operability as well as
conducting durability evaluations over a long duration

Carbon solutions

GE and IHI Sign Memorandum of Understanding
to Develop Gas Turbines That Can Operate on
100% Ammonia●●●Copyright © 2023 IHI Corporation All Rights Reserved.

Under the MOU, the companies will cooperate to develop 100%
ammonia capable combustion system
Modiﬁcation of existing large GE gas turbine power plants to use
ammonia
Also to meet the demand for new large ammonia gas turbines6ʻProject Changeʼ Initiatives

Carbon solutions

Lifecycle businesses
Lifecyclebusinesses

Ammonia Co-ﬁring Demonstration Project atHekinan Thermal Power Station●●●

Signiﬁcant progress in large-scale demonstration project to establish
technology in which fuel ammonia is co-ﬁred
Steady progress being made in adjustments to necessary facilities andthe demonstration project till now
As a result, the start of large-scale co-ﬁring of fuel ammonia (fuel ratioof 20%) has been brought forward by about a year to FY2023

Carbon solutions

IHI Invests in US Company NuScale Power, LLC andParticipates in Its Small Modular Reactors (SMR) Project●●●Copyright © 2023 IHI Corporation All Rights Reserved.

Joint investment with Japan Bank for International Cooperation andJGC Holdings Corporation
NuScale Powerʼs SMR technologyʼs design certiﬁcation review has
been completed, the ﬁrst in the United States
IHI will leverage its expertise in designing and producing mainmachines for nuclear power plants in the SMR project7

ʻProject Changeʼ Initiatives

Carbon solutions

IHI Receives Order for the First Time for Standard
Methanation Machine that Uses CO2 and H2 as Raw
Materials for TOHO GASʼs Chita LNG Terminal●●●

Joint research and development of catalysts with a research institution aﬃliatedwith the Singapore Agency for Science, Technology and Research (A*STAR)
The synthetic methane (e-methane) produced can be used as fuel for city gas, etc.
Plan to carry out demonstration tests from FY2023 to FY2026 inanticipation of large-scale implementation in society

IHIʼs SAF Concept
Carbon solutions

Aero
Aeroengine,engine,spacespace

Technology Developed for SAF Synthesis Veriﬁed as
Achieving Top-ranking Yield Worldwide in Production ofHydrocarbons Derived from CO2●●●Copyright © 2023 IHI Corporation All Rights Reserved.

Joint research and development of catalysts with a research institution aﬃliatedwith the Singapore Agency for Science, Technology and Research (A*STAR)
New catalyst developed for SAF synthesis, which has achieved liquidhydrocarbon yield of 26% in catalyst reaction tests
Eﬀective exploration and calibration of test conditions such as catalyst
composition and reactive conditions leveraging AI technology
8ʻProject Changeʼ Initiatives

Aero
Aeroengine,engine,spacespace

IHI Signs MOUwith a Global Aerospace and Defense
Technology Company to Work Together on Artiﬁcial Satellites●●●

Started collaborating with Northrop Grumman Corporation, which is a
global leader in detection and identiﬁcation of space objects
Aim to provide small, highly maneuverable satellites to Japan forSpace Domain Awareness (SDA)
To utilize Northrop Grummanʼs existing satellite buses and IHIʼs space
situational awareness data services

Aero
Aeroengine,engine,space
space

IHI Participates in Tri-national Next-Generation Fighter
Development Program●●●

Engine for the next-generation ﬁghter development program to be
jointly developed by Japan, the United Kingdom, and Italy
IHI will work closely with the government and related companies andplay a vital role in the collaboration
To contribute to developing and turning out human resources andhighly skilled engineers who can succeed globally in the future

Courtesy of Japan Ministry of Defense
Copyright © 2023 IHI Corporation All Rights Reserved.

9ʻProject Changeʼ Initiatives

Aero engine, spaceLife cycle businesses

Tsurugashima Works, the New Base for Civil AeroEngine, Starts Operations●●●

Started operations of new plant for expanding the civil aero engine
business centered on life cycle business
Introduced new technologies such as IoT and AI under solid quality
control system dedicated for civil aero engine maintenance
Aims to achieve worldʼs highest standard in aviation safety quality andeﬃcient maintenance service

Aero engine, space

Carbon solutions

IHI Succeeds in Developing a Prototype of a High-PowerElectric Motor for Aircraft Propulsion Systems●●●©Akita University
Copyright © 2023 IHI Corporation All Rights Reserved.

IHI, in collaboration with local companies in Akita Prefecture and others,
succeeded in developing a prototype of a 250-kW high-power electric motor
for aircraft propulsion systems
Envisages the motorʼs output to be increased to more than 1MW and installed
as electric hybrid propulsion system in medium-sized passenger aircraft
While aiming for practical use in the 2030s, IHI will also work on theelectriﬁcation and optimization of the entire aircraft system
10ʻProject Changeʼ Initiatives

Carbon solutions

IHIʼs Electric Turbocharger to be Installed in Fuel
Cell System for Commercial Vehicles(Manufactured by AVL List GmbH)●●●

AVL is a major global automobile power train engineering company
IHIʼs electric turbocharger to be installed in the HyTruck fuel cell system that will
be installed in the demo truck being developed by AVLin 2023
IHIʼs electric turbocharger, with its small size and power savings,contributes to miniaturization and higher eﬃciency of fuel cell systems

Carbon solutions

Maintenanceandanddisasterprevention
and mitigation
Maintenancedisasterprevention
and mitigation

IHI and Sumitomo Forestry Establish a TropicalPeatland Consulting Company●●●Copyright © 2023 IHI Corporation All Rights Reserved.

Sumitomo Forestry Co., Ltd. and IHI established a joint venturecompany NeXT FOREST
Started consulting service for appropriate management of peatlands
Introduced a monitoring system that combines the data accumulatedby Sumitomo Forestry and IHIʼs weather monitoring technology

11ʻGroup Management Policies 2023ʼCopyright © 2023 IHI Corporation All Rights Reserved.

12

Review on actions of ʻProject Changeʼ

●●●Policies and Results of ʻProject Changeʼ

●Business Environmental awarenessSociety whereinstability
becomes thenorm

Preparation period for business transformation
Creating a new business main pillar as Aero engines

Need to further
enhance
corporate
strength

Return to growth trajectory●●Transforming the businessmodel from product andservice businesses toLifecycle businesses (LCB)
Reformation of coststructure

Record-high levels
for operating cash
ﬂow (FY2021) andoperating proﬁt(FY2022)

Growth business creation●●Signiﬁcance of this management policy

Full-scale business transformationto achieve strong sustainable growth

Initiatives for the fuel ammonia value-chain business as a
new business modelPreparations in place
for business transformation

Copyright © 2023 IHI Corporation All Rights Reserved.

Accelerating transformation into acompany that can quickly respond todisruptive environmental changes

13Business Transformation to Achieve Strong Sustainable Growth●Group Corporate Strategy●Social Issues to be tackled

DECARBONATIONRESILIENCE

Achieving Carbon
Neutrality in Industry

Realizationof a global ecosystem
resilient to climate change

ECOSYSTEMSSECURITY

Building and improving
industrial ecosystems

Economic, National andEnergy Security●Key points for the ʻGroup Management Policies 2023ʼ
Leaping forward to become a sustainable high-growthcompany through a bold shift of management resources
to growth areas

Growth Business

Development-focus Business

Aero Engines and Space

Clean Energy

Allocating management resources(cash and human resources)

TransformationBusinesses

Core Businesses
Providing value chain
throughout the Lifecycle ofcustomer's businessResources, Energy & Environment; Social Infrastructure;
Industrial Systems & General-Purpose Machinery

Building up theentire value chain●TechnologyCopyright © 2023 IHI Corporation All Rights Reserved.

Insight

Capability of realizing transformation
Developing and recruiting
human resources tofacilitate transformation

Advancement of digital
infrastructure

14

Growth Business : Aero Engines and Space
Lead the growth of the corporate by pursuing business and production transformation, in addition tostrengthening and expanding the civil aero engine and defense business.
● Creating new businesses from the viewpoint of Lifecycle and value chain●Expanding businesses
from the viewpoint of lifecycle
and value chain

Initiatives for Next-generation aircraft●●●Light weight composite material
Electriﬁcation
SAF/synthetic fuels

Environmentally friendly and economically viable aircraft to achieve carbon neutrality

Strengthening
existing businesses

Business environment

Recovery from pandemic and return to growth
Expanding demand in defense market

Aero Engine business
●●

●

●

●

Develop Advanced gas turbine technologies
Develop Next-generation ﬁghter engine
Incorporate IHIʼs own technologies to nextgeneration aero engines
Establish New engine maintenance site
Enhance Raw material business

Improve proﬁtability and asset efﬁciency by transforming
production systems and business structures

Initiatives for Space,
Land and Underwater
data utilization●●Rocket business●●●Copyright © 2023 IHI Corporation All Rights Reserved.

©JAXA

Defense systems
Ship surveillance and forest
management collaborating withsatellite utilization partners

Expand production systems to meet increasing
defense demand
Enhance competitiveness of Solid rocket motors
Establish Rocket launching service

15

Development-focus Business : Clean Energy●●●

Building it into a business that will be main pillar as Aero Engines, SpaceWe will work to create and improve our entire value chain. This includes power generation equipment such as Gas Turbine thatutilizes world-leading ammonia combustion technology, as well as our storage and receiving terminals with top-tier performance.
While investigating investment in fuel manufacturing projects, we will utilize our engineering capabilities to build a new
business model.
Demonstration of ammonia co-ﬁring in thermal
power plants around the world Demonstrationof co-ﬁring ratio increase from 20% to 60%

Ammonia Manufacturing

Successful development of ammonia-based Gas Turbine
Joint development with GE to apply this technology tolarge gas turbines

Storage & Transportation

Utilization

Ammonia certiﬁcation platform

Blueammonia
Natural gas

RenewableenergyＧＴBoilers

For electricitygeneration

CCS/EOR

Ammoniasynthesis

Greenammonia

NH 3

NH 3

NH 3

Shipping
terminal

Marine transport

Receivingterminal

Waterelectrolyzers

Developmentof standardsfor safe operations

Industrial use
Package boilers and engines
for power generation
NH 3

Vessel engines

Maritime use

Development of ammonia receiving tanks,
ﬂoating storage and regasiﬁcation equipment

Investment participation in afuel production projectCity gas and industrial use
CO 2 capture
from industrial processes

Copyright © 2023 IHI Corporation All Rights Reserved.

Synthesis of methane,and production of synthetic fuels, etc.

SAF andchemical use
16

Development-focus Business : Clean Energy
Amid rising energy prices, interest in the use of fuel ammonia is growing faster worldwide.
●●We will accelerate the creation of a network for fuel ammonia utilization with partners in Japan, the United States, Europe, and Asia.
Wewill help to realize this kind of value chain by promoting discussions with European and US companies involved in ammonia handling as wellas with companies in regions where renewable energy is produced. These discussions will cover production of fuel ammonia and thedevelopment of necessary transportation and storage networks.

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17

(LCB)

Expanding and improving the customerʼs value chain, by going beyond just equipment and system sales and maintenancePositive-spiral initiatives for＜carbon neutrality, labor saving, and resilience enhancement＞

Exploit of LCB
Expanding target value chains, and improving value forcustomers, society and the environment
Targeting the customers of competitors
Expansion into customer peripheral devices and systems

Upstream(Materials andenergy)

Actions in “Project Change”
Preventive maintenanceContinuous monitoring
Maintenanceand inspection

End users

Optimization ofmonitoring and operations

Feedback

Equipment and system
maintenance

Evolution ofLCB

Customer value chains
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18

Core Businesses : Exploit and evolution of Lifecycle Businesses (LCB) –Examples

Exploit and Evolution of LCB by operation
optimization of entire plants and clean energy

Exploit and Evolution of LCB through CO2 emissions
reduction, automation and labor saving in factories
and industrial parks

Promoting eﬃcient operations andcarbon-neutrality achievement measures forcustomers in the power generation sector

Improving value for multiple industrial customers
by making optimization proposals tailored to theregion and industry concerned

Promoting carbon neutrality achievement
through large-scale fuel conversion(reﬁtting for co-ﬁring with ammonia) andadoption of methanation technology, etc.

ProposingCO2 emissions reduction
solutions to industrial parks anddistricts, such as fuel conversion andshared use of exhaust heat
LCB expansion into plant peripheral
equipment and equipment
manufactured by competitors

Preventive maintenance and optimal
operation supportbased on continuous
monitoringof plant operations

Realizing operation optimization for entire plants based ondata analysis, and promoting carbon neutrality achievementin the customer value chain by using clean energy
Copyright © 2023 IHI Corporation All Rights Reserved.

CO2 emissionsreductionproposalsbasedon
factory energy-saving diagnosis(utilization ofexhaustheatandimprovementof manufacturing
processeﬃciency),aswellaseﬃciency
improvementthroughdistribution dataanalysis

Visualization of equipment operation status,
Preventive maintenance, and multiple unit
control

By visualizing equipment operation data, the aim is to achieve eﬃcientenergy use, automation, and labor savings.
Realize carbon neutrality and solve labor shortages by proposing fuelconversion and shared use of exhaust heat to industrial parks and regions.
19Core Businesses : Thorough Business Structure Reform
Focusing on strengthening the cash generation capabilities
by growth strategy based on Exploit and Evolution of LCB, and Structural reforms● By emphasizing these eﬀorts, we will free up management resources to invest in Growth and Development-focus Businesses.
●Operational process reformation and Advancement of digital infra
to improve business eﬃciency and reducing ﬁxed and variable costs

Enhancing businessstrength to enable
quick response todisruptive
environmental
changes

Business portfolio
optimization

Copyright © 2023 IHI Corporation All Rights Reserved.

Improving the cash conversion cycle and generating operating cash ﬂow

Strengthening risk management

Business restructuring to secure proﬁtability and eﬃciency

20

Capability of Realizing Transformation

Management centered on ESG values

Climate change adaptationand mitigation

Diversity,
Equity & Inclusion
Human rights

Earning the trustof stakeholders

Focus on Agile and Continous self-transformation of themanagement and personnel and to make it part of thecorporate culture

Directions

Developing and recruiting

Innovative human resourcesthat achieving business andcorporate structure transformation(1) Acquiring global-level expertiseand management skills and making
it part of the corporate culture●

Advancement of digital
infrastructure

Directions

Providing re-skilling opportunities for all employees(2) Implementing measures toimprove engagement andwell-being●

Support for self career development

Aiming to improve customer value while maximizing
business valuethat essential for business
transformation(1) Digital infrastructure forcreating a new business modelwith global competitiveness

Copyright © 2023 IHI Corporation All Rights Reserved.

(2) Digital infrastructure fordramatic production andbusiness process reforms

21

Resource Allocation and Management Targets

Resource allocation

Management targets
About half of the total investment
budget of 500 billion yen will be invested
in Growth and Development-focus
Businesses

Aiming to generate ongoing
operating cash ﬂow of 100 billion
yen or more

Cash ﬂows from operating activities

FY2025
Operating proﬁt margin

7.5%

ROIC

8% or higher(billion yen)

Cash Conversion Cycle

100 days(Reference) Revenue

1.7 trillion yen

100

Shareholder returns
Aiming for a consolidated dividend
payout ratio of0
FY2020

FY2021

FY2022

FY2023

FY2024FY202530 %based on abasic policy of stable dividends

ROIC (after tax) : (Operating proﬁt + Interest and dividend income) after tax / (Equity attributable to owners of parent + Interest-bearing liabilities)

Copyright © 2023 IHI Corporation All Rights Reserved.

22

Resource Allocation and Management Targets
Factors in operating proﬁt changes (FY2022～FY2025)（billion yen ）140

Investment in human resources,
R&D, and structural reforms

Operating income level before
these costts and investments

127.5120100

90.0
80

81.96040200
FY2022
ResultRebound form
sales of large
assets and FX

Copyright © 2023 IHI Corporation All Rights Reserved.

Rebound of
subsequent
event

Business
enviromentchangeExpansion of
Lifecycle ofbusinesses

Strengthen
earnings
foundations

Imvestment Reformation offor growthbusiness
structure

FY2023

Expansion of
Lifecycleof
businesses

Strengthen
earnings
foundations

FY2025
Forecast23

Resource Allocation and Management Targets
Forecast of Operating Proﬁt Margin by Business Domain（Billion yen）

Operating proﬁt/ Operating proﬁt margin

Resources, Energy &Environment
Social Infrastructure

FY2022（Results）

FY2023（Forecast）

FY2025（Targets）

26.2

26.0

31.0

7.1%
17.0

18.0

Aero Engine, Space &Defense

36.1

Adjustments
Total
FX rates

Copyright © 2023 IHI Corporation All Rights Reserved.

13.0

9.9%

Industrial Systems &General-Purpose Machinery

Other

6.8%
18.0

6.8%
24.0

4.1%

8.6%
40.0

5.2％
51.0

9.9%

7.2%

7.5%
60.0

11.9%

11.5%

Revenue
FY2022（Results）

FY2023（Forecast）

FY2025（Targets）

371.3

380.0

430.0

171.0

190.0

210.0436.5

460.0

530.0

364.1

430.0

520.0

1.3

3.0

3.0

54.2

50.0

50.0

-16.8

-27.0

-24.5

-44.4

-60.0

-40.0

81.9

90.0

127.5

1,352.9

1,450.0

1,700.0

134.32 JPY/USD

130.00 JPY/USD

130.00 JPY/USD

6.1%

6.2％

7.5%

134.32 JPY/USD

130.00 JPY/USD

130.00 JPY/USD

24