corporate vision - hitachi construction machinery · rental・sharing electric product deeping...

© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.

FY18-4Q

Corporate Vision

Public Relations & Investor Relations Dept. Corporate Brand & Communications Div.

1

Contents

Corporate Vision

1. Management Plan 2. Market Environments 3. Operating Results & Forecast 4. Company Outline and Topics

Management Plan

2 Management Plan

“CONNECT TOGETHER 2019” 【FY2017-FY2019】

Mid-term Management Plan

2020VISION

“Close and reliable partner" anywhere on the earth

with the best solutions through Kenkijin Spirit

April 24, 2019

Kotaro Hirano Representative Executive Officer Executive Officer, President & CEO

3


Main Points of “CONNECT TOGETHER 2019”

1. Transform our business structure into high profitable with entire value chain enhancement

2. Make No.1 presence of hydraulic excavators stronger and expand market share of wheel loaders and mining dump trucks

3. Expand used machine and rental business

4. Strengthen R&D capabilities with ICT/IoT and develop solution business

5. Promote fixed cost optimization and cost reduction by structural reform

6. Promote ESG management

Management Plan

4


Changes of macro business environment

Change Business Model Mega Trend

Customer Needs Change

Core Competence of OEM

Operating data (Accumulated)

▪ Aging, labor shortage

▪ Tightening of Environmental regulation (SDGs)

▪ IoT/Digital revolution

▪ Electrification /Automation

▪ “Ownership to “Sharing / Rental”

▪ Tangible goods to intangible goods

– Operation support / Automation

– Operation management – from machine to entire construction site

▪ Safety, Environmental Regulation

Technology ・Engine/EV ・Internal manufacturing of major component

Base

Solution ・ Information‐oriented construction ･ Autonomous operation ・ One Stop service ・ Preventive maintenance

▪ Digital Technology ▪ Big Data/AI

Number of sales

Value chain business

(units) Utilizing data by AI

New business area

New machine sales Value chain model

Number of units in operating

4

*Include rental & used

00 02 04 06 08 10 12 14 16 18

Management Plan

5


Deeping Value Chain

Main products

FY2016: 35% FY2019 Forecast: 44%

New machinery

Value chain

New machinery

Value chain

Value chain ratio

Parts

Serv

ice

New

machin

ery

Used m

achin

ery

Renta

l

Pa

rts re

ma

nu

factu

ring

Fin

ance

Pro

ducts

Marketing

R&D

Production

Procurement

Logistics

Other product group

Skid-steer loader

Crawler crane

Backhoe loader

Bulldozer

Management Plan

Customer interests: Safety and productivity improvement, reduction of life cycle cost

Value chain

6


0

100

200

300

400

500

FY16 17 18 19

Deeping Value Chain – Progress -

Value chain sales is expect to increase steadily Promote parts and service business through IoT utilization and rental &used business enhancement

Global expansion of ConSite (over 129k units) Development and global expansion of ConSite OIL Expansion of the mining remanufacturing business

Value chain sales ratio

Europe: Establishment of Synergy Hire Ltd. in UK Americas: Rental business promotion (ACME) Europe&China: Re-rent model promotion

Bradken・H-E Parts Expansion of Chile facility/Entering Southern Africa Development of next-gen GET (mining consumables)

(B JPY) Solution Business

Parts and Service

Used

Rental

Initiatives to grow value chain

Global expansion of certified used equipment business

Forecast

35% 44% 39% 40%

Management Plan

7


ICT・IoT Solution Mining：Autonomous Operation

Electric Product Rental・Sharing

Deeping Value Chain

Connect Fleet Management System to customer’s system & database

Propose total asset management which supports management decision

Connected Auto

nom

ous

Sharing

Digital Technology Utilization

C A S E

＊Prototype at bauma2019 exhibition. Release is under consideration

Machine & Site Management -> Big Data Avoid Machine Downtime ->Predictive Diagnosis

Autonomous Haulage System (AHS) dump trucks

Establishment of a Joint Venture Company to Develop Electric Construction Machinery (Germany, with KTEG,2018)

Investment in North American Rental Business(ACME, 2018) USA

UK Establishment of Synergy Hire Ltd(2019)

Solution Linkage

zero-emission electric mini excavator *

Electric

Management Plan

8


Deeping Value Chain -Expand Rental Business-

Japan

Customer’s Needs shift. From Possess to Rental/Sharing

Management as HCM asset Build-on Rental + young used equipment

business model Analyze each regional scheme & expand

most suitable one to each region

Expansion of rental business at Hitachi Construction Machinery Japan

Investment in ACME Increase of product range in cooperation with HCM

Establishment of Synergy Hire (UK)

Promotion at sales subsidiary in China

ConSite utilization Operating data management & utilization of all units incl. used ＊Business on operating machine business ＊Parts & Service on used equipment

North America

Europe

China

Background of Rental Business

Customer (HCM) -Not want to increase asset -Want to use machine much with application

-High profit ratio Service business -Expand rental machine to used market

Rental Business Sales

Promotion at sales subsidiary in Australia in cooperation with Delta Rental

Australia

30

50

70

17 18 19 20 21FY

Rental Business

(B JPY)

Rental business sales revenue

Used Equipment

Service

Rental

New

Background

(E)

Management Plan

9


Global Restructuring

・Integration of production and sales (FY17) ・Mining bucket production (FY17)

・Factory

integration

・Factory capability expansion

・Capacity expansion at parts remanufacturing factory

・Factory reformation (FY17)

・Reorganization of manufacturing ・Production rationalization

・Divestment of the second factory (FY16)

・Facility expansion for mining service

Construction machinery business

・Integration of production and sales (FY18)

・Divestment of the company (FY16)

・Liquidation (FY18)

77.3 72.5

71.2

68

70

72

74

76

78

FY16 17 18 19

(％)

COGS ratio

Solution business

・Liquidation (FY18) ・Subsidiary integration (FY18)

・Factory closing (FY18)


・Integration of company (FY17) ・Establishment of engine remanufacturing site (FY18)


・New factory establishment (FY18)

・Liquidation (FY18)

IT

Capital Investment

Plan Manufacturing Sales

Management Plan

10


Domestic Restructure : Status of business structure reforms from now to 2022

● ● ● ●

● ●

■FY17～19 : Transferred large excavators from Tsuchiura Works to Hitachinaka-Rinko Works *scheduled by 1st half year

■April 2019 : Implemented an absorption-type merger of KCM Corporation ■FY18～19 : Transferred components for wheel loaders from Banshu Works to Hitachinaka Works

*scheduled by 1st half year ...etc

Major restructuring of development and production bases to strengthen global competitiveness

Tsuchiura Works Development: Mining

Construction Components

Production: Construction

Ryugasaki Works Production: Main parts for construction

Banshu Works Production: Main parts for compact

Hitachinaka-Rinko Works Production: Mining

Hitachinaka Works Production: Components for mining and construction

HCM Tierra Shiga Works Development: Compact and main parts for compact Production: Compact

HCM Tierra Osaka Works Production: Main parts for compact

Kasumigaura Works Production: Components for mining and construction

Management Plan

11


Numerical Management Targets

To be a company with higher tolerance against changes in business environment, we improve profitability and efficiency through enhancement of value chain and business structure reform. (The company aims to achieve each target under the business environment and FX rate mentioned in

the Mid-term Management Plan announced in March 2017)

CT2019 March 2018 Actual

CT2019 March 2019

Actual

CT2019 March 2020

Forecast (※As of April 2019)

FX rate ￥/$

￥/€ ￥/RMB

110.9 130.1 16.8

111.0 127.9 16.6

100.0 110.0 15.0

Global Demand 220K units ※(y-o-y)+27％

230K units ※(y-o-y)+6％

220K units ※(y-o-y)△5％

Revenue billions of yen 959.2 1,033.7 950.0

Adjusted operating income ratio

9.8％ 11.3％ 9.1％

ROE 14.1％ 14.7％ Over 9%

Net D/E ratio 0.33 0.49 0.4or less

Dividend payout policy 30.1％ 31.0％ Approximately 30%

or more

CT2019 March 2020

Guidance (※As of April 2017)

100.0 110.0 15.0

170K units

Environment of

850.0

Over 9%

Over 9%

0.4or less

Approximately 30% or more

Management Plan

12


ESG Management Relevance between SDGs and the sustainable growth strategies that leverage our strengths

CSV target by 2030

Corporate target

CO2 reduction rate by product ▲33% (from 2010)

Streamlined relevance between our activities and SDGs and set 10 key goals Established Sustainability Promotion Division in April 2019

2017 ・Expanded sales of certified used equipments ・Launched ConSite OIL

2018 ・Established parts remanufacturing factory for H-E Parts ・Won the Energy Conservation Grand Prize ・Received orders for ultra- large electric hydraulic excavators

2019 ・Developed prototypes of zero-emission electric excavators ＊CSV：Creating Shared Value

Management Plan

13

Contents

Corporate Vision


Market Environments

14

'17 '18 '19

+27% +6% -5%

+80% +11% -8%

Russia,CIS,

E Europe+77% +19% -4%

Africa +6% -6% +2%

Middle East +1% -45% +16%

Latin +27% +0% +0%

+24% -6% +1%

India +21% +10% -1%

Indonesia +55% +12% -17%

Others +13% -1% -11%

+22% +5% -8%

+18% +13% -1%

+7% +11% -7%

+8% -4% +0%

N America

W Europe

Japan

Total

China

Others

Asia & Oceania

23 28 40

31 24 23 25 24 24

27 25

27 31

30 35 38 42 39

19 24

24 27

26 25

29 33 33

48 44

36 32

32 41

49 52

48

38 39

34 32

24

19

24

23 23

70

42 50

30

19

30

54

60

55

225

202 211

183

155

173

220

234

222

0

25

50

75

100

125

150

175

200

225

250

'11 '12 '13 '14 '15 '16 '17 '18 '19

（K units）

FY

China

Others

Asia & Oceania

North America

Western Europe

Japan

Emerging Countries ： FY2019 57% (Y-o-Y Change:-1%)

Year-on-Year Change

Global Demand Trend for Hydraulic Excavators

＊Incl. India

※Estimates by HCM, Excluding Chinese manufacturers ※Distributing, copying, or forwarding prohibited

※Emerging Countries: China, Asia/Oceania, and others © Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.

FY2019 Outlook －5％～±0%

Market Environments

15 ＜Japan＞ Fourth Quarter （from January to March 2019）

-150%

-100%

-50%

0%

50%

100%

150%

0

5

10

15

20

FY12/1Q

2Q

3Q

4Q

FY13/1Q

2Q

3Q

4Q

FY14/1Q

2Q

3Q

4Q

FY15/1Q

2Q

3Q

4Q

FY16/1Q

2Q

3Q

4Q

FY17/1Q

2Q

3Q

4Q

FY18/1Q

2Q

3Q

4Q

-150%

-100%

-50%

0%

50%

100%

150%

0

5

10

15

20

FY12/1Q

2Q

3Q

4Q

FY13/1Q

2Q

3Q

4Q

FY14/1Q

2Q

3Q

4Q

FY15/1Q

2Q

3Q

4Q

FY16/1Q

2Q

3Q

4Q

FY17/1Q

2Q

3Q

4Q

FY18/1Q

2Q

3Q

4Q

-40%

-20%

0%

20%

40%

FY12/1Q

2Q

3Q

4Q

FY13/1Q

2Q

3Q

4Q

FY14/1Q

2Q

3Q

4Q

FY15/1Q

2Q

3Q

4Q

FY16/1Q

2Q

3Q

4Q

FY17/1Q

2Q

3Q

4Q

FY18/1Q

2Q

3Q

4Q

経済データ完了需要データ完了

Market Environment: Housing/Public Spending and Capex (y-o-y) Demand Trend for Mini Excavators (K units)

*Estimates by HCM

Demand Trend for Hydraulic Excavators Demand Trend for Wheel Loaders (K units) (K units)

*Estimates by HCM *Estimates by HCM

Public spending （Public work orders）

*Source: MLIT, Cabinet Office, and Construction

Surety Company

New housing starts (number of houses)

Capex （Orders for machinery, excluding foreign demands)

■While housing investment and public investment increased, capital investment remained flat y-o-y.

■Demand for hydraulic/mini excavators and wheel loaders increased (38%, 5%, and 13% y-o-y, respectively.)

-150%

-100%

-50%

0%

50%

100%

150%

0

5

10

15

20

FY12/1Q

2Q

3Q

4Q

FY13/1Q

2Q

3Q

4Q

FY14/1Q

2Q

3Q

4Q

FY15/1Q

2Q

3Q

4Q

FY16/1Q

2Q

3Q

4Q

FY17/1Q

2Q

3Q

4Q

FY18/1Q

2Q

3Q

4Q

Market Environments

16 ＜Europe＞

-1%

0%

1%

2%

CY12/1Q

2Q

3Q

4Q

CY13/1Q

2Q

3Q

4Q

CY14/1Q

2Q

3Q

4Q

CY15/1Q

2Q

3Q

4Q

CY16/1Q

2Q

3Q

4Q

CY17/1Q

2Q

3Q

4Q

CY18/1Q

2Q

3Q

4Q

-100%

-50%

0%

50%

100%

0

5

10

15

20

FY12/1Q

2Q

3Q

4Q

FY13/1Q

2Q

3Q

4Q

FY14/1Q

2Q

3Q

4Q

FY15/1Q

2Q

3Q

4Q

FY16/1Q

2Q

3Q

4Q

FY17/1Q

2Q

3Q

4Q

FY18/1Q

2Q

3Q

4Q

-100%

-50%

0%

50%

100%

0

5

10

15

20

25

FY12/1Q

2Q

3Q

4Q

FY13/1Q

2Q

3Q

4Q

FY14/1Q

2Q

3Q

4Q

FY15/1Q

2Q

3Q

4Q

FY16/1Q

2Q

3Q

4Q

FY17/1Q

2Q

3Q

4Q

FY18/1Q

2Q

3Q

4Q

-100%

-50%

0%

50%

100%

0

5

10

15

20

FY12/1Q

2Q

3Q

4Q

FY13/1Q

2Q

3Q

4Q

FY14/1Q

2Q

3Q

4Q

FY15/1Q

2Q

3Q

4Q

FY16/1Q

2Q

3Q

4Q

FY17/1Q

2Q

3Q

4Q

FY18/1Q

2Q

3Q

4Q

■Throughout the Eurozone, GDP growth rate slightly increased.

■ Hydraulic excavators and wheel loaders showed continued growth, while demand for mini excavators slightly declined. (10% and 2%, fell 1% y-o-y , respectively)

Demand Trend for Mini Excavators GDP Growth Rate in Major Countries (y-o-y)

*Source: IMF, etc

(K units)

*Estimates by HCM

Demand Trend for Hydraulic Excavators Demand Trend for Wheel Loaders (K units) (K units)

*Estimates by HCM *Estimates by HCM

France

UK

Germany

Italy

Others

UK

Germany

France

EUR zone

France

UK

Germany

Italy

Others

France

UK

Germany

Italy

Others

(E)

(E) (E)

Fourth Quarter （from January to March 2019）

Market Environments

17

75%

100%

125%

150%

CY12/1

Q2Q

3Q

4Q

CY13/1

Q2Q

3Q

4Q

CY14/1

Q2Q

3Q

4Q

CY15/1

Q2Q

3Q

4Q

CY16/1

Q2Q

3Q

4Q

CY17/1

Q2Q

3Q

4Q

CY18/1

Q2Q

3Q

4Q

CY19/1

Q

Residential Non-residential Public

-100%

-50%

0%

50%

100%

0

5

10

15

20

FY

12

/1

Q2

Q3

Q4

QFY

13

/1

Q2

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Q4

QFY

14

/1

Q2

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15

/1

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16

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QFY

17

/1

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Q

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0

5

10

15

20

FY

12

/1

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13

/1

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QFY

14

/1

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15

/1

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16

/1

Q2

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QFY

17

/1

Q2

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QFY

18

/1

Q2

Q3

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Q

-10%

-5%

0%

5%

10%

0

500

1000

1500

2000

CY

12

/1

Q2

Q3

Q4

QC

Y1

3 1

Q2

Q3

Q4

QC

Y1

4/1

Q2

Q3

Q4

QC

Y1

5/1

Q2

Q3

Q4

QC

Y1

6/1

Q2

Q3

Q4

QC

Y1

7/1

Q2

Q3

Q4

QC

Y1

8/1

Q2

Q3

Q4

QC

Y1

9/1

Q

<North America>

＊Bureau of Economic Census, US Census Bureau

＊Bureau of Economic Census, US Census Bureau

■Housing starts decreased y-o-y & growth rate for private construction spending slowed y-o-y.

■Demand for hydraulic excavators remained almost flat, while demand growth rate for mini excavators increased slightly. (±0% and +4% y-o-y, respectively).

Demand Trend for Hydraulic Excavators GDP Growth Rate, Housing Starts in US (K units) (K units)

*Estimates by HCM

Demand Trend for Mini Excavators Construction Spending in US (y-o-y)

*Estimates by HCM

(K units)

GDP (y-o-y/Right axis)

（Seasonally adjusted）

Housing starts (Left axis)

(E)

(E)


Market Environments

18

(6.3%)

0

5

10

0%

10%

20%

30%

40%

CY

12

/1

Q2

Q3

Q4

QC

Y1

3/1

Q2

Q3

Q4

QC

Y1

4/1

Q2

Q3

Q4

QC

Y1

5/1

Q2

Q3

Q4

QC

Y1

6/1

Q2

Q3

Q4

QC

Y1

7/1

Q2

Q3

Q4

QC

Y1

8/1

Q2

Q3

Q4

QC

Y1

9/1

Q

＜China＞

-150%

-100%

-50%

0%

50%

100%

150%

0

10

20

30

40

50

60

70

FY

12

/1

Q

2Q

3Q

4Q

FY

13

/1

Q

2Q

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FY

14

/1

Q

2Q

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FY

15

/1

Q

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FY

16

/1

Q

2Q

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4Q

FY

17

/1

Q

2Q

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FY

18

/1

Q

2Q

3Q

4Q 0%

20%

40%

60%

80%

100%

FY

15

…

3Q

4Q

FY

16

…

2Q

3Q

4Q

FY

17

…

2Q

3Q

4Q

FY

18

…

2Q

3Q

4Q

（％）

Domestic

Foreign

(6.4%)

20t below

20t and over

～6t

20t

10～15t

21～29t

30～39t

40t～

6～10t

■The GDP growth rate was 6.4%.

■Demand for hydraulic excavators slightly declined (fell 2% y-o-y). ※Foreign Manufactures only

(K units)

GDP and Fixed Asset Investment Quarterly Demand for Hydraulic Excavators by Region (y-o-y)

Demand Trend for Hydraulic Excavators Demand Composition by Class for Mini Excavators and Hydraulic Excavators

*Estimates by HCM Y-o-y comparison data is limited to foreign manufactures only

＊Estimates by HCM Foreign manufactures

only

(y-o-y)

GDP (right axis)

Accumulated Fixed Asset Investment (y-o-y) (left axis)

*Foreign manufactures only

*Estimates by HCM

＊National Bureau of Statistics of China

North China 69%/34%/54%/20%

North West 41%/-12%/-5%/2%

South West 43%/0%/-22%/-17%

North East -2%/-13%/-39%/-20%

South Middle China 64%/17%/-12%/-10%

East China 70%/17%/-7%/13%

Total China 55%/11%/-10%/-2%

FY18 1Q/2Q/3Q/4Q


Market Environments

19

-80%

-40%

0%

40%

80%

120%

160%

200%

240%

280%

0

5

10

15

4月 5月 6月 7月 8月 9月 10月 11月 12月 1月 2月 3月 4月 5月 6月 7月 8月 9月 10月 11月 12月 1月 2月 3月 4月 5月 6月 7月 8月 9月 10月 11月 12月 1月 2月 3月

Monthly Demand Trend for Hydraulic Excavators

0

2

4

6

8

10

12

14

16

4月 5月 6月 7月 8月 9月 10月 11月 12月 1月 2月 3月

<(Supplementary Information) Chinese Market>

FY2016 Actual

FY2017 Actual

FY2018 Actual

FY2016 FY2017 FY2018

(Compared to the same month in the previous year)

(Foreign Manufactures only) (K units)

*Estimates by HCM

y-o-y

Demand Trend for Hydraulic Excavators (y-o-y) *Estimates by HCM

(Foreign Manufactures only) (K units)

【Chinese New Year】

Jan 28, 2017

Feb 16, 2018

Feb 5, 2019

* Actual result (From April to March)

Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

-15% +58% +83% +109%

+132% +102% +100% +45% +55% +11% -10% -2%

Apr. May.Jun. Jul. Aug .Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May.Jun. Jul. Aug .Sep. Oct. Nov. Dec .Jan. Feb. Mar. Apr. May.Jun. Jul. Aug .Sep. Oct. Nov. Dec.Jan. Feb. Mar.

Market Environments

20

0

2

4

6

8

10

FY

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/1

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/1

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/1

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QFY

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/1

Q2

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Q4

QFY

18

/1

Q2

Q3

Q4

Q

-200%

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-100%

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50%

0

1

2

3

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5

6FY

12

/1

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/1

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Q

-100%

-50%

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50%

100%

-10

-5

0

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CY

12

/1

Q

3Q

CY

13

/1

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3Q

CY

14

/1

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15

/1

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3Q

CY

16

/1

Q

3Q

CY

17

/1

Q

3Q

CY

18

/1

Q

3Q

<Asia, Oceania, and India>

(％)

■Demand for hydraulic excavators decreased in countries such as Indonesia and Australia, and decreased overall in the Asia Pacific region (fell 9% y-o-y).

■Demand for hydraulic excavators decreased in India (y-o-y), however the demand level is still high.

Demand Trend for Hydraulic Excavators in Asia & Oceania

*Estimates by HCM

(K units)

GDP Growth Rate in Major Countries (y-o-y)

*Source: IMF, etc

Thailand

Malaysia

Singapore

Indonesia

Australia

ＮＺ

Others Demand Trend for Hydraulic Excavators in India

*Estimates by HCM (K units)

* Calculation criteria for GDP growth rate in India was revised in CY2013 2Q

Malaysia

India

Singapore

Thailand Indonesia

(E) (E)


Market Environments

21

*According to HCM’s research

-100%

-50%

0%

50%

100%

0

1

2

3

4

5

FY12/1

Q2Q

3Q

4Q

FY13/1

Q2Q

3Q

4Q

FY14/1

Q2Q

3Q

4Q

FY15/1

Q2Q

3Q

4Q

FY16/1

Q2Q

3Q

4Q

FY17/1

Q2Q

３Q

4Q

FY18/1

Q2Q

3Q

4Q

0.01

0.014

0.018

0.022

0.026

0.03

0.034

0.038

40.00

60.00

80.00

100.00

120.00

140.00

30.00

55.00

80.00

105.00

130.00

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19


-100%

0%

100%

200%

0

1

2

3

4

5

FY

12

/1

Q2

Q3

Q4

QFY

13

/1

Q2

Q3

Q4

QFY

14

/1

Q2

Q3

Q4

QFY

15

/1

Q2

Q3

Q4

QFY

16

/1

Q2

Q3

Q4

QFY

17

/1

Q2

Q3

Q4

QFY

18

/1

Q2

Q3

Q4

Q

(E)

<Russia and the Middle East>

(US$)

(Natural Gas Index ）

(K units)

*Estimates by HCM *Ex-Works base (Turkey: retail-prices base)

(K units)

Demand Trend for Hydraulic Excavators in Russia Foreign Exchange Rate of the Ruble

Demand Trend for Hydraulic Excavators in the Middle East Price Trend of Crude Oil and Natural Gas

*Estimates by HCM *Ex-Works base *Incl. Local manufacturing

Crude Oil （Left axis）

Natural Gas (Right axis)

Against US$

Against EUR€

UAE

Saudi Arabia

Turkey

Others

*Created by HCM , the source from IMF HP

*Natural Gas Index (2010=100)

■In Russia, demand for hydraulic excavators increased (5% y-o-y).

■In the Middle East, demand significantly decreased in response to weakening TRY (Turkish lira).

(E)


Market Environments

22

-

500

1,000

1,500

2,000

2,500

3,000


Dump Trucks (over 150t)

Ultra-large Excavators

(over 100t)

0

500

1,000

1,500

2,000

2,500

3,000


Central and South America

North America

Europe Russia CIS

Oceania

Asia

Africa and Middle East

<Mining Machinery>

(Units)

Ultra-large Excavators (over 100t), Dump Trucks (over 150t)

(Units) Demand by product Demand by region

■Demand for mining machinery in FY2018 is expected to increase slightly.

■Demand for ultra-large excavators (over 300t) and dump trucks (over 150t) for major mining companies is increasing. It is expected to continue increasing in FY2019.

※ According to HCM’s research

Market Environments FY2018 (from April 2018 to March 2019）

23

0%

100%

200%

300%

400%

500%

600%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


BB Ratio (Ultra-large Hydraulic Excavators, over 100t)

0%

100%

200%

300%

400%

500%

600%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4


BB Ratio (Dump Trucks, over 150t)

<(Supplementary Information) BB Ratio>

※ Book-to-Bill(BB)Ratio = Bookings (Orders received)/Billings (Value of shipment) Non-consolidated basis (average of 6 months)

Market Environments

24

Contents

Corporate Vision


Operating Results & Forecast

25

change

＜1,000.0＞

Revenue 1,033.7 959.2 8%

Adjusted ＜100.0＞

operating income *1 (11.3%) 116.8 (9.8%) 93.6 25%

＜94.0＞

Operating income (9.9%) 102.3 (10.0%) 95.7 7%

Income before ＜92.0＞

(9.9%) 102.7 (10.0%) 95.6 7%

＜58.0＞

(6.6%) 68.5 (6.3%) 60.0 14%

EBIT *2 ＜94.9＞ (10.2%) 105.6 (10.2%) 98.1 8%

Rate (YEN/US$) ＜107.9＞ 111.0 0.1

Rate (YEN/EURO) ＜126.6＞ 127.9 -2.2

Rate (YEN/RMB) ＜16.2＞ 16.6 -0.2

Rate (YEN/AU$) ＜81.0＞ 80.9 -4.8

Cash dividend per share (yen) *3 <TBD> 100 85 15

(billions of yen)

FY2017

Actual

FY2018

Actual

income taxes

Net income attributable to

owners of the parent

130.1

85.7

FX

rate

110.9

16.8

Summary of consolidated results

■Revenue increased by 8% to 1,033.7 billion yen compared to the previous year due to the increase in sales volume. ■Adjusted operating income and net income attributable to the owners of the parent were the record highest level ever.

*1 "Adjusted operating income" is calculated by excluding "Other income" and "Other expenses" from "Operating Income" listed in Consolidated Statements of Income. *2 "EBIT" stands for Earnings Before Interests and Taxes, and is calculated by excluding "Interest income" and "Interest expenses" from “Income before income taxes” *3 “Cash dividend per share”: The Company will pay dividends linked to its consolidated business results twice, interim and year end, in the fiscal year and aim to achieve a consolidated dividend payout ratio of approx. 30% or more.

note: ＜＞ shows previous forecast as of Jan 2019


26

■ Revenue for FY2018 increased in all regions except for in the Middle East and China, excluding the impact of foreign exchange. ■ Total revenue increased by 74.6 billion yen compared to the previous year. The factors were the strong appreciation of the yen resulting in -27 billion yen and an increase in sales volume of 101.6 billion yen.

amount %

Japan 206.1 20% 193.2 20% 12.9 7%

Asia 88.5 9% 75.4 8% 13.1 17%

India 67.9 7% 65.1 7% 2.9 4%

Oceania 163.9 16% 151.9 16% 12.0 8%

Europe 111.6 11% 104.2 11% 7.5 7%

N.America 168.7 16% 136.3 14% 32.3 24%

L.America 17.1 2% 16.1 2% 1.0 6%

Russia-CIS 34.4 3% 27.4 3% 7.0 26%

M.East 11.8 1% 23.1 2% -11.4 -49%

Africa 43.8 4% 44.8 5% -1.0 -2%

China 119.9 12% 121.6 13% -1.7 -1%

Total 1,033.7 100% 959.2 100% 74.6 8%

80% 80%

(billions of yen)

FY2018

Actual

FY2017

Actualchange

Revenue by geographic region (consolidated)

Overseas ratio


27 Mining revenue

■Revenue of mining in FY2018 increased by 17% to 160.8 billion yen year on year. ■In particular, revenue of trucks (new machine) dramatically increased by 72%.

(billions of yen) shows sales ratio against total company sales [ % ] shows changed ratio from the same period of previous year

％

21%

16% 15% 15% 16%

14%

16%

[ 72%]

[ 35%]

[ 5%]

[ 17%]

[ 45%]

New machine total


28 Value chain revenue （*1)

■Revenue of the value chain business in FY2018 increased by 5% or 17.2 billion yen year on year.

(*2)Solution business: The business segment primarily intends to provide development, production, distribution of parts and service solutions for mining facilities and equipment after the sales made that are not included in the construction machinery business segment.

(*1) Value chain: Total of Parts & services, Solution business, Rental etc. other than new machine sales.

（*2)


％

35%

40% 39%

[ 5%]

[ 4%]

[ 4%]

[ 5%]

[ 7%]

[ 2%]

[ 5%]


29 Comparison of consolidated profit & loss

■Adjusted operating income increased by 23.3 billion yen year on year mainly due to an increased sales volume and selling price.

Sales volume 36.0 Model mix of value chain business 3.4 Decrease in PPA expense 3.1

Handling of increase on production -3.2

Improvement of profitability -3.5 Increase of personnel expenses -7.1 Decrease in PPA expense 1.1

US$ -0.6 EUR -1.2 RMB -0.7 AU$ -1.1 Other emerging -1.3

*1

note : ( ) shows previous forecast as of Jan. 2019

Total variance excluding FX effect 28.3

*1 Other operating income and expenses :FY18 includes 8.8 billion yen of

provision to the excess in payment of value added tax in China.


30

amount

Revenue 1,033.7 959.2 74.6

Cost of Sales (71.2%) 735.5 (72.5%) 695.3 40.2

SGA expenses (17.5%) 181.4 (17.8%) 170.3 11.1

Adjusted operating income *1 (11.3%) 116.8 (9.8%) 93.6 23.3

Other Income/expenses -14.5 2.2 -16.7

Operating income (9.9%) 102.3 (10.0%) 95.7 6.6

Financial income/expenses -4.3 -4.5 0.2

4.7 4.4 0.4

Income before income taxes (9.9%) 102.7 (10.0%) 95.6 7.1

Income taxes 28.5 26.4 2.1

Net income (7.2%) 74.2 (7.2%) 69.2 5.0

(6.6%) 68.5 (6.3%) 60.0 8.5

61.9 67.7 -5.8

(billions of yen)

change

%

FY2018

Actual

FY2017

Actual

8%

6%

7%

25%

-

7%

-4%

Share of profits of investments

accounted for using the equity method 8%

7%

8%

7%

Net income attributable to

owners of the parent 14%

Comprehensive income -9%

■Net income attributable to the owners of the parent increased by 14% to 68.5 billion yen compared to the previous year.

Consolidated statement of income

*1 "Adjusted operating income" is calculated by excluding "Other income" and "Other expenses" from "Operating Income" listed in Consolidated Statements of Income.


31

2016 2017

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Rate (YEN/US$) 121.4 122.2 121.5 115.5 108.1 102.4 109.3 113.6 111.1 111.0 113.0 108.3 109.1 111.5 112.9 110.2

Rate (YEN/EURO) 134.2 136.0 133.0 127.2 122.0 114.3 117.8 121.1 122.2 130.4 133.0 133.2 130.1 129.6 128.8 125.2

Rate (YEN/RMB) 19.6 19.3 18.9 17.6 16.5 15.4 16.0 16.6 16.2 16.6 17.1 17.1 17.1 16.4 16.3 16.3

Rate (YEN/AU$) 94.4 88.8 87.4 83.2 80.6 77.6 81.9 86.2 83.4 87.6 86.8 85.3 82.6 81.5 81.1 78.5

2018FX rate

2015

(billions of yen)

2016 2017


Revenue 177.4 187.7 184.1 209.2 161.3 173.6 172.1 246.9 211.5 228.8 243.6 275.3 240.2 250.2 252.8 290.5

Adjusted operating income/loss 5.5 11.0 -1.2 8.1 2.4 3.6 5.0 17.3 13.2 21.0 31.5 27.5 27.6 25.8 31.8 31.7

Operating income/loss 4.9 11.1 -3.8 21.8 3.7 0.7 3.8 15.5 13.4 22.5 32.4 27.1 25.7 24.8 30.8 21.0

20182015

177.4 187.7 184.1 209.2 161.3 173.6 172.1 246.9 211.5 228.8 243.6 275.3 240.2 250.2 252.8 290.5

3.1%5.8%

-0.7%

3.9%

1.5%

2.1%

2.9%

7.0%

6.2%

9.2%

12.9% 10.0%11.5%

10.3%

12.6%10.9%

2.8%

5.9%

-2.0%

10.4%

2.3%

0.4%

2.2%

6.3%

6.3%

9.8%

13.3%

9.9% 10.7% 9.9%

12.2%

7.2%

-7.0%

-2.0%

3.0%

8.0%

13.0%

18.0%

-50.0

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0


2015 2016 2017 2018

Revenue

Adjusted operating income/loss Ratio

Operating income/loss Ratio

(billions of yen)

Summary of quarterly consolidated revenue and operating income/loss (ratio) Operating Results & Forecast

32

(billions of yen)

(A) (B) (A)-(B) (D) (E) (D)-(E)

Mar '2019 Mar '2018 change Mar '2019 Mar '2018 change

Cash and cash equivalents 67.3 81.9 -14.6 Trade and other payables 275.8 287.1 -11.3

Trade receivables 238.2 219.6 18.6 Bonds and borrowings 304.8 230.7 74.1

Inventories 324.8 255.6 69.2 Total current liabilities 642.6 584.8 57.8

Total current assets 673.9 597.8 76.1(Equity attributable to owners of

the parent ratio) (41.0%) (41.2%) (-0.1%)

Total non-current assets 511.4 492.0 19.4 Total equity 542.7 505.0 37.6

Total assets 1,185.3 1,089.8 95.5 Total liabilities and equity 1,185.3 1,089.8 95.5

Trade receivables incl.

non-current 282.6 261.0 21.6

Unit 89.3 56.7 32.6 (25.7%) (21.2%) (4.6%)

Parts 102.2 93.5 8.7 Interest-bearing debt 304.8 230.7 74.1

Raw materials, WIP and etc 133.3 105.5 27.9 Cash and Cash equivalents 67.3 81.9 -14.6

Total inventories 324.8 255.6 69.2 Net interest-bearing debt (20.0%) (13.6%) (6.4%)

（Days） Debt 237.5 148.7 88.7

Trade receivables 100 99 1

Inventories 115 97 18 Net D/E Ratio 0.49 0.33 0.16

Trade payables 57 71 -14

Net working capital 155 125 30

Inventories by products

On hand days(divided by net sales)

■Trade receivables including non-current increased by 21.6 billion yen compared to the previous fiscal year-end due to the increased revenues. ■Inventories increased by 69.2 billion yen compared to the previous fiscal year-end.

Consolidated statement of financial position Operating Results & Forecast

33

Net income 74.2 69.2 5.0Depreciation and amortization 111.1 37.0 107.1 37.8 4.1 -0.9(Increase)decrease in trade/lease receivables -26.2 -41.8 15.5(Increase)decrease in inventories -76.5 -24.7 -51.8Increase(decrease) in trade payables -121.3 -18.6 -13.1 53.3 -108.2 -71.9Others, net -15.5 -9.4 -6.1

Net cash provided by (used in) operating activities -25.7 84.5 -110.2Cash flow margin for operating activities -2.5% 8.8% -11.3%

Net cash provided by (used in) investing activities -30.3 -37.6 7.2Free cash flows -56.0 47.0 -103.0

Net cash provided by (used in) financing activities 43.9 -30.5 74.4

changeFY2018

Actual

FY2017

Actual

(billions of yen)

Consolidated cash flow

■Net cash provided by (used in) operating activities was a negative 25.7 billion yen due to the increase in inventories and the decrease in trade payables by the earlier payment to a particular supplier domestically.


34

amount %

Revenue 950.0 1,033.7 -83.7 -8%

Adjusted operating income 86.0 (11.3%) 116.8 -30.8 -26%

Operating income 82.0 (9.9%) 102.3 -20.3 -20%Income beforeincome taxes 80.0 (9.9%) 102.7 -22.7 -22%Net income attributable toowners of the parent 48.0 (6.6%) 68.5 -20.5 -30%

EBIT 83.5 105.6 -22.1

Rate (YEN/US$) 100.0 111.0 -11.0Rate (YEN/EURO) 110.0 127.9 -17.9Rate (YEN/RMB) 15.0 16.6 -1.6Rate (YEN/AU$) 77.0 80.9 -3.9

Cash dividend per share (yen) *1 100 -

FY2018

Actualchange

to be determined

(8.4%)

(5.1%)

CurrencyFY2019

Forecast

change

(9.1%)

(8.6%)

FY2019

Forecast

FY2018

Actual

Summary of consolidated earnings forecast

■HCM forecasts a decrease in FY2019 consolidated revenue by 8% and adjusted operating income by 26%. Revenue will remain mostly unchanged and the adjusted operating income will increase year on year excluding the impact of the expected strong exchange rate of the yen.

(billions of yen)

*1 “Cash dividend per share”: The Company will pay dividends linked to its consolidated business results twice, interim and year end, in the fiscal year and aim to achieve a consolidated dividend payout ratio of approx. 30% or more.

For FX sensitivity, please refer to appendix 1.


35 Consolidated revenue forecast by geographic region

■HCM forecasts a decrease in FY2019 total revenue by 83.7 billion yen compared to the previous year due to the 82.8 billion yen of the negative impact of foreign exchange.

(billions of yen)

amount %

Japan 210.6 22% 206.1 20% 4.5 2%

Asia 88.4 9% 88.5 9% -0.1 -0%

India 66.7 7% 67.9 7% -1.2 -2%

Oceania 146.7 15% 163.9 16% -17.2 -10%

Europe 86.5 9% 111.6 11% -25.1 -23%

N.America 164.0 17% 168.7 16% -4.6 -3%

L.America 14.0 1% 17.1 2% -3.1 -18%

Russia-CIS 33.3 4% 34.4 3% -1.1 -3%

M.East 13.1 1% 11.8 1% 1.3 11%

Africa 30.3 3% 43.8 4% -13.5 -31%

China 96.4 10% 119.9 12% -23.6 -20%

Total 950.0 100% 1,033.7 100% -83.7 -8%

Overseas ratio 78% 80%

FY2019

Forecast

FY2018

Actual

change

*1 Includes the impact of the termination of the commercial truck and bus business other than construction machinery in New Zealand

*1 *1


36 Mining revenue forecast

■HCM forecasts an increase in FY2019 mining revenue by 15% to 184.7 billion yen year on year despite the expected strong appreciation of the yen.

(billions of yen)

21%

16% 15% 15%

16%

14%

16%

[ 54%]

[ 34%]

[ 1%]

[ 15%]

[ 40%]

19%

New machine total

shows sales ratio against total company sales [ % ] shows changed ratio from the same period of previous year

％


37 Value chain revenue forecast （*1)

■HCM forecasts an increase in FY2019 sales of the value chain business by 5% compared to the previous year mainly due to the increase in the revenue of parts & services and rental business despite the expected strong appreciation of the yen, and aim for 44% of composition ratio with a 6% increase.

(*1) Value chain: Total of Parts & services, Solution business, Rental etc. other than new machine sales.

（*2)


％

(*2)Solution business: The business segment primarily intends to provide development, production, distribution of parts and service

solutions for mining facilities and equipment after the sales made that are not included in the construction machinery business segment.

35%

40% 39%

44%

[ 1%]

[-3%]

[14%]

[ 7%]

[ 7%]

[ 5%]

[10%]


38 Comparison of consolidated profit & loss forecast

Sales volume -3.0 Model mix of value chain business 10.8

R&D expense -3.9 Increase of personnel expenses -4.9 Increase depreciation -5.5

US$ - 20.6 EUR -14.0 RMB -4.5 AU$ -0.8 Other emerging -3.0

■HCM forecasts FY2019 adjusted operating income will increase by 12.7 billion yen, excluding the expected strong appreciation of the yen due to an increase in the value chain business and an improvement of the selling price despite a decrease in the sales volume.

*1 Total variance excluding FX effect 12.7

*1 Other operating income and expenses :FY18 includes 8.8 billion yen of

provision to the excess in payment of value added tax in China.


39 <Appendix 1> FX rate and FX sensitivity

(billions of yen) FX rate and FX sensitivity

FY19 FY18

Forecast Actual

US$ 100.0 111.0 Impact by 1 yen depreciation 2.4 2.0

EURO 110.0 127.9 Impact by 1 yen depreciation 0.7 0.8

RMB 15.0 16.6 Impact by 0.1 yen depreciation 0.6 0.3

AU$ 77.0 80.9 Impact by 1 yen depreciation 2.1 0.2

FX sensitivity (1Q-4Q)FX rate

CurrencyCondition Revenue

Adjusted

operating

income

■The forecast exchange rate for FY2019 was set based on the lower limit of the forecasted fluctuation range for each currency, considering the uncertain prospects of the global economy etc..


40

FY17 FY18 Change FY19 Change

Actual(A) Actual(B) (B)-(A) Forecast(C) (C)-(B)

America Excavator 13.6 14.6 0.9 14.1 -0.5

Dump Truck 7.8 7.0 -0.7 7.0 -0.1

Total 21.4 21.6 0.2 21.0 -0.6

Europe, Africa Excavator 18.2 24.8 6.5 26.8 2.0

and Middle East Dump Truck 15.9 17.0 1.1 21.4 4.4

Total 34.1 41.8 7.7 48.2 6.4

Asia & Oceania Excavator 58.7 63.8 5.1 77.9 14.1

Dump Truck 21.1 31.5 10.4 33.3 1.8

Total 79.8 95.3 15.5 111.2 15.9

China Excavator 1.9 1.0 -0.9 1.3 0.3

Dump Truck 0.1 0.1 0.1 0.1 -0.0

Total 2.0 1.1 -0.9 1.4 0.3

Japan Excavator 0.5 1.0 0.5 2.9 1.9

Dump Truck 0.0 0.0 0.0 0.0 -0.0

Total 0.5 1.0 0.5 2.9 1.8

Total Excavator 92.9 105.1 12.1 122.9 17.9

Dump Truck 44.8 55.7 10.9 61.7 6.0

Total 137.7 160.8 23.0 184.7 23.9

<Appendix 2> Detail of mining revenue

(billions of yen)


41

(billions of yen)

937.7 96.8 -0.9 1,033.7

11.8% 111.0 6.0% 5.9 - 11.3% 116.8

(billions of yen)

856.8 93.2 - 950.0

9.0% 77.2 9.5% 8.8 - 9.1% 86.0

＜Forecast＞

FY2019

Revenue

Adjusted operating income

Reportable segment

Adjustments

*1TotalConstruction

Machinery

Business

Solution

Business

＜Actual＞

FY2018

Reportable segment

Adjustments

*1TotalConstruction

Machinery

Business

Solution

Business

Revenue

Adjusted operating income

<Appendix 3> Segment information

■The amortizations of PPA (amount of 1.2 billion yen in FY2018) are included in the adjusted operating income of the solution business.

Note(*1): Adjustments represent eliminations of intersegment transactions, and amounts of companies that do not belong to any operation segment.


42 <Appendix 4> Actual and forecast of consolidated capital expenditures, depreciation, and R&D expenses

■HCM forecasts high levels of capital expenditure for FY2019 due to the restructuring of domestic plants and the improvement & expansion of sales offices to strengthen value chains.

1.Capital Expenditure　（Based on completion）（billion of yen ）

FY2015 FY2016 FY2017 FY2018 FY2019

Actual Actual Actual Actual Forecast

21.0 14.1 18.7 30.4 70.1

14.1 16.5 23.1 27.2 36.9

35.2 30.7 41.8 57.6 107.0

2.Depreciation (tangible and intangible fixed assets) （billion of yen ）

FY2015 FY2016 FY2017 FY2018 FY2019


23.7 22.4 27.5 26.8 31.9

11.8 11.5 10.3 10.1 13.9

35.4 34.0 37.8 37.0 45.9

（billion of yen ）

FY2015 FY2016 FY2017 FY2018 FY2019


18.8 19.3 24.6 24.8 28.7

Capital Expenditure

Assets held for operating lease

Total

Capital Expenditure

Assets held for operating lease

Total

3.R&D expenses

Total of consolidation

(*1) The forecasted capital expenditure of FY19 includes the impact of adoption IFRS 16 "Leases" in the amount of 18.5 billion Yen.

(*2) The forecasted depreciation for capital expenditure of FY19 includes the impact of adoption IFRS 16 "Leases" in the amount of 3.5 billion Yen.

（*1)

（*2)


43

Contents

Corporate Vision


Company Outline and Topics

44 Company Outline

・Company Name Hitachi Construction Machinery Co., Ltd.

Stock Exchange Listings：Tokyo (#6305)

・Major Operations Manufacturing , sales and service of construction machinery,

transportation machinery, and other machines and devices.

・Established 1 October, 1970

・Capital 81.6 billion Yen (Hitachi, Ltd：50.8%)

・President Kotaro Hirano

・Subsidiaries

Affiliates

Japan: 9 companies, Overseas: 71 companies

Japan: 4 companies, Overseas: 20 companies

・Number of Employees Consolidated :24,591 Non-consolidated :4,341

(March 31, 2019)


45 Our Products and Revenue

Hydraulic Excavator

(Hybrid / ICT hydraulic excavator)

Mining

ConSite

H-E Parts Bradken

Value Chain

business

Construction

Double-Front Work

Machine

Wheel-drive Type

Hydraulic Excavator

Mini excavator Road

Construction

Machinery

Wheel Loader

Dump Truck Ultra-large Hydraulic Excavator

Mine management system


Construction

New Machine

56%

Mining

New Machine

4%

Mining

Parts & Services

10%

Construction

Parts &

Services

10%

Solution

Business

9%

Others

9%

39%

Value Chain

FY2018 Revenue

1,033.7

(Billions of yen )

46

0

10

20

30

40

50

60

70

80

90

0

2,000

4,000

6,000

8,000

10,000

12,000

'70 '75 '80 '85 '90 '95 '00 '05 '10 15

海外売上高

国内売上高

海外事業比率

Globalizing and Localizing Manufacturing Company Outline and Topics

（％）

●Mini excavator ●Wheel Loader ● Dump truck

Product

Expansion

“Made in Japan” main Localizing Manufacturing

Main business: Japan Expansion of

overseas business

Europe & America China Sales network

covering the Europe,

1,200

1,000

800

600

400

200

0

（ Billions of yen ）

‘85 Plaza Accord

‘91 the bursting of

the Japan’s bubble

economy

‘97 Asian

Financial Crisis

‘08 the collapse of Lehman Brothers

Overseas revenue

Domestic revenue

Overseas revenue ratio

18

47 Global Network（Major sites） Company Outline and Topics

Middle East

Russia

India

Africa Asia

Japan China

Manufacturing

Americas

Oceania

Sales & Service *Including parts remanufacturing

Europe

48 Deepening Value Chain

Main products

FY2016: 35% FY2019 Forecast: 44%

New machinery

Value chain

New machinery

Value chain

Value chain ratio

Parts

Serv

ice

New

machin

ery

Used m

achin

ery

Renta

l

Pa

rts re

ma

nu

factu

ring

Fin

ance

Pro

ducts

Marketing

R&D

Production

Procurement

Logistics

Other product group

Skid-steer loader

Crawler crane

Backhoe loader

Bulldozer

Solution

Business

Customer interests: Safety and productivity improvement, reduction of life cycle cost

Value chain


49 New value created by Hitachi Construction Machinery - Solution Linkage


ICT/IoT solutions solving problems together with customers

AHS: Autonomous Haulage System

ICT: Information & Communication Technology

Customers’ needs

One Hitachi Hitachi Construction

Machinery Open Innovation

Solution Linkage

Improvement

of productivity

Reduction of

life-cycle cost

Enhancement

of safety

* Wenco, ConSite is a registered trademark of Hitachi Construction Machinery Co., Ltd.

* Solution Linkage is currently applying for registered trademarks.

® ®

50 Service Solution - ConSite

KPI: Remote prognostic detection rate by sensing

Fully automated system for remote fault prediction

The failure prognostic detection rate shows the percentage of faults that were remotely detected or predicted

2013

2015

2017

2020~

Development of global business

Differentiation by ConSite-enabled machines

Utilization of existing data

Big data analysis

ConSite-enabled machines

Phase 2.0

Phase 1.5

Phase 1.0

Phase 3.0

Steps to the target

Data application

2000 20%

37%

Failure prognostic detection rate 90%

World's first all-purpose hydraulic excavator with communication terminal loading machines (June

2000)

Communication start


51 Service Solution - ConSite

0

20,000

40,000

60,000

80,000

100,000

120,000

FY2015 FY2016 FY2014 FY2018 FY2017

地域統括会社

代理店

日立建機本社(ConSite)

Image of gradual market penetration of fee-based data

service

Information infrastructure linking customers all over the world 24 hours a day, 365 days a year

Provide high quality maintenance & repair services earlier than before

Failure prognostic detection rate 90% in and after FY2020

Number of contracts has increased dramatically to over 129,000 units at the end of FY2018 after initiating a global business development plan in 2014.

Initial Plan

142 countries & regions and 33 languages are covered.

Number of contracts:

129,000 units ※As of the end of March 2019


52 Service Solution - ConSite Company Outline and Topics

■Distribute data report to 129,000 units worldwide via our fully automated system.

■Assess malfunction risk from sensing data. Distribute alarm report and correspondence manual automatically in accordance with the seriousness of problem.

■Strengthen efforts for sign diagnostics and further expand future service menus.

We constantly monitor machines remotely and support stable operation with our data report service.

Periodical report (33 languages)

Corresponding manual

(16 languages)

Communication network

Periodical report

Urgent report

Periodical report

Important report Urgent report

Owners/operators Hitachi Construction Machinery Service personnel

Enabling smooth setup on site

Enabling prompt support on site

53 Service Solution - ConSite OIL Company Outline and Topics

Launched ConSite OIL to improve prognostic detection rate

Rolled out ConSite OIL, enabling 24-

hour oil monitoring for the first time in

the construction machinery industry in

Europe, Japan, and Oceania.

【Supplement】 Necessity of preventive maintenance based on oil diagnosis

If you do not perform proper oil management and maintenance…

Increased

repair time

Increased

running cost

Machine

breakage

Due to repair after trouble occurrence

Due to response after trouble occurrence

Because of sudden trouble

54 Used Equipments Company Outline and Topics

Expansion of sales of used equipments from Japan (auction business)

Expansion of sales of certified used equipments

□Sales of well-maintained, high-value added used equipments in Japan, China, and Europe, etc.

Japan

□Hosting auctions of 3500 units per year

□Sales of good-conditioned used equipments, which made possible through the distinctive service as a manufacturer

Auction venue of HCM Japan

China

55 【AHS】Autonomous Haulage System (AHS) for dump trucks Company Outline and Topics

Current status and further developments FY2017: Implementation of commercialization test

FY2018: User test with Whitehaven Coal in Australia

FY2019: Commercialization (planned)

Hitachi's railway traffic management system keeps data traffic per unit under control and can handle about a hundred of fleets.

Scalability

Dump trucks equipped with Hitachi's automobile electric control technology and AC motor control technology can be converted into AHS model after delivery.

Flexibility

Realized fast system improvement to meet customers’ project needs due to simulation technology etc..

Agility

56 Dump Truck The synergy of Hitachi Group Company Outline and Topics

Clarion Co., Ltd.

Sky Angle

Hitachi Ltd.

Grid box

Hitachi Ltd.

AC drive system（Control cabinet）

Hitachi Ltd.

AC Wheel motor

Hitachi Ltd.

Alternator

Hitachi Power Solutions Co., Ltd..

Pantograph(Trolley Dump Trucks)

・The synergy of Hitachi Group ・High-Performance Stability Control Technologies

57 Expansion of Parts and Services System

Using machine information from each vehicle to determine optimal replacement periods and select items for recommendation Building upon the results achieved in Australia to expand to other regions and provide parts and services

System of setting up parts remanufacturing plants near customer sites to provide support

Utilizing bases established by H-E Parts and Bradken

Expansion of parts and services system to reduce customer lifecycle costs

Colombia

USA

Peru

Canada

Australia

Japan

Indonesia

China

Kazakhstain

Turkey

Russia

Holland

Zambia Remanufacturing Plant

Australia Remanufacturing Plant

Indonesia Remanufacturing Plant

Ukraine

South Africa

Zambia Mozambique

Chile

Remanufacturing

Repair

Outsource


58

● Established an operating base H-E Parts in Chile: Parts remanufacturing, servicing, and parts supply functions for dump trucks have been strengthened. The opening ceremony was held on October, 2018

Cooperation with Bradken and H-E Parts Company Outline and Topics

Expansion of solution business

*Ground Engaging Tools

● Expand sales channels by utilizing each other’s networks

- Expand sales of Bradken‘s undercarriage parts and GETs* for mining equipment (consumables) - Utilizing GETs for wheel loaders procured by Bradken ● Newly promote parts remanufacturing business of H-E Parts by

collaborating with HCM Zambia

Incorporation of parts and services businesses to cover all

machinery at customer sites

Expansion of procurement system

59 Expanding the Range of Mining Operations Covered by HCM Company Outline and Topics

Solution business Previous HCM

Coverage expanded to include consumable parts for excavators and rigid dump trucks in general, as well as mills and crushers

60 Acquisition of Two Solution Business Companies Company Outline and Topics

H-E Parts

2006: Company established

December 2016: Restructured as subsidiary of HCM

Expanded to Australia, USA, Chile, Canada, and other areas

Main strength: Comprehensive after-market solutions

Bradken

1922: Company established

March 2017: Restructured as subsidiary of HCM

Expanded to Australia, USA, Africa, Europe, Asia, China, and other areas

Main strength: Technical capabilities in molding and casting

GET* , etc. Liners for crushers and

mills, etc.

Specialty castings, etc.

Castings for fixed plant mining

equipment, etc.

Comprehensive solutions for

mobile mining equipment

Services & parts for crushing

equipment as well as on-site

and off-site services & repairs

Comprehensive, high-horsepower

diesel engine remanufacturing

solutions (including rebuilding)

Comprehensive undercarriage parts and GET

for mobile construction equipment

Aiming to deepen the value chain of the mining business

*Ground Engaging Tools

61 Acquisition of Two Solution Business Companies Company Outline and Topics

Key Financials(1)

H-E Parts Transaction Overview

Acquisition

Ownership 100%

Enterprise

Value USD 240mn

Key Dates

Board Resolution: Dec 21, 2016

Agreement: Dec 21, 2016

Closing: Dec 21, 2016

Seller H-E Parts Investors LLC (SPC owned by Frontenac

and Champ Ventures)

Bradken Transaction Overview

Acquisition

price

A$ 3.25 per ordinary share (a 37.7% premium to

the 1 month VWAP of Bradken shares up to 30

September)

Maximum total consideration of

A$ 689 million (JPY 51.6 billion JPY75=A$)

Acquisition

structure

A cash takeover offer for 100% of the ordinary

shares

Source of funds Existing cash reserves and external funding

Anticipated

schedule*1

Nov 1, 2016: Commence takeover bid

Apr 7, 2017: Complete takeover bid

Number of Shares

Tendered 193,741,575 shares

Ratio of Shares

Tendered 92.8%

Key Financials

1,008

1,154

1,4561,317

1,138

968

82116.6% 17.0%

15.1%16.2%

15.2%14.1%

13.2%

8.0%

12.0%

16.0%

20.0%

24.0%

28.0%

0

200

400

600

800

1,000

1,200

1,400

1,600

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

Revenue EBITDA margin

(A$ million)

(1) Consolidated base, exchange rate of USD/JPY:115.0, AUD/JPY:85.0

18.6

26.1 23.5

28.8

11.1%

9.3% 10.9% 11.1%

0.0%

5.0%

10.0%

15.0%

20.0%

0

5

10

15

20

25

30

2013A 2014A 2015A 2016E

Revenue EBITDA Margin(JPYbn)

62 《Bradken》 Revenue Breakdown Company Outline and Topics

Australia/NZ

North America

South America

Africa

Europe

SE Asia

China

Coal

Iron Ore

Copper

Gold

Other Minerals

Oil & Gas

ConsumableProducts

CapitalProducts

Resources

Non-Resources

Industry Sector Product

Strong presence in the resources sector

Consumable products account for c.

90% of total revenue

Region Commodity

Strong presence in Australia and North America

Well-balanced exposure to commodities

Note: Revenue for FYE 2016/6.

15.3%

84.7%

10.6%

89.4%

45.0% 44.1%

2.9%

2.7% 2.6%

0.2% 2.5%

23.7%

19.2%

18.8%

18.1%

11.7%

8.5%

63 《H-E Parts》Revenue Breakdown Company Outline and Topics

Mining Solution

59%

Crushing Solution

28%

Construction Machinery

7%

Engine Solution

6%

Australia 44%

USA 27%

Chile 13%

Canada 6%

Others 10% Gold

18%

Copper 17%

Iron Ore 13% Thermal

Coal 10%

Coking Coal 10%

Construction 8%

Aggregate 3%

Oil Sand 3%

Other 18%

After Parts Solution

48% Remanufactu

ring / Rebuilding

37%

Fabrication / Service

14%

Other 1%

Solution Sales by Type

Commodity

Segment

Note: Revenue share for FY2015

Region

64 Major Domestic Restructure to Strengthen Global Competitiveness - Objectives


Phase.1

Business structure reforms are currently in progress

at overseas production bases

(China, India, the Netherlands, Canada, and other regions)

[Objectives]

1. Strengthen development capabilities for technology shared between products,

such as ICT and EV

2. Establish product development structure organized by customer segment

3. Establish flexible production structure that can adapt to fluctuations in demand

4. Establish workplace environment compatible with work style reforms and the

declining labor force

Phase.2

Start business structure reforms at domestic development

and production bases (complete by FY2022)

65 Major Domestic Restructure to Strengthen Global Competitiveness - Results of reforms


<Development> Centralize R&D resources and improve development efficiency and

processes, to strengthen product development capabilities

<Production> Implement centralization by class and function at 7 major bases,

to establish a structure that responds quickly to changes in market

environment

Establish new production lines to implement automation, reduce

workload, and improve energy productivity

Accelerate IoT to improve equipment failure prediction and

traceability

Establishment of production structure with strong ability to adapt to

changes in the market environment

・ Make approx. 42 billion yen in capital expenditure (including earthquake-resistant

construction) from FY2018 to FY2022

・ Work toward strengthening the profit structure to achieve operating income of

approx. 6 billion yen annually, through efforts such as improving efficiency and

expanding wheel loader business

Improvement of investment and profit structure

66 Major Domestic Restructure to Strengthen Global Competitiveness - current status


HCM Hitachinaka Works

Production: Components

(for hydraulic excavators, rigid dump trucks, and

medium wheel loaders)

HCM Tierra Shiga Works

Development: Mini excavators

Production: Mini excavators

HCM Tsuchiura Works Development: Hydraulic excavators

(except mini)

Rigid dump trucks

Components

Production: Medium to large hydraulic excavators

HCM Kasumigaura Works

Production: Components

(for hydraulic excavators)

HCM Hitachinaka-Rinko Works Production: Ultra-large hydraulic excavators

Rigid dump trucks

KCM Ryugasaki Works Development: Mini/medium to large wheel loaders

Production: Mini/medium to large wheel loaders

● ● ● ● ● ●

KCM Banshu Works Development: Medium to large/ultra-large

wheel loaders

Components

Production: Medium to large/ultra-large

wheel loaders

Components for wheel loaders

HCM Tierra Osaka Works

Production: Main parts for mini excavators

(※As of September 2018)

67 Domestic Restructure : Status of business structure reforms from now to 2022

● ● ● ●

● ●

■FY17～19 : Transferred large excavators from Tsuchiura Works to Hitachinaka-Rinko Works *scheduled by 1st half year

■April 2019 : Implemented an absorption-type merger of KCM Corporation ■FY18～19 : Transferred components for wheel loaders from Banshu Works to Hitachinaka Works

*scheduled by 1st half year ...etc

Major restructuring of development and production bases to strengthen global competitiveness

Tsuchiura Works Development: Mining

Construction Components

Production: Construction

Ryugasaki Works Production: Main parts for construction

Banshu Works Production: Main parts for compact

Hitachinaka-Rinko Works Production: Mining

Hitachinaka Works Production: Components for mining and construction

HCM Tierra Shiga Works Development: Compact and main parts for compact Production: Compact

HCM Tierra Osaka Works Production: Main parts for compact

Kasumigaura Works Production: Components for mining and construction


*Duplicated page

68

Energy consumption rate*1 was reduced by 32%*2at 5 Works in Ibaraki.

We win “ECCJ*3 Chairman Prize of the Energy Conservation Grand Prize for excellent energy conservation equipment for FY2018”.

《Topic》 Initiative for improved energy productivity wins Energy Conservation Grand Prize

■Hitachi Group’s advanced IoT technology-based “Emilia” has visualized electric energy data of equipment (about 1,000 units), operation data of equipment (about 700 units), temperature and humidity in offices, and outside air temperature at Tsuchiura, Kasumigaura, Hitachinana, HitachinakaRinko, and KCM Ryugasaki Works.

■Based on the visualized data, measures were taken to save standby electricity of production equipment and electricity of air-conditioning equipment in offices. Peak load cut of electricity and stand-by electricity reduction have been achieved while unused energy has been effectively utilized.

❝Visualizing❞ electric energy data using Emilia

Air-conditioning equipment utilizing radiators designed for hydraulic shovels

*1:This refers to the amount of energy necessary to manufacture a unit quantity of products, an index representing production efficiency related to energy.

*2:Compared to the target reduction rate by the end of FY 2016 to reduce over 30% with reference to the end of FY2010. *3:The Energy Conservation Center, Japan


69 《Topic》 Utilization of Photovoltaic Power Generation in India

Tata Hitachi Construction Machinery switched to photovoltaic power generation, reducing power consumption by approximately 30%

This initiative is one of our energy conservation efforts, along with visualization of plants

power consumption in Japan. 7,000 MWh per year, equivalent to about 30% of the power

consumption of Kharagpur Works, will be provided by environmentally-friendly renewable

energy (expected CO2 reduction is 3,500 tons per year).

Solar panels at Tata Hitachi’s Kharagpur Works

70 《Topic》 Strengthening the Oceania Business, the Key Region

Established: April 5, 2019

New headquarters will supply Oceania collectively and work to optimize efficiency in sales of new and used machinery, as well as in the parts and service business—strengthening and expanding its value chain.

Parts center for expansion of parts business in Oceania

A new regional headquarters in Oceania has been established

71

・8 units x EH4000AC-3 and 6 units x EH5000AC-3（payload 296t）

Delivery and operation to be started in FY19 (retro type of AHS fitted in the future）

・16 units x EH5000AC-3

Delivery and operation to be started in FY19 -20

・8 units x EH5000AC-3

Delivery and operation to be started in FY19

《Topic》 Mining

・5 units x EX5600 excavators

(operating weight 537t) (electric-powered)


(operating weight 359t) (electric-powered)


(operating weight 254t) (engine-type)

・17 units x EH4000AC-3 excavators

(operating weight 221t)

Delivery and operation to be started in FY19

An order for 38 dump trucks was secured for 3 projects in Australia

An order for 13 ultra-large hydraulic excavators and

17 dump trucks was secured in Mongolia

72 《Topic》 Development of Zero-Emission Electric Excavator Prototypes

EAC, a JV company with KTEG in Germany, developed zero-emission electric excavators

Prototypes were exhibited at bauma 2019, an international construction machinery trade fair

Demonstration of zero-emission electric excavators (8t class) and exhibition of zero-emission electric mini excavators (2t class) * Details for launch are under consideration.

Zero-emission electric excavators (8t class) being demonstrated

73

Topics are classified and introduced with appropriate icons according to 17 goals described in the Sustainable Development Goals (SDGs).

《Supplementary Information》


Public Relations & Investor Relations Dept. Corporate Brand & Communications Div.

[Cautionary Statement] This material contains forward-looking statements that reflect management’s views and assumptions in the light of information currently available with respect to certain future events, including expected financial position, operating results, and business strategies. Actual results may differ materially from those projected, and the events and results of such forward-looking assumptions cannot be assured. Factors that may cause actual results to differ materially from those predicted by such forward-looking statements include, but are not limited to, changes in the economic conditions in the Company’s principal markets; changes in demand for the Company’s products, changes in exchange rates, and the impact of regulatory changes and accounting principles and practices.

Hitachi Construction Machinery Co., Ltd

FY18-4Q

Corporate Vision

END

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