Corporate Vision

Public Relations & Investor Relations Dept.

Corporate Brand & Communications Div.

FY18-4Q
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.
 Management Plan
1

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

2020VISION
“Close and reliable partner" anywhere on the earth
with the best solutions through Kenkijin Spirit

Mid-term Management Plan

“CONNECT TOGETHER 2019”
【FY2017-FY2019】
April 24, 2019
Kotaro Hirano
Representative Executive Officer
Executive Officer, President & CEO
 Management Plan
Main Points of “CONNECT TOGETHER 2019” 3

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

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

 Management Plan
Changes of macro business environment 4

Mega Trend
Change Business Model
▪ Aging, labor shortage New machine sales Value chain model
▪ Tightening of Environmental
regulation (SDGs)
▪ IoT/Digital revolution (units)
▪ Electrification /Automation Utilizing
Operating data data by AI
(Accumulated)
Customer Needs Change New
▪ “Ownership to “Sharing / Rental” business area
▪ Tangible goods to intangible goods Value chain
– Operation support / Automation business
– Operation management – from
machine to entire construction site Number of units
▪ Safety, Environmental Regulation in operating
*Include rental & used
Core Competence of OEM
Base
▪ Digital Technology
▪ Big Data/AI

Technology Solution
・Engine/EV ・ Information‐oriented
Number of sales
・Internal construction
manufacturing ･ Autonomous operation
of major component ・ One Stop service 00 02 04 06 08 10 12 14 16 18
・ Preventive maintenance
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved. 4
 Management Plan
Deeping Value Chain 5

Value chain ratio

FY2016: 35% FY2019 Forecast: 44%

Value Value
New New
Other product group chain chain
machinery machinery
 Backhoe loader  Skid-steer loader
 Bulldozer  Crawler crane

Main products

Marketing
Products

New machinery
R&D

Service

Parts

Used machinery

Rental

Parts remanufacturing

Finance
Production
Procurement
Logistics

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

Value chain
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.
 Management Plan
Deeping Value Chain – Progress - 6

 Value chain sales is expect to increase steadily

 Promote parts and service business through IoT utilization and
rental &used business enhancement

Initiatives to grow value chain

Value chain sales ratio Solution Business
(B JPY)
500 Bradken・H-E Parts
35% 40% 39% 44%  Expansion of Chile facility/Entering Southern Africa
 Development of next-gen GET (mining consumables)

400 Used
 Global expansion of certified used equipment
business
300
Rental
 Europe: Establishment of Synergy Hire Ltd. in UK
200  Americas: Rental business promotion (ACME)
 Europe&China: Re-rent model promotion

100 Parts and Service

 Global expansion of ConSite (over 129k units)
 Development and global expansion of ConSite OIL
0  Expansion of the mining remanufacturing business
FY16 17 18 19
Forecast
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.
 Management Plan
Deeping Value Chain 7

ICT・IoT Solution Mining：Autonomous Operation

Solution Linkage
Autonomous
Machine & Site Management Haulage
-> Big Data System (AHS)
Avoid Machine Downtime dump trucks
->Predictive Diagnosis

Autonomous
 Connect Fleet Management
System to customer’s system
& database
 Propose total asset
management which supports
management decision

Connected
C A S E Electric
Digital
Technology
Sharing Utilization

Rental・Sharing Electric Product

Investment in North American Rental Establishment of a Joint Venture
USA Business(ACME, 2018) Company to Develop Electric
zero-emission
Construction Machinery
electric mini
UK Establishment of Synergy Hire Ltd(2019) (Germany, with KTEG,2018)
excavator *
＊Prototype at bauma2019 exhibition. Release is under consideration
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.
 Management Plan
Deeping Value Chain -Expand Rental Business- 8

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

Background of Rental Business

Rental Business
 Expansion of rental business at Customer (HCM)
Japan
Hitachi Construction Machinery -Not want to increase -High profit ratio
Japan asset Service business
-Want to use machine -Expand rental
much with application machine to used
 Investment in ACME market
North  Increase of product range
America in cooperation with HCM
Rental
New

 Management as HCM asset

Europe  Establishment of Synergy Hire (UK)  Build-on Rental + young used equipment
business model
 Analyze each regional scheme & expand
China  Promotion at sales subsidiary in China most suitable one to each region

 Promotion at sales subsidiary in Used Service

Australia Australia in cooperation with Delta Equipment
Rental
RentalRental
business sales
Business revenue
Sales
(B JPY)
ConSite utilization 70
Operating data management & utilization of
50
all units incl. used
＊Business on operating machine business
30
＊Parts & Service on used equipment
FY 17 18 19 (E) 20 21
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.
 Management Plan
Global Restructuring 9

・Integration of production and sales (FY17) Construction

・Mining bucket production (FY17)
machinery business
・Factory ・Divestment of the second ・Divestment of the Solution business
integration factory (FY16) company (FY16)

・Factory reformation (FY17)

・Factory closing (FY16)

・Reorganization of
manufacturing
・Production rationalization ・Integration of
・Factory capability production and sales
expansion (FY18)

・Liquidation (FY18) ・Factory closing (FY18)

・Capacity expansion at
parts remanufacturing
factory
・Liquidation (FY18)
・Subsidiary integration (FY18)
・Integration of company (FY17)
・Liquidation (FY18) ・Establishment of engine
remanufacturing site (FY18)

・New factory
establishment (FY18)

・Facility expansion for

mining service
IT

COGS ratio
Capital
78 (％)
77.3 Investment
76
Plan
74
72.5
71.2
Sales Manufacturing
72
70
・Factory closing (FY18)
68
FY16 17 18 19

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

 Management Plan
Domestic Restructure : 10
Status of business structure reforms from now to 2022

Major restructuring of development and production bases to strengthen global competitiveness

■FY17～19 : Transferred large excavators from Tsuchiura Works to Hitachinaka-Rinko Works
*scheduled by 1st half year
■April 2019 : Implemented an absorption-type merger of KCM Corporation

■FY18～19 : Transferred components for wheel loaders from Banshu Works to Hitachinaka Works
*scheduled by 1st half year
...etc

Tsuchiura Works Hitachinaka-Rinko Works

Development: Mining Production: Mining
Construction
Components Hitachinaka Works
Production: Construction Production: Components for mining
and construction
Ryugasaki Works
Production: Main parts for construction
Kasumigaura Works
Banshu Works ●● Production: Components for mining
● ● and construction
●●
Production: Main parts for compact
HCM Tierra Shiga Works
Development: Compact and main parts for compact
Production: Compact

HCM Tierra Osaka Works

Production: Main parts for compact
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.
 Management Plan
Numerical Management Targets 11

To be a company with higher tolerance against changes in business environment, we

improve profitability and efficiency through enhancement of value chain and
business structure reform.
(The company aims to achieve each target under the business environment and FX rate mentioned in
the Mid-term Management Plan announced in March 2017)

CT2019 CT2019 CT2019

CT2019
March March 2020 March 2020
March 2019
2018 Forecast Guidance
Actual
Actual (※As of April 2019) (※As of April 2017)

FX rate ￥/$ 110.9 111.0 100.0 100.0

￥/€ 130.1 127.9 110.0 110.0
￥/RMB 16.8 16.6 15.0 15.0

Global Demand 220K units 230K units 220K units 170K units
※(y-o-y)+27％ ※(y-o-y)+6％ ※(y-o-y)△5％
Environment of
Revenue billions of yen 959.2 1,033.7 950.0 850.0
Adjusted operating Over 9%
9.8％ 11.3％ 9.1％
income ratio
ROE 14.1％ 14.7％ Over 9% Over 9%
Net D/E ratio 0.33 0.49 0.4or less 0.4or less

Approximately 30% Approximately 30%

Dividend payout policy 30.1％ 31.0％ or more or more
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.
ESG Management Management Plan
Relevance between SDGs and the sustainable growth strategies that 12
leverage our strengths

 Streamlined relevance between our activities and SDGs and set 10 key goals
 Established Sustainability Promotion Division in April 2019
2017 ・Expanded sales of certified used equipments
・Launched ConSite OIL CSV target by 2030
2018 ・Established parts remanufacturing factory for H-E Parts
・Won the Energy Conservation Grand Prize Corporate target
・Received orders for ultra- large electric hydraulic excavators CO2 reduction rate by
2019 ・Developed prototypes of zero-emission electric excavators product ▲33% (from 2010)
＊CSV：Creating Shared Value

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

 Market Environments
13

Corporate Vision
Contents
1. Management Plan
2. Market Environments
3. Operating Results & Forecast
4. Company Outline and Topics
 Market Environments
Global Demand Trend for Hydraulic Excavators 14

※Estimates by HCM, Excluding Chinese manufacturers

※Distributing, copying, or forwarding prohibited
（K units）
250 FY2019 Outlook
234 －5％～±0% Year-on-Year Change
225
220 '17 '18 '19
225
211
202 222 Total +27% +6% -5%
60
200 China +80% +11% -8%
70 183 54 55
42
50 173 China Russia,CIS,
175 +77% +19% -4%
30
E Europe
155 23
30
24 23 Africa +6% -6% +2%
150 Others
39
34 19 Middle East +1% -45% +16%
38 32 19
125 24 52 Latin +27% +0% +0%
49 48 Asia & Oceania
36
Others +24% -6% +1%
32 41
100 44 32 ＊Incl. India India +21% +10% -1%
48
33 North America Indonesia +55% +12% -17%
24 29 33
75 27
26
25 Others +13% -1% -11%
24
19 Asia & Oceania +22%
50 27 +5% -8%
31 38 42 Western Europe
25 30 35 39 N America +18% +13% -1%
27
25 W Europe +7% +11% -7%
40
28 31 Japan
23 24 23 25 24 24 Japan +8% -4% +0%
0
FY '11 '12 '13 '14 '15 '16 '17 '18 '19

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

※Emerging Countries: China, Asia/Oceania, and others
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.
 Market Environments
＜Japan＞ Fourth Quarter 15
（from January to March 2019）

■While housing investment and public investment increased, capital investment remained flat y-o-y.
■Demand for hydraulic/mini excavators and wheel loaders increased (38%, 5%, and 13% y-o-y,
respectively.)

Market Environment: Housing/Public Spending and Capex (y-o-y) (K units) Demand Trend for Mini Excavators
40% 20 150%
Public spending *Source: MLIT, Cabinet
Office, and Construction
*Estimates by HCM
（Public work orders） Surety Company
100%
20% 15
50%

0% 10 0%

-50%
5
-20% Capex
（Orders for machinery, New housing starts -100%
excluding foreign demands) (number of houses) 0 -150%

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

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

2Q
3Q
4Q
FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY18/1Q
-40%
2Q

3Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q

4Q

2Q
3Q
4Q

2Q
3Q
4Q
FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

FY18/1Q

(K units) Demand Trend for Hydraulic Excavators (K units) Demand Trend for Wheel Loaders
20 150% 20 150%
*Estimates by HCM *Estimates by HCM
100% 100%
15 15
50% 50%
10 0% 10 0%
-50% -50%
5 5
-100% -100%
0 -150% 0 -150%
FY12/1Q

4Q
FY13/1Q

FY14/1Q

FY15/1Q

3Q

FY16/1Q

FY17/1Q

FY18/1Q
2Q
2Q
3Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q

4Q

2Q
3Q
4Q

2Q
3Q
4Q

3Q
4Q

2Q

2Q
2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

3Q
4Q

2Q
3Q
4Q

3Q
4Q
FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

FY18/1Q
 Market Environments
＜Europe＞ Fourth Quarter 16
（from January to March 2019）

■Throughout the Eurozone, GDP growth rate slightly increased.

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

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

Demand Trend for Mini Excavators
2% 25 100%
*Source: IMF, etc UK *Estimates by HCM
Others
20
50%
1% Germany Germany
15
0% Italy
France 10
0% France
-50%
EUR 5 UK
zone
-1% 0 -100%

FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

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

3Q
2Q
3Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q

4Q

2Q
3Q
4Q
CY12/1Q

CY13/1Q

CY14/1Q

CY15/1Q

CY16/1Q

CY17/1Q

CY18/1Q

(E)

(K units)
Demand Trend for Hydraulic Excavators Demand Trend for Wheel Loaders
(K units)
20 100% 20 100%
*Estimates by HCM *Estimates by HCM
Others
Others
15 50% 15 50% Germany
Germany

10 0% 10 0% Italy
Italy
France
France
5 -50% 5 -50%
UK
UK
0 -100% 0 -100%
FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

FY18/1Q
2Q
3Q
4Q
2Q
3Q
4Q
2Q
3Q
4Q
2Q
3Q
4Q
2Q
3Q
4Q
2Q
3Q
4Q
2Q
3Q
4Q
FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

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

(E) (E)
 Market Environments
<North America> Fourth Quarter 17
（from January to March 2019）

■Housing starts decreased y-o-y & growth rate for private construction spending slowed y-o-y.
■Demand for hydraulic excavators remained almost flat, while demand growth rate for mini excavators
increased slightly. (±0% and +4% y-o-y, respectively).

(K units) GDP Growth Rate, Housing Starts in US (K units) Demand Trend for Hydraulic Excavators
2000 10% 20 100%
GDP (y-o-y/Right axis) *Estimates by HCM

1500 5% 15 50%

1000 0% 10 0%

Housing starts (Left axis)

500 （Seasonally adjusted）
-5% 5 -50%

0 -10% 0 -100%

FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

FY18/1Q
2Q

2Q
2Q

3Q

2Q
3Q
4Q

3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

3Q
4Q

2Q
3Q
4Q

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

2Q
3Q
4Q

3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q

4Q
CY12/1Q

CY14/1Q

CY15/1Q

CY16/1Q

CY17/1Q

CY18/1Q

CY19/1Q
CY13 1Q

(E)

＊Bureau of Economic Census, US Census Bureau

Construction Spending in US (y-o-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%

75% 0 -100%
3Q
2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q

4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q
CY13/1Q

CY18/1Q
CY12/1Q

CY14/1Q

CY15/1Q

CY16/1Q

CY17/1Q

CY19/1Q

FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

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

3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q
(E)

＊Bureau of Economic Census, US Census Bureau

 Market Environments
＜China＞ Fourth Quarter 18
（from January to March 2019）

■The GDP growth rate was 6.4%.

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

GDP and Fixed Asset Investment Quarterly Demand for Hydraulic Excavators by Region (y-o-y)
（％）
*Foreign manufactures only
40% 10 FY18 1Q/2Q/3Q/4Q *Estimates by HCM
(y-o-y)
30% North East
-2%/-13%/-39%/-20%
GDP (right axis) (6.4%) North West
20% 5 41%/-12%/-5%/2%
(6.3%) North China
10% Accumulated Fixed Asset 69%/34%/54%/20%
Investment (y-o-y) (left axis) South West
East China
0% 0 43%/0%/-22%/-17%
70%/17%/-7%/13%
3Q

2Q
2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q

4Q

2Q
3Q
4Q

3Q
4Q

2Q
3Q
4Q
CY12/1Q

CY13/1Q

CY14/1Q

CY15/1Q

CY16/1Q

CY17/1Q

CY18/1Q

CY19/1Q
Total China South Middle China
55%/11%/-10%/-2% 64%/17%/-12%/-10%
＊National Bureau of Statistics of China

Demand Trend for Hydraulic Excavators Demand Composition by Class for Mini Excavators and Hydraulic Excavators
(K units) *Estimates by HCM
Y-o-y comparison data is limited to foreign manufactures only 100%
70 150% 40t～
60 Domestic 20t and 30～39t
100% 80%
Foreign over
50
50% 21～29t
40 60%
0% 20t
30
-50%
40%
20 20t 10～15t
10 -100% 20% below 6～10t
0 -150%
～6t
2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q
FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

FY18/1Q

0%
FY15…

FY16…

FY17…

FY18…
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q
＊Estimates by HCM
Foreign manufactures
only
 Market Environments
<(Supplementary Information) Chinese Market> 19
(K units) Monthly Demand Trend for Hydraulic Excavators (Foreign Manufactures only)
(Compared to the same month in the previous year)
15
*Estimates by HCM 280%
y-o-y
240%
200%
10
160%
-15% +58% +83% +109% 120%
80%
5 40%
0%
+132% +102% +100% +45% -40%
+55% +11% -10% -2%
0 -80%
4月 May.Jun.
Apr. 5月 6月 Jul.
7月 Aug
8月 .Sep.
9月 Oct.
10月 Nov.
11月 Dec.
12月 Jan.
1月 Feb.
2月 Mar.
3月 4月Apr. 5月 6月 7月
May.Jun. 8月 .Sep.
Jul. Aug 9月 10月
Oct. 11月
Nov.12月 1月 Feb.
Dec.Jan. 2月 Mar.
3月 4月Apr. 5月 6月 Jul.
May.Jun. 7月 Aug
8月 .Sep.
9月 10月 11月 12月
Oct. Nov. 1月 Feb.
Dec .Jan. 2月 Mar.
3月

FY2016 FY2017 FY2018

(K units) Demand Trend for Hydraulic Excavators (y-o-y) (Foreign Manufactures only)
*Estimates by HCM
16
【Chinese New Year】
14 Jan 28, 2017 FY2018 Actual
12 Feb 16, 2018
Feb 5, 2019
10
* Actual result (From April to March)
FY2017 Actual
8
FY2016 Actual
6

0
4月
Apr. 5月
May. 6月
Jun. 7月
Jul. 8月
Aug. 9月
Sep. 10月
Oct. 11月
Nov. 12月
Dec. 1月
Jan. 2月
Feb. 3月
Mar.
 Market Environments
<Asia, Oceania, and India> Fourth Quarter 20
（from January to March 2019）

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

Demand Trend for Hydraulic Excavators in Asia & Oceania (％) GDP Growth Rate in Major Countries (y-o-y)
(K units) 20
10 50% *Source: IMF, etc
*Estimates by HCM
15 Indonesia
Thailand India
10
5
8 0%
0
Malaysia
-5 Singapore

-10
6 -50%

3Q
3Q

3Q

3Q

3Q

3Q

3Q
CY12/1Q

CY13/1Q

CY14/1Q

CY15/1Q

CY16/1Q

CY17/1Q

CY18/1Q
* Calculation criteria for GDP growth rate in India was revised in CY2013 2Q
Others
4 -100% Demand Trend for Hydraulic Excavators in India
ＮＺ
(K units) *Estimates by HCM
100%
Australia 6

Thailand 5 50%
2 -150% 4
Singapore
3 0%
Malaysia 2
-50%
Indonesia 1
0 -200%
0 -100%
FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

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

FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

FY18/1Q
2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q
(E)
(E)
 Market Environments
<Russia and the Middle East> Fourth Quarter 21
（from January to March 2019）

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

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

Foreign Exchange Rate of the Ruble Demand Trend for Hydraulic Excavators in Russia
0.038 (K units)
5 *Estimates by HCM
200%
0.034 Against *Ex-Works base
US$ 4 *Incl. Local manufacturing
0.03
Against 100%
0.026 EUR€ 3

0.022 2
0%
0.018
1
0.014
0 -100%
0.01

FY14/1Q
FY12/1Q

FY13/1Q

FY15/1Q

FY16/1Q

4Q
FY17/1Q

FY18/1Q
2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q

2Q
3Q
4Q

2Q
3Q
4Q
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 (E)
*According to HCM’s research

Price Trend of Crude Oil and Natural Gas (Natural Gas Demand Trend for Hydraulic Excavators in the Middle East
(US$) Index ）
(K units)
130.00 140.00 5 100%
*Estimates by HCM
*Ex-Works base
Natural Gas 120.00 4 (Turkey: retail-prices base)
105.00 50% Others
(Right axis)
100.00 3
UAE
80.00 0%
80.00 2 Saudi
Arabia
55.00 -50%
Crude Oil 60.00 1
Turkey
（Left axis）
30.00 40.00
0 -100%

2Q
2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

2Q
3Q
4Q

3Q
4Q

2Q

4Q

2Q
3Q
4Q
FY12/1Q

FY13/1Q

FY14/1Q

FY15/1Q

FY16/1Q

FY17/1Q

FY18/1Q
３Q
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
*Created by HCM , the source from IMF HP (E)
*Natural Gas Index (2010=100)
 Market Environments
<Mining Machinery> FY2018 (from April 2018 to March 2019） 22

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

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

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

(Units) Demand by product (Units) Demand by region

3,000 3,000
Central and South America
Dump Trucks (over 150t) North America
2,500 2,500
Ultra-large Excavators Europe Russia CIS
(over 100t) Oceania
2,000 2,000 Asia
Africa and Middle East
1,500 1,500

1,000 1,000

500 500

- 0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
※ According to HCM’s research
 Market Environments
<(Supplementary Information) BB Ratio> 23

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

600%
500%
400%
300%
200%
100%
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

BB Ratio (Dump Trucks, over 150t)

600%
500%
400%
300%
200%
100%
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

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

Non-consolidated basis (average of 6 months)
 Operating Results & Forecast
24

Corporate Vision
Contents
1. Management Plan
2. Market Environments
3. Operating Results & Forecast
4. Company Outline and Topics
 Operating Results & Forecast
Summary of consolidated results 25

■Revenue increased by 8% to 1,033.7 billion yen compared to the previous year due
to the increase in sales volume.
■Adjusted operating income and net income attributable to the owners of the parent
were the record highest level ever.
note: ＜ ＞ shows previous forecast as of Jan 2019 (billions of yen)
FY2018 FY2017
change
Actual Actual
＜1,000.0＞
Revenue 1,033.7 959.2 8%
Adjusted ＜100.0＞
operating income *1 (11.3%) 116.8 (9.8%) 93.6 25%
＜94.0＞
Operating income (9.9%) 102.3 (10.0%) 95.7 7%
Income before ＜92.0＞
income taxes (9.9%) 102.7 (10.0%) 95.6 7%
Net income attributable to ＜58.0＞
owners of the parent (6.6%) 68.5 (6.3%) 60.0 14%
EBIT *2 ＜94.9＞ (10.2%) 105.6 (10.2%) 98.1 8%
Rate (YEN/US$) ＜107.9＞ 111.0 110.9 0.1
FX Rate (YEN/EURO) ＜126.6＞ 127.9 130.1 -2.2
rate Rate (YEN/RMB) ＜16.2＞ 16.6 16.8 -0.2
Rate (YEN/AU$) ＜81.0＞ 80.9 85.7 -4.8

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

*1 "Adjusted operating income" is calculated by excluding "Other income" and "Other expenses" from "Operating Income" listed in
Consolidated Statements of Income.
*2 "EBIT" stands for Earnings Before Interests and Taxes, and is calculated by excluding "Interest income" and "Interest expenses" from
“Income before income taxes”
*3 “Cash dividend per share”: The Company will pay dividends linked to its consolidated business results twice, interim and year end, in
the fiscal year and aim to achieve a consolidated dividend payout ratio of approx. 30% or more.
 Operating Results & Forecast
Revenue by geographic region (consolidated) 26

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

FY2018 FY2017 change

Actual Actual
amount %

Japan 206.1 20% 193.2 20% 12.9 7%

Asia 88.5 9% 75.4 8% 13.1 17%

India 67.9 7% 65.1 7% 2.9 4%

Oceania 163.9 16% 151.9 16% 12.0 8%

Europe 111.6 11% 104.2 11% 7.5 7%

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

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

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

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

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

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

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

Overseas ratio 80% 80%

 Operating Results & Forecast
Mining revenue 27

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

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

[%] shows changed ratio from the same period of

21% previous year 16%
[ 17%]
14%
[ 72%]
16% 15%
15% 16% New
machine
total
[ 45%]
[ 35%]

[ 5%]
 （*1) Operating Results & Forecast
Value chain revenue 28

■Revenue of the value chain business in FY2018 increased by 5% or 17.2 billion yen
year on year.
％ shows sales ratio against total company sales
(billions of yen)
[%] shows changed ratio from the same period of
previous year
39%
（*2) 40%
[ 5%]

[ 2%]
35%
[ 7%]

[ 4%]

[ 4%]

[ 5%]

[ 5%]

(*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.
 Operating Results & Forecast
Comparison of consolidated profit & loss 29

■Adjusted operating income increased by 23.3 billion yen year on year mainly due to
an increased sales volume and selling price.
note : ( ) shows previous forecast as of Jan. 2019
Handling of increase on production -3.2
Sales volume 36.0
Improvement of profitability -3.5
Model mix of value chain business 3.4
Increase of personnel expenses -7.1
Decrease in PPA expense 3.1
Decrease in PPA expense 1.1

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

Total variance excluding FX effect 28.3 *1

*1 Other operating income and expenses :FY18 includes 8.8 billion yen of
provision to the excess in payment of value added tax in China.
 Operating Results & Forecast
Consolidated statement of income 30

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

FY2018 FY2017 change

Actual Actual amount %
Revenue 1,033.7 959.2 74.6 8%
Cost of Sales (71.2%) 735.5 (72.5%) 695.3 40.2 6%
SGA expenses (17.5%) 181.4 (17.8%) 170.3 11.1 7%
Adjusted operating income *1 (11.3%) 116.8 (9.8%) 93.6 23.3 25%
Other Income/expenses -14.5 2.2 -16.7 -
Operating income (9.9%) 102.3 (10.0%) 95.7 6.6 7%
Financial income/expenses -4.3 -4.5 0.2 -4%
Share of profits of investments
accounted for using the equity method 4.7 4.4 0.4 8%
Income before income taxes (9.9%) 102.7 (10.0%) 95.6 7.1 7%
Income taxes 28.5 26.4 2.1 8%
Net income (7.2%) 74.2 (7.2%) 69.2 5.0 7%
Net income attributable to
owners of the parent (6.6%) 68.5 (6.3%) 60.0 8.5 14%

Comprehensive income 61.9 67.7 -5.8 -9%

*1 "Adjusted operating income" is calculated by excluding "Other income" and "Other expenses" from "Operating Income"
listed in Consolidated Statements of Income.
Summary of quarterly consolidated revenue and
operating income/loss (ratio) Operating Results & Forecast 31

(billions of yen)
2015 2016 2017 2018
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue 177.4 187.7 184.1 209.2 161.3 173.6 172.1 246.9 211.5 228.8 243.6 275.3 240.2 250.2 252.8 290.5
Adjusted operating income/loss 5.5 11.0 -1.2 8.1 2.4 3.6 5.0 17.3 13.2 21.0 31.5 27.5 27.6 25.8 31.8 31.7
Operating income/loss 4.9 11.1 -3.8 21.8 3.7 0.7 3.8 15.5 13.4 22.5 32.4 27.1 25.7 24.8 30.8 21.0

(billions of yen)
450.0 18.0%
Revenue
400.0
Adjusted operating income/loss Ratio 13.3%
12.6%
350.0 Operating income/loss R atio 11.5% 10.9% 13.0%
9.8% 12.9% 10.0% 10.3%
300.0 10.4% 12.2%
9.9% 10.7% 9.9%
250.0 7.0% 9.2% 8.0%
5.9% 6.3%
3.9% 7.2%
200.0 5.8%
3.1% 2.9% 6.3% 6.2%
2.3%
150.0 2.8% 2.1% 3.0%
2.2%
100.0 1.5%
-0.7% 0.4%
50.0 -2.0% -2.0%
177.4 187.7 184.1 209.2 161.3 173.6 172.1 246.9 211.5 228.8 243.6 275.3 240.2 250.2 252.8 290.5
0.0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
-50.0 -7.0%
2015 2016 2017 2018

2015 2016 2017 2018

FX rate
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Rate (YEN/US$) 121.4 122.2 121.5 115.5 108.1 102.4 109.3 113.6 111.1 111.0 113.0 108.3 109.1 111.5 112.9 110.2
Rate (YEN/EURO) 134.2 136.0 133.0 127.2 122.0 114.3 117.8 121.1 122.2 130.4 133.0 133.2 130.1 129.6 128.8 125.2
Rate (YEN/RMB) 19.6 19.3 18.9 17.6 16.5 15.4 16.0 16.6 16.2 16.6 17.1 17.1 17.1 16.4 16.3 16.3
Rate (YEN/AU$) 94.4 88.8 87.4 83.2 80.6 77.6 81.9 86.2 83.4 87.6 86.8 85.3 82.6 81.5 81.1 78.5
 Operating Results & Forecast
Consolidated statement of financial position 32

■Trade receivables including non-current increased by 21.6 billion yen compared to

the previous fiscal year-end due to the increased revenues.
■Inventories increased by 69.2 billion yen compared to the previous fiscal year-end.
(billions of yen)
(A) (B) (A)-(B) (D) (E) (D)-(E)
Mar '2019 Mar '2018 change Mar '2019 Mar '2018 change
Cash and cash equivalents 67.3 81.9 -14.6 Trade and other payables 275.8 287.1 -11.3
Trade receivables 238.2 219.6 18.6 Bonds and borrowings 304.8 230.7 74.1
Inventories 324.8 255.6 69.2 Total current liabilities 642.6 584.8 57.8
(Equity attributable to owners of
Total current assets 673.9 597.8 76.1 the parent ratio) (41.0%) (41.2%) (-0.1%)
Total non-current assets 511.4 492.0 19.4 Total equity 542.7 505.0 37.6
Total assets 1,185.3 1,089.8 95.5 Total liabilities and equity 1,185.3 1,089.8 95.5
Trade receivables incl.
non-current 282.6 261.0 21.6
Inventories by products
Unit 89.3 56.7 32.6 (25.7%) (21.2%) (4.6%)
Parts 102.2 93.5 8.7 Interest-bearing debt 304.8 230.7 74.1
Raw materials, WIP and etc 133.3 105.5 27.9 Cash and Cash equivalents 67.3 81.9 -14.6
Total inventories 324.8 255.6 69.2 Net interest-bearing debt (20.0%) (13.6%) (6.4%)
On hand days(divided by net sales) （Days） Debt 237.5 148.7 88.7
Trade receivables 100 99 1
Inventories 115 97 18 Net D/E Ratio 0.49 0.33 0.16
Trade payables 57 71 -14
Net working capital 155 125 30
 Operating Results & Forecast
Consolidated cash flow 33

■Net cash provided by (used in) operating activities was a negative 25.7 billion yen
due to the increase in inventories and the decrease in trade payables by the earlier
payment to a particular supplier domestically.
(billions of yen)
FY2018 FY2017
change
Actual Actual
Net income 74.2 69.2 5.0
Depreciation and amortization 111.1 37.0 107.1 37.8 4.1 -0.9
(Increase)decrease in trade/lease receivables -26.2 -41.8 15.5
(Increase)decrease in inventories -76.5 -24.7 -51.8
Increase(decrease) in trade payables -121.3 -18.6 -13.1 53.3 -108.2 -71.9
Others, net -15.5 -9.4 -6.1
Net cash provided by (used in) operating activities -25.7 84.5 -110.2
Cash flow margin for operating activities -2.5% 8.8% -11.3%
Net cash provided by (used in) investing activities -30.3 -37.6 7.2
Free cash flows -56.0 47.0 -103.0
Net cash provided by (used in) financing activities 43.9 -30.5 74.4
 Operating Results & Forecast
Summary of consolidated earnings forecast 34

■HCM forecasts a decrease in FY2019 consolidated revenue by 8% and adjusted

operating income by 26%. Revenue will remain mostly unchanged and the adjusted
operating income will increase year on year excluding the impact of the expected
strong exchange rate of the yen.
(billions of yen)
FY2019 FY2018 change
Forecast Actual amount %

Revenue 950.0 1,033.7 -83.7 -8%

Adjusted operating income (9.1%) 86.0 (11.3%) 116.8 -30.8 -26%

Operating income (8.6%) 82.0 (9.9%) 102.3 -20.3 -20%

Income before
income taxes (8.4%) 80.0 (9.9%) 102.7 -22.7 -22%
Net income attributable to
owners of the parent (5.1%) 48.0 (6.6%) 68.5 -20.5 -30%
EBIT 83.5 105.6 -22.1
FY2019 FY2018
Currency change
Forecast Actual
Rate (YEN/US$) 100.0 111.0 -11.0
Rate (YEN/EURO) 110.0 127.9 -17.9
Rate (YEN/RMB) 15.0 16.6 -1.6 For FX
sensitivity,
Rate (YEN/AU$) 77.0 80.9 -3.9 please refer to
Cash dividend per share (yen) *1 to be determined 100 - appendix 1.

*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.
 Operating Results & Forecast
Consolidated revenue forecast by geographic region 35

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

FY2019 FY2018 change

Forecast Actual
amount %

Japan 210.6 22% 206.1 20% 4.5 2%

Asia 88.4 9% 88.5 9% -0.1 -0%
India 66.7 7% 67.9 7% -1.2 -2%
Oceania 146.7 15% 163.9 16% *1 -17.2 *1 -10%
Europe 86.5 9% 111.6 11% -25.1 -23%
N.America 164.0 17% 168.7 16% -4.6 -3%
L.America 14.0 1% 17.1 2% -3.1 -18%
Russia-CIS 33.3 4% 34.4 3% -1.1 -3%
M.East 13.1 1% 11.8 1% 1.3 11%
Africa 30.3 3% 43.8 4% -13.5 -31%
China 96.4 10% 119.9 12% -23.6 -20%
Total 950.0 100% 1,033.7 100% -83.7 -8%
Overseas ratio 78% 80%
*1 Includes the impact of the termination of the commercial truck and bus business other than construction machinery in New
Zealand
 Operating Results & Forecast
Mining revenue forecast 36

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

％ shows sales ratio against total company sales

(billions of yen) [%] shows changed ratio from the same period of 19%
previous year
[ 15%]
21% 16%
14% [ 54%]
New
16% 15% 16% machine
15% total
[ 40%]
[ 34%]

[ 1%]
 （*1) Operating Results & Forecast
Value chain revenue forecast 37

■HCM forecasts an increase in FY2019 sales of the value chain business by 5%

compared to the previous year mainly due to the increase in the revenue of parts &
services and rental business despite the expected strong appreciation of the yen,
and aim for 44% of composition ratio with a 6% increase.
(billions of yen) ％ shows sales ratio against total company sales
[%] shows changed ratio from the same period of
previous year 44%
（*2) 39% [ 5%]
40%

[10%]

35% [ 7%]

[-3%]

[14%]
[ 7%]

[ 1%]

(*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.
 Operating Results & Forecast
Comparison of consolidated profit & loss forecast 38

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

Sales volume -3.0

R&D expense -3.9
Model mix of value chain business 10.8
Increase of personnel expenses -4.9
Increase depreciation -5.5

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

Total variance excluding FX effect 12.7 *1

*1 Other operating income and expenses :FY18 includes 8.8 billion yen of
provision to the excess in payment of value added tax in China.
 Operating Results & Forecast
<Appendix 1> FX rate and FX sensitivity 39

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

(billions of yen)
FX rate and FX sensitivity
FX rate FX sensitivity (1Q-4Q)
Currency FY18 Adjusted
FY19
Condition Revenue operating
Forecast Actual income

US$ 100.0 111.0 Impact by 1 yen depreciation 2.4 2.0

EURO 110.0 127.9 Impact by 1 yen depreciation 0.7 0.8

RMB 15.0 16.6 Impact by 0.1 yen depreciation 0.6 0.3

AU$ 77.0 80.9 Impact by 1 yen depreciation 2.1 0.2

 Operating Results & Forecast
<Appendix 2> Detail of mining revenue 40

(billions of yen)

FY17 FY18 Change FY19 Change

Actual(A) Actual(B) (B)-(A) Forecast(C) (C)-(B)
America Excavator 13.6 14.6 0.9 14.1 -0.5
Dump Truck 7.8 7.0 -0.7 7.0 -0.1
Total 21.4 21.6 0.2 21.0 -0.6
Europe, Africa Excavator 18.2 24.8 6.5 26.8 2.0
and Middle East Dump Truck 15.9 17.0 1.1 21.4 4.4
Total 34.1 41.8 7.7 48.2 6.4
Asia & Oceania Excavator 58.7 63.8 5.1 77.9 14.1
Dump Truck 21.1 31.5 10.4 33.3 1.8
Total 79.8 95.3 15.5 111.2 15.9
China Excavator 1.9 1.0 -0.9 1.3 0.3
Dump Truck 0.1 0.1 0.1 0.1 -0.0
Total 2.0 1.1 -0.9 1.4 0.3
Japan Excavator 0.5 1.0 0.5 2.9 1.9
Dump Truck 0.0 0.0 0.0 0.0 -0.0
Total 0.5 1.0 0.5 2.9 1.8
Total Excavator 92.9 105.1 12.1 122.9 17.9
Dump Truck 44.8 55.7 10.9 61.7 6.0
Total 137.7 160.8 23.0 184.7 23.9
 Operating Results & Forecast
<Appendix 3> Segment information 41

■The amortizations of PPA (amount of 1.2 billion yen in FY2018) are included in the
adjusted operating income of the solution business.
(billions of yen)
Reportable segment
＜Actual＞ Construction Adjustments
Solution Total
FY2018 Machinery *1
Business
Business

Revenue 937.7 96.8 -0.9 1,033.7

Adjusted operating income 11.8% 111.0 6.0% 5.9 - 11.3% 116.8

(billions of yen)
Reportable segment
＜Forecast＞ Construction Adjustments
Solution Total
FY2019 Machinery *1
Business
Business

Revenue 856.8 93.2 - 950.0

Adjusted operating income 9.0% 77.2 9.5% 8.8 - 9.1% 86.0

Note(*1): Adjustments represent eliminations of intersegment transactions, and amounts of companies that do not belong to any operation segment.
 Operating Results & Forecast
<Appendix 4> Actual and forecast of consolidated capital 42
expenditures, depreciation, and R&D expenses
■HCM forecasts high levels of capital expenditure for FY2019 due to the
restructuring of domestic plants and the improvement & expansion of sales offices to
strengthen value chains.
1.Capital Expenditure　（Based on completion） （billion of yen ）
FY2015 FY2016 FY2017 FY2018 FY2019
Actual Actual Actual Actual Forecast
Capital Expenditure 21.0 14.1 18.7 30.4 70.1 （*1)
Assets held for operating lease 14.1 16.5 23.1 27.2 36.9
Total 35.2 30.7 41.8 57.6 107.0
2.Depreciation (tangible and intangible fixed assets) （billion of yen ）
FY2015 FY2016 FY2017 FY2018 FY2019
Actual Actual Actual Actual Forecast
Capital Expenditure 23.7 22.4 27.5 26.8 31.9 （*2)
Assets held for operating lease 11.8 11.5 10.3 10.1 13.9
Total 35.4 34.0 37.8 37.0 45.9
3.R&D expenses （billion of yen ）
FY2015 FY2016 FY2017 FY2018 FY2019
Actual Actual Actual Actual Forecast
Total of consolidation 18.8 19.3 24.6 24.8 28.7
(*1) The forecasted capital expenditure of FY19 includes the impact of adoption IFRS 16 "Leases" in the amount of 18.5 billion Yen.
(*2) The forecasted depreciation for capital expenditure of FY19 includes the impact of adoption IFRS 16 "Leases" in the amount of 3.5 billion Yen.
 Company Outline and Topics
43

Corporate Vision
Contents
1. Management Plan
2. Market Environments
3. Operating Results & Forecast
4. Company Outline and Topics
 Company Outline and Topics
Company Outline 44

・Company Name Hitachi Construction Machinery Co., Ltd.

Stock Exchange Listings：Tokyo (#6305)
・Major Operations Manufacturing , sales and service of construction machinery,
transportation machinery, and other machines and devices.

・Established 1 October, 1970

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

・President Kotaro Hirano

・Subsidiaries Japan: 9 companies, Overseas: 71 companies

Affiliates Japan: 4 companies, Overseas: 20 companies

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

(March 31, 2019)

 Company Outline and Topics
Our Products and Revenue 45

Construction

Road
Hydraulic Excavator Mini excavator Wheel-drive Type Double-Front Work Wheel Loader Construction
(Hybrid / ICT hydraulic excavator) Hydraulic Excavator Machine Machinery

Value Chain Mining

39% Others
Solution 9%
Business
9%
Dump Truck Ultra-large Hydraulic Excavator
Construction FY2018 Revenue
Parts & Value Chain
Services 1,033.7 Construction business
10%
New Machine
(Billions of yen )
Mining 56%
Parts & Services
H-E Parts Bradken
10%
Mining
New Machine
4% Mine management system ConSite
 Company Outline and Topics
Globalizing and Localizing Manufacturing 46

E xp a n sio n o f
Main business: Japan o ve rse a s b u sin e ss

“Made in Japan” main Localizing Manufacturing

Sales network
Europe & America China covering the Europe,
Product ● Mini excavator
（ Billions of yen ） Expansion ● Wheel Loader ● Dump truck
12,000
1,200 90（％）
‘08 the collapse of Lehman Brothers
海外売上高
Overseas revenue 80
10,000
1,000
国内売上高
Domestic revenue 70
‘97 Asian
8,000
800 Overseas revenue ratio
海外事業比率 Financial Crisis 60
‘91 the bursting of 50
the Japan’s bubble
6,000
600
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 18
 Company Outline and Topics
Global Network（Major sites） 47

Russia
Europe
Americas
China
Middle East Japan

India
Asia
Africa Oceania

Sales & Service Manufacturing

*Including parts remanufacturing
 Company Outline and Topics
Deepening Value Chain 48

Value chain ratio

FY2016: 35% FY2019 Forecast: 44%

Value Value
New New
Other product group chain chain
machinery machinery
 Backhoe loader  Skid-steer loader
 Bulldozer  Crawler crane

Main products

Marketing
Products

New machinery
R&D

Service

Parts

Used machinery

Rental

Parts remanufacturing

Finance
Production
Procurement
Logistics
Solution
Business
Customer interests: Safety and productivity improvement, reduction of life cycle cost

Value chain
New value created Company Outline and Topics
49
by Hitachi Construction Machinery - Solution Linkage

Customers’ needs

Enhancement Improvement Reduction of

of safety of productivity life-cycle cost

Solution Linkage
ICT/IoT solutions solving problems together with customers

® ®

Hitachi Construction
One Hitachi Open Innovation
Machinery
* Wenco, ConSite is a registered trademark of Hitachi Construction Machinery Co., Ltd.
AHS: Autonomous Haulage System * Solution Linkage is currently applying for registered trademarks.
ICT: Information & Communication Technology
 Company Outline and Topics
Service Solution - ConSite 50

Fully automated system

for remote fault prediction
KPI: Remote prognostic detection rate by sensing
The failure prognostic detection rate shows the percentage of faults that were
remotely detected or predicted
Steps to the target
Development of Data application Differentiation by ConSite-enabled machines
global business
2020~
World's first all-purpose hydraulic excavator with Phase 3.0
communication terminal loading machines (June 2017
2000)
Phase 2.0 Failure prognostic
2015 detection rate 90%
Phase 1.5 ConSite-enabled
2013 machines
Phase 1.0 Big data analysis

2000 Utilization of 37%

existing data 20%
Communication start
 Company Outline and Topics
Service Solution - ConSite 51

Number of contracts has increased dramatically to over

129,000 units at the end of FY2018 after initiating a
global business development plan in 2014.
 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
120,000
Number of contracts:
129,000 units 100,000
※As of the end of March 2019

80,000

60,000

Initial Plan 40,000

142 countries & regions
and 33 languages are covered. Image of gradual
20,000
market penetration
of fee-based data
service
0
FY2014 FY2015 FY2016 FY2017 FY2018
 Company Outline and Topics
Service Solution - ConSite 52

We constantly monitor machines remotely and support stable

operation with our data report service.
■Distribute data report to 129,000 units worldwide via our fully
automated system.
■Assess malfunction risk from sensing data. Distribute alarm report
and correspondence manual automatically in accordance with
the seriousness of problem.
Periodical report Corresponding
■Strengthen efforts for sign diagnostics and further expand future (33 languages) manual
service menus. (16 languages)

Communication
network

Periodical
Periodical report
report
Important report
Urgent report Urgent report

Hitachi Construction
Machinery Service
Owners/operators personnel
Enabling smooth Enabling prompt
setup on site support on site
 Company Outline and Topics
Service Solution - ConSite OIL 53

Launched ConSite OIL to improve prognostic detection rate

Rolled out ConSite OIL, enabling 24-

hour oil monitoring for the first time in
the construction machinery industry in
Europe, Japan, and Oceania.

【Supplement】 Necessity of preventive maintenance based on oil diagnosis

If you do not perform proper oil management and maintenance…

Because of sudden Due to repair after Due to response after

trouble trouble occurrence trouble occurrence
Machine Increased Increased
breakage running cost repair time
 Company Outline and Topics
Used Equipments 54

Expansion of sales of used equipments from Japan

(auction business)
□Hosting auctions of 3500 units per year
□Sales of good-conditioned used equipments, which made
possible through the distinctive service as a manufacturer

Auction venue of HCM Japan

Expansion of sales of Japan China

certified used equipments
□Sales of well-maintained,
high-value added used equipments
in Japan, China, and Europe, etc.
 Company Outline and Topics
【AHS】Autonomous Haulage System (AHS) for dump trucks 55

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

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

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

Current status and further developments

FY2017: Implementation of commercialization test
FY2018: User test with Whitehaven Coal in Australia
FY2019: Commercialization (planned)
 Company Outline and Topics
Dump Truck The synergy of Hitachi Group 56

Hitachi Power Solutions Co., Ltd..

Pantograph(Trolley Dump Trucks)
Hitachi Ltd.
Grid box

Clarion Co., Ltd.

Sky Angle

Hitachi Ltd.
AC drive system（Control cabinet）

Hitachi Ltd. Hitachi Ltd.

AC Wheel motor Alternator

・The synergy of Hitachi Group

・High-Performance Stability Control Technologies
 Company Outline and Topics
Expansion of Parts and Services System 57

Expansion of parts and services system to reduce customer lifecycle costs

 Using machine information from each vehicle to determine optimal replacement periods
and select items for recommendation
Building upon the results achieved in Australia to expand to other regions and provide parts and
services
 System of setting up parts remanufacturing plants near customer sites to provide
support
 Utilizing bases established by H-E Parts and Bradken

Russia
Canada
Holland Ukraine Kazakhstain
USA
Turkey
China Japan

Indonesia
Remanufacturing Plant

Zambia
Colombia Remanufacturing Plant
Indonesia

Chile Peru
Zambia Mozambique

Australia Australia
South Remanufacturing Plant
Africa
Remanufacturing

Repair

Outsource
 Company Outline and Topics
Cooperation with Bradken and H-E Parts 58

Expansion of solution business

 Incorporation of parts and services businesses to cover all
machinery at customer sites
 Expansion of procurement system
● 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 *Ground Engaging Tools
● Newly promote parts remanufacturing business of H-E Parts by
collaborating with HCM Zambia

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

Coverage expanded to include consumable parts for excavators and

rigid dump trucks in general, as well as mills and crushers
Previous HCM Solution business
 Company Outline and Topics
Acquisition of Two Solution Business Companies 60

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  December 2016: Restructured as

of HCM subsidiary of HCM
 Expanded to Australia, USA, Africa,  Expanded to Australia, USA, Chile,
Europe, Asia, China, and other areas Canada, and other areas
 Main strength: Technical capabilities  Main strength: Comprehensive after-
in molding and casting market solutions

GET* , etc. Liners for Castings for fixed Specialty Comprehensive Services & parts Comprehensive, Comprehensive
crushers and plant mining castings, etc. solutions for for crushing high-horsepower undercarriage
mills, etc. equipment, etc. mobile mining equipment as diesel engine parts and GET
equipment well as on-site remanufacturing for mobile
and off-site solutions construction
services & repairs (including equipment
rebuilding)

*Ground Engaging Tools

 Company Outline and Topics
Acquisition of Two Solution Business Companies 61

Bradken H-E Parts

Transaction Overview Transaction Overview

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

100%
the 1 month VWAP of Bradken shares up to 30 Ownership
Acquisition
September)
price
Maximum total consideration of Enterprise
A$ 689 million (JPY 51.6 billion JPY75=A$) USD 240mn
Value

Acquisition A cash takeover offer for 100% of the ordinary Board Resolution: Dec 21, 2016
structure shares Key Dates
Agreement: Dec 21, 2016
Closing: Dec 21, 2016
Source of funds Existing cash reserves and external funding
Anticipated Nov 1, 2016: Commence takeover bid H-E Parts Investors LLC (SPC owned by Frontenac
schedule*1 Apr 7, 2017: Complete takeover bid Seller
and Champ Ventures)
Number of Shares
193,741,575 shares
Tendered Key Financials(1)
Ratio of Shares Revenue EBITDA Margin
92.8% (JPYbn)
Tendered
28.8 20.0%
30
Key Financials 26.1
25 23.5
(A$ million) 15.0%
1,600 1,456 28.0%
1,317 20 18.6
1,400
1,154 1,138 24.0% 10.0%
1,200 15 11.1% 10.9% 11.1%
1,008 968 9.3%
1,000 821 20.0% 10
16.6% 17.0% 5.0%
800 16.2%
15.1% 15.2% 5
600 14.1% 16.0%
13.2%
0 0.0%
400
12.0% 2013A 2014A 2015A 2016E
200
0 8.0% (1) Consolidated base, exchange rate of USD/JPY:115.0, AUD/JPY:85.0
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
Revenue EBITDA margin
 Company Outline and Topics
《Bradken》 Revenue Breakdown 62

Industry Sector Product

10.6%
15.3%
Resources Consumable
Products
Non-Resources
84.7% 89.4% Capital
Products

Strong presence in the resources sector Consumable products account for c.

90% of total revenue

Region Commodity

2.6% 2.5%
2.7%
0.2%
2.9% Australia/NZ
8.5% Coal
North America
11.7% 23.7% Iron Ore
South America
Copper
45.0% Africa 18.1%
44.1% 19.2% Gold
Europe
Other Minerals
SE Asia 18.8%
Oil & Gas
China

Strong presence in Australia and North America Well-balanced exposure to commodities

Note: Revenue for FYE 2016/6.

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

Segment Solution Sales by Type

Engine
Solution Other
Fabrication / 1%
Construction 6% Service
Machinery 14%
7%

After Parts
Crushing Remanufactu Solution
Solution Mining ring / 48%
28% Solution Rebuilding
59% 37%

Region Commodity

Others
10% Other Gold
Canada 18% 18%
6%
Oil Sand
3%
Chile Australia
44% Aggregate
13%
3%
Copper
Construction 17%
8%

Coking Coal
USA 10% Iron Ore
27% Thermal 13%
Coal
Note: Revenue share for FY2015 10%
Major Domestic Restructure Company Outline and Topics
64
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)
Phase.2
Start business structure reforms at domestic development
and production bases (complete by FY2022)
[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
Major Domestic Restructure Company Outline and Topics
65
to Strengthen Global Competitiveness - Results of reforms

Establishment of production structure with strong ability to adapt to

changes in the market environment
<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

Improvement of investment and profit structure

・ 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
Major Domestic Restructure Company Outline and Topics
66
to Strengthen Global Competitiveness - current status
(※As of September 2018)
HCM Tsuchiura Works
Development: Hydraulic excavators
(except mini)
Rigid dump trucks
Components HCM Kasumigaura Works
Production: Medium to large hydraulic excavators Production: Components
(for hydraulic excavators)

KCM Ryugasaki Works HCM Hitachinaka-Rinko Works

Development: Mini/medium to large wheel loaders Production: Ultra-large hydraulic excavators
Production: Mini/medium to large wheel loaders Rigid dump trucks

KCM Banshu Works

Development: Medium to large/ultra-large HCM Hitachinaka Works
wheel loaders Production: Components
Components (for hydraulic excavators, rigid dump trucks, and
medium wheel loaders)
Production: Medium to large/ultra-large
● ●●
wheel loaders ●
●
Components for wheel loaders ●
HCM Tierra Shiga Works
Development: Mini excavators
Production: Mini excavators
HCM Tierra Osaka Works
Production: Main parts for mini excavators
 Company Outline and Topics
Domestic Restructure : 67
Status of business structure reforms from now to 2022
*Duplicated page

Major restructuring of development and production bases to strengthen global competitiveness

■FY17～19 : Transferred large excavators from Tsuchiura Works to Hitachinaka-Rinko Works
*scheduled by 1st half year
■April 2019 : Implemented an absorption-type merger of KCM Corporation

■FY18～19 : Transferred components for wheel loaders from Banshu Works to Hitachinaka Works
*scheduled by 1st half year
...etc

Tsuchiura Works Hitachinaka-Rinko Works

Development: Mining Production: Mining
Construction
Components Hitachinaka Works
Production: Construction Production: Components for mining
and construction
Ryugasaki Works
Production: Main parts for construction
Kasumigaura Works
Banshu Works ●● Production: Components for mining
● ● and construction
●●
Production: Main parts for compact
HCM Tierra Shiga Works
Development: Compact and main parts for compact
Production: Compact

HCM Tierra Osaka Works

Production: Main parts for compact
 Company Outline and Topics
《Topic》 Initiative for improved energy 68
productivity wins Energy Conservation Grand Prize
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”.
■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.

Air-conditioning
equipment utilizing
❝Visualizing❞ electric energy data using radiators designed for
Emilia 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
《Topic》 Utilization of Photovoltaic Power Generation
69
in India

Tata Hitachi Construction Machinery switched to photovoltaic power

generation, reducing power consumption by approximately 30%

This initiative is one of our energy conservation efforts, along with visualization of plants
power consumption in Japan. 7,000 MWh per year, equivalent to about 30% of the power
consumption of Kharagpur Works, will be provided by environmentally-friendly renewable
energy (expected CO2 reduction is 3,500 tons per year).

Solar panels at Tata Hitachi’s Kharagpur Works

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

A new regional headquarters in Oceania has been established

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

Established: April 5, 2019

Parts center for expansion of parts business in

Oceania
《Topic》 Mining 71

An order for 13 ultra-large hydraulic excavators and

17 dump trucks was secured in Mongolia
・5 units x EX5600 excavators
(operating weight 537t) (electric-powered)
・5 units x EX3600 excavators
(operating weight 359t) (electric-powered)
・3 units x EX2600 excavators
(operating weight 254t) (engine-type)
・17 units x EH4000AC-3 excavators
(operating weight 221t)
Delivery and operation to be started in FY19
An order for 38 dump trucks was secured for 3 projects in Australia
・8 units x EH4000AC-3 and 6 units x EH5000AC-3（payload 296t）
Delivery and operation to be started in FY19 (retro type of AHS fitted in the future）
・16 units x EH5000AC-3
Delivery and operation to be started in FY19 -20
・8 units x EH5000AC-3
Delivery and operation to be started in FY19
《Topic》 Development of Zero-Emission Electric
72
Excavator Prototypes
EAC, a JV company with KTEG in Germany, developed zero-
emission electric excavators
Prototypes were exhibited at bauma 2019, an international
construction machinery trade fair
Demonstration of zero-emission electric excavators (8t class) and exhibition of zero-
emission electric mini excavators (2t class)
* Details for launch are under consideration.

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

《Supplementary Information》 73

Topics are classified and introduced with appropriate icons

according to 17 goals described in the Sustainable
Development Goals (SDGs).
 [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.

END
Corporate Vision

Public Relations & Investor Relations Dept.

Corporate Brand & Communications Div.
Hitachi Construction Machinery Co., Ltd
FY18-4Q
© Hitachi Construction Machinery Co., Ltd. 2019. All rights reserved.