Hitachi Holds Briefing for Investors: Aiming for an Operating Income of Over a Trillion Yen in FY2025
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On June 8, 2021, Hitachi, Ltd. held "Hitachi Investor Day 2021" to explain its management policies to investors. At the briefing, Chairman Toshiaki Higashihara and Vice President Keiji Kojima, who will be the next president, took the stage to talk about the future direction of management.
Making Hitachi more resilient
First, Chairman Higashihara reviewed the company's past activities and emphasized that it had promoted structural reforms in five business sectors: IT, Industry, Mobility, Energy, and Life. Then, as for revenue in FY2021, he stated that the company had created a situation where it was able to secure an operating income margin of more than 8% in all five sectors above despite being in the midst of the COVID-19 pandemic.
He also mentioned that over the last few years the company executed a series of acquisitions of overseas companies such as JR Automation in the U.S., ABB Power Grids in Switzerland, and GlobalLogic in the U.S., and enthusiastically relayed how the company built a framework to become a global business leader and was aiming to make itself more resilient by utilizing these new assets.
Shifting to a value-driven business model
Chairman Higashihara also mentioned one of Hitachi’s main businesses, Lumada. According to him, the Lumada Alliance Program, which collaborates with various partners across various industries, is effective toward resolving social issues. He said: "Resolving social issues with stakeholders is the new value-driven business model, and we will shift toward that direction in the future."
Furthermore, he mentioned the importance of human capital development, saying: "In order to further accelerate social innovation business, we need to consider social issues as our own, and we need people who can take the initiative in leading others."
Adjusted operating income of over a trillion yen in FY2025
Vice President Kojima, who will be the next president, was also present at the briefing and explained the direction of management, etc. He said that Hitachi would accumulate information on use cases and solutions in Lumada and would generate competitive software assets after resolving customer and social issues by comprehensively providing "OT x IT x Products." This is the company's basic strategy.
Furthermore, Vice President Kojima explained three objectives that Hitachi is aiming for in 2025. First, it aims to become a company that grows in the digital field and that generates stable, adjusted operating income of over a trillion yen. Second, it aims to deepen ESG management and to become one of the leading global companies in diversity & inclusion, environmental management, and corporate governance. Third, it aims to become more attractive to various stakeholders in terms of return of profit.
When a reporter asked Vice President Kojima about the specific amount of operating income of “over a trillion yen,” instead of an operating income margin, he said: "We are going to improve our corporate value. Determining how to improve the absolute amount is what we need to work on next."
Total of 1.5 trillion yen for R&D expenses over the next three years
Vice President Kojima also announced a plan to invest 1.5 trillion yen for research and development (R&D) over the next three years. According to him, in the midst of rapid changes in society, it is very important to backcast (set desired goals at some point in the future, then identify requirements to connect that desired future back to the present) from around 2050 and to consider R&D investment on the assumption that improving corporate value simply by expanding what we currently have is difficult.
As for his responsibility regarding the next mid-term management plan, he mentioned the need to improve quality of management in order to maximize the assets acquired through numerous M&As and to link them to the improvement of corporate value. As for improvement points, simplification, digitalization, and the globalization of management were mentioned.
He said: "First, we will simplify management by focusing on increasing the value of assets and managing businesses with similar asset characteristics collectively, as well as by identifying competitors. Next, we will digitalize management in order to speed up transformation by utilizing the GlobalLogic asset, which is a very important factor. Finally, we will globalize management, which remains Japan-based, in order to expand steadily in growing areas."
At the end of the presentation, he touched on the next mid-term management plan and said: "Hitachi's mission is to innovate social infrastructure via data and technology and to help people to enjoy a good quality of life through our social innovation business. Today, I only shared the future direction to head in for management, but in the next mid-term management plan, which is scheduled to be announced next spring, I will share the future of Hitachi in a more-concrete and more-quantitative approach."