Corporate Vision FY2021-1Q - Management Plan 2. Business Results 3. Company Outline and Topics - Hitachi Construction Machinery
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Corporate Vision FY2021-1Q 1. Management Plan 2. Business Results 3. Company Outline and Topics Public Relations & Investor Relations Dept. Corporate Brand & Communications Div. © Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved. 1
Management Plan Medium-term Management Plan “Realizing Tomorrow‘s Opportunities 2022” (FY 2020-2022) Kotaro Hirano Executive Officer, President & CEO © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 2
Our achievements over the past three years Management Plan and our initiatives for these three years Realizing Tomorrow’s CONNECT TOGETHER 2019 Opportunities 2022 Deepen the value chain Value chain + Enhance digital solutions Parts and service (ConSite®) Parts and service (ConSite® + parts Acquisition of Bradken /H-E Parts remanufacturing + Bradken/H-E Parts) US & UK:start of rental business Digital Mining Certified used equipment Rental +used equipment →Global Global Restructuring Efficiency in development, marketing and production Efficiency at overseas sites Global cooperation © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 3
Management Plan Impact of COVID-19 on the business Performance deteriorated in FY2020 due to the impact of COVID-19 Full-fledged recovery in market conditions other than China is expected to occur from the second half of FY2021 onward Performance grows due to expansion of the value chain and deepening of solutions Demand Trend for Hydraulic Excavators Revenue and Adjusted Operating Income Ratio [K units] (千台) [billions of yen] 250 12,000 12.0% 229 Revenue difference 220 from the previous plan COVID-19 225 10,000 0 10% 10.0% 200 69 53 10,000 175 8,000 8,800 8.0% 150 25 8,133 25 7.0% 125 6,000 6.0% 48 45 100 50% 32 4,000 4.0% 4.0% 75 31 43% 50 33 36 2,000 2.0% 25 26 26 0 0 0.0% FY FY20 20年度 FY21 Forecast 21年度見通 FY22 Forecast 22年度見通 FY20 20年度 FY21 Forecast 21年度見通 FY22 Forecast 22年度見通 China 中国 Others その他 アジア・大洋州 Asia & Oceania VC New 新車 machine 北米 North America 西欧 Western Europe 日本 Japan Profit margin 利益率(コロナ前) Profit margin 利益率(コロナ後) (Before COVID-19) (After COVID-19) © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 4
Management Plan Strengthen development of digital and advanced technologies Global restructuring of production sites is almost completed Restructuring domestic production sites and development bases is on-going Initial plan Reviewed plan Invest 50 billion yen by 2027 Invest 42 billion yen by Investment plan Restructuring functions at Tsuchiura 2022 Works and Ryugasaki Works Profit contribution from production- 6 billion yen / year related restructuring Development of Collaborative Construction Equipment and accelerate the promotion of technological development for reducing CO2 emissions R&D expense ratio raised to 4%; Development of bases in Japan, Europe and North America + Open innovation Main research and development themes • Achieve “Collaborative safety" and advanced autonomous Achieve collaborative operation system platform "ZCORE" control between people • Operation support system and machinery • Site safety Initiatives for reducing • New drive systems such as batteries, fuel cells, hydrogen, etc. CO2 emissions • New technology development for "Net Zero Emissions" © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 5
Management Plan Corporate Strategy Core of Corporate Strategy Environmental Economic Social value value value Strengthen value Customers chain business Safety Productivity Reduction of improvement improvement lifecycle cost Provide enhanced Means to resolve customer issues solutions at every Focus on main products* Digital/Value chain contact with Enhance solutions customers New machinery Parts and service Rental Used equipment remanufacturing Parts Finance Form highly flexible corporate structure Expand value chain *Other product group: Backhoe loader, Crawler crane, Bulldozer, Skid-steer loader © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 6
Strengthen value chain business Social value Management Plan (Rental and Used equipment) Reduction of lifecycle cost Differentiation by high-quality rental machines and provide bushiness globally Expansion as guaranteed and refurbished used equipment Expand rental business in various places Used equipment with brands Proper maintenance by data utilization Distributing high-quality rental machines as used equipment around the world North Europe Japan Expand the used equipment business America sales revenue Middle east FY2022 FY2030 Used equipment Adoption of products Southeast Latin and services that Africa 280% Asia America meet regional needs Compared to FY2010 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 7
Strengthen value chain business Social value Management Plan Reduction of (Parts & Service) lifecycle cost Expanding services with ConSite menu, increasing touch point with customers Increasing the choice of service parts for various parts brands Strengthening traceability and make parts distribution more efficient Expanding services with ConSite Customers Increasing Strengthening traceability touch point Efficiency in parts distribution Selectable from various parts brands Expand parts remanufacturing businesses sales revenue Life cycle cost reductions FY2022 FY2030 FY2022 FY2030 Adoption of products Parts remanufacturing and services that meet ConSite® Aim for 420% regional needs Adoption rate 90% “zero” downtime Compared to FY2010 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 8
Advancement of construction machinery Social value Safety Management Plan Productivity and improvement of safety improvement improvement Aiming to realize “the optimal relationship between people and machinery” by enhancing site safety as a whole through Collaborative Construction Equipment, operation support systems, and various solutions Collaborative Construction Equipment Developed "ZCORE", a system platform that realizes both Collaborative safety and advanced autonomous operation Prototype machine Operation support system Surrounding recognition and automatic braking Excavation status judgment and automatic loading Operator status monitoring Functionality to reduce accidents caused by Site safety HCM products Site safety management and risk analysis FY2022 FY2030 Cooperation with disaster information, risk Achieve collaborative Contribute to prediction control between people "zero" overturn and and machinery fatal accidents © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 9
Toward the realization Environmental value Economic value Management Plan of a sustainable society Productivity improvement Long-term initiatives for reducing CO2 emissions Compact Battery powered 8t class: Orders for 25 units in FY2020, the target for FY2021 is 50 units 5t class: Under evaluation test period, scheduled to be released in Launched in Europe Under evaluation test Japan and Europe in FY2021 in the market Construction Fuel cell powered Hydrogen engine Collaboration with research institutes, universities and partner companies Mining ABB All electrification Improving the efficiency collaboration in the mine of the entire mine Reducing CO2 emissions from products FY2022 FY2030 Digital mine promoted by ABB ▲20% Compared to FY2010 ▲33% Expanding sales of trolley type with ABB electric infrastructure Applying ABB Digital Solution to Machines © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 10
Management Plan Summary of KPI for these three years plan Realizing Tomorrow’s Opportunities Previous medium-term plan Current medium-term plan KPI FY2019 result FY2022 target Growth ・Revenue ・931.3 billion yen ・1 trillion yen ・Value chain ratio ・40% ・50% Profitability Adjusted operating 8.2% More than 10% income ratio Safety Net D/E Ratio 0.58 Less than 0.5 Efficiency ROE 8.6% More than 10% ESG Social value ConSite adoption rate 73% ConSite adoption rate 90% *Compared to Environmental value parts remanufacturing parts remanufacturing FY2010 Economic value businesses sales revenue businesses sales revenue 296%* 420%* Reducing CO2 emissions Reducing CO2 emissions from products -15.9%* from products -20%* Shareholder Dividend payout ratio 31% 30% or more return © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 11
Management Plan © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 12
Business Results Corporate Vision FY2021-1Q 1. Management Plan 2. Business Results 3. Company Outline and Topics © Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved. 13
Business Results Explanatory Meeting for Business Results for the First Quarter ended June 30, 2021 Hidehiko Matsui Executive Officer, President, Marketing Div. Keiichiro Shiojima Executive Officer, CFO © Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved. 14
Business Results 1. Regional Market Environments and Projections Hidehiko Matsui Executive Officer, President, Marketing Div. © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 15
Business Results Global Demand Trend for Hydraulic Excavators Emerging Markets ratio : Year-on-Year Change by Region FY2021 : 56% ( y-y Change : -5% ) [K units] (千台) ※Emerging Markets: China, Asia/Oceania, and others ※Estimates by HCM, Excluding Chinese manufacturers ※Distributing, copying, or forwarding prohibited 250 236 237 '20 '21 220 220 220 225 217 Total +9% -7% 60 China +42% -30% 200 69 183 54 49 53 48 Russia,CIS, 173 中国 China -7% +0% 175 E Europe 30 Africa +10% -10% 155 24 30 25 27 24 28 25 150 その他 Others Middle East +10% +0% 19 32 19 Latin +34% -0% 125 24 53 43 49 47 48 47 アジア・大洋州 Asia & Oceania Others +11% -2% 100 32 41 *Incl. India Asia +12% +5% 32 35 India +5% -4% 29 33 32 35 北米 North America 75 27 33 26 25 Oceania +16% -1% 50 Asia & Oceania +9% +1% 31 38 42 40 35 36 36 西欧 Western Europe 30 35 N America -6% +8% 25 W Europe -13% +3% 31 24 23 25 24 25 26 26 26 Japan 日本 Japan +3% +0% 0 FY '14 '15 '16 '17 '18 '19 '20 '21 '21 Previous Current Outlook Outlook © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 16
Business Results Japan: First Quarter ( from April to June 2021 ) Housing investment and public investment increased. Capital investment improved at the level of the last FY. Demand increased: Hydraulic excavators +6% y-y, Mini excavators +2% y-y, Wheel loaders +17% y-y, respectively. Market Environment Housing/Public Spending and Capex (y-y) [K units] Demand Trend for Mini Excavators 40% 20 100% Public spending *Source: MLIT, Cabinet Office, and *Estimates by HCM (Public work orders) Construction Surety Company 20% 15 50% 0% 10 0% Capex New housing starts -20% 5 -50% (Orders for machinery, excluding foreign demands) (number of houses) -40% 0 -100% FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q FY20/1Q FY21/1Q 2Q 3Q 4Q 2Q 3Q 4Q [K units] Demand Trend for Hydraulic Excavators [K units] Demand Trend for Wheel Loaders 20 100% 20 100% *Estimates by HCM *Estimates by HCM 15 50% 15 50% 10 0% 10 0% 5 -50% 5 -50% 0 -100% 0 -100% FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 17
Business Results Europe: First Quarter ( from April to June 2021 ) Throughout the Eurozone, GDP growth rates have been on an improving trend. Demand increased significantly: Hydraulic excavators +33% y-y, Mini excavators +33% y-y, Wheel loaders +32% y-y, respectively. GDP Growth Rate in Major Countries (y-y) [K units] Demand Trend for Mini Excavators 10% 25 100% *Estimates by HCM UK Others 5% 20 50% 0% Germany Germany 15 -5% Italy 0% -10% 10 France France -15% -50% 5 UK -20% EUR zone * Source: Eurostat -25% 0 -100% FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q CY14/1Q CY15/1Q CY16/1Q CY17/1Q CY18/1Q CY19/1Q CY20/1Q CY21/1Q (E) [K units] Demand Trend for Hydraulic Excavators [K units] Demand Trend for Wheel Loaders 20 100% 20 100% *Estimates by HCM *Estimates by HCM Others Others 15 50% 15 50% Germany Germany 10 0% Italy 10 0% Italy France France 5 -50% 5 -50% UK UK 0 -100% 0 -100% FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q (E) (E) © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 18
Business Results North America: First Quarter ( from April to June 2021 ) Housing starts and construction spending in residential were upward trend. Non-residential and public work remained at the same level of the previous year. Demand significantly increased: Hydraulic excavators +37% y-y, Mini excavators +28% y-y, respectively. [K units] GDP Growth Rate, Housing Starts in US [K units] Demand Trend for Hydraulic Excavators 2000 35% 20 100% * Bureau of Economic Census, US Census Bureau *Estimates by HCM 25% GDP (y-y/Right axis) 15% 15 50% 1500 5% 10 0% -5% 1000 Housing starts (Left axis) -15% 5 -50% (Seasonally adjusted) -25% 500 -35% 0 -100% 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q CY14/1Q CY15/1Q CY16/1Q CY17/1Q CY18/1Q CY19/1Q CY20/1Q CY21/1Q FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q (E) Construction Spending in US (y-y) [K units] Demand Trend for Mini Excavators 150% 20 100% *Estimates by HCM Residential Non-residential Public 15 50% 125% 10 0% 100% 5 -50% * Bureau of Economic Census, US Census Bureau 75% 0 -100% 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q CY14/1Q CY15/1Q CY16/1Q CY17/1Q CY18/1Q CY19/1Q CY20/1Q CY21/1Q FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q (E) © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 19
Business Results China: First Quarter ( from April to June 2021 ) ■The GDP growth rate was +7.9%. ■Demand for hydraulic excavators in China decreased. -37% y-y, Foreign manufactures only. GDP and Fixed Asset Investment [%] Quarterly Demand for Hydraulic Excavators by Region (y-y) (y-y) *Estimates by HCM 30% 20 FY20 2Q 3Q 4Q 1Q *Foreign manufactures only left axis right axis Accumulated Fixed Asset GDP (+7.9%) 15 North East +112 +27 +98 -31% [%] 20% Investment (y-y) (+12.6%) 10 North +40 +23 +76 -20% 5 East +57 +36 +42 -42% 10% 0 Central +22 +22 +70 -42% South 0% -5 North West 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 2Q 2Q CY14/1Q CY15/1Q CY16/1Q CY17/1Q CY18/1Q CY19/1Q CY20/1Q CY21/1Q +64 +27 +68 -42% 3Q 4Q -10 -10% South West +21 +26 +25 -35% -15 Total +40 +28 +53 -37% * National Bureau of Statistics of China -20% -20 Demand Trend for Hydraulic Excavators Demand Composition by Class for Mini Excavators and Hydraulic Excavators *Estimates by HCM *Estimates by HCM *Foreign manufactures only [K units] y-y comparison data is limited to foreign manufactures only 40t- 100% 80 150% 30-39t 20t 70 Domestic 80% and 21-29t 60 Foreign 100% over 50 60% 20t 50% 40 10-15t 40% 30 0% 20t 6-10t 20 20% below -50% 10 -6t 0 -100% 0% FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 20
Business Results Supplemental Information: China ( from April to June 2021 ) [K units] *Estimates by HCM 15 Monthly Demand Trend for Hydraulic Excavators (Foreign Manufactures only) 250% 200% y-y 150% 10 100% 50% 5 0% -50% -100% 0 +102% +100% +45% +55% +11% -9% -2% -19% -10% -8% -31% +45% +40% +28% +53% -37% -150% Apr. 5月 4月 May.6月 Jun. 7月 Jul. Aug. 8月 9月Sep. Oct. 10 Nov. Dec.1月 11 12 Jan. 2月 Feb.3月 Apr. 5月 Mar.4月 May.6月 Jun.7月 Jul. 8月 Aug.9月 Sep.Oct. 10 No. 11 Dec. 12 Jan. 1月Feb. 2月Mar. Apr. May. 3月 4月 5月 6月Jun. 7月 Jul. Aug. 8月 9月Sep. Oct. 10 Nov. 11 Dec. 12 1月Jan. 2月 Feb.3月 Mar.Apr. 4月 5月 May.6月 Jun. 7月 Jul. Aug. 8月 9月Sep. Oct. 10 Nov. Dec.1月 11 12 Jan. 2月 Feb.3月 Apr. 5月 Mar.4月 May.6月 Jun. FY2017 FY2018 FY2019 FY2020 月 月 月 月 月 月 月 月 月 月 月 月 FY2021 [K units] Demand Trend for Hydraulic Excavators (y-y) (Foreign Manufactures only) 16 *Estimates by HCM 14 FY2018 Actual 2018年度 [Chinese New Year] FY2019 Actual 2019年度 12 Feb. 5, 2019 FY2020 Actual 2020年度 Jan. 25, 2020 10 FY2021 Actual 2021年度 Feb. 12, 2021 8 Feb. 1, 2022 6 4 2 0 Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. 4月 5月 6月 7月 8月 9月 10月 11月 12月 1月 © Hitachi Construction 2月 Co., Machinery 3月 Ltd. 2021. All rights reserved. 21
Business Results Asia Oceania, and India: First Quarter ( from April to June 2021 ) Demand for hydraulic excavators increased overall in the Asia Pacific region, +57%. Demand for hydraulic excavators in India was +107%. Demand Trend for Hydraulic Excavators in Asia & Oceania [%] GDP Growth Rate in Major Countries (y-y) [K units] * Source: IMF, etc 15 Indonesia India 10 100% *Estimates by HCM 10 5 0 50% -5 Thailand 8 Singapore -10 -15 -20 Malaysia 0% -25 6 CY14/1Q CY15/1Q CY16/1Q CY17/1Q CY18/1Q CY19/1Q CY20/1Q CY21/1Q 3Q 3Q 3Q 3Q 3Q 3Q 3Q -50% ※ Calculation criteria for GDP growth rate in India was revised in CY2013 2Q Others Demand Trend for Hydraulic Excavators in India 4 NZ [K units] *Estimates by HCM -100% Australia 8 7 100% Thailand 6 2 50% Singapore 5 -150% 4 0% Malaysia 3 2 -50% Indonesia 1 0 -200% 0 -100% FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q (E) (E) © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 22
Business Results Russia and Middle East: First Quarter ( from April to June 2021 ) Demand for hydraulic excavators in Russia was +38%. Demand for hydraulic excavators in the Middle East was +23%. Foreign Exchange Rate of the Ruble [K units] Demand Trend for Hydraulic Excavators in Russia 5 200% *Estimates by HCM 4 *Ex-Works base 150% 0.03 * Incl. Local manufacturing 100% Against US$ 3 0.02 50% 2 0% 0.01 1 -50% Against EUR€ 0 -100% FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q 0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 (E) * According to HCM’s research [Crude oil [Natural Gas Price Trend of Crude Oil and Natural Gas Index] [K units] Demand Trend for Hydraulic Excavators in the Middle East US$] 140 140 5 Natural gas 100% *Estimates by HCM 120 120 (right scale) 4 *Ex-Works base (Turkey: retail-sales base) 50% 100 100 Others 80 80 3 0% UAE 60 60 2 Saudi Arabia 40 40 -50% 20 Crude oil 20 1 Turkey (left scale) 0 0 0 -100% FY14/1Q 2Q 3Q 4Q FY15/1Q 2Q 3Q 4Q FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 4Q FY18/1Q 2Q 3Q 4Q FY19/1Q 2Q 3Q 4Q FY20/1Q 2Q 3Q 4Q FY21/1Q 3Q FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 (E) * Created by HCM, sourced from World Bank * Natural Gas Index (2010 = 100) © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 23
Business Results Mining machinery: FY2021 ( from April 2021 to March 2022 ) Demand forecast for mining machinery in FY2021 is expected to increase +15% y-y. Demand from hard-rock mines has been solid. Demand for hydraulic excavator over 100t increased for small and medium sized mines and constructors. Ultra-large Hydraulic Excavators (over 100t), Dump Trucks(over 150t) [Units] Demand by product [Units] Demand by region 2,000 2,000 Dump Trucks(over 150t) Central and South America Ultra-large Hydraulic Excavators(over 100t) North America Europe Russia CIS 1,500 1,500 Oceania Asia Africa and Middle East 1,000 1,000 500 500 - 0 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 ※ According to HCM’s research © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 24
Business Results Supplementary Information: BB Ratio BB Ratio (Ultra-large Hydraulic Excavators, over 100t) BB Ratio (Dump trucks, over 150t) * Book-to-Bill(BB) Ratio = Bookings (Orders received)/Billings (Value of shipment ) Non-consolidated basis (average of 6 months) © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 25
Business Results 2. Business Results for the First Quarter ended June 30, 2021 (April 1, 2021 - June 30, 2021) Keiichiro Shiojima Executive Officer, CFO © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 26
Business Results Summary of consolidated results In the first quarter of the current fiscal year, despite the impact of COVID-19, revenue increased by 34% y-y and adjusted operating income increased by 303%, partly due to the impact of yen depreciation of 14.5 billion yen. [billions of yen] FY2021 FY2020 change 1Q 1Q Revenue 228.1 170.2 34% Adjusted operating income *1 5.2% 11.8 1.7% 2.9 303% Operating income 5.2% 11.9 1.5% 2.5 374% Income before income taxes 5.3% 12.0 1.1% 1.8 572% Net income attributable to owners of the parent 3.1% 7.1 0.1% 0.2 - EBIT *2 5.5% 12.7 1.6% 2.7 369% Rate (YEN/US$) 109.5 107.6 1.9 Rate (YEN/EURO) 132.0 118.5 13.5 FX rate Rate (YEN/RMB) 17.0 15.2 1.8 Rate (YEN/AU$) 84.3 70.7 13.7 *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” © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 27
Business Results Revenue by geographic region (consolidated) Revenue increased in each region except China y-y; consolidated revenue increased by 58.0 billion yen. [billions of yen] FY2021 FY2020 change 1Q 1Q amount % Japan 43.2 19% 39.9 23% 3.3 8% Asia 16.3 7% 9.2 5% 7.1 77% India 9.9 4% 4.8 3% 5.1 107% Oceania 39.7 17% 33.1 19% 6.6 20% Europe 31.4 14% 13.5 8% 17.9 132% N.America 42.1 18% 27.9 16% 14.2 51% L.America 4.7 2% 2.8 2% 1.9 67% Russia-CIS 7.6 3% 4.3 3% 3.3 77% M.East 6.5 3% 3.3 2% 3.2 95% Africa 9.3 4% 6.2 4% 3.1 49% China 17.5 8% 25.1 15% -7.5 -30% Total 228.1 100% 170.2 100% 58.0 34% Overseas ratio 81% 77% © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 28
Business Results Mining revenue Revenue of mining in FY2021 1Q increased by 18% to 34.1 billion yen y-y, partly due to the impact of depreciation of the yen, which accounted for 3.2 billion yen. % shows sales ratio against total company sales [billions of yen] [ % ] shows changed ratio from the same period of previous year 16% 18% 14% 15% 16% 15% 15% 15% 17% [ 18%] Machine Total [ △60%] [ △1%] [ 29%] [ 28%] © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 29
Business Results Value chain*1 revenue Revenue of the value chain business in FY2021 1Q increased by 20% to 95.0 billion yen y-y, partly due to the impact of depreciation of the yen, which accounted for 7.0 billion yen. [billions of yen] % shows sales ratio against total company sales [ % ] shows changed ratio from the same period of 40% 39% previous year (*2) 41% 43% 35% 42% 46% [ 20%] [ 24%] [ 18%] [ 9%] [ 25%] [ 26%] [ 28%] (*1) Value chain: Total of Parts & services, Solution business, Rental etc. other than new machine sales. (*2) Solution business: The business segment primarily intends to provide development, production, distribution of parts and service solutions for mining facilities and equipment after the sales made that are not included in the construction machinery business segment. © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 30
Business Results Comparison of consolidated income Adjusted operating income increased by 8.9 billion yen y-y due to the impact of increased sales volume and model mix, despite increased overheads. [billions of yen] Increase of expense linked to 20 Sales Volume 16.5 production and sales -2.1 Model mix of value chain business 1.7 Decrease of general overheads 1.4 18 Other model mix -7.0 Increase of expense for sustained growth -3.6 16 14 10.0 -0.7 0.2 -0.3 -4.2 4.2 11.8 0.3 11.9 2.9 8.9 Sales volume, model mix & others Selling price Expenses related structural reform 12 Material cost Foreign exchange rate Overhead expenses Other operating income and Adjusted operating income income variance of adjusted operating Adjusted operating income 10 Operating income 8 2.5 Operating income 6 US$ 0.3 4 EUR 1.3 RMB 0.7 AU$ 0.9 2 0 FY20 FY21 FY20 FY21 1Q Actual 1Q Actual 1Q Actual 1Q Actual Total variance excluding FX effect 4.7 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 31
Business Results Consolidated statement of income SG&A expenses increased by 7.6 billion yen to 44.2 billion yen y-y. [billions of yen] FY2021 FY2020 change 1Q 1Q amount % Revenue 228.1 170.2 58.0 34% Cost of Sales (75.4%) 172.1 (76.7%) 130.6 41.5 32% SGA expenses (19.4%) 44.2 (21.5%) 36.6 7.6 21% Adjusted operating income *1 (5.2%) 11.8 (1.7%) 2.9 8.9 303% Other Income/expenses 0.1 -0.4 0.5 - Operating income (5.2%) 11.9 (1.5%) 2.5 9.4 374% Financial income/expenses -1.1 -0.8 -0.2 29% Share of profits of investments accounted for using the equity method 1.2 0.1 1.1 - Income before income taxes (5.3%) 12.0 (1.1%) 1.8 10.2 572% Income taxes 4.2 0.6 3.6 602% Net income (3.4%) 7.8 (0.7%) 1.2 6.7 557% Net income attributable to owners of the parent (3.1%) 7.1 (0.1%) 0.2 6.9 - *1 “Adjusted operating income” is calculated by excluding “Other income” and “Other expenses” from “Operating Income” listed in Consolidated Statements of Income. © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 32
Summary of quarterly consolidated revenue and Business Results operating income (ratio) [billions of yen] 2018 2019 2020 2021 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Revenue 240.2 250.2 252.8 290.5 234.7 245.9 206.6 244.2 170.2 190.7 197.8 254.6 228.1 Adjusted operating income 27.6 25.8 31.8 31.7 22.9 22.1 13.8 17.9 2.9 8.0 7.4 14.4 11.8 Operating income 25.7 24.8 30.8 21.0 23.7 19.6 14.1 15.5 2.5 6.0 6.7 13.0 11.9 [billions of yen] 450.0 Revenue 15.0% 11.5% 12.6% 10.3% 10.9% Adjusted operating income Ratio 400.0 10.1% 9.0% Operating income Ratio 12.2% 10.0% 10.7% 6.8% 7.3% 350.0 9.9% 9.8% 5.7% 5.2% 7.2% 8.0% 4.2% 3.7% 300.0 6.7% 1.7% 5.0% 6.3% 5.1% 5.2% 250.0 3.2% 3.4% 1.5% 0.0% 200.0 150.0 -5.0% 100.0 -10.0% 50.0 240.2 250.2 252.8 290.5 234.7 245.9 206.6 244.2 170.2 190.7 197.8 254.6 228.1 0.0 -15.0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2018 2019 2020 2021 2018 2019 2020 2021 FX rate 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Rate (YEN/US$) 109.1 111.5 112.9 110.2 109.9 107.4 108.8 108.9 107.6 106.2 104.5 105.9 109.5 Rate (YEN/EURO) 130.1 129.6 128.8 125.2 123.5 119.3 120.3 120.1 118.5 124.1 124.5 127.7 132.0 Rate (YEN/RMB) 17.1 16.4 16.3 16.3 16.1 15.3 15.5 15.6 15.2 15.4 15.8 16.4 17.0 Rate (YEN/AU$) 82.6 81.5 81.1 78.5 76.9 73.6 74.3 71.8 70.7 75.9 76.3 81.8 84.3 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 33
Business Results Consolidated statement of financial position Total current assets decreased by 4.8 billion yen y-y due to a decrease of 16.0 billion yen in trade receivables. [billions of yen] (A) (B) (C) (A)-(B) (D) (E) (F) (D)-(E) FY21-1Q Mar '2021 FY20-1Q change FY21-1Q Mar '2021 FY20-1Q change Cash and cash equivalents 72.7 80.3 71.0 -7.7 Trade and other payables 191.9 199.2 166.6 -7.3 Trade receivables 195.2 211.2 176.2 -16.0 Bonds and borrowings 328.3 329.5 343.9 -1.2 Inventories 308.3 297.8 310.3 10.5 Total liabilities 646.8 651.3 626.5 -4.5 (Equity attributable to owners of Total current assets 612.3 617.2 593.3 -4.8 the parent ratio) (42.6%) (42.1%) (41.2%) (0.5%) Total non-current assets 612.2 603.4 562.6 8.8 Total equity 577.7 569.2 529.4 8.5 Total assets 1,224.5 1,220.6 1,155.9 4.0 Total liabilities and equity 1,224.5 1,220.6 1,155.9 4.0 Trade receivables incl. non-current 236.0 252.7 215.3 -16.6 Inventories by products Unit 84.4 77.3 83.5 7.1 (26.8%) (27.0%) (29.8%) (-0.2%) Parts 104.3 102.3 108.4 2.0 Interest-bearing debt 328.3 329.5 343.9 -1.2 Raw materials, WIP and etc 119.6 118.2 118.4 1.3 Cash and Cash equivalents 72.7 80.3 71.0 -7.7 Total inventories 308.3 297.8 310.3 10.5 Net interest-bearing debt (20.9%) (20.4%) (23.6%) (0.5%) On hand days(divided by revenue) (Days) Debt 255.6 249.2 272.9 6.4 Trade receivables 99 113 91 -14 Inventories 129 134 131 -5 Net D/E Ratio 0.49 0.48 0.57 0.01 Trade payables 47 49 40 -3 Net working capital 178 194 178 -16 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 34
Business Results Consolidated cash flow Net cash provided by (used in) operating activities increased to a positive 6.7 billion yen. [billions of yen] FY2021 FY2020 change 1Q 1Q Net income 7.8 1.2 6.7 Depreciation and amortization 21.2 13.3 12.9 11.8 8.2 1.6 (Increase)decrease in trade/lease receivables 18.6 41.9 -23.3 (Increase)decrease in inventories -10.3 -2.8 -7.5 Increase(decrease) in trade payables 9.1 0.9 19.9 -19.2 -10.7 20.1 Others, net -23.6 -11.4 -12.3 Net cash provided by (used in) operating activities 6.7 21.4 -14.8 Cash flow margin for operating activities 2.9% 12.6% -9.7% Net cash provided by (used in) investing activities -8.2 -9.3 1.1 Free cash flows -1.5 12.2 -13.7 Net cash provided by (used in) financing activities -6.6 -4.3 -2.3 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 35
Business Results Summary of consolidated earnings forecast FY2021 Consolidated Statement of Income is expected to be the same as the previous forecast. [billions of yen] FY2021 FY2020 change Forecast Actual amount % Revenue 880.0 813.3 66.7 8% (7.0%) (4.0%) (3.0%) Adjusted operating income 62.0 32.7 29.3 90% (6.6%) (3.5%) (3.1%) Operating income 58.0 28.2 29.8 105% (6.4%) (3.1%) (3.2%) Income before income taxes 56.0 25.6 30.4 119% Net income attributable to (3.7%) (1.3%) (2.4%) owners of the parent 32.3 10.3 22.0 212% EBIT 58.8 28.7 30.0 1Q 2Q-4Q Total FY2020 Currency change Actual Forecast Forecast Actual Rate (YEN/US$) 109.5 105.0 106.0 106.0 0.0 For FX Rate (YEN/EURO) 132.0 125.0 126.9 124.6 2.3 sensitivity, Rate (YEN/RMB) 17.0 16.0 16.2 15.7 0.5 please refer to appendix 1. Rate (YEN/AU$) 84.3 80.0 81.0 76.0 5.0 Cash dividend per share (yen) *1 to be determined 20 - *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. © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 36
Business Results Consolidated revenue forecast by geographic region Consolidated revenue for FY2021 is expected to increase by 66.7 billion yen y-y, due to an increase in other regions, although decreasing in China, India, and Africa. (billions of yen) FY2021 FY2020 change Forecast Actual amount % Japan 211.5 24% 203.3 25% 8.1 4% Asia 68.9 8% 52.7 6% 16.2 31% India 46.8 5% 50.0 6% -3.3 -7% Oceania 145.0 16% 139.9 17% 5.0 4% Europe 99.0 11% 87.8 11% 11.2 13% N.America 149.4 17% 107.2 13% 42.2 39% L.America 14.2 2% 10.9 1% 3.4 31% Russia-CIS 34.7 4% 22.7 3% 12.0 53% M.East 20.5 2% 16.1 2% 4.5 28% Africa 30.3 3% 33.6 4% -3.3 -10% China 59.6 7% 89.1 11% -29.5 -33% Total 880.0 100% 813.3 100% 66.7 8% Overseas ratio 76% 75% © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 37
Business Results Mining revenue forecast Revenue of mining in FY2021 is expected to increase by 12% to 138.0 billion yen y-y, the same as the previous forecast. % shows sales ratio against total company sales [billions of yen] [ % ] shows changed ratio from the same period of previous year 18% 16% 14% 16% 15% 16% 15% [ 12%] Machine 15% Total [ 6%] 16% [ 23%] [ 34%] 15% [ 6%] © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 38
Business Results Value chain*1 revenue forecast Revenue of parts and services in FY2021 is expected to increase by 7% to 185.0 billion yen y-y, the same as the previous forecast. % shows sales ratio against total company sales [ % ] shows changed ratio from the same period of [billions of yen] previous year 39% 45% (*2) 40% 41% 43% [ 12%] [ 18%] 46% 35% [ 10%] [ 18%] [ 16%] [ 15%] [ 18%] 42% [ 16%] [ 9%] [ 20%] [ 24%] [ 4%] [ 7%] [ 18%] [ 9%] [ 2%] [ 6%] [ 25%] [ △1%] [ 26%] [ 28%] (*1) Value chain: Total of Parts & services, Solution business, Rental etc. other than new machine sales. (*2) Solution business: The business segment primarily intends to provide development, production, distribution of parts and service solutions for mining facilities and equipment after the sales made that are not included in the construction machinery business segment. © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 39
Business Results Comparison of consolidated income forecast Adjusted operating income for FY2021 is expected to increase by 29.3 billion yen y-y due to an increase in sales volume and model mix and depreciation of the yen, although there is an increase in material costs and overheads costs. Sales Volume 15.4 note : ( ) shows previous forecast as of April 2021 Model mix of value chain business14.3 Other model mix 15.2 Increase of expense linked to [billions of yen] production and sales -8.8 Decrease of general overheads 2.6 100 (-0.9) (-0.2) Increase of expense for sustained (52.6) 7.3 -14.6 growth -14.1 90 50.8 (-20.3) Selling price Material cost 80 -20.3 (0.9) Sales volume, model mix & others Overhead (-1.9) (62.0) 0.9 62.0 (-0.4)(58.0) 70 6.2 (29.3) -0.4 58.0 Expenses related structural reform 60 32.7 29.3 Foreign exchange rate Adjusted operating income Adjusted operating income income variance of adjusted operating expenses Other operating income and 50 28.2 Operating income 40 US$ 0.5 Operating income EUR 1.3 30 RMB 0.9 AU$ 1.2 20 10 0 FY20 FY21 FY20 FY21 Actual Forecast Actual Forecast Total variance excluding FX effect 23.1 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 40
Business Results Appendix 1: FX rate and FX sensitivity The forecast exchange rate for FY2021 was set within the expected fluctuation range for each currency. FX rate and FX sensitivity [billions of yen] FX rate FX sensitivity (2Q-4Q) FY21 Adjusted Currency FY20 1Q 2Q-4Q Total Condition Revenue operating Actual Actual Forecast Forecast income US$ 109.5 105.0 106.0 106.0 Impact by 1 yen depreciation 1.7 1.3 EURO 132.0 125.0 126.9 124.6 Impact by 1 yen depreciation 0.5 0.4 RMB 17.0 16.0 16.2 15.7 Impact by 0.1 yen depreciation 0.3 0.1 AU$ 84.3 80.0 81.0 76.0 Impact by 1 yen depreciation 1.6 0.2 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 41
Business Results Appendix 2: Detail of mining revenue [billions of yen] FY20 FY21 Actual Forecast Change 1Q 2-4Q Year 1Q 2-4Q Year 1Q 2-4Q Year America Excavator 3.2 7.3 10.6 1.9 4.8 6.8 -1.3 -2.5 -3.8 Dump Truck 0.3 1.8 2.1 0.7 1.8 2.5 0.4 0.0 0.4 Total 3.5 9.1 12.7 2.6 6.6 9.2 -0.9 -2.5 -3.4 Europe, Africa Excavator 3.2 12.1 15.3 6.2 14.7 20.8 2.9 2.6 5.5 and Middle East Dump Truck 2.0 10.3 12.2 3.7 10.2 13.9 1.8 -0.1 1.7 Total 5.2 22.4 27.6 9.9 24.8 34.7 4.7 2.5 7.2 Asia & Oceania Excavator 11.9 37.7 49.6 16.2 48.4 64.6 4.3 10.7 15.0 Dump Truck 7.7 23.1 30.8 5.1 21.4 26.5 -2.6 -1.7 -4.3 Total 19.7 60.8 80.5 21.4 69.8 91.1 1.7 8.9 10.7 China Excavator 0.2 0.5 0.7 0.2 0.4 0.6 -0.0 -0.1 -0.1 Dump Truck 0.0 0.1 0.1 0.0 0.1 0.1 0.0 0.1 0.1 Total 0.2 0.6 0.8 0.2 0.5 0.7 -0.0 -0.0 -0.1 Japan Excavator 0.3 1.3 1.6 0.1 1.5 1.6 -0.1 0.2 0.0 Dump Truck 0.0 0.4 0.4 0.0 0.6 0.6 -0.0 0.2 0.2 Total 0.3 1.7 2.0 0.1 2.0 2.1 -0.2 0.3 0.2 Total Excavator 18.9 59.0 77.9 24.6 69.8 94.4 5.8 10.8 16.5 Dump Truck 10.0 35.6 45.6 9.5 34.0 43.6 -0.5 -1.6 -2.0 Total 28.9 94.6 123.5 34.1 103.8 138.0 5.3 9.2 14.5 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 42
Business Results Appendix 3: Segment information The amortizations of PPA are included in the adjusted operating income of the solution business. The amounts of 0.3 billion yen are included in the first quarter of FY2021, and in the 1.1 billion yen in the forecast for FY2021. [billions of yen] Reportable segment FY2021 Construction Adjustments 1Q Solution Total Machinery *1 Actual Business Business Revenue 206.5 22.5 -0.9 228.1 Adjusted operating income 4.9% 10.1 7.5% 1.7 - 5.2% 11.8 [billions of yen] Reportable segment FY2021 Construction Adjustments Solution Total Forecast Machinery *1 Business Business Revenue 789.4 90.6 0.0 880.0 Adjusted operating income 6.9% 54.3 8.4% 7.7 - 7.0% 62.0 *1: Adjustments represent eliminations of intersegment transactions and amounts of companies that do not belong to any operation segment. © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 43
Company Outline and Topics Corporate Vision FY2021-1Q 1. Management Plan 2. Business Results 3. Company Outline and Topics © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 44
Company Outline and Topics Company Outline ・Company Name Hitachi Construction Machinery Co., Ltd. Stock Exchange Listings:Tokyo (#6305) ・Major Operations Manufacturing , sales and service of construction equipment, transportation equipment, and other machines and devices. ・Established 1 October, 1970 ・Capital 81.6 billion Yen (Hitachi, Ltd:50.81%) ・President Kotaro Hirano ・Subsidiaries Japan: 7 companies, Overseas: 74 companies Affiliates Japan: 3 companies, Overseas: 20 companies ・Number of Employees Consolidated :24,873 Non-consolidated :5,455 (March 31, 2021) © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 45
Company Outline and Topics Our Products and Revenue Construction Road Construction Hydraulic Excavator Mini excavator Wheel-drive Type Double-Front Work Wheel Loader equipment (Hybrid / ICT hydraulic excavator) Hydraulic Excavator Machine Value Chain Mining 43% Others Rental 5% 7% Solution Business 10% Dump Truck Ultra-large Hydraulic Excavator FY2020 Revenue Construction Value Chain 813.3 Construction Parts & New Machine business 52% Services (Billions of yen ) 11% Mining H-E Parts Bradken Parts & Services 10% Mining New Machine Mine management system ConSite 5% © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 46
Company Outline and Topics Sales Trend ( Billions of yen ) (%) 1,200 12,000 ‘08 the collapse ’19~ COVID-19 90 of Lehman Brothers Overseas revenue 海外売上高 80 1,000 10,000 Domestic revenue 国内売上高 70 800 8,000 Overseas revenue ratio 海外事業比率 60 ‘97 Asian Financial Crisis 50 600 ‘91 the bursting of 6,000 the Japan’s bubble economy 40 400 4,000 30 ‘85 Plaza Accord 20 200 2,000 10 00 0 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 ‘20 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 47
Company Outline and Topics Sales Trend-Decentralization in sales and profit ■Sales ratio in China decreased, regional decentralization in profit (FY10) (FY16) (FY21)Estimate China : 26% → 10% → 7% Asia & Oceania(Oceania) : 26%(10%) → 28%(13%) → 30%(16%) The Americas : 8% → 11% → 19% (billions of yen) Go Together 2013 GROW TOGETHER 2016 CONNECT TOGETHER 2019 Realizing Tomorrow’s Opportunities 2022 Chi na As i a & Oceani a The Ameri cas 1,200 Europe,Afri ca and M.Eas t Japan Ra�o of Chi na 35% Ra�o of As i a & Oceani a Ra�o of The Ameri cas 1,000 30% 25% 800 20% 600 15% 400 10% 200 5% 0 0% FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21(E) (billions of yen) US$ 114 101 92 85 79 82 100 111 120 109 111 111 109 105 105 Euro 161 156 129 112 108 108 135 138 132 119 130 128 121 125 125 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 48
Company Outline and Topics Global Network(Major sites) Russia Europe Americas China Middle East Japan India Asia Africa Oceania Sales & Service Manufacturing *Including parts remanufacturing © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 49
Company Outline and Topics Growth Potential of HCM Concentrating on the continuous structural reform to secure sales and profit +:Consolidation of joint venture business in India, Acquisition of Wenco, Bradken, and H-E Parts, etc. -:Withdrawal from engine manufacturing, temporal withdrawal of small-sized dump truck, non-consolidation of crane business, etc. Increase in sales and profit of parts & service utilizing ConSite® Increase in timely proposals to customers based on high accuracy machinery information Effect of customer-based service via direct sales and service Open innovation and Efficient R&D through synergy with Hitachi group Development of AC dump truck and AHS in short-time because of accumulated technology from performance in other sectors Expectation for further improvement via accumulated machinery information with AI analysis on Global e-service® Accelerate promotion of Collaborative Construction Equipment development and technological development for reducing CO2 emissions © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 50
Company Outline and Topics Growth Potential of HCM-1 Concentrating on the continuous structural reform to secure sales/profit Termination of Joint Venture Relationship with Deere Signed a MoU with ABB Investment in Australian Startup Baraja Establishment of Synergy Hire (Rental in UK) Acquisition of WENCO Investment in ACME(Rental in US) Acquisition of Bradken Consolidation of Hitachi Brand Wheel loaders joint venture in N. America business in India Acquisition of H-E Parts 1974 2009 2010 2012 2016 2017 2018 2019 2020 2021 Withdrawal from engine Temporal withdrawal of manufacturing small-sized dump truck Discontinuation of Non-consolidation of forklift business crane business © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 51
Company Outline and Topics Acquisition of Two Solution Business Companies Aiming to deepen the value chain of the mining business Bradken H-E Parts 1922: Company established 2006: Company established March 2017: Restructured as subsidiary of December 2016: Restructured as subsidiary of HCM HCM Expanded to Australia, USA, Africa, Europe, Expanded to Australia, USA, Chile, Canada, and Asia, China, and other areas other areas Main strength: Technical capabilities in Main strength: Comprehensive after-market molding and casting solutions GET* , etc. Liners for Castings for fixed Specialty Comprehensive Services & parts for Comprehensive, high- Comprehensive crushers and plant mining castings, etc. solutions for crushing horsepower diesel undercarriage parts mills, etc. equipment, etc. mobile mining equipment as well engine and GET for mobile equipment as on-site and off- remanufacturing construction site services & solutions equipment repairs (including rebuilding) *Ground Engaging Tools © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 52
Company Outline and Topics Accelerating our open innovation in the mining business Signed a MoU with ABB to collaborate to target net-zero emissions from mining machinery Signed: March 2021 • Applying ABB’s electrification, automation and digital solutions to mining machinery • Providing solutions that streamline and optimize overall mining operations Rigid dump truck on trolley line Investment in Australian Startup Baraja to accelerate development for autonomous operation Invested: March 2021 • Accelerating the development of LiDAR Images captured by LiDAR products with mine site specifications and strengthening local support. • Applying the improvement of AHS and .* LiDAR is an abbreviation for Light Detection And Ranging. This technology detects the shape of an object autonomous operation of ultra-large and the distance to the object by irradiating the object hydraulic excavators. with a laser beam and capturing the reflected light with a sensor. © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 53
Company Outline and Topics Beginning Joint Development of a Full Battery Rigid Dump Truck with ABB Toward realization of "Net Zero Emissions Mining,” aiming to start experiments at a customer's mine by mid-2024 Limit the volume of batteries by a trolley charging system • Control initial and lifecycle costs • Reduce vehicle weight to maximize payload capacity. • No need to stop for recharging; realize a high operating rate. Rigid dump truck model with trolley © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 54
Company Outline and Topics Growth Potential of HCM-2 Enhancement in proposals and increase in sales and profit of parts & service utilizing Big Data Analysis Global e-Service® Information ® Sign of machines and sensors diagnostic ConSite®OIL※1 Periodical report Customer Number of units in operation Urgent report Approx.330,000 Accumulated know-how Big Data • Service know-how Analysis • Failure diagnostics • Technological knowledge ConSite® Pocket※2 Inspection/ Enhancement Maintenance/ maintenance in proposals Recommendation of Service Manual parts that often need Information to be replaced at the ConSite® ConSite® same time Shot※3 Health Check※4 ※1:OIL sensing service for hydraulic oil or engine oil Sales dealers (when sensors attached) / service representatives ※2:App for customers and sales dealers to receive reports ※3:Tools for service reps to inspect & propose for sites ※4:App for automated health check of equipment due to engine Order operation sound and measurement of hydraulic pump pressure availability; HCM’s ※5:Order system for HCM’s genuine parts over the Internet at any time ConSite®Parts anytime, Parts and from any location. It enables to check stocks, price, delivery time and anywhere Warehouse recommended parts that often need to be replaced at the same time. Web Shop ※:Areas for direct sales/service; Japan, Oceania/Asia, S.Africa, Netherlands, UK and USA(WL) © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 55
Company Outline and Topics Service Solution - ConSite 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 Fully automated system for remote fault prediction KPI: Remote prognostic detection rate* by sensing 113 countries & regions and 33 languages are covered. Failure prognostic detection rate ConSite adoption rate FY2023 Target 90% 18 Number of contracts: 16 75% 158,000 units 14 71% ※As of the end of March 2021 12 58% 37% 10 20% 8 FY2022 Target 6 FY15 FY17 FY18 FY19 FY20 adoption rate 4 *prognostic detection rate 90% 2 Percentage of all failure patterns occurring in major components of hydraulic excavators (excluding accessory failures) that can be 0 notified and covered in ConSite ® Alarms Report 2014 2020 © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 56
Company Outline and Topics Topic: Digital Solutions to Resolve Problems at Mine Sites Developed “ConSite® Mine”remotely monitoring mining machinery on 24/7 basis, with Wenco. Releases in 2021. • Visualize prediction the occurrence of cracks in the boom or arm by utilizing IoT, AI and applied analysis technologies • Analyzing operator’s operational patterns and fuel consumption • Improving productivity and safety, reducing life-cycle costs Arm Boom ® Analyzing loads to ultra-large excavator boom or arm Dashboard (example) © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 57
Company Outline and Topics Growth Potential of HCM-3 Efficient R&D through synergy with Hitachi group Hitachi Group Technology Development to HCM’s Product and Service Transportation Automobile Energy Big data AI Solution Linkage® ConSite®, AHS, Wenco, ICT equipment Improvement in energy productivity at factory※1 ※1:Utilizing Hitachi’s technology Emilia®; Integrated management of energy data and facility © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 58
Company Outline and Topics System Platform for Autonomous Construction Machinery Development of a System Platform “ZCORE® ” for Autonomous Construction Equipment • Enabled the machinery to recognize, judge and execute, which operators conventionally do • Easy addition and customization of functions, adapting various customer needs more quickly • Applied to all kinds of our construction machinery, regardless of product type or size © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 61
Verification Tests to Start Directed Company Outline and Topics at the Development of Autonomous Ultra-Large Hydraulic Excavators • Utilizing the knowledge from many years of research and development in the remotely control technology to cater to the needs of customers • Effective use of customer-owned equipment to retrofit onto the EX-7 series Ultra-large hydraulic excavator, EX3600-7(right) Current status and future schedule Until 2023: Development of remote operation systems including working assistance systems Until 2026: Combine remote control systems with partial operation automation (autonomous drilling and loading functions) Until 2030: Added autonomous operation function © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 62
Company Outline and Topics Strengthening ICT Construction Solutions Wide-ranging support in response to customer issues related to ICT construction Want to use more drones When will the dump come Want to know the volume easily Can’t use the Internet here.. ? ???? Solution Linkage® Assist Assist operation with 2D/3D machine control Construction Construction record Chart Data Solution Linkage® Point Cloud Solution Linkage® Mobile Prepare 3D point group data easily from drone imagery Visualization of sites with smartphones and tablets Solution Linkage® m3 Cloud Solution Linkage® Survey Solution Linkage® Wi-Fi Share data with remote location, Improving the communication environment Easy measurement with smartphones, and introducing an IoT to the site also compatible with volume calculations such as headquarters © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 63
Company Outline and Topics Proactively promoting battery-powered mini excavators in response to growing demand for electrification Electric Mini Excavators now on sale since 2020 by collaboration between Japan & Europe • Demand for electric construction machinery is growing, as the shift to electric vehicles becomes clear. • 8-ton class has received orders for about 25 units in Europe for 2020, target 50 units for 2021. • 5-ton class is scheduled to be released for Japan and Europe during FY2021. • Equipped with lithium-ion batteries and powered by both battery and commercial power. European HCM* Application HCM Tierra Center Battery-powered mini excavator Development based on existing models with a short rear end swing design to rapidly respond to European market developed with an emphasis on work needs in narrow spaces * Hitachi Construction Machinery 2-ton class prototype and 8-ton class on sale 5-ton class prototype © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 64
Company Outline and Topics Strengthening the system to meet new market needs in China Expanding the product line-up of excavator for civil construction use • Mainly targeting self-employed operators, who are the volume zone of demand • Realizing the best suited specifications and structure for urban civil construction and the high cost-effectiveness • Utilize the operating data of the models for new product development and sales strategy in the future. 6-ton class 12-ton class 20-ton class Strengthening our group’s sales and service systems • Newly opened three regional offices, Chengdu, Beijing, Shanghai to support dealers in their nearby regions • Holding seminars on systematic sales methods and sales process management. Collaborate on rental and used equipment businesses, deepen value chain business • Selling our rental equipment as high-quality used equipment National Dealer "PREMIUM USED“. Conference © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 65
Company Outline and Topics Strengthening marketing and sales in Southeast Asia User testing of the excavators for civil construction use is underway from April 2021. • Considering the best-suited specifications and structure for urban civil construction • Reflecting the voices of local customers in product development User testing Accelerating the expansion of used equipment businesses, and deepening value chain business • Procuring local used equipment and expanding Vietnam them as our guaranteed and refurbished ones Thailand Philippines • Creating high-quality used equipment from our rental machines ● Malaysia • ConSite® provides manufacturer-quality maintenance and service after the sale ● Indonesia 【 Area of Coverage 】 Guaranteed and refurbished used equipment (PREMIUM USED+REFURBISHED USED) ● Rental business(PREMIUM RENTAL) Refurbished used Guaranteed used © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 66
Company Outline and Topics Used Equipment Expansion of sales of used equipment from Japan (auction business) □Hosting auctions of 3500 units per year □Sales of good-conditioned used equipment, which made possible through the distinctive service as a manufacturer Auction venue of HCM Japan Japan China Expansion of Certified / Refurbished Used equipment’s sales □Sales of well-maintained, high-value added used equipment in Japan, China, Asia and Europe, etc. © Hitachi Construction Machinery Co., Ltd. 2021. All rights reserved. 67
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