Corporate Vision · PDF fileCONNECT TOGETHER 2019 4 0 50 100 150 200 250 300 ... Emerging markets (BRICs) Rapid deceleration Remain flat Rapid expansion Lehman shock Energy saving

FY17-3Q

Corporate Vision

© Hitachi Construction Machinery Co., Ltd. 2018. All rights reserved.

Public Relations Strategy Office

Contents

Corporate Vision

Management Plan

1. Management Plan

2. Operating Results & Forecast

3. Regional Trend & Business Strategy

4. Company Outline and Topics


3

“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

Management Plan


4 CONNECT TOGETHER 2019

0

50

100

150

200

250

300

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

Go Together 2013 GROW TOGETHER 2016 CONNECT TOGETHER 2019

De

ve

lope

d

co

un

tries

Em

erg

ing

co

un

tries

Ch

ina

Thousand units / Year

Hydraulic excavator global demand

Planting seeds

for growth

Structural reform

Changes/ Connect

Management Plan


5

Items 2000 2010 2020

Social Trend

Economic Trend

Construction

Machinery

Industry

Basic performance

(durability/operability)

Environmental responsiveness (global warming countermeasure)

Infrastructure development and urbanization in emerging countries

Labor shortages, aging and

handing down of technology

Increase of crude oil and resource prices Slumping resource prices

Tightening of exhaust

gas regulations

Equipped with

communication function

i-Construction (automation)

Diversification of customer choices

(Lease / Rental / Used etc..)

Changes in Business Environment

Emerging markets (BRICs) Rapid deceleration Remain flat Rapid

expansion Lehman

shock

Energy saving Safety, Productivity, Life cycle

cost

AHS (Autonomous

Haulage System)

Spread to emerging countries

Machinery

management Remote monitoring

Preventive

maintenance

Management Plan


6 Business Environment Assumption

0

50

100

150

200

250

09 10 11 12 13 14 15 16 17 18 19

Construction

Thousand

units

Fiscal

year

0

500

1,000

09 10 11 12 13 14 15 16 17 18 19

0

1,000

2,000

09 10 11 12 13 14 15 16 17 18 19

Mining

Units

Restricted investment due to resource prices stuck

at the mid-level.

Lengthening of machinery usage period

Fiscal

year

Significant demand recovery is not expected.

ICT machinery is expected to be widespread in

Japan, the United States, Europe, Australia, etc.

(Over 100t)

(Over 150t)

Fiscal

year

Units

Small and medium-sized hydraulic excavator global demand

Ultra large hydraulic excavator global demand

Rigid dump truck global demand

Management Plan


7

Main products

Other product group

Pro

ducts

Skid-steer loader

Crawler crane

Backhoe loader

Bulldozer

Current FY2019 target

Value chain business ratio

New

machinery

Value

chain New

machinery

Value

chain

Marketing

R&D

Production

Procurement

Logistics

Value chain

Renta

l

Fin

ance

New

ma

ch

inery

Used m

achin

ery

Serv

ice

Parts

Parts

recyclin

g

Deepening Value Chain

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

Management Plan


8

ICT machinery

(Application for i-Construction)

New machinery

sales

Resale (used machinery)

Used machinery

with warranty

Valu

e C

hain

Surv

ey

Desig

n a

nd

constru

ctio

n p

lan

Constru

ctio

n

Inspectio

n

i-Construction Rental

Solu

tion

Environment Responsiveness

Energy saving and efficiency

Automation, Computerization

Machinery which adopt latest

exhaust gas regulation

Hybrid machinery

Electric machinery

Lumada

Remote monitoring Big data analysis Artificial Intelligence

Sensor

Used

machinery

distribution

Value Chain Connect (Construction)

L i f e C y c l e

Pro

duct D

evelo

pm

ent

Management Plan


9 Value Chain Connect (Mining)

Trolley spec Safety support system

ＡＨＳ(自律運転トラック)

• Provision of service solutions

• Development, manufacturing and

sales aftermarket parts

• Casting, manufacturing and distribution

service of casting products

Durability, Reliability Electrification,

Energy saving, Safety Labor-saving, Automation

AHS (Autonomous Haulage System)

Maintenance

management of

main components

Fleet management

Big data analysis Service (M&A)

New machinery

sales

L i f e C y c l e

Pro

duct D

evelo

pm

ent

Valu

e C

hain

S

olu

tion

Remote

monitoring

Management Plan


10 Global Restructuring

Capital Investment Plan

Manufac

turing Sales

IT investment

Management Plan


11 Global Value Chain

• Provision of service solutions

• Development, manufacturing and sales

aftermarket parts

• Casting, manufacturing and distribution

service of casting products

Management Plan


12

Transform to the corporate structure with high adaptability to

changes by improving the profitability and efficiency through value

chain enhancement and business structure reform

Numerical Management Targets

Sales revenue ¥850 billion Foreign exchange rate $1=¥100 / €1=¥110 / RMB1=¥15

GT2016 <FY2016>

CT2019 <FY2019>

Adjusted operating

income ratio 3.7% Over 9%

ROE 2.0% Over 9%

Net D/E ratio 0.46 0.4 or less

Dividend payout policy 31.8% Approximately 30%

or more

< FY2019 preconditions >

Management Plan


13

Contribution to community

development

Enhanceｄ initiatives to increase social

infrastructure workforce

Solutions to global environmental issues

Create a corporate value from the mid-/long- term perspective, and Promote information disclosure from the ESG perspective

ESG Management (Strategic CSR)

3 CSV Themes

Three themes having high social expectations and a high level of correlation with our business operations

Basic 5 themes ··· essential contents for realizing the 3 key CSV themes

1. Pursuit of safe, effective

and sophisticated products,

services and working

environments

2. Occupational safety

and work-style reform

3. Development of

global and local

human resources

4. Making better

business transactions

and value chain

enhancement

5. Governance

Integrate the CSR initiatives with the management strategy, and contribute to the social issues through business FY2030

CSV target

Corporate Target

Solution Target

Hybrid machinery

ICT machinery

CSV：Creating Shared Value

Improvement of productivity and safety, reduction of life cycle cost

CO2 saving rate by product (comparison with 2010)▲33%

Management Plan


14 ICT/IoT Solution

Solution Linkage is ICT・IoT Solutions provided by Hitachi Construction Machinery to solve

customers’ challenge for “High Safety”, “High Productivity” and ” Low life-cycle cost” with them.

Hitachi Construction Machinery aims to be the partner who is able to solve the customers’ problem together

not only by providing products and system ,but also by sharing the Machinery and working field data with customer.

Management Plan

Contents

Corporate Vision

1. Management Plan




Operating Results & Forecast


16 I. Summary of consolidated results

・Revenue increased by 35% compared to the previous year due to the increase in sales volume.

・Adjusted operating income and other income increased compared to the previous year.

*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”

change

Revenue 35%

Adjusted

operating income *1 9.7% 66.0 2.2% 11.0 500%

Operating income 10.0% 68.6 1.6% 8.2 740%

Income before

10.1% 69.2 1.9% 9.4 635%

6.3% 42.9 0.5% 2.5 -

EBIT *2 10.4% 71.3 2.0% 10.1 604%

Rate (YEN/US$) 5.2Rate (YEN/EURO) 10.5

Rate (YEN/RMB) 0.7

income taxes

(billions of yen)

FY2017

1Q-3Q

FY2016

1Q-3Q

683.9 507.0

owners of the parent

Net income attributable to

F

X

111.8 106.6

128.4 117.9

16.7 16.0


17 Revenue by geographic region (consolidated)

amount %

Japan 142.3 (21%) 158.8 (31%) -16.4 -10%

Asia 54.9 (8%) 42.3 (8%) 12.6 30%

India 45.6 (7%) 33.9 (7%) 11.6 34%

Oceania 110.6 (16%) 63.4 (13%) 47.2 74%

Europe 71.2 (10%) 58.6 (12%) 12.6 22%

N.America 103.3 (15%) 54.6 (11%) 48.6 89%

L.America 11.7 (2%) 3.4 (1%) 8.3 246%

Russia-CIS 20.0 (3%) 13.4 (3%) 6.5 49%

M.East 11.8 (2%) 14.6 (3%) -2.8 -19%

Africa 34.2 (5%) 24.4 (5%) 9.8 40%

China 78.3 (11%) 39.5 (8%) 38.8 98%

Total 683.9 507.0 176.9 35%

79% 69%

(billions of yen)

FY2017

1Q-3Q

FY2016

1Q-3Qchange

(ratio) (ratio)

Revenue increased by 89% or 48.6 billion yen in North America year on year, by 74% or 47.2 billion yen

in Oceania year on year, and by 98% or 38.8 billion yen in China year on year.

Overseas revenue

ratio

Overseas revenue

ratio


18 Mining revenue

68.0 66.2 66.5 66.5 71.4 79.1 72.4

82.597.2

60.3 55.6 44.141.7

27.4

150.4163.4

126.8 122.1115.5

120.8

99.9

0.0

50.0

100.0

150.0

200.0

FY11 FY12 FY13 FY14 FY15 FY16 FY171-3Q

New machine

Parts & Services

(billions of yen)

shows sales ratio against total company sales

[ % ] shows changed ratio from the same period of

previous year

％

18%

21%

16% 15% 15%

16%

15% [ 5%]

[ -5%]

[ 11%]

[ 19%]

[ -1%]

[ 29%]

Revenue of new machines has decreased by 1% year on year due to the production interruption of below 150 tons

dump trucks from this fiscal year, however sales of parts and services have increased by 29% year on year.


19 Value chain revenue （*1)

175.7 168.2 144.0 120.8

6.7 69.4

103.4 90.466.9

64.6

279.1265.2

280.3

185.4

0.0

100.0

200.0

300.0

400.0

FY15 FY16 FY171-3Q

FY161-3Q

Rental & others

Solution business

Parts & Services (Construction)

Parts & Services (Mining)

104.3

71.4

89.1

79.1

71.6

72.4

64.8

55.9

(billions of yen) shows sales ratio against total company sales


previous year

％

37% 35%

41%

37%

（*2)

[ -4%]

[ 10%]

[29%]

[ - ]

[ 51%]

(*2)Solution business: Business segment consists of parts manufacturing, sales of parts and services

that are not included in construction machinery business.

Sales of value chain business have dramatically increased by 94.9 billion yen year on year due to the increase

in the sales of parts and service and solution business, which is composed of H-E Parts Group companies and

Bradken Group companies. Also, the ratio in total sales has increased by 4%.

[19%]

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

Total of parts & services


20 Comparison of consolidated profit & loss

Adjusted operating income has increased by 55.0 billion yen year on year due to the increased sales volume

of construction machines, the incorporation of the solution business and favorable foreign exchange rates

despite the HSC deconsolidation.

(billions of yen)

Ad

juste

d o

pe

ratin

g

inco

me

(*1)

Sa

les v

olu

me

, mo

del

mix

& o

the

rs

Se

lling

pric

e

11.0

63.8 2.0

11.0 0.6 -22.3

66.0

8.2

55.0 68.6 F

ore

ign

exch

an

ge ra

te

Ma

teria

l co

st

Ove

rhea

d

Ad

juste

d o

pe

ratin

g

inco

me

(*1)

Op

era

ting in

com

e

Op

era

ting in

com

e

Va

riance o

f ad

juste

d

op

era

ting in

com

e

Oth

er o

pera

ting in

com

e

an

d e

xp

en

se

s



3.1

Solution business 20.9

HSC deconsolidation -6.8

Construction machinery

business 41.1

Solution business -19.6

HSC deconsolidation 4.7

R&D expense -2.6

US$ 3.9

EUR 3.8

RMB 1.3

2.3

Exp

enses re

late

d

stru

ctu

ral re

form


21 Consolidated statement of income

amount

Revenue 683.9 507.0 176.9

Cost of Sales (72.5%) 496.2 (77.1%) 390.7 105.5

SGA expenses (17.8%) 121.7 (20.8%) 105.3 16.4

Adjusted operating income *1 (9.7%) 66.0 (2.2%) 11.0 55.0

Other Income/expenses 2.6 -2.8 5.4

Operating income (10.0%) 68.6 (1.6%) 8.2 60.4

Financial income/expenses -2.3 1.2 -3.5

2.9 0.0 2.8

Income before income taxes (10.1%) 69.2 (1.9%) 9.4 59.8

Income taxes 20.2 4.6 15.7

Net income (7.2%) 49.0 (1.0%) 4.9 44.1

(6.3%) 42.9 (0.5%) 2.5 40.4

66.4 1.3 65.1

(billions of yen)

%

FY2017

1Q-3Q

FY2016

1Q-3Q

change

35%

27%

16%

500%

-

740%

-

Share of profits of investments

accounted for using the equity method -

635%

344%

909%

Net income attributable to

-

Comprehensive income -

owners of the parent

Net income attributable to owners of the parent increased by 40.4 billion yen to 42.9 billion yen compared to

the previous year due to the increase in operating income and share of profits of investments accounted for

using the equity method.




22 Summary of quarterly consolidated revenue and operating income/loss (ratio)

2015 2016

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

Rate (YEN/US$) 102.2 103.9 114.5 119.1 121.4 122.2 121.5 115.5 108.1 102.4 109.3 113.6 111.1 111.0 113.0

Rate (YEN/EURO) 140.1 137.8 143.1 134.2 134.2 136.0 133.0 127.2 122.0 114.3 117.8 121.1 122.2 130.4 133.0

Rate (YEN/RMB) 16.4 16.9 16.8 19.1 19.6 19.3 18.9 17.6 16.5 15.4 16.0 16.6 16.2 16.6 17.1

20172014FX rate

187.7 201.4 190.6 236.0 177.4 187.7 184.1 209.2 161.3 173.6 172.1 246.9 211.5 228.8 243.6

7.0%7.8% 7.8%

7.7%

3.1% 5.8%

-0.7%

3.9%

1.5%

2.1%2.9%

7.0%

7.9%9.1%

11.7%7.1% 7.8% 8.1% 7.9%

2.8%

5.9%

-2.0%

10.4%

2.3%

0.4%

2.2%

6.3%

8.0%

9.8%

12.0%

-7.0%

-2.0%

3.0%

8.0%

13.0%

18.0%

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0


2014 2015 2016 2017

Revenue

Adjusted operating income/loss Ratio

Operating income/loss Ratio

(billions of yen)

(billions of yen)(billions of yen)

2015 2016


Revenue 187.7 201.4 190.6 236.0 177.4 187.7 184.1 209.2 161.3 173.6 172.1 246.9 211.5 228.8 243.6

Adjusted operating income/loss 13.1 15.7 14.8 18.3 5.5 11.0 -1.2 8.1 2.4 3.6 5.0 17.3 16.8 20.9 28.4

Operating income/loss 13.2 15.8 15.5 18.6 4.9 11.1 -3.8 21.8 3.7 0.7 3.8 15.5 16.9 22.4 29.3

20172014


23 Consolidated statement of financial position

(billions of yen)

(A) (B) (C) (A)-(B) (D) (E) (F) (D)-(E)

FY17-3Q Mar '2017 FY16-3Q change FY17-3Q Mar '2017 FY16-3Q change

Cash and cash equivalents 82.6 65.5 81.4 17.1 Trade and other payables 265.5 227.3 209.1 38.2

Trade receivables 200.2 184.5 145.4 15.7 Bonds and borrowings 262.0 248.7 210.9 13.3

Inventories 273.7 232.4 252.4 41.4 Total current liabillities 602.4 549.2 483.7 53.2

Total current assets 609.1 527.0 548.9 82.1(Equity attributable to owners of

the parent ratio) (40.4%) (40.0%) (42.1%) (0.4%)

Total non-current assets 499.3 472.6 383.7 26.7 Total equity 506.0 450.4 448.9 55.6

Total assets 1,108.4 999.6 932.6 108.8 Total liabilities and equity 1,108.4 999.6 932.6 108.8

Trade receivables incl.

non-current 238.7 215.7 171.6 22.9

Unit 69.2 49.8 77.3 19.4 (23.6%) (24.9%) (22.6%) (-1.2%)

Parts 93.9 86.3 91.3 7.6 Interest-bearing debt 262.0 248.7 210.9 13.3

Raw materials, WIP and etc 110.6 96.3 83.7 14.3 Cash and Cash equivalents 82.6 65.5 81.4 17.1

Total inventories 273.7 232.4 252.4 41.4 Interest-bearing debt, net (16.2%) (18.3%) (13.9%) (-2.1%)

（Days） Debt 179.4 183.2 129.5 -3.8

Trade receivables 94 104 87 -10

Inventories 107 112 129 -5 Net D/E Ratio 0.40 0.46 0.33 -0.06

Trade payables 69 64 65 5

Net working capital 131 151 149 -20

Inventories by products

On hand days(divided by net sales)

・Days of trade receivables on hand including non-current were reduced by 10 days to 94 days compared to

the previous fiscal year-end.

・Days of inventories on hand were reduced by 5 days to 107 days compared to the previous fiscal year-end.

*The balance as of the end of FY2016 announced in April 2017 is before the reclassification to specify the impact of purchase price allocation.


24 Consolidated cash flow

Net income 49.0 4.9 44.1Depreciation and amortization 77.1 28.1 30.1 25.3 47.0 2.9(Increase)decrease in trade/lease receivables -11.3 32.7 -44.0(Increase)decrease in inventories -33.1 -3.5 -29.6Increase(decrease) in trade payables -9.7 34.7 49.6 20.4 -59.2 14.3Others, net -20.1 -14.8 -5.2

Net cash provided by (used in) operating activities 47.3 64.9 -17.5Cash flow margin for operating activities 6.9% 12.8% -5.9%

Net cash provided by (used in) investing activities -29.4 -31.6 2.2Free cash flows 17.9 33.3 -15.4

Net cash provided by (used in) financing activities -3.7 -31.0 27.3

(billions of yen)

FY2017

1Q-3Q

FY2016

1Q-3Qchange

・Net cash provided by (used in) operating activities was a positive 47.3 billion yen due to the increase in net

income despite the increase in working capital arising from the increase of revenue.

・Free cash flow was a positive 17.9 billion yen despite 17.6 billion yen of acquisition shares to acquire 100%

ownership of the Bradken Group.


25 II. Consolidated earnings forecast (Market Environment)

HCM expects the FY2017 global demand for hydraulic excavators to grow by 16% to 201K units year on year

due to an increase in all regions except Middle East and Africa.

*Emerging Countries: China, Asia/Oceania, and others


26 Summary of consolidated earnings forecast

HCM forecasts a FY2017 income statement with an upward-corrected revenue by 4% and adjusted operating income of

20.0 billion yen against the previous forecast due to increased sales volume of 3Q and reflecting the impact of the

depreciating trend of the Japanese yen on foreign exchange rates.

(billions of yen)

amount %

Revenue (890.0) 930.0 753.9 176.1 23%

(6.4%) (8.3%) (3.7%) (4.5%)

Adjusted operating income *1　 (57.0) 77.0 28.3 48.7 172%

(6.2%) (8.3%) (3.1%) (5.1%)

Operating income (55.0) 77.0 23.6 53.4 226%

Income before (5.7%) (8.3%) (3.2%) (5.1%)

income taxes (51.0) 77.0 23.9 53.1 223%

Net income attributable to (3.4%) (4.9%) (1.1%) (3.9%)

owners of the parent (30.0) 46.0 8.0 38.0 473%

EBIT *2 (54.3) 80.0 24.7 55.3

Rate (YEN/US$) (107.9) 110.0 108.7 1.3

Rate (YEN/EURO) (118.0) 122.8 118.9 3.9

Rate (YEN/RMB) (15.6) 16.1 16.2 -0.2

Cash dividend per share (yen) *3　 12 -

note : ( ) shows previous forecast as of October 2017

FX sensitivity of adjusted operating income (4Q) (Impact by 1 yen for US$ and EURO, 0.1 yen for RMB depreciation)

FX rate

US$ (1.0) 105.0 (0.6) 0.3

EURO (1.0) 110.0 (0.4) 0.2

RMB (0.1) 15.0 (0.1) 0.1

FX sensitivityCurrency

to be determined

FY2017

Forecast

FY2016

Actual

change

FY

rate


27 Segment information

(billions of yen)

614.5 69.6 -0.2 683.9

10.5% 64.7 8.8% 6.1 - 10.4% 70.8

-4.8 -4.8

10.5% 64.7 1.9% 1.3 - 9.7% 66.0

＜Actual＞

FY2017

1Q-3Q

Reportable segment

Adjustments

*1TotalConstruction

Machinery

Business

Solution

Business

Revenue

Adjusted operating income

　Amortization of PPA


（After amortization of PPA）

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

(billions of yen)

837.4 92.8 -0.2 930.0

8.9% 74.7 8.9% 8.3 - 8.9% 83.0

-6.0 -6.0

8.9% 74.7 2.5% 2.3 - 8.3% 77.0

　Amortization of PPA


（After amortization of PPA）

Adjustments

*1TotalConstruction

Machinery

Business

Solution

Business

Revenue


＜Forecast＞

FY2017

Reportable segment

・We booked 4.8 billion yen of the amortization cost resulted from PPA for H-E Parts and Bradken.

・HCM forecasts the FY2017 adjusted operating income ratio of solution business to be 2.5% including 6.0

billion yen of amortization cost resulted from PPA. (8.9% excluding the amortization cost)


28 Sales forecast by geographic region (consolidated)

Compared with the previous fiscal year, HCM forecasts an increase of 23% in total revenues for FY2017

due to an increase in sales volume based on improved demand and considering the impact of consolidation

of H-E Parts Group companies and Bradken Group companies, despite the decrease in revenue in Japan

and Middle East.

amount %

Japan 196.9 (21%) 226.0 (30%) -29.1 -13%

Asia 72.7 (8%) 62.2 (8%) 10.4 17%

India 60.5 (7%) 48.6 (6%) 12.0 25%

Oceania 150.6 (16%) 96.4 (13%) 54.2 56%

Europe 98.8 (11%) 87.6 (12%) 11.3 13%

N.America 136.7 (15%) 78.5 (10%) 58.2 74%

L.America 16.1 (2%) 7.0 (1%) 9.1 129%

Russia-CIS 24.8 (3%) 19.5 (3%) 5.3 27%

M.East 21.8 (2%) 22.7 (3%) -0.9 -4%

Africa 42.9 (5%) 34.1 (5%) 8.8 26%

China 108.3 (12%) 71.5 (9%) 36.8 52%

Total 930.0 (100%) 753.9 (100%) 176.1 23%

Overseas revenue ratio 79% 70%

FY2017

Forecast

FY2016

Actual

change

(billions of yen)


29 Mining revenue forecast

68.0 66.2 66.5 66.5 71.4 79.194.6

72.4

22.2

82.5 97.2

60.3 55.6 44.141.7

39.0

27.4

11.6

150.4163.4

126.8 122.1115.5

120.8133.7

99.9

33.8

0.0

50.0

100.0

150.0

200.0

FY11 FY12 FY13 FY14 FY15 FY16 FY17Forecast

FY171-3Q

FY174Q

New machine

Parts & Services



previous year

％

18%

21%

16% 15%

15% 16%

15%

[ 11%]

[ -6%]

[ 20%] [ -9%]

[-17%]

[ -4%]

14%

14%

[ 19%]

[ -1%]

[ 29%]

(billions of yen)

HCM forecasts a decrease in FY2017 sales of new machines by 6% compared to the previous year due to the

production interruption of below 150 tons dump trucks from this fiscal year, however HCM forecasts that the

sales of parts and services will increase by 20% compared to the previous year.


30 Value chain revenue forecast （*1)

175.7 168.2189.6

144.0

45.6

6.7

92.6

69.4

23.2

103.4 90.4

92.2

66.9

25.4

279.1265.2

374.4

280.3

94.1

0.0

100.0

200.0

300.0

400.0

500.0

FY15 FY16 FY17Forecast

FY171-3Q

FY174Q

Rental & others

Solution business

Parts & Services (Construction)

Parts & Services (Mining)

104.3

71.4

89.1

79.1

71.6

72.4

95.0

94.6 23.422.2

(billions of yen)

HCM forecasts a large increase in FY2017 sales of value chain business by 41% (109.2 billion yen）

compared to the previous year due to the increase in the sales of parts and service and solution business due

to acquisition of H-E Parts Group companies and Bradken Group companies

37% 35%

40%

41%

38%

（*2)

[41%]

[ 7%]

[20%]

[ 2%]

[ - ]

[ 18%]

[ -4%]

[ -4%]

[ -1%]

[ 247%]

[ 4%]

[10%]

[29%]

[ - ]

[51%]

(*2)Solution business: Business segment consists of parts manufacturing, sales of parts and services that are not included in

construction machinery business.

(*1) Value chain: Total of Parts & Service, solution business, rental etc. other than new machine sales.

[ 13%] [19%]

[ -4%]

Total of parts & services



previous year

％


31 Comparison of consolidated profit & loss forecast

HCM forecasts FY2017 adjusted operating income to significantly increase by 48.7 billion yen compared to the

previous year due to the positive influence of depreciation of the Japanese yen and increase in sales volume of

construction machines, as well as the consolidation of solution business, despite the HSC deconsolidation.

(billions of yen)

Ad

juste

d o

pe

ratin

g

inco

me

(*1)

Sa

les v

olu

me

, mo

del

mix

& o

the

rs

Se

lling

pric

e

28.3

71.2 2.8 4.9 0.6 -30.8

77.0

23.6

0.9 3.8

Fo

reig

n e

xch

an

ge ra

te

Ma

teria

l co

st

Overh

ead

Ad

juste

d o

pe

ratin

g

inco

me

(*1)

Op

era

ting in

com

e

Op

era

ting in

com

e

Va

riance o

f ad

juste

d

op

era

ting in

com

e

Oth

er o

pe

ratin

g in

com

e

an

d e

xp

en

se

s

77.0



48.7

US$ 1.3

EUR 1.9

RMB 0.1

ZAR 0.7

Solution business 25.3

HSC deconsolidation -11.3

Construction machinery business 44.0

（55.1）（2.8）（-3.0）（-0.7）（-25.5）

（57.0）

note : ( ) shows previous forecast as of Oct. 2017

（28.7）（0.9）（1.8）（55.0）

Solution business -23.5

HSC deconsolidation 6.2

R&D expense -6.0

Exp

enses re

late

d

stru

ctu

ral re

form


32 <Appendix 1> Detail of mining revenue

（billions of yen）

1-3Q 4Q Year 1-3Q 4Q Year 1-3Q 4Q Year

America Excavator 7.8 2.3 10.1 10.6 2.6 13.2 2.8 0.3 3.1

Dump Truck 3.9 2.1 6.0 5.8 1.7 7.5 1.9 -0.4 1.5

Total 11.7 4.4 16.1 16.5 4.3 20.7 4.7 -0.1 4.6

Europe, Africa Excavator 10.2 5.1 15.3 13.4 3.3 16.8 3.3 -1.8 1.5

and Middle East Dump Truck 14.5 4.1 18.6 12.4 3.5 15.9 -2.1 -0.7 -2.7

Total 24.7 9.3 33.9 25.8 6.8 32.7 1.2 -2.5 -1.3

Asia & Oceania Excavator 31.7 15.4 47.1 41.9 15.4 57.3 10.2 0.0 10.1

Dump Truck 13.6 7.6 21.1 14.3 6.2 20.4 0.7 -1.4 -0.7

Total 45.3 23.0 68.3 56.2 21.5 77.7 10.9 -1.4 9.4

China Excavator 0.8 0.4 1.2 1.0 1.0 2.0 0.2 0.6 0.8

Dump Truck 0.1 0.1 0.2 0.1 0.1 0.1 -0.1 0.0 -0.1

Total 0.9 0.5 1.4 1.1 1.1 2.1 0.2 0.6 0.8

Japan Excavator 1.1 0.1 1.1 0.3 0.1 0.4 -0.7 0.0 -0.7

Dump Truck 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 1.1 0.1 1.1 0.3 0.1 0.4 -0.7 0.0 -0.7

Total Excavator 51.5 23.3 74.8 67.2 22.4 89.7 15.7 -0.9 14.9

Dump Truck 32.1 13.9 46.0 32.6 11.4 44.0 0.5 -2.5 -2.0

Total 83.6 37.2 120.8 99.9 33.8 133.7 16.2 -3.4 12.8

FY16

Actual

FY17

Forecast

Change

from FY16


33 <Appendix 2>

Impact of settlements by solution business of purchase price allocation (PPA).

(billions of yen)

1Q-3Q

（Actual）

3.1

0

3. Intangible assets 1.7

Total depreciation(amortization) 4.8

----- 24.2

6.0 1.2 1.2 1.2 ----- 33.0

One-time amortization/

Average of amortization is 20years2.4 0.9 0.9 0.9

2. Tangible assetsNon-depreciable/

Average of depreciation is 15years0.5 0.3 0.3 0.3 ---- 5.7

----- 3.1

After FY2021

（Including the

foreign currency

translation

adjustments）

Total

（※1）The amount for the Bradken Group is our estimation since a portion of the PPA has not been completed by the end of the third quarter.

（※2）For the H-E Parts Group, the amortization expense of FY2017 is the total for the period from January 2017 through March 2018 (15 months) since the company recognizes it retroactively to the acquisition date.

Assets Term of depreciation(amortization)FY2017

FY2018 FY2019 FY2020

1. Inventories Depreciation in one year 3.1

（※2）

(billions of yen)

34.6

14.6

49.2

-33.0

12.6

28.8Goodwi l l on Consol idation

（After PPA）

Goodwi l l on Consol idation

（Before PPA）

Goodwill of Individual

Tota l Goodwi l l

（Before PPA）

Increased assets

　Deferred tax liability, etc.

2. Remeasurements of goodwill by PPA.

1. Prospect of depreciation(amortization) by PPA.

A forecasted impact on the consolidated financial results from the PPA for the acquired assets and liabilities

of H-E Parts and Bradken acquired in FY2016 is as follows.

Contents

1. Management Plan




Corporate Vision

Regional Trend & Business Strategy

35 35


Global Demand Trend for Hydraulic Excavators

10 14 23 28

40 31

24 23 26 26 15

23

27 25

27 31

30 35 37 38

10

13

19 24

24 27

26 25

27 27

29

40

48 44

36 32

32 41

43 43

15

28

38 39

34

32

24

19

20 20

73

111

70

42 50

30

19

30

42 47

151

230 225

202

211

183

155

173

194

201

0

25

50

75

100

125

150

175

200

225

250

'09 '10 '11 '12 '13 14 '15 '16 '17 '17

(K Units)

FY

＊Estimates by HCM , Excluding Chinese manufacturer

Emerging Countries 2017：55% (Y-o-Y Change:+3%)

*Emerging Countries: China, Asia/Oceania, and others

Japan

Western Europe

North America

Asia Oceania

Others

Total

China

＊Incl. India

(Distributing, copying, or forwarding prohibited) Previous Outlook

Present Outlook

Year-on-Year Change

'16 '17

Previous

Outlook

'17 Present

Outlook

+12% +12% +16%

+58% +39% +56% Russia, CIS,

E Europe +23% +15% +34%

Africa +13% -12% -9%

Middle East -45% +3% -10%

Latin America -15% -2% +9%

-18% +0% +0%

India +44% +16% +16%

Indonesia +36% +29% +42%

Others +16% -10% -11%

+28% +5% +5%

-4% +9% +9%

+17% +3% +6%

-4% +13% +13%

China

N America

W Europe

Japan

Total

Others

Asia & Oceania

36 36


<Japan>

-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

-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-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

-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

◇While housing investment decreased, capital investment and public investment have recovered. ◇Regarding demand for construction machinery from October to December 2017, the demand growth

of hydraulic excavators and wheel loaders slowed due to the end of last-minute demands in anticipation of the new emissions regulations.

Market Environment: Housing/Public Spending and Capex (y-o-y)

Demand Trend for Hydraulic Excavators Demand Trend for Wheel Loaders

Demand Trend for Mini Excavators

(K units) (K units)

*Estimates by HCM *Estimates by HCM

(K units)

*Estimates by HCM

New housing starts (number of houses)

Capex （Orders for machinery, excluding foreign demands)

Public spending （Public work orders）

*Source: MLIT, Cabinet Office, and Construction

Surety Company

37 37


<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

-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

-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

-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

◇GDP showed solid growth throughout the Euro zone. ◇Demand for hydraulic excavators and wheel loaders remained brisk. Demand for mini excavators

continuously increased mainly in France and Italy. (Demand for hydraulic/mini excavators increased 10% and 18% y-o-y, respectively.)

Demand Trend for Hydraulic Excavators Demand Trend for Wheel Loaders

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

*Source: IMF, etc

(K units)

*Estimates by HCM

(K units) (K units)

*Estimates by HCM *Estimates by HCM

France

UK

Germany

Italy

Others

France

UK

Germany

Italy

Others

France

UK

Germany

Italy

Others

UK

Germany

France

EUR zone

38 38


<North America>

75%

100%

125%

150%

CY

12

/1

Q

2Q

3Q

4Q

CY

13

/1

Q

2Q

3Q

4Q

CY

14

/1

Q

2Q

3Q

4Q

CY

15

/1

Q

2Q

3Q

4Q

CY

16

/1

Q

2Q

3Q

4Q

CY

17

/1

Q

2Q

3Q

4Q

Residential Non-residential State & local

0

5

10

15

20

FY

12

/1

Q

2Q

3Q

4Q

FY

13

/1

Q

2Q

3Q

4Q

FY

14

/1

Q

2Q

3Q

4Q

FY

15

/1

Q

2Q

3Q

4Q

FY

16

/1

Q

2Q

3Q

4Q

FY

17

/1

Q

2Q

3Q

-100%

-50%

0%

50%

100%

0

5

10

15

20

FY

12

/1

Q

2Q

3Q

4Q

FY

13

/1

Q

2Q

3Q

4Q

FY

14

/1

Q

2Q

3Q

4Q

FY

15

/1

Q

2Q

3Q

4Q

FY

16

/1

Q

2Q

3Q

4Q

FY

17

/1

Q

2Q

3Q

-100%

-50%

0%

50%

100%

-10%

-5%

0%

5%

10%

0

500

1000

1500

2000

CY

12

/1

Q

2Q

3Q

4Q

CY

13

1Q

2Q

3Q

4Q

CY

14

/1

Q

2Q

3Q

4Q

CY

15

/1

Q

2Q

3Q

4Q

CY

16

/1

Q

2Q

3Q

4Q

CY

17

/1

Q

2Q

3Q

4Q

＊Bureau of Economic Census, US Census Bureau

＊Bureau of Economic Census, US Census Bureau

◇Housing starts remained brisk. Residential and public construction spending have increased.

◇Demand for hydraulic/mini excavators continuously increased (12% and 22% y-o-y, respectively).

Demand Trend for Mini Excavators

Demand Trend for Hydraulic Excavators

Construction Spending in US (y-o-y)

GDP Growth Rate, Housing Starts in US (K units) (K units)

*Estimates by HCM

*Estimates by HCM

GDP (y-o-y/Right axis)

（Seasonally adjusted）

Housing starts (Left axis)

(K units)

39 39


<China>

0

10

20

30

40

50

60

70

FY

12

/1

Q

2Q

3Q

4Q

FY

13

/1

Q

2Q

3Q

4Q

FY

14

/1

Q

2Q

3Q

4Q

FY

15

/1

Q

2Q

3Q

4Q

FY

16

/1

Q

2Q

3Q

4Q

FY

17

/1

Q

2Q

3Q

-150%

-100%

-50%

0%

50%

100%

150%

＊当社推定

0%

10%

20%

30%

40%

CY

11

/1

Q2

Q3

Q4

QC

Y1

2/1

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

Q

0

5

10

15

20

（％）

(K units)

North China 237%/229%/202%/86%

North West 72%/150%/128%/46%

South West 105%/110%/72%/77%

North East 114%/146%/153%/167%

South Middle China 97%/101%/92%/120%

East China 124%/162%/99%/124%

Total China 109%/132%/102%/100%

FY16 4Q FY17 1Q/2Q/3Q

(6.8%) (2.1 %)

＊当社推定

0%

20%

40%

60%

80%

100%

FY14

1H 2H

FY15

1Q 2Q 3Q 4Q

FY16

1Q 2Q 3Q 4Q

FY17

1Q 2Q 3Q

◇The GDP growth rate from October to December 2017 remained stable at around 6.8%. ◇Demand for hydraulic excavators continued to significant increase (2 times y-o-y), mainly due to

increased public investment.

GDP and Fixed Asset Investment

Demand Trend for Hydraulic Excavators

Quarterly Demand for Hydraulic Excavators by Region (y-o-y)

Demand Composition by Class for Mini Excavators and Hydraulic Excavators

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

＊National Bureau of Statistics of China

*Foreign manufactures only

*Estimates by HCM (y-o-y)

GDP (Right axis)

Fixed Asset Investment (y-o-y) (Left axis)

20t and below

20t over

～6t

20t

10～15t

21～29t

30～39t

40t～

6～10t

Domestic

Foreign

40 40


<(Supplementary Information) China>

Demand Trend for Hydraulic Excavators (y-o-y)

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

-80%

-40%

0%

40%

80%

120%

160%

200%

240%

280%

0

1

2

3

4

5

6

7

8

9

10

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

FY2015 Actual

y-o-y

FY2016 Actual

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

FY2017 (Forecast)

+132% +102%

FY2015 FY2016 FY2017

+100%

Monthly Demand Trend for Hydraulic Excavators (Compared to the same month in the previous year)

(Foreign Manufactures only)

*Estimates by HCM

(K units)

(K units)

*Estimates by HCM

(Foreign Manufactures only)

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

【Chinese New Year】 Feb 8, 2016 Jan 28, 2017 Feb 16, 2018

* Actual result (From April to December)

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.

41 41


<Asia, Oceania, and India>

0

2

4

6

8

10

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

Q

-200%

-150%

-100%

-50%

0%

50%

0

1

2

3

4

5FY

12

/1

Q2

Q

3Q

4Q

FY

13

/1

Q

2Q

3Q

4Q

FY

14

/1

Q2

Q

3Q

4Q

FY

15

/1

Q

2Q

3Q

4Q

FY

16

/1

Q2

Q

3Q

4Q

FY

17

/1

Q

2Q

3Q

-100%

-50%

0%

50%

100%

-10

-5

0

5

10

15

20

CY

12

/1

Q

2Q

3Q

4Q

CY

13

/1

Q

2Q

3Q

4Q

CY

14

/1

Q

2Q

3Q

4Q

CY

15

/1

Q

2Q

3Q

4Q

CY

16

/1

Q

2Q

3Q

4Q

CY

17

/1

Q

2Q

3Q

(％)

◇Demand for hydraulic excavators significantly increased in Indonesia, the Philippines, and Australia. Despite continuously decreasing in Thailand, demand has increased in the entire Asia Pacific region (15% y-o-y).

◇Demand for hydraulic excavator increased in India (21% y-o-y), mainly for infrastructure investments, such as railways and roads.

*Estimates by HCM

Demand Trend for Hydraulic Excavators in Asia & Oceania

(K units)

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

*Estimates by HCM

(K units)

Demand Trend for Hydraulic Excavators in India

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

*Source: IMF, etc

Thailand

Malaysia

Singapore

Indonesia

Australia

ＮＺ

Others

Malaysia Indonesia India

Singapore

Thailand

42 42


《Topic》

Participated in EXCON 2017, an exhibition held in India

●Participated in "EXCON 2017," the largest construction machinery exhibition in South Asia (December 2017).

●The event attracted over 40,000 visitors (number of visitors in 2015 was approximately 30,000).

●We displayed various machineries, including the latest hybrid excavators, and introduced the new model backhoe loader.

<Exhibition booth> <SHINRAI BX80>

43 43


<Russia and the Middle East>

0

1

2

3

4

5

FY

12

/1

Q

2Q

3Q

4Q

FY

13

/1

Q

2Q

3Q

4Q

FY

14

/1

Q

2Q

3Q

4Q

FY

15

/1

Q

2Q

3Q

4Q

FY

16

/1

Q

2Q

3Q

4Q

FY

17

/1

Q

2Q

3Q

-100%

0%

100%

200%

-100%

-50%

0%

50%

100%

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

Q

３Q

0.01

0.014

0.018

0.022

0.026

0.03

0.034

0.038

0

5

10

15

20

30

55

80

105

130

(US$) (US$)

FY12 FY13 FY14 FY15 FY16 FY17


◇In Russia, demand significantly increased throughout the fiscal year, underpinned by revival of crude oil prices (increased by 1.9 times cumulatively y-o-y).

◇In the Middle East, demand remained at a low level, mainly around Saudi Arabia.

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

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

Against US$

Against EUR€

*According to HCM’s research

(K units)

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

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

(K units)

UAE

Saudi Arabia

Turkey

Others

Crude Oil （Left axis）

Natural Gas (Right axis)

*Created by HCM , the source from The World Bank HP

44 44


<Mining Machinery>

-100%

-50%

0%

50%

100%

-

500

1,000

1,500

2,000

2,500

3,000


DT(over 150t)(Left axis)

SH(over 100t)(Left axis)

y-o-y (Right axis)

◇Demand for mining machinery is expected to increase 50% y-o-y.

◇Demand forecast (vs last year): 100t excavators +90%, over 200t excavators 20%, and trucks 40%.

◇Demand for excavators increased in Russia and Asia, and demand for trucks increased in Russia and North, Central and South America.

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

(Units)

Ultra-large Excavator (over 100t), Truck (over 150t)

(Units) Demand by product Demand by region

*According to HCM’s research estimate estimate

45 45


<(Supplementary Information) BB Ratio>

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

FY11 FY12 FY13 FY14 FY15 FY16 FY17

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

FY11 FY12 FY13 FY14 FY15 FY16 FY17

BB Ratio (Dump Truck, over 150t)

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

* Book-to-Bill(BB)Ratio = Bookings (Orders received)/Billings (Value of shipment)

Non-consolidated basis (average of 6 months)

Contents

1. Management Plan




Corporate Vision

Company Outline and Topics

47 Company Outline and Topics

・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 81,576 million Yen (Hitachi, Ltd：51%)

・President Kotaro Hirano

・Subsidiaries

Affiliates

Japan: 10 companies, Overseas: 74 companies

Japan: 4 companies, Overseas: 8 companies

・Number of Employees Consolidated :23,962 Non-consolidated :4,124

Company Outline

(December 31, 2017)


Construction

New Machine

and others

72%

Construction

Parts &

Services

12%

Mining

New

Machine

6%

Mining

Parts &

Services

10%

Double-Front Work

Machine

Wheel-drive Type

Hydraulic Excavator

Mini excavator

Road

Construction

Machinery

Our Products and Revenue

Wheel Loader

Hydraulic Excavator

(Hybrid hydraulic excavator,

ICT hydraulic excavator)

Mining

Construction

Solution Business

Dump Truck Ultra-large Hydraulic Excavator

Mine management system

FY2016 Revenue

753.9

(Billions of yen )

ConSite

H-E PARTS Bradken


81.6

0

20

40

60

80

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

'70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16

Overseasrevenue

Domesticrevenue

Overseasrevenue ratio

（ Billions of yen ）（％）

“Made in Japan”

main

Localizing Manufacturing

‘85 Plaza Accord

‘91 the bursting of

the Japan’s bubble

economy

‘97 Asian

Financial Crisis

‘08 the collapse of Lehman Brothers

Globalizing and Localizing Manufacturing

Europe &

America China Sales network

covering the Europe,

3.8 22.2 21.4 Capital（ Billions of yen ）

Main business: Jpan Expansion of

overseas business

Mini excavator

Wheel Loader Dump truck

1,000

900

800

700

600

500

400

300

200

100

0


Globalization of Manufacturing & Sales Bases (Major group companies)

※Europe Middle east and Africa

The Americas Manufacturing:3

Sales:2

EMEA※ Manufacturing & Sales:1

Sales:4

Southern Africa Manufacturing & Sales:1

India Manufacturing & Sales:1

China Manufacturing:2

Sales:3

Asia Manufacturing:1

Sales:5

Oceania Manufacturing & Sales:1

Sales:2

Japan Manufacturing:4

Sales:1

Russia＆ CIS. Manufacturing & Sales:1

https://www.hitachicm.com/global/wp-content/uploads/2015/04/hcme_office-1.jpg


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)

Dump Truck The synergy of Hitachi Group

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

52 52

Company Outline and Topics Dump Truck Product characteristic

AWARD - JSME(The Japan Society of Mechanical Engineer)

Medal for New Technology 2014,

We received JSME Medal for New Technology 2014 from The Japan Society of

Mechanical Engineers for “High-Performance Stability Control Technologies” installed in

the new AC-3 dump truck series.

The technologies were “Pitching restraint control” and “Sideslip prevention control”. The

former reduces pitching of the truck, resulting in better operating comfort and fewer load

spillage. The latter prevents sideslip of the truck, resulting in enabling stabilized operation

under various road conditions including slippery rutted surfaces. This award was highly

evaluated these two technologies.

Pitching restrain control

Sideslip prevention control EH5000AC-3 dump equipped with

”High-Performance Stability Control Technologies"

Without control

Without

control

With

control

With control

53 53 Company Outline and Topics

i-Construction

国土交通省が提唱する i-Constructionへの対応 Provide Solution for customer’s Challenge

3D Data Provide

ICT excavator check３D

Data

Survey Design・Execution

scheme Execution Check

3D Survey

Process

HCM HCM Japan

Hitachi Group・Survey machine and company・Software for construction

Manage・ Update

Manage earthmoving

Hitachi Group・Survey machine and company・Software for construction

Demo site for customer to experience Solution was established at Hitachi-naka city, Ibaraki Prefecture, in October 2016.

■Purpose

We provide following experience to customers

through test drive and training session;

・ Informatization execution

・ Deep understanding for i-Construction

・ Solution from various partner with HCM

14,000㎡（largest class in Japan）

2,467 people visited (as of December 31, 2017)

One Hitachi and Open Innovation


54

Main products

Other product group

Pro

ducts

Skid-steer loader

Crawler crane

Backhoe loader

Bulldozer

Current FY2019 target

Value chain business ratio

New

machinery

Value

chain New

machinery

Value

chain

Marketing

R&D

Production

Procurement

Logistics

Value chain

Renta

l

Fin

ance

New

ma

ch

inery

Used m

achin

ery

Serv

ice

Parts

Parts

recyclin

g

Deepening Value Chain

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

Solution Business


55 © Hitachi Construction Machinery Co., Ltd. 2016. All rights reserved.


Overview of H-E Parts International

Business

Description

Provides service solutions for mining /

construction machines and develops,

manufactures and sales aftermarket parts

CEO Steve McBrayer

Headquarters Atlanta (USA)

Countries Australia, USA, Chile, Canada, et al.

Foundation 2006 (commencement of business)

Employees approx. 750

≪Topics≫ Overview of H-E Parts International

Financial Overview(1)

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

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)

Overview of Seller

Frontenac US-based PE fund established in 1971

Focus on food, services and industrials

Invests in mid-sized companies

Champ

Ventures

Australia-based PE fund established in 1987

Invests in a broad range of companies from

seed stage to later stage

Invests in mid-sized companies

(JPYbn）

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%

(2.0)

3.0

8.0

13.0

18.0

23.0

28.0

33.0

2013A 2014A 2015A 2016E

Revenue EBITDA Margin

http://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiJ8vbqv_DQAhUC4iYKHStZAYYQjRwIBw&url=http://h-epartsmining.com/sales-and-support/index?pid=41A230085P2&psig=AFQjCNFj76ygUaZuKKug8MDkVxHfSbvRHg&ust=1481695449262749



≪Topics≫ Transaction Rationale

0

5,000

10,000

15,000

20,000

0

2,500

5,000

7,500

10,000

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14E '15E

Coal Iron Ore Copper

Global Production of Coal, Iron Ore & Copper(1)

Strategic Rationale of the Acquisition

Grow solutions business and establish a

leading position in the aftermarket services

segment by leveraging H-E Parts’ platform

Strengthen distribution network by utilizing

sales and services network of H-E Parts

Enhancement of our value chain through

gaining access to the aftermarket services,

remanufactured parts, and non-genuine parts

markets

Effective use of remanufacturing / rebuilding

facilities

Industry Trends

Demand for mining equipment is recovering

• Growth market in the medium to long-term

Increase in customers’ needs driven by

improvements in safety and productivity as well

as decreases in life-cycle cost

• Market participants are differentiated by

providing value added solutions to

customers’ challenges

Innovation led by ICT-IoT at production &

operating site

(1) HCM research

(M Metric t: Coal, Iron Ore) (K Metric t: Copper)



Comprehensive aftermarket solutions for mobile

mining equipment including haul trucks, shovels

and dozers

Maintenance and repair services and alternative

parts for major makes and models

Largest global footprint and broadest product

coverage of any non-OEM

Customize parts to meet clients’ demands

Products and Services Offered:

General Parts

Drive Systems

Cooling Systems

≪Topics≫ H-E Parts Operating Segments

Mining Solutions Crushing Solutions

Engine Solutions Construction

Aftermarket services & parts for crushing

equipment as well as on-site and off-site

services & repairs

Services to design, evaluate and optimize to

reduce costs and increase productivity

Innovative computer modelling and scanning

for application-specific crushing machines


Crusher Parts

Wear Plates

Comprehensive, high-horsepower diesel

engine remanufacturing solutions

Parts and rebuilds for diesel engines ranging

from 1,500 to 4,000 horsepower

Provide rebuilding services using customized

parts and components, which boast the

industry's lowest failure rates and superior

engine performance


Camshaft Machining

Dyno Testing

Crankshafts Machining

Comprehensive undercarriage parts

and ground engagement tools (G.E.T.)

for mobile construction equipment

ln-house designing and engineering to

lower the total cost of undercarriage

and G.E.T.


Undercarriage for construction

G.E.T. (Ground Engaging Tools)

for construction

6% of Total Revenue 7% of Total Revenue

Clutch & Brakes

Hydraulics

Cylinder Block Machining

Magnaflux

59% of Total Revenue 28% of Total Revenue

Note: Revenue share for FY2015



≪Topics≫ Revenue Breakdown

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%

Remanufacturing / Rebuilding

37%

Fabrication / Service

14%

Other 1%

Geography

Commodity Solution Sales by Type

Segment

Note: Revenue share for FY2015



≪Topics≫ Synergies with H-E Parts

Current

Business

Access to On-Site Operating Machines

Collaboration with Wenco System

Distribution and Services Network

• Access to H-E Parts’ existing clients presents significant business

opportunities

• Obtaining access to long-term operating machines

• Selling opportunity of H-E Parts’ original compatible parts

Expansion of Mining Parts Offering

Access to Services Market

• Rebuilding and remanufacturing engines as

well as processing services

• Differentiation through upgraded parts

• Rebuilding / remanufacturing engines

• Utilization of distribution and services

network of H-E Parts

https://www.google.co.jp/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiv_ojHxvHQAhVIRCYKHViSB4cQjRwIBw&url=https://thenounproject.com/term/dump-truck/671867/&bvm=bv.141320020,d.cGw&psig=AFQjCNFqdYQItmllHziotc3Lz6CHu_l2jw&ust=1481731586004698

60 60


Overview of the Transaction

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

1 Nov. 2016: Commence takeover bid

7 Apr. 2017: Complete takeover bid

Number of Shares Tendered

193,741,575 shares

Ratio of Shares Tendered

92.8%

Overview of Bradken

Name Bradken Limited

Business Casting, manufacturing and distribution service of casting products

Representative Paul Zuckerman (CEO)

Headquarters Newcastle (NSW), Australia

Established 1922

No. of employees Almost 3,500

Stock listing Australian Stock Exchange (ASX: BKN)

*1 The schedule is subject to extension

Key Financials Share Performance

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) (A$)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0.0

2.0

4.0

6.0

8.0

10.0

12.0

'10 '11 '12 '13 '14 '15 '16

Share price S&P/ASX 200 Index

≪Topics≫Acquisition of Bradken


High-precision wear parts for

mobile mining equipment

Revenue：A$228.4mm

% total revenue：27.8%

Global leader in crawler systems,

GET

Crawler systems

GET（Ground Engaging Tools）

Industrial product for infrastructure

Mining wear parts business Specialty castings

business

Wear surface solutions for fixed

plant mining equipment

Revenue：A$349.5mm


Global leader in metallic mill

liners

Metallic mill liners

Wear surface solutions

Live, remote wear monitoring technology

High-spec, specialty castings for

the industrial, energy and

defence industries

Revenue：A$227.2mm


Customized specialty castings

Industrial

Energy

Defence

* Revenue and % Total Revenue based on 2016/6A.

In addition to these three businesses, Bradken’s total revenue includes Cast Metal Services (A$13.9 mm, 1.7%), Others (A$1.6mm, 0.2%).

≪Topics≫Core Products and Solutions of Bradken

62 62


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

REVENUE BY INDUSTRY SECTOR REVENUE BY PRODUCT

Strong presence in the resources sector

Consumable products account for c.

90% of total revenue

REVENUE BY REGION REVENUE BY 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%

≪Topics≫Overview of Bradken～Revenue Breakdown～


Combined Market of Parts & Services

Genuine Products Non-branded Products

Landscape of Construction & Mining Machinery Parts & Services Market

≪Topics≫ Anticipated Synergies① Enhancement of Value Chain through Reinforcement of the Mining Wear Parts Business

The acquisition of Bradken will not only raise the capture rate of mining wear parts used in our

own construction machinery, but also raise those in our competitors’ machinery.

HCM genuine products

for HCM machinery

【Hardware manufacturer

(HCM)】

【Hardware manufacturer

(other companies)】

Market for genuine products

manufactured by HCM

competitors

(HCM unable to capture)

Non-branded products

for HCM machinery

【Parts manufacturer (Bradken)】

Market for non-branded

products

(Bradken already in market)

【Parts manufacturer (Bradken)】

Oth

er

OE

Ms

HC

M

Capture Rate: High

Market for non-

branded products

【Parts manufacturer


Competitor’s share of

non-branded products

for HCM machinery

【Parts manufacturer


Capture Rate: Low

・・

・

・・

・

Penetrate parts & services business of

competitors

Increase capture rate

Pu

rsu

e s

yne

rgy

Pu

rsu

e s

yne

rgy


Upgrade productivity Reduction of life cycle cost Improve safety

Bradken’s Strength

Competitive mining consumable products

Ability to respond to sophisticated

customers’ needs

Superior casting technology

Experienced management team

Brand value based on established

relationship with customers

HCM’s Strength

New Equipment development capability

Production technology cultivated over

years

Continuous innovation (ICT・IoT, hybrid)

Large operating fleet based on high

reliability and durability

Brand value based on established

relationship with customers

Consolidated

revenue

JPY 758bn*1

Consolidated

revenue

A$821mn *1

Provide solutions to

customers

Synergies Synergies

≪Topics≫ Anticipated Synergies②Accelerate Innovation

Combining Superior Technology, Product Capability and Operational Know-How

*1 HCM: 2016/3A; Bradken: 2016/6A

65

END

Public Relations Strategy Office

Corporate Vision


Any forward-looking statements in the “Corporate Vision” , including

results forecasts, are based on certain assumptions that were

deemed rational as well as information currently available to the

Company at this time. However, various factors could

cause actual results to differ materially.

FY17-3Q

Documents

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