corporate vision - hitachi construction machinery · market share of wheel loaders and mining dump...

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

FY18-3Q

Corporate Vision

Public Relations Strategy Office

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

3 Main Points of “CONNECT TOGETHER 2019” Management Plan

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

4 Changes of Macro Environment Management Plan

Core competence of OEM

Technology

Engine / EV

Internal manufacturing of

major component

Basis Solution

information‐oriented

construction

Autonomous operation

One Stop service

Digital Technology

Big Data

Customer -centric policy

Mega Trend

[Social] Aging, labor shortage (especially skilled labor) SDGs Further urbanization [Technology] IoT/Digital revolution Electrification /Automation [Economy] Growth at next emerging countries (Africa, Central Asia) Rise of Venture companies

Customer Needs Change

From “Product” to “Product and Service”

Operation management - from machine to entire construction site “Ownership to “Sharing / Rental” Direct deal with OEM Enhancement of Africa and Central Asia

Optimization of assets efficiency Operation support / Automation Safety (surrounding recognition , Avoidance

control) Eco-friendly

5 CONNECT TOGETHER 2019 - precondition- Management Plan

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

6 Deepening Value Chain Management Plan

Pro

ducts

Parts

Serv

ice

New

machin

ery

Used m

achin

ery

Renta

l

Pa

rts re

ma

nu

factu

ring

Fin

ance

Main products

Other product group

Skid-steer loader

Crawler crane

Backhoe loader

Bulldozer

Marketing

R&D

Production

Procurement

Logistics

FY2016 actual FY2019 target

Value chain business ratio

New

machinery

Value

chain New

machinery

Value

chain

Value chain

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

7 Deepening Value Chain –Progress and Forecast- Management Plan

Sales of value chain steadily increased by several measures including utilization of ConSite

and acquisition of Bradken and H-E Parts.

We focus on further expansion of value chain with a view to entering to rental business and

so on in major developed countries.

Development and global expansion of

ConSite OIL

Expansion of the mining remanufacturing

parts business

0

100

200

300

400

500

FY2016 2017 2018 2019

35%

40%

Value chain sales ratio

Acceleration of rental business expansion in

Europe and Australia

Promoting rental business in Americas

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

Others

50%

Initiatives to grow value chain sales

Solution Linkage

Global expansion of certified used

equipment business

8 【Wheel Loaders】

Sales expansion in North America and improvement of profitability

Management Plan

Purpose

Improved response capabilities to

customers and dealers

Production capability enhancement

Higher operation efficiency

Base Integration Brand switch / Utilization of dealer network

Integration and expansion plan in FY2018

Sales promotion in North America for Brand switch to Hitachi

Integration of sales and production base in North America

Conceptual drawing

(Newnan Works and head office)

Dealer Network

（Newnan）

9 One Hitachi Management Plan

Utilization of HCM data among Hitachi Group Provision of Hitachi Group’s additional value to HCM

customers

One Hitachi Growth Strategy：

Value chain enhancement

＋Regional Strategy＋M&A

Rigid dump truck AHS solution

ConSite OIL [The world first service]

Lots of machines and customer data

utilized by LUMADA (FY2018~)

No 1 Asset Management

Solution

Mining Construction

i-Construction Big data (construction management)

10 Global Restructuring Management Plan

・Integration of production and

sales(Done)

・Mining bucket production(Done)

・Factory capability

expansion

・Capacity expansion

at recycling factory

・Factory reformation

(Done)

・Reorganization of manufacturing

・Production rationalization

・Divestment of the

second factory(Done)

・Facility expansion

for mining service

HCM’s manufacturing bases

HCM’s sales bases

・Integration of production

and sales

・Divestment of

the company

・Liquidation

77.3

72.5

687072747678

FY2016 2017 2018 2019

(％)

COGS ratio

H-E Parts bases

Bradken bases

・Liquidation(Done)

・Subsidiary integration(Done)

・Factory closing

・Factory

closing(Done)

・Integration of company(Done)

・Establishment of engine

remanufacturing site (Done)

・Factory closing

・New factory

establishment (Done)

・Liquidation(Done)

Capital Investment Plan

Manufac

turing Sales

IT

investment

・Integration of

factory

11 ESG Management / Work-Style Reform Management Plan

Work-Style Reform Personal Work-

Style reform

Organizational

Work-Style

reform Introduction of Tele-Work etc. ×

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

3 CSV*2 Themes

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

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

Improvement of productivity and safety, reduction of life cycle cost

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

＊2 CSV：Creating Shared Value

＊3 Sustainable Development Goals

SDGs*3

12 Numerical Management Targets Management Plan

CT2019

March,2018

Actual

CT2019

March 2019

Forecast

(As of April,2018)

FX rate ￥/＄

￥/€

￥/RMB

110.9

130.1

16.8

100.0

120.0

15.5

Revenue 959.2 billions of yen 950.0 billions of yen

Adjusted operating income

ratio 9.8％ 8.8％

ROE 14.1％ Over 9%

Net D/E ratio 0.33 0.4 or less

Dividend payout policy 30.1％ Approximately 30%

or more

CT2019

March 2020

Guidance

100.0

110.0

15.0

Environment of

850.0 billions of yen

Over 9%

Over 9%

0.4 or less

Approximately 30%

or more

(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)

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.

13

Contents

Corporate Vision


Market Environments

14 Global Demand Trend for Hydraulic Excavators

14 23 28

40 31

24 23 25 24 23

23

27 25

27 31

30 35 38 38 38 13

19 24

24 27

26 25

29 32 32 40

48 44

36 32

32 41

49 52 52

28

38 39

34

32

24

19

24 21 21

111

70

42 50

30

19

30

54 62 60

230 225

202

211

183

155

173

220

229 225

0

25

50

75

100

125

150

175

200

225

250

'10 '11 '12 '13 14 '15 '16 '17 '18 '18

(K units)

＊Estimates by HCM , Excluding Chinese manufacturers

(Distributing, copying, or forwarding prohibited)

Year-on-Year Change

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

FY Previous Outlook

Present Outlook

Emerging Countries FY2018：59% (Y-o-Y Change:+1%)

＊Incl. India

Japan

Western Europe

North America

Asia Oceania

Others

Total

China '17'18

Previous

Outlook

'18Present

Outlook

+27% +4% +2%

+80% +14% +10%Russia, CIS,

E Europe+77% -7% +4%

Africa +6% -12% -18%Middle East +1% -38% -45%Latin America +27% -6% -6%

+24% -15% -14%

India +21% +10% +10%

Indonesia +55% +16% +16%Others +13% -3% -3%

+22% +5% +5%

+18% +9% +9%

+7% +0% +0%

+8% -4% -10%

China

N America

W Europe

Japan

Total

Others

Asia & Oceania

Market Environments

15 <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

4Q

FY18/1Q

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

4Q

FY18/1Q

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

4Q

FY18/1Q

2Q

3Q

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

■Demand for hydraulic/mini excavators and wheel loaders increased (5%, 6%, and 16% y-o-y, respectively.)

-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

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)

Market Environments Third Quarter

（from October to December 2018）

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

-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

-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

-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

■Throughout the Eurozone, GDP growth rate declined.

■Mini excavators and wheel loaders showed continued growth, while demand for hydraulic excavators remained positive. (Demand for hydraulic/mini excavators and wheel loaders increased 3%, 10%, and 27% y-o-y, respectively.)

10月―11月：実績のみ 12月：現地案

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



17 <North America>

75%

100%

125%

150%

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

Q

Residential Non-residential Public

0

5

10

15

20

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

Q

-100%

-50%

0%

50%

100%

0

5

10

15

20

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

Q

-100%

-50%

0%

50%

100%

-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

Q＊Bureau of Economic Census, US Census Bureau

＊Bureau of Economic Census, US Census Bureau

■While housing starts remained flat, public construction spending increased y-o-y.

■Demand growth rate for hydraulic/mini excavators remained positive (8% and ±0% 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)



18

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

Q

0

5

10

<China>

0

10

20

30

40

50

60

70

FY

12

/1

Q2

Q3

Q4

Q

FY

13

/1

Q2

Q3

Q4

Q

FY

14

/1

Q2

Q3

Q4

Q

FY

15

/1

Q2

Q3

Q

4Q

FY

16

/1

Q2

Q3

Q

4Q

FY

17

/1

Q2

Q3

Q

4Q

FY

18

/1

Q2

Q3

Q

-150%

-100%

-50%

0%

50%

100%

150%

（％）

Domestic

Foreign

North China 129%/69%/34%/54%

North West 73%/41%/-12%/-5%

South West 34%/43%/0%/-22%

North East 75%/-2%/-13%/-39%

South Middle China 34%/64%/17%/-12%

East China 35%/70%/17%/-7%

Total China 45%/55%/11%/-10%

FY17 4Q/ FY18 1Q/2Q/3Q

(6.4%)

(5.9%)

20t and below

20t over

～6t

20t

10～15t

21～29t

30～39t

40t～

6～10t

0%

20%

40%

60%

80%

100%

FY15

1Q2Q3Q4Q

FY16

1Q2Q3Q4Q

FY17

1Q2Q3Q4Q

FY18

1Q2Q

3Q

■The GDP growth rate was 6.4%.

■Demand for hydraulic excavators slightly declined (fell 10% y-o-y). ●油圧ショベル需要：外資・国産台数済

外資：12,054台国産：15,343台計：27,397台

※2017年10月～12月外資：13,334 国産：12,313 計：25,647

●地域別油圧ショベル済

●ＧＤＰ済(10月～12月期)

●固定資産済 ●クラス別需要構成比済

(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



19 <(Supplementary Information) Chinese Market>

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

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

FY2016 Actual

FY2017 Actual

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

FY2018 (Forecast)

+132% +102%

FY2016 FY2017 FY2018

+100% +45% +55% +11% -10%

●油圧ショベル需要(月別推移：外資台数、対前年同期、対前年同月

比較済 ●全ての数値(外資)を

CEMAに統一済み

Monthly Demand Trend for Hydraulic Excavators (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 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

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

Market Environments

20 <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

Q4

QFY

18

/1

Q2

Q3

Q

-200%

-150%

-100%

-50%

0%

50%

0

1

2

3

4

5

6FY

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

Q

-100%

-50%

0%

50%

100%

-10

-5

0

5

10

15

20

CY

12

/1

Q

3Q

CY

13

/1

Q

3Q

CY

14

/1

Q

3Q

CY

15

/1

Q

3Q

CY

16

/1

Q

3Q

CY

17

/1

Q

3Q

CY

18

/1

Q

3Q

(％)

■Demand for hydraulic excavators increased in Indonesia, the Philippines, and Australia, decreased in countries such as Thailand and Malaysia; and decreased overall in the Asia Pacific region (fell 3% y-o-y).

■Demand for hydraulic excavators increased in India (14% y-o-y), mainly for infrastructure investments, such as railways and roads.

10月―11月：実績のみ 12月：実績

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



21 <Russia and the Middle East>

-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

Q

-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

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


■In Russia, demand for hydraulic excavators slightly increased.

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

10月―11月：実績のみ 12月：現地案

Third Quarter （from October to December 2018）

(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

*According to HCM’s research

*Created by HCM , the source from IMF HP

*Natural Gas Index (2010=100)

Market Environments

22 <Mining Machinery>

(Units)

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

(Units)

※ According to HCM’s research

Demand by product Demand by region

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

■By region, the demand increase is mainly driven by Oceania, Asia and Central and South America.

FY2018 (from April 2018 to March 2019）

-

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

Market Environments

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

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

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

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

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

Revenue 9%

Adjusted

operating income *1 11.5% 85.1 9.6% 65.8 29%

Operating income 10.9% 81.3 10.0% 68.3 19%

Income before

10.6% 78.9 10.1% 68.9 14%

6.9% 51.3 6.2% 42.7 20%

EBIT *2 10.9% 81.0 10.4% 71.0 14%

Rate (YEN/US$) -0.5Rate (YEN/EURO) 128.4 1.1

Rate (YEN/RMB) 16.7 16.7 0.0

Rate (YEN/AU$) -4.2

129.5

81.7 85.9

owners of the parent

Net income attributable to

743.2

FY2018

1Q-3Q

FY2017

1Q-3Q

(billions of yen)

income taxes

FX

rate

111.3 111.8

683.9

*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”

HCM retroactively adjusted the income statement in the previous year due to the completion of purchase price allocation (PPA) during fiscal year 2017 ended March 31, 2018. The impacts of PPA include -0.3 billion yen on adjusted operating income, operating income, and quarterly income before income taxes and -0.2 billion on net income attributable to owners of the parent. There is no retroactive adjustment on the income statement for FY 2017 ended March 31, 2018. (For details, see Appendices 1 and 2.)

Summary of consolidated results Operating Results & Forecast

26

■Revenue increased by 20% or 20.9 billion yen in North America year on year, and by 14% or 15.3 billion yen in Oceania year on year. ■The overseas revenue ratio increased by 1 point year on year to 80%.

amount %

Japan 145.5 20% 142.3 21% 3.2 2%

Asia 62.5 8% 54.9 8% 7.6 14%

India 49.7 7% 45.6 7% 4.1 9%

Oceania 126.0 17% 110.6 16% 15.3 14%

Europe 76.7 10% 71.2 10% 5.6 8%

N.America 124.2 17% 103.3 15% 20.9 20%

L.America 13.0 2% 11.7 2% 1.4 12%

Russia-CIS 24.3 3% 20.0 3% 4.3 22%

M.East 9.0 1% 11.8 2% -2.8 -24%

Africa 29.8 4% 34.2 5% -4.5 -13%

China 82.4 11% 78.3 11% 4.1 5%

Total 743.2 100% 683.9 100% 59.3 9%

80% 79%

(billions of yen)

FY2018

1Q-3Q

FY2017

1Q-3Qchange

Overseas ratio

Revenue by geographic region (consolidated) Operating Results & Forecast

27 Mining revenue

■Revenue of mining in FY2018 3Q increased by 15% year on year (new machines increased by 40% and parts & services increased by 6%).

21%

16% 15% 15% 16%

14%

15%

15%

[ 68%]

[ 30%]

[ 6%]

[ 15%]

[ 40%]

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

％


28 Value chain revenue （*1)

■Revenue of value chain business in FY2018 3Q increased by 5% or 14.9 billion yen year on year.

(*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 & services, Solution business, Rental etc. other than new machine sales.

（*2)


％

37% 35%

40%

40% 41%

[ 6%]

[ 5%]

[ 5%]

[ 5%]

[ 5%]

[ 5%]


29 Comparison of consolidated profit & loss

■Adjusted operating income increased by 19.4 billion yen year on year mainly due to the increased sales volume.

Sales volume 27.2 Model mix of value chain business 2.6 Decrease in PPA expense 3.1

Handling of increase on production -2.4 R&D expense -1.2 Improvement of profitability -3.0 Increase of personnel expenses -5.8 Decrease in PPA expense 1.0

US$ -0.8 EUR 0.5 RMB 0.1 AU$ -0.7 Other emerging -0.9


30 Consolidated statement of income

■Revenue increased by 9% compared to the previous year due to the increase in sales volume. ■Adjusted operating income increased by 29%.

amount

Revenue 743.2 683.9 59.3

Cost of Sales (70.7%) 525.3 (72.5%) 496.2 29.1

SGA expenses (17.9%) 132.8 (17.8%) 122.0 10.8

Adjusted operating income *1 (11.5%) 85.1 (9.6%) 65.8 19.4

Other Income/expenses -3.8 2.6 -6.3

Operating income (10.9%) 81.3 (10.0%) 68.3 13.0

Financial income/expenses -5.5 -2.3 -3.2

3.0 2.9 0.2

Income before income taxes (10.6%) 78.9 (10.1%) 68.9 10.0

Income taxes 20.9 20.1 0.8

Net income (7.8%) 57.9 (7.1%) 48.8 9.2

(6.9%) 51.3 (6.2%) 42.7 8.6

43.9 66.2 -22.3

20%

Comprehensive income -34%

owners of the parent

19%


14%

4%

141%

Share of profits of investments

accounted for using the equity method 6%

-

19%

9%

29%

9%

6%

%

FY2018

1Q-3Q

FY2017

1Q-3Q

change

(billions of yen)

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


31

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

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%

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%

-7.0%

-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

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

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)

2016 2017


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

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

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

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

20182015FX rate

(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

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

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

20182015


32 Consolidated statement of financial position

■Trade receivables including non-current decreased by 15.9 billion yen compared to the previous fiscal year-end. ■Inventories increased by 70.3 billion yen compared to the previous fiscal year-end.

(billions of yen)

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

FY18-3Q Mar '2018 FY17-3Q change FY18-3Q Mar '2018 FY17-3Q change

Cash and cash equivalents 59.7 81.9 82.6 -22.2 Trade and other payables 250.4 287.1 265.5 -36.7

Trade receivables 204.8 219.6 200.2 -14.8 Bonds and borrowings 307.1 230.7 262.0 76.4

Inventories 325.9 255.6 273.7 70.3 Total current liabilities 615.5 584.8 604.0 30.7

Total current assets 645.0 597.8 609.1 47.2(Equity attributable to owners of

the parent ratio) (41.0%) (41.2%) (40.4%) (-0.2%)

Total non-current assets 497.6 492.0 500.7 5.6 Total equity 527.2 505.0 505.8 22.1

Total assets 1,142.6 1,089.8 1,109.8 52.8 Total liabilities and equity 1,142.6 1,089.8 1,109.8 52.8

Trade receivables incl.

non-current 245.1 261.0 238.7 -15.9

Unit 99.4 56.7 69.2 42.7 (26.9%) (21.2%) (23.6%) (5.7%)

Parts 101.7 93.5 93.9 8.2 Interest-bearing debt 307.1 230.7 262.0 76.4

Raw materials, WIP and etc 124.9 105.5 110.6 19.4 Cash and Cash equivalents 59.7 81.9 82.6 -22.2

Total inventories 325.9 255.6 273.7 70.3 Net interest-bearing debt (21.7%) (13.6%) (16.2%) (8.0%)

（Days） Debt 247.4 148.7 179.4 98.7

Trade receivables 88 99 94 -11

Inventories 117 97 107 20 Net D/E Ratio 0.53 0.33 0.40 0.20

Trade payables 54 71 69 -17

Net working capital 147 125 131 22

Inventories by products

On hand days(divided by net sales)


33 Consolidated cash flow

Net income 57.9 48.8 9.2Depreciation and amortization 85.3 27.4 77.2 28.4 8.2 -1.0(Increase)decrease in trade/lease receivables 8.0 -11.3 19.3(Increase)decrease in inventories -78.9 -33.1 -45.8Increase(decrease) in trade payables -98.6 -27.7 -9.7 34.7 -88.9 -62.4Others, net -35.9 -20.2 -15.7

Net cash provided by (used in) operating activities -49.2 47.3 -96.5Cash flow margin for operating activities -6.6% 6.9% -13.5%

Net cash provided by (used in) investing activities -19.8 -29.4 9.6Free cash flows -69.0 17.9 -86.9

Net cash provided by (used in) financing activities 49.7 -3.7 53.4

FY2018

1Q-3Q

FY2017

1Q-3Qchange

(billions of yen)

■Net cash provided by (used in) operating activities was a negative 49.2 billion yen due to the increase in inventories and the decrease in trade payables by the earlier payment to a particular supplier domestically.


34 Summary of consolidated earnings forecast

■HCM forecasts a FY2018 consolidated income statement with an upward-corrected revenue by 20.0 billion yen and adjusted operating income of 9.0 billion yen against the previous forecast due to the increased sales volume in 3Q and reflecting the impact of the depreciating trend of the Japanese yen on foreign exchange rates.

(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.

note : < > shows previous forecast as of October 2018

amount %

Revenue 1,000.0 959.2 40.8 4%(10.0%) (9.8%) (0.2%)

Adjusted operating income 100.0 93.6 6.4 7%(9.4%) (10.0%) (-0.6%)

Operating income 94.0 95.7 -1.7 -2%Income before (9.2%) (10.0%) (-0.8%)income taxes 92.0 95.6 -3.6 -4%Net income attributable to (5.8%) (6.3%) (-0.5%)owners of the parent 58.0 60.0 -2.0 -3%

EBIT 94.9 98.1 -3.2

1Q-3Q 4Q Total

Actual Forecast Forecast

Rate (YEN/US$) 111.3 100.0 107.9 110.9 -2.9Rate (YEN/EURO) 129.5 120.0 126.6 130.1 -3.5Rate (YEN/RMB) 16.7 15.5 16.2 16.8 -0.6Rate (YEN/AU$) 81.7 79.0 81.0 85.7 -4.7

Cash dividend per share (yen) *1 85 -to be determined

FY2018

Forecast

FY2017

Actual

change

changeFY2017

ActualCurrency

<980.0>

<86.6>

<51.0><5.2%><84.0><8.6%><86.0><8.8%><91.0><9.3%>

For FX sensitivity, please refer to appendix 3.


35 Consolidated revenue forecast by geographic region

■Compared with the previous year, HCM forecasts an increase in total revenue for FY2018 due to the increase in revenue in all regions except M. East excluding the impact of foreign exchange.

(billions of yen)

amount %

Japan 194.2 19% 193.2 20% 1.0 1%

Asia 86.0 9% 75.4 8% 10.6 14%

India 63.6 6% 65.1 7% -1.5 -2%

Oceania 162.4 16% 151.9 16% 10.5 7%

Europe 106.3 11% 104.2 11% 2.1 2%

N.America 161.7 16% 136.3 14% 25.4 19%

L.America 16.1 2% 16.1 2% -0.0 -0%

Russia-CIS 33.9 3% 27.4 3% 6.5 24%

M.East 11.3 1% 23.1 2% -11.9 -51%

Africa 41.9 4% 44.8 5% -3.0 -7%

China 122.6 12% 121.6 13% 1.0 1%

Total 1,000.0 100% 959.2 100% 40.8 4%

Overseas ratio 81% 80%

FY2018

Forecast

FY2017

Actual

change


36 Mining revenue forecast

■HCM forecasts an increase in FY2018 sales of new machines and parts & services by 51% and 3%, and mining business total by 17% compared to the previous year due to the sales volume increase based on demand increase despite the strong yen appreciation of the expected exchange rate.

21%

16% 15% 15%

16%

14% [ 60%]

[ 3%]

15%


％

16%

[ 48%]

[ 17%]

[ 51%]

18%


37 Value chain revenue forecast （*1)

■HCM forecasts an increase in FY2018 sales of value chain business by 5% compared to the previous year due to the increase in the revenue of solution business, parts & services, and rental business despite the strong yen appreciation of the expected exchange rate.

(*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 & services, Solution business, Rental etc. other than new machine sales.

（*2)

(billions of yen)

37% 35%

40% 40%

40%

40%

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

％

[ 3%]

[ 5%]

[ 7%]

[ 5%]

[ 4%]

[ 5%]


38 Comparison of consolidated profit & loss forecast

Sales volume 27.4 Model mix of value chain business 3.9 Decrease in PPA expense 3.1

Handling of increase on production -2.8 R&D expense -2.9 Improvement of profitability -5.9 Increase of personnel expenses -6.0 Decrease in PPA expense 1.0

US$ -4.8 EUR -2.2 RMB -1.6 AUD -1.1 Other emerging -1.5

note : ( ) shows previous forecast as of Oct. 2018

■HCM forecasts FY2018 adjusted operating income to be 100.0 billion yen due to the increase in the sales volume of construction machines, despite the strong yen appreciation of the expected exchange rate and the increase in overheads.


39 <Appendix 1> Retroactive adjustment by completion of PPA in the consolidated statement of income on FY2017

HCM recognized the amortization based on the asset book value of the company as that of acquisition under IFRS because the process of the purchase price allocation (PPA) of the acquired company takes time. After the completion of PPA, HCM needs to retroactively recognize the difference between the amortization based on the PPA amount and the provisional amortization in the previous fiscal year.

■Retroactive adjustment of adjusted operating income on FY 2017

① Depreciation (Amortization ) on PPA in the quarterly FY2017 ( billions of yen )

The account

itemAssets of evaluation

FY2017

1Q

FY2017

1Q-2Q

FY2017

1Q-3QFY2017

Cost of Sales Inventories 2.7 3.1 3.1 3.1Property, plant and equipment 0.1 0.2 0.3 0.4

Intangibles 0.7 1.2 1.6 1.9

3.6 4.5 5.0 5.4

② Depreciation (Amortization ) on PPA of the provisional accounting treatment in the quarterly FY2017

The account


FY2017

1Q

FY2017

1Q-2Q

FY2017

1Q-3QFY2017

Cost of Sales Inventories － 0.7 3.1 3.1Property, plant and equipment －－－ 0.4

Intangibles － 0.4 1.6 1.9

－ 1.1 4.8 5.4

③Retroactive adjustment of adjusted operating income on FY 2017（③=①-②）

The account


FY2017

1Q

FY2017

1Q-2Q

FY2017

1Q-3QFY2017

Cost of Sales Inventories 2.7 2.4 －－Property, plant and equipment 0.1 0.2 0.3 －

Intangibles 0.7 0.8 －－

3.6 3.4 0.3 －Total

SGA expenses

Total

SGA expenses

Total

SGA expenses

※For the gray parts, Depreciation (Amortization) of PPA is not reflected in the consolidated statement of income due to the calculation

of PPA has not completed.


40 <Appendix 2> Consolidated statement of income before completion of PPA and the retroactive adjustment of PPA

(billions of yen)

amount

Revenue 743.2 683.9 0.0 683.9 59.3

Cost of Sales (70.7%) 525.3 (72.5%) 496.2 0.0 (72.5%) 496.2 29.1

SGA expenses (17.9%) 132.8 (17.8%) 122.0 0.3 (17.8%) 121.7 11.1

Adjusted operating income *1 (11.5%) 85.1 (9.6%) 65.8 0.3 (9.7%) 66.0 19.1

Other Income/expenses -3.8 2.6 0.0 2.6 -6.3

Operating income (10.9%) 81.3 (10.0%) 68.3 0.3 (10.0%) 68.6 12.7

Financial income/expenses -5.5 -2.3 0.0 -2.3 -3.2

3.0 2.9 0.0 2.9 0.2

Income before income taxes (10.6%) 78.9 (10.1%) 68.9 0.3 (10.1%) 69.2 9.7

Income taxes 20.9 20.1 -0.1 20.2 0.7

Net income (7.8%) 57.9 (7.1%) 48.8 0.2 (7.2%) 49.0 9.0

0.0 0.0

(6.9%) 51.3 (6.2%) 42.7 0.2 (6.3%) 42.9 8.4

43.9 66.2 0.2 66.4 -22.6

Announced this time

Please refer to

appendix 1

Announced

in January 29, 2018

29%

-

19%

141%

6%

FY2017

1Q-3Q(Before PPA completion)

AdjustmentFY2017

1Q-3Q(After PPA completion)

9%

FY2018

1Q-3Q

change

%

9%

6%

Share of profits of investments

accounted for using the equity method

14%

4%

18%

owners of the parent 20%

-34%Comprehensive income


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

Shows a comparison between the consolidated statement of income before the completion of PPA in the third quarter of FY2017 announced in January 2018 and the consolidated statement of income for the third quarter of FY2018. Details of the retroactive adjustment of PPA are as follows.


41 <Appendix 3> FX rate and FX sensitivity

FX rate and FX sensitivity

1Q-3Q 4Q Total

Actual Forecast Forecast

US$ 111.3 100.0 107.9 110.9 Impact by 1 yen depreciation 0.6 0.4

EURO 129.5 120.0 126.6 130.1 Impact by 1 yen depreciation 0.2 0.2

RMB 16.7 15.5 16.2 16.8 Impact by 0.1 yen depreciation 0.3 0.1

AU$ 81.7 79.0 81.0 85.7 Impact by 1 yen depreciation 0.6 0.1

FX sensitivity (4Q)FX rate

FY18Currency FY17

ActualCondition Revenue

Adjusted

operating

income

(billions of yen)


42 <Appendix 4> Detail of mining revenue

(billions of yen)

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

America Excavator 10.6 3.0 13.6 9.8 4.5 14.3 -0.8 1.5 0.7

Dump Truck 5.8 1.9 7.8 5.6 1.2 6.8 -0.2 -0.8 -1.0

Total 16.5 5.0 21.4 15.5 5.6 21.1 -1.0 0.7 -0.3

Europe, Africa Excavator 13.4 4.8 18.2 17.5 7.8 25.4 4.1 3.0 7.2

and Middle East Dump Truck 12.4 3.5 15.9 10.7 6.2 16.9 -1.7 2.7 1.0

Total 25.8 8.3 34.1 28.3 14.0 42.2 2.4 5.7 8.1

Asia & Oceania Excavator 41.9 16.8 58.7 45.4 20.5 65.9 3.5 3.7 7.2

Dump Truck 14.3 6.8 21.1 24.2 5.4 29.6 9.9 -1.4 8.5

Total 56.2 23.6 79.8 69.5 25.9 95.4 13.4 2.3 15.7

China Excavator 1.0 0.9 1.9 0.7 0.2 0.9 -0.3 -0.7 -1.0

Dump Truck 0.1 0.0 0.1 0.1 0.0 0.1 0.0 0.0 0.0

Total 1.1 0.9 2.0 0.8 0.2 1.0 -0.2 -0.7 -0.9

Japan Excavator 0.3 0.2 0.5 0.9 0.1 0.9 0.5 -0.1 0.5

Dump Truck 0.0 0.0 0.0 0.0 -0.0 0.0 0.0 -0.0 0.0

Total 0.3 0.2 0.5 0.9 0.1 0.9 0.5 -0.1 0.5

Total Excavator 67.2 25.7 92.9 74.3 33.1 107.4 7.1 7.4 14.4

Dump Truck 32.6 12.2 44.8 40.7 12.7 53.4 8.0 0.5 8.6

Total 99.9 37.9 137.7 115.0 45.8 160.7 15.1 7.9 23.0

FY17

Actual

FY18

Forecast Change


43 <Appendix 5> Segment information

(billions of yen)

670.1 73.6 -0.5 743.2

12.0% 80.6 6.2% 4.5 - 11.5% 85.1

(billions of yen)

903.5 97.0 -0.5 1,000.0

10.4% 93.6 6.6% 6.4 - 10.0% 100.0

Revenue


Reportable segment

Adjustments

*1TotalConstruction

Machinery

Business

Solution

Business

＜Actual＞

FY2018

1Q-3Q

Reportable segment

Adjustments

*1TotalConstruction

Machinery

Business

Solution

Business

Revenue


＜Forecast＞

FY2018

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

The amortizations of PPA are included in the adjusted operating income of the solution business. The amount of 0.9 billion yen is included in the third quarter of FY2018, and the 1.3 billion yen forecast for FY2018.


44

Contents

Corporate Vision


Company Outline and Topics

45 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：51%)

・President Kotaro Hirano

・Subsidiaries

Affiliates

Japan: 9 companies, Overseas: 72 companies

Japan: 4 companies, Overseas: 20 companies

・Number of Employees Consolidated :24,570 Non-consolidated :4,299

(December 31, 2018)


46 Our Products and Revenue

Construction

New Machine

56%

Mining

New Machine

4%

Mining

Parts & Services

10%

Construction

Parts &

Services

10%

Solution

Business

10%

Others

10%

Hydraulic Excavator

(Hybrid / ICT hydraulic excavator)

Mining

ConSite

H-E Parts Bradken

Value Chain

business

Construction

Value Chain

40%

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

FY2017 Revenue

959.2

(Billions of yen )


47 Globalizing and Localizing Manufacturing Company Outline and Topics

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

（％）

●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

17

48 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

49 Deepening Value Chain Company Outline and Topics

Pro

ducts

Parts

Serv

ice

New

machin

ery

Used m

achin

ery

Renta

l

Pa

rts re

ma

nu

factu

ring

Fin

ance

Main products

Other product group

Skid-steer loader

Crawler crane

Backhoe loader

Bulldozer

Marketing

R&D

Production

Procurement

Logistics

Value chain business ratio

New

machinery

Value

chain New

machinery

Value

chain

Solution

Business

Value chain

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

FY2016 actual FY2019 target

50 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.

® ®

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 123,000 units at the end of 2018 after initiating a global business development plan in 2014.

Initial Plan

113 countries & regions and 33 languages are covered.

Number of contracts:

123,000 units ※As of the end of December 2018


52 Service Solution - ConSite Company Outline and Topics

Offered worldwide

Registered number

exceeded 123,000 ※ As of December 31, 2018

■Distribute data report to 123,000 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, Australia, and Japan.

【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

(million yen）

Auction venue of HCM Japan

China

0

2000

4000

6000

8000

10000

FY13 FY14 FY15 FY16 FY17

Total contract amount

of the auction (million yen）

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

HCM established a sales company to further expand business in the Central Asia market

Mining sales topics

■Eurasian Machinery B.V. was established in

July 2018. Investment Ratio: Hitachi

Construction Machinery 40%

■Sales network and value chain business grew,

and delivery to major mining companies in

Central Asia started.

■An order for 11 EH5000AC-3 units was secured.

Start of delivery and operation is scheduled for

FY2018.

■A order for 7 EX3600 excavators (electric-powered) was secured.

Start of delivery and operation is scheduled for FY2019.

An order for dump trucks was secured in Mozambique

A major order for electric-powered ultra-large hydraulic excavators was secured in Thailand

Ultra-large hydraulic excavator operating in mine in the Republic of Kazakhstan


58 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

59 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

60 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)

61 《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%

62 《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

63

● 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

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

67 Major Domestic Restructure to Strengthen Global Competitiveness - status in 2022


HCM Hitachinaka Works Production: Components for mining and

construction

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

Production: Compact

HCM Banshu Works Production: Main parts for compact

Main parts for wheel loaders

HCM Hitachinaka-Rinko Works

Production: Mining

HCM Ryugasaki Works Production: Main parts for construction

HCM Tierra Osaka Works Production: Main parts for compact

HCM Tsuchiura Works Development: Mining

Construction

Components

Production: Construction

HCM Kasumigaura Works Production: Components for mining and

construction ● ● ● ●

● ●

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”.

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 HCM to provide cooperation for Exhibition “Under Construction!” by displaying a machine

A Double-Arm Working Concept Machine with Four-Crawler will be exhibited throughout the exhibition to offer chances mainly for children to be exposed to unique technologies.

Cooperation will be provided in sympathy with the theme: ”Scientifically exploring human wisdom embedded in industrial vehicles (heavy machinery) and their impact on society.”

Four crawler units-type double-arm concept machine

■Period: February 8, 2019 – May 19, 2019

■Venue: Miraikan – The National Museum of Emerging Science and Innovation (Aomi, Koto-ku, Tokyo)

■Organizers:

Miraikan – The National Museum of Emerging Science and Innovation The Yomiuri Shimbun Fuji Television Network, Inc. BS Nippon Corporation


70

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

《Supplementary Information》

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

This advertisement was awarded the following prizes (in November 2018). ■The first price of Part IV in the newspaper category of

the 53rd Japan Industrial Advertisement Awards (hosted by The Nikkan Kogyo Shimbun, Ltd.

(The Daily Industrial News)).

■The 85th Anniversary Special Award of the 57th Business Advertisement Awards

(hosted by Fuji Sankei Business i.).

[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.

Public Relations Strategy Office Hitachi Construction Machinery Co., Ltd

FY18-3Q

Corporate Vision

END

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