Hitachi, Ltd. (6501) Earnings Call Transcript & Summary

Thank you very much for taking time out of your busy schedule to join our webinar today. Time has come, so we will now begin Hitachi Investor Day 2022. Today's program is shown on the screen. The entire program from CEO remarks to the Independent Directors session is scheduled to end at 5:40 p.m. The presentation materials are posted on Hitachi, Ltd. IR site and the news release site. So please check them accordingly. On Japanese channel, you can also listen to the English voice of the interpreter by using the language selection function. Please select the audio you wish to listen to by clicking the interpretation button at the bottom of the Zoom screen. The locations of -- may vary depending on the device you are using. The interpretation button is located at the bottom of the Zoom screen on your PCs. We will now switch the screen to the presenter. Keiji Kojima, President and CEO, will give a CEO remarks presentation to start Hitachi Investor Day 2022. We will project the slide, so please wait for a moment. Kojima-san, please.

[Interpreted] I'm Kojima, President and CEO of Hitachi Limited. On today's Investor Day, I will first share with you the positioning of the midterm management plan 2024, the developing process and feedback from capital markets following the announcement. After that, I will briefly explain today's agenda. And then we will move on to the presentations. Thank you for your cooperation. In the wake of the management crisis, following the global financial crisis, Hitachi decided to make a major shift to the Social Innovation business, which leverages data and technology to solve social issues together with our customers. To this end, we have been on the journey of structural reform to create a governance and business portfolio, a true transformation journey with the CEOs of each era Kawamura, Nakanishi and Higashihara, passing the baton to the next generation. The divestiture of all 22 listed subsidiary we had in 2006 was truly symbolic for me, and I feel that we have reached a true milestone in our reforms. I, too, will pass on the baton based on my unwavering belief that we will continue to evolve the social innovation business together with our customers and that we will not hesitate to make changes to achieve this goal. I believe that it's my role to make full use of the foundation laid by the past reforms and finally change the mode of management to global growth. In formulating the medium -- Mid-term Management Plan, or MTMP, we hold internal and external discussion to envision what the next Hitachi should look like. Our internal project team thoroughly discussed what changes we need to make to achieve global growth in green, digital and innovation. We set the structure and the management targets of the sectors through a series of discussions on whether we had a clear target to benchmark against and how to outperform the market. Now on the Board of Directors side, we repeatedly reviewed the draft of the MTMP prepared by the internal project team from an early stage. Although we received strong support for the concept and management goals of the MTMP, we were harshly criticized for our ideas on how to achieve them, saying that our ideas on accountability were too lenient compared to the European and U.S. companies. In response, we are working to clarify the accountability by, for example, fully linking the degree of achievement against key KPIs of the MTMP, such as cash flow and CO2 reduction to the performance evaluation of executive officers. In addition, effective April 1, we established a new organization and responsibility structure to mitigate global risks that could become obstacles to achieving the MTMP. This also reflects our discussion at the Board of Directors meetings. In our dialogue with investors, we sorted out how to ensure that they understand Hitachi's goals in the MTMP 2024 in a form that is easy to analyze and monitor with transparency. We also gained important input on what KPIs and capital allocation policies are expected to enhance shareholder value. About 1.5 month has passed since the announcement of the MTMP 2024, during which time I have had many opportunities to discuss the new management policies with our stakeholders. What I found gratifying and rewarding was the number of comments I received from investors that the framework of the MTMP 2024 reflects the discussions we have had so far. While some investors call for an even higher level of targets for the MTMP, others said that the plan was too aggressive given the increasingly severe macroeconomic environment. The common voice was that Hitachi should do exactly what the MTMP calls for, acquire earnings power, adjusted EBITDA that will be the source of EPS growth, link this to core free cash flow and allocate it to growth and shareholder returns in a well-balanced manner. We also received many requests to communicate carefully and continuously with the market by explaining how we will achieve the high goals we have set, the path and specific strategies and to disclose our progress in each phase of the plan. Today's Investor Day is part of such communication, and we would like to help you understand Hitachi's mode change for growth through 4 sessions. First, I will introduce our corporate strategy for growth through Green and Innovation. We will explain the measures in the MTMP 2024 taking into account major technological trends by backcasting what steps we should take now as we look to 2050. Next, we will explain our growth strategies for sectors -- three sectors: Digital Systems & Services, Green Energy and Mobility and Connective Industries. In particular, the CEOs of the 2 major acquisitions, GlobalLogic and the Power Grid business will explain the status of their businesses directly. In the last session of the day, we will hear from 2 independent directors on the theme of Hitachi from the Independent Directors' perspective. I hope we could share with you the process of the MTMP discussion at the Board of Directors, which I mentioned earlier and how the executive officers and directors maintain a balance in how Hitachi's reform continue. As CEO, I will strive to achieve the goals of the MTMP 2024 so that investors will have even greater confidence in Hitachi's ability to transform and grow. I would like to ask you for your continuous guidance and support.

That concludes the CEO remarks. Thank you very much, Mr. Kojima. Now, we will be proceeding to the Green and Innovation Strategy. It will be presented by linking with the [indiscernible], the Hitachi's Research and Development Base in [ Kokubunji ]. We'll be resuming shortly. [Break]

Green -- Out of the Green, Innovation Strategy in the first part, Green Strategy will be presented by Lorena Dellagiovanna, Vice President and Executive Officer and Chief Sustainability Officer. And for the second part, Innovation Strategy will be presented by Norihiro Suzuki, Vice President and Executive Officer and Chief Technology Officer . Now we will be switching over to the Green Strategy screen shortly. Lorena-san, please start your presentation.

[Foreign Language] Good afternoon. I'm Lorena Dellagiovanna, recently appointed Chief Sustainability Officer. The new position integrating responsibility, both on sustainability and diversity and inclusion. And today, I'm here to present the new Green strategy. As part of my mandate, I have the goal to accelerate the achievement of Hitachi's long-term environmental targets. And if you look at the [ world ] macro trends, many countries have declared their carbon-neutral targets as well as allocated investments, and everyone globally has recognized the importance of protective planetary boundary. That's why we, in Hitachi, are indeed committing to solving the environmental challenges faced by our customers and the society. In this scenario, today, I would like to share with you 3 key stance Hitachi would take. First, we aim at becoming the climate change innovator by setting 2 challenging targets: Enable our customers to reduce their CO2 emission by 100 million tonnes within 2024 through the usage of our products. While for Hitachi operation and products the aim is to reach a net zero emission in 2030 for Scope 1 and 2 and 50% reduction through the whole value chain by the same year. Secondly, we believe that the new Green Strategy, which enables to decarbonize the society and to decarbonize Hitachi on footprint, we will unlock a new value in Hitachi. And finally, we are setting up the Global Environmental Division as corporate function. This is to guarantee the successful execution of cross-sector projects, offering tailor end-to-end green solution to a wide range of customers. In line with Hitachi overall vision, which aims to achieve a sustainable society and the protect the [ earth ], 3 pillars to drive our growth strategy are Green, Digital and Innovation. And now we are going to focus on the Green strategy. Our Green strategy is embedded in all Hitachi business segments, Mobility, Energy, Connective Industries and Digital. In all these segments, we are working on various green technologies, which are contributing to the acceleration of green transition. That included the launch of our first pilot in [ Glasgow ]. We are also active in many global public forums, focusing on global sustainability challenges. We have been principal partner in COP 26. And just recently, we have participated in the World Economic Forum, CEO Climate Leaders Alliance. To achieve the net zero target in 2050, all the companies are taking commitments towards 2 directions. The net zero of their own driven emission, Scope 1, 2 and 3, and reduction of customer footprints by enabling the low emission solution, which we call the Scope 4. We aim to achieve the leading position, leveraging our global footprint, our superior green products and our digital technologies. To become the climate change innovator, we defined 2 key priorities. The green transformation for the core which aims to strengthen our commitment in decarbonization of our own operation by achieving net zero emission of Scope 1 and 2 by 2030 and 50% emission reduction through the whole value chain by the same year. And green transformation for the growth, which aims to enable our clients to reduce their emission, through more efficient products -- greener products through a new service and solution and through investment in the green technology in the future. For each key priority, we will set a tangible milestone, and we are cascading measurable target [indiscernible]. Furthermore, we have also identified a series of enabling activities to ensure the rollout of our value initiatives. We are preparing the green bond framework. We aim to improve Hitachi ESG rating, including new SBTi certification for net zero. And we are setting our partnership and ecosystem to develop and commercialize the new products and services. In Hitachi, we believe that our strong [indiscernible] sustainability is not the cost, but each represent value driver. Through our GX core initiative, we aim to create value through efficiency gain by less energy consume and energy produced by renewable services. And here, for example, we are deploying multisite [ channel ] optimization in wide area and facility management. Also, we aim to create value, avoided extra cost for purchase of carbon credits to offset our emission. And finally, by the issuance of the dedicated green financial -- products. Moving to GX for growth, we aim to create a new value through the launch of new services. And here, I would like to refer to the new end-to-end service solution for Mobility and Energy as a service. For example, in respect of e-mobility, we are developing turn-key solution to drive the transition for bus fleet, light commercial vehicles and private vehicles. We aim to create value by a new position in [ Hitachi ] as decarbonization leader with a greener product offering. And finally, by selecting inorganic growth opportunities to develop new technology. Within my responsibility as Head of Environmental Division, we design and implement the global environmental strategies to accelerate activities aimed at achieving environmental targets of Hitachi and at the same time, maintaining comprehensive attention to sustainability. But I would like to explain you how we can execute our green strategy and orchestrate across the whole Hitachi Group. First of all, we integrated under, my responsibility, both internal initiatives as the GX for core and business growth as GX for growth to ensure one unique vision across the whole Hitachi Group and to achieve our sustainability targets. The internal initiative is led by Masai-san, who is former executive of [ Rail BU ] and current Head of Monozukuri, leveraging his global experience and manufacturing expertise. The business growth is led by Morita-san, who is former Head of Center of Technology Innovation in R&D Group, leveraging his great deal of R&D experience in the energy field. Secondly, we are building a global team. A global team involving local talent for multiple BUs and corporate function in order to avoid any overlapping and most importantly, to approach the market as One Hitachi. We have regional divisions in EMEA, North America, Japan, China and APAC. And we have appointed global talents as General Manager of each regional division to lead opportunity findings and new business incubation by value-driven approaches. In terms of GX for core, our targets and initiatives are for carbon neutrality and circular economy. For Scope 1 and 2, we intended to abate the emission through 4 levels. Energy saving and renewable generation, renewable energy purchase, renewable certificate and carbon credit. For energy saving and renewable generation, we are planning to invest JPY 37 billion over 3 years to achieve a 50% reduction by 2024. Moving over to Scope 3, we plan to establish a monitoring scheme and set measurable KPIs, both for upstream and downstream emission. Focusing on the downstream, we are working on 2 main directions: promote transparency on where CO2 is generated and developing energy saving products. On top of this decarbonization target, we have also set a list of circular economic KPI because we indeed believe that recycling is a key dimension to achieve environmental protection. In particular, we have set a KPI with the target values to be achieved by business unit. We will focus on waste management and recycling. And we think that the attention on circular economy will not only realize the preservation of natural resources, but also acceleration of the decarbonization. Focusing now on the second pillar, the green transformation for growth. Our short-term goal is to contribute of 100 million tonnes of CO2 per year by 2024 through our product portfolio. Indeed, we believe that our technologies are key enablers to boost the energy transition, electrification and energy savings. This slide shows the environmental business growth model. Our Social Innovation Business increased customer value through a cycle. This cycle begins with understanding customer issues, followed by the design of solution with operational technology, informational technology and products, followed by the implementation and then operation and maintenance. The Lumada business is defined as a growth model that expand the profit throughout the cycle, utilizing digital technology. And for the green business, what we aim is to develop end-to-end services applying this growth cycle model. This page shows our differentiation point. To make our growth model more concrete, as an example on how we wanted to achieve our target to contribute to decarbonize the society, Hitachi is offering a wide range of solutions for multiple customer segments. By leveraging our digital capability, we can provide different services through the integration of our digital technology and solution to be able to reply to multiple customer needs. As I mentioned in the previous slide, our global green team will lead the acceleration of transformation of our business, thinking globally while playing locally. Our green transformation is fully aligned with all business unit strategy, and we'll be executing in a joint cross effort with all the BU. While sectors is focusing on its own business portfolio at the front line, the Digital System & Service sector will also play an important role as an enabler for digital platform. And together, the Global Environmental Division will focus on cross-sector business to deliver end-to-end solution. The cross-sector initiative, we are, at the moment, driving are focusing on 3 segments: EV value chain as a service, energy as a service and decarbonization services. And through our first pilots in 2024, we expect to generate revenues for JPY 30 billion. As part of our global expansion, in addition to the technologies we are currently developing, we are also investing in the next-generation technologies that will play a very important role over the medium and long term. In the next presentation, Dr. Suzuki will provide you the additional insights on this technology and the technology we are currently investing in. As a conclusion with the strategy described so far and all the activities I described so far, we -- what we are aiming is really to become the innovator in the technology and solution to mitigate the climate change. We have developed a new Green Strategy, and this Green Strategy is focusing on value creation. And finally, we are setting up the Global Environmental Division in order to guarantee the successful execution of cross-sector projects. And by that, I would like to end my presentation, and thank you so much for your attention.

Thank you very much, Lorena-san. We will prepare the screen, so please wait for a moment. Next, on Innovation Strategy by Suzuki-san, please.

[Interpreted] Yes, I am Suzuki. Today, I will explain Hitachi's Innovation Strategy. These are the 3 key messages for today: generating digital service business with the Lumada growth model, backcasting from 2050 to create radical innovation and accelerating outside-in innovation through start-up investment. I will explain them using the table of contents here. First is early investment in innovation supporting Hitachi's growth. In the MTMP 2024, we will focus on digital technology to generate innovation for global business growth. During MTMP 2021, we opened Kyoso-no-Mori to expand customer collaborative creation as well as updated our technological platform and acquired business models through start-up investment and collaboration. In MTMP 2024, we will further accelerate these efforts. The newly established innovation growth strategy division will formulate an innovation investment strategy to inspire the next growth of our customers. And under this investment strategy, we will promote the creation of digital service businesses and disruptive innovation. To implement these initiatives, we will revamp our promotion structure. Innovation growth strategy division will develop and execute innovation investment strategies, while R&D group has 2,300 diverse talents and will promote innovation creation through digital and technology. The global intellectual property group brought Stephen Manetta, on board, who has extensive experience in global intellectual property management and will promote the establishment of an IP platform to provide value to our global customers. These 3 organizations will accelerate global business growth through DX and GX. We will increase the innovation investment of the entire Hitachi Group in MTMP 2024. We will invest JPY 100 billion in advanced research cumulatively over 3 years in MTMP 2024 and expand the group's overall R&D investment to JPY 1.1 trillion. In addition, we will add JPY 50 billion to our new corporate venturing investment in order to create radical innovation that can solve future social challenges. First, is on creation of digital service businesses. In MTMP 2021, we promoted value offering by combining IT, OT and product. Through this activity, we were able to significantly strengthen digital talents and top-class AI talents. As digital talents played an important role, Lumada solution through customer cocreation shown here were created. Particularly in the area of AI, biometric authentication platform and security, we showcased our capability in international competitions and awards. In product, we established the world's #1 technology and IP in high-speed rail and vehicle inverters. We will evolve and develop Lumada growth model further and will co-create innovations together with our customers and promote digitalization of services for their next management challenge. Specifically, in order to spiral up the Lumada growth cycle, we understand kizashi, or signs of change in the society and customers, envision the customers' new growth together and provide innovations to realize that growth. We believe that Lumada growth models can be categorized according to customer segments and business characteristics, and we will strengthen marketing activities with the global frontline operations to crystallize and scale them through collaborative creation. Let me share with you some examples of our efforts. This is our initiative in the financial and public services area. The current challenge is to improve retail operational efficiency, but we see the next step as creating new value by creating new demand. To address this challenge, we are providing solutions for operational excellence by utilizing the AI technology we have developed through international competitions. For the next challenge, we believe that an information distribution system that cuts across industries will become important. And we will apply the OT knowhow and have accumulated through collaborative creation, an IoT blockchain technology as well as aim to realize new value distribution services utilizing the Metaverse/Web 3.0. As for the Energy and Railway and Transport area for asset management transformation, which is our current challenge, we will leverage digital and AI technologies to advance equipment maintenance as in previous slide. To support the transition to carbon neutrality, we have drawn carbon neutrality scenarios and are working with Hitachi Energy on grid edge implementation as well as aiming to offer multi-energy optimization service. Through these spiral up activities of the Lumada growth model, we will continue to create innovations that will support the next growth of our customers. Next is on the creation of radical innovation. We discussed with stakeholders and explored future challenges as we developed our MTMP 2024, specifically expert panel session in COP26 and World Economic Forum, C4IR, with universities, Hitachi-Tokyo University Lab, Hitachi-Kyoto University lab, Tsinghua University, Imperial College London and customers and start-ups. We then analyze challenges Hitachi should solve with customers on this radial chart. Hitachi and customers are in the center and highest impact challenges at the top, lower impact challenges in the back, right and left. The further you are from the center, the further out into the future. Left side is challenges in the society and market. Right side is the technology. Ones in the bold letters are important challenges in the long run. And this is the diagram of the road map from the analysis. We see the social issues in 2050 as precisely environmentally neutral society, society with 100-year active life and digital technologies, people and society evolve together. We will take on challenge for a radical innovation to solve future customers issues by backcasting. Let me introduce some of the initiatives in the field of environment, safety, security, health care, resilience. For carbon negative, we are working on energy storage and supply and direct air capture. In energy storage and supply, we combine Hitachi Energy's world-leading power system, high-voltage technologies with our electrochemical insulation and control technologies to create large-scale, low-cost hydrogen production system. In direct air capture, we will take on a challenge of improving the efficiency of artificial photosynthesis to produce fuel directly from CO2, which is CO2 fuel cycle that goes beyond plants. We plan to verify the system by 2024. Through these efforts, we aim to realize a carbon-negative society. Next, to overcome cancer and intractable diseases. For minimally invasive cancer treatment, we aim to realize minimally invasive, accurate and high throughput treatment by developing automated positioning in small, high-dose accelerators in addition to the dynamic tracking function to achieve the world's #1 share in high accuracy particle beam radiotherapy equipment. For designed cells, we will promote the development of design cells based on genetic modification and cell measurement technologies based on our track record of iPS cell large-scale automated culture systems and other technologies. This is a photo of Hitachi's proprietary designed cells, CAR-T cells attacking target cells. Through these efforts, we will take on the challenge of eradicating cancer and intractable diseases. Third, we are working toward the co-evolution of digital technologies, people and society. Here, we are working on ultra-big data management and silicon quantum computers. In the area of ultra-big data management, we will further evolve the ultra-high-speed database engine that we commercialized in collaboration with the University of Tokyo, aiming for data extraction performance that is 100x faster than that of conventional systems. For silicon quantum computers, we are developing a quantum computer in silicon based on deep science as Cambridge [ laboratory ], which has been in operation for 30 years. This is the prototype wafer of the Quantum device. Since the device is realized in silicon, we think it will be easier to scale up compared to superconductors. Along with the development of hardware, we are developing quantum applications and algorithms and will accelerate the development towards quantum transformation, QX, which will follow DX and GX. Finally, acceleration of outside-in innovation. Through start-up investment and collaborations, we will acquire disruptive technologies and innovative business models to help expand Lumada's business. In 2019, we established Hitachi Ventures, GmbH and set up Fund 1. Fund 2 is also set up and have invested in 15 companies in total. In fiscal year 2022, CEO, Gabriel, was named one of the global top 19 by Global Corporate Venturing. Currently, the company is promoting collaboration with start-ups for growth in each of the 4 quadrants of the Lumada growth model. In the MTMP 2024, we will expand the innovation ecosystem with customers, start-ups, academia and government in order to further accelerate the creation of radical innovation. In particular, we will accelerate the construction of innovation ecosystems as well as expand start-up investment and collaboration in the themes shown here for 3 areas backcasting from 2050. Finally, summary. We will steadily implement the measures I mentioned today through global growth in the area of digital, green and innovation. That is all from me. Thank you very much for your attention.

Thank you very much, Dr. Suzuki. We will be switching over the screen.

Now here onward, the 2 speakers, Lorena Dellagiovanna and Norihiro Suzuki will be responding to questions that you may have. Those of you with questions, please press the raise hand button on the Zoom screen. When your name is called, unmute, state your name and affiliation and ask your question. We will be calling you by the name shown on the screen. If you no longer need to ask a question, please release the button. We will not be showing video of the person posing the question. The Green and Innovation strategies are different substances, so please indicate to whom the question is addressed. We will limit the number of questions to be received by -- 2 per person. We will be taking questions from the Japanese channel first and followed by the English channel. So we will now take questions on the Japanese language channel. If you have questions, please press the raise-hand button. [ Hiraka-san ], please. Please unmute and ask your question in Japanese language.

[Interpreted] Lorena, I have a question for you and one question for Suzuki-san as well. First of all, for Lorena-san. Thank you very much for the presentation. On Page 6, you talked about the great strategy to becoming a climate change innovation. And you talked about GX for growth by 100 million tonnes of CO2 reduction is the objective. But for GX for growth, in terms of product, have you already started to provide products to enable this process? What kind of products is that? And in fiscal year 2024, what is the size of sales for that product? If you have any idea, please share that with us. So that's my first question to Lorena.

Lorena-san, please respond to the question.

[Interpreted] Thank you so much for the [ Hirakawa-san ]. So first of all, the 100 million tonnes estimation of reduction per year from -- in FY '24 are based on the current Hitachi portfolio. And we have done the estimation, looking at the impact of Hitachi products in the market where Hitachi is present. The biggest, let's say, contribution comes from Hitachi Energy, the electrical distribution products of Hitachi Energy are enabling the deployment of a larger scale of renewables as well as based on the market share of Hitachi Energy, we are estimating those savings. In addition to that, the estimation has come from the Rail Business and the industry. As far as for them, we have calculated a saving based on the avoided CO2 emission, thanks to the new installation of technology and the new deployment of more ecofriendly technology compared to the conventional one. In terms of sales growth, let me say that most of our business, especially in the Green Energy and Mobility are related to the scope because they are, of course, distributing products that are very important to reduce the CO2 emission for our customer footprint. Thank you so much.

[Interpreted] And my next question is to Dr. Suzuki. So in Innovation, Page 6. So R&D investment. Hitachi R&D investment until now had been -- the -- in terms of contribution to R&D, you always focused on contribution and efficiency in return. So in MTMP 2021, R&D investment impact, how do you see the impact from the investment? And -- so the R&D investment to sales ratio is R&D 3%. So it's rather low, maybe not to you, but a question to the entire company, but by raising this R&D investment to sales ratio, what will change in MTMP 2024? What will be different from the previous 3 years? If you could elaborate, I appreciate it.

[Interpreted] Thank you very much. As you rightly mentioned, the Innovation investment are -- 2 KPIs exist. One is the R&D cost to sales ratio and the 3-year average R&D investment against operating profit. So as you mentioned, regarding the development efficiency, we are more advantageous or stronger compared to our peers. In the MTMP 2024, we need to pursue further growth. And to achieve growth, the R&D efficiency advantage need to be maintained. And the R&D cost to sales ratio will be raised. With that, we think we can achieve further growth. In 2022 plan, 3.6% is our projection. We will look at our peers, benchmark against them and increase our R&D investments going forward. In MTMP 2021, customer co-creation was pursued. Our Lumada solution contribution was realized through customer co-creation. We want to spiral up through Lumada growth strategy model and aim for higher sales and higher operating profit. So the innovation growth strategy division will use green and digital and with the corporate strategies, corporate divisions and with marketing divisions, we will work together to achieve global growth. So the synergy within the corporate organization will also be pursued. Thank you very much.

Thank you very much. We will take another question from the Japanese channel. Yoshizumi-san, please. Please unmute and ask your question in Japanese language.

[Interpreted] Thank you very much for the explanation today. I have 2 questions. First question is for Lorena. Now in terms of a carbon-neutral objective of Hitachi was explained for the customer CO2 reduction by 100 million tonnes. Is there a risk of achieving this objective? What is the risk? Energy cost is increasing, and there is also geopolitical risk coming to the floor increasingly today. So it isn't as if there is a complete alignment globally in promoting carbon neutrality. So the environment is changing. What can you do on your own as Hitachi? And what are areas where you should be cooperating globally? But as an ecosystem, what is the risk you recognize today? And against these risks, what are the measures you will be implementing to overcome this risk?

Lorena-san, please respond to the question.

[Interpreted] Thank you so much for your question, Yoshizumi-san. That's a very important question because, of course, in front of these climate change and in front of all the geopolitical risk, many people are thinking that this deal might delay. First of all, maybe in the short term, yes, but there is a strong urgency due to the price increase and the strong urgency to be less dependent, for example, from Russian gas that will push the world to accelerate. The second point is that we are very confident to achieve these targets because it is based on our current portfolio. And we think that we should set it and keep evolving as circumstances and technology will change. We have for -- also for 2050, as Dr. Suzuki explained, we are investing in a new technology and we know that the current technology will not be enough to achieve the energy transition. And we have in place a number of countermeasures. One thing where Hitachi cannot control is, for example, on the customers or supplier side because whatever we do in terms of investing in our new technology, we needed to make sure that from the customer side, they will use green power to power our products, or from the supplier side, they will implement green processes and they will develop the green product in order to achieve targets across the whole value chain. We are going to do a strong lobby with our suppliers and our customers. We would like to engage them for the SBTi certification as well because that's absolutely important in achieving those. You talked about the -- you talk about the ecosystem. The ecosystem is absolutely important. In Hitachi, our differentiation is that we are operating in many industries. We have many different technologies. And by integrating all these technologies as one structure, that will help to deliver and meet the customer and the society requirements. However, there is another point, which is the lobby with the policymaker. And that's where Hitachi, with many other players, should be part of. In order to facilitate the discussion with the policymaker, in order to make sure that all the countries will put in place a regulation that will accelerate this transition. Thank you so much.

[Interpreted] My second question is to Dr. Suzuki. So Page 10 of your material, the financial and public sector services, Lumada. Metaverse and Web 3 were mentioned. So in infrastructure, the physical place is what I think of. But Web 3 -- in space like Web 3, what kind of service specifically do you see as a business opportunity? And what kind of inquiries and movement trends are you seeing? If you could share with us something.

[Interpreted] Thank you for the question. Metaverse, as you mentioned, from E2C, the market is now starting. So the cyber space and physical space and the link between the two is where we see the business opportunity. So NFT, Web 3, DFFT, these technologies will advance and at the same time, the systems and rules need to be established. Society 5.0. From Society 5.0 perspective, one is Metaverse for industry. That's one. So under such circumstances, essential workers work from home is one application. So new way of working can be realized with Metaverse. One more is the new value exchange platform. In the environment, sustainable finance. So first, monitoring, reporting and verification of the CO2 accounting. So the platform that shares that will be established in carbon credit and security token of these value exchange platform will be another new business opportunity. And in the distribution and supply chain, digital settlement, digital payment will also be another business opportunity for us. So first, monitoring, reporting and verification of the CO2 accounting -- so the platform that shares that will be established and carbon credit and security token of these value exchange platform will be another new business opportunity. And in the distribution and supply chain, digital settlement, digital payment will also be another business opportunity for us. So this new metaverse and Web 3.0 growth opportunity will be captured so that we can do PoC with global customers and establish the models. Thank you very much -- thank you. That's all for me.

Thank you very much. We are running out of time. So now we would like to take questions from the English language channel. Any questions on the English channel? There seem not. Therefore, with this, we would like to bring this session on Green and Innovation Strategies to a close. Thank you very much. At 2 o'clock, we will resume with the digital system and service sector session. Thank you. [Break]

It's now 2 p.m. Next, Executive Vice President and Executive Officer, Toshiaki Tokunaga will make a presentation in Digital Systems and Services Sector. I will switch the screen, so please hold on for a minute or so. Thank you -- over to you, Tokunaga-san.

I'm Tokunaga. Thank you very much for your time, taking time out of your very busy schedule. I will explain the growth strategy of Digital Systems and Services sector or DSS sector for short. First, I would like to summarize what I would like to share with you today. The first is the basic policy of mid-term management plan 2024. By fiscal 2021, the DSS sector has evolved into a highly profitable entity and prepared for growth. Based on these effort in the mid-term management plan 2024, we aim to achieve revenue expansions and improved profitability. We will continue to provide value and achieve sustainable growth of Lumada as a partner to solve the problem of our customers in Japan and overseas. Second is the sustainable growth of GlobalLogic. GlobalLogic, which we acquired last July, continues to grow steadily and exceeded our plan in fiscal year 2021. In MTMP 2024, we will further expand synergies with Hitachi Group to achieve continuous business growth and enhance corporate value. Mr. Shashank, CEO of GlobalLogic will explain more about the GlobalLogic later. Third, Hitachi Digital will accelerate the Lumada business. Established in April, Hitachi Digital will lead the formulations and executions of digital strategy across the Hitachi Group under the leadership of CEO Taniguchi serving as a center. This will maximize the value at Hitachi's strengths combining OT, IT and Products. and accelerate the expansion of the Lumada business across the Global Hitachi Group. Fourth, we will invest in growth through cash generation. In MTMP 2024, we will strengthen our ability to generate cash and investor resources and capabilities needed to expand Lumada business through growth investments, including M&A. Here is what I will explain today: I will begin with the overview of the DSS sector. The first is the business visions of DSS sector. The DSS sector will combine the digital power -- Sorry, could you go back a bit -- The DSS sector will combine the digital power of its 3 business groups: front business, IT services and platform and collaborate with green energy and mobility, connective industry sector and Hitachi Astemo to contribute to the realization of a sustainable society by promoting DX for the customers business operations and social infrastructures. This is the business structure. The DSS sector has a total of 100,000 employees operating in 50 countries and regions. We established Hitachi Digital in North America this year to strengthen the structure of -- for formulating and executing global company-wide digital strategy. CEO, Taniguchi, who's up on the stage today, leads the formulations and execution of digital strategy across Hitachi Group from Silicon Valley as a control center of Lumada business. In addition, from this year, we have established 3 business group system by adding IT Services centered on Hitachi Systems and Hitachi Solutions to the existing Front Office business and Services & Platforms. In MTMP 2024 under the Business Structure that I have just explained, we will disclose the business results and operations of DDS (sic) [ DSS ] more transparently in easy-to-understand way. This slide shows an overview of the business unit and major group of companies in the DSS sector. Due to the time constraints I ended the explanations, and I hope you will take a look at it later. This slide show the positions of the DSS sector in the Hitachi Group's corporate results for fiscal 2021 as well as the composition of revenues and adjusted operating income within the sector. The DSS sector accounts for 20% of Hitachi Group's total revenue and 36% of adjusted operating income. In addition, 3 business groups account for almost 1/3 each of the revenue and profit compositions within the sector. Next, I will explain the policies and performance target of MTMP 2024. First, let me discuss the business environment surrounding DSS sector. Customers continue to intensify the use of digital and services to address increasingly complex business challenges. They are also accelerating the move against the environmental issues and SDGs. As a result, as shown on the graph on the right, the global DX market targeted by Lumada business is expected to continue to grow by double digit in all the regions. We recognize that the business opportunity in the DSS sector is very large. Next to the basic policy of the MTMP 2024. The DSS sector has been strengthening its earnings power and solidifying its foundations for growth through the two mid-term plan of 2018 and 2021. In the MTMP 2018, we achieved double-digit operating income margin by improving the adjusted operating income margin by 4.2% compared to fiscal 2015 by reforming our business portfolio, reducing loss cost and thoroughly making an improvement. In MTMP 2021, we strengthened the foundations of Lumada's growth by acquiring GlobalLogic, launching the new Hitachi Vantara and launching the Lumada Alliance program. In MTMP 2024, we aim to reap the fruit of our efforts to date and achieve dramatic growth of the Lumada business in the global DX market. This is the performance target of the DSS sector in MTMP 2024. First, the revenue, the important indicator for growth. Regarding Lumada business, which is being focused by the entire start, we plan to outperform the growth of DX market and to achieve revenue of JPY 2.6 trillion in DSS sector in fiscal 2024. We recognize that adjusted EBITA ratio profitability indicator is already one of the highest in Japan as of the end of fiscal 2021, and we aim to further improve it to read 15% by FY 2024, which is in par with the global players. In addition, we will thoroughly implement cash-oriented management, generate EBITDA of over JPY 1 trillion over the next 3 years and continue to invest in growth. Next, I will discuss growth strategy to achieve MTMP 2024 targets. Here is the overall picture of the DSS sector growth strategy in MTMP 2024. We will implement the 4 growth strategies shown here to achieve rapid growth of Lumada business and the global DX market. In order to ensure the execution of these strategies, we plan to improve a total of JPY 500 billion in M&A and other business expansion investment as well as JPY 200 billion in Lumada development investment for growth within MTMP 2024 period. I will now provide the overview of each strategy. First, strategy one. In the growth model of the Social Innovations business by Lumada shown this figure, the DSS sector is the core business unit driving digital engineering system and integrations of managed service. In MTMP 2024, digital engineering capability of the global logic, which we newly -- which newly joined Hitachi Group and combined Hitachi's OT, IT and Product to promote solutions to customer and social issues. We will also enhance our engagement with customers through these efforts, continuously create value for customers as DX partner and achieve sustainable growth for Lumada business. In other words, we will be rolling up the recurring business. Next, strategy 2. One of the important feature of the Lumada business is its scale of business. DSS sector will accelerate the scale of Lumada business through 3 approaches. The first is the Customer DX type. This approach is to increase engagement with individual customers through co-creation and to obtain repeat orders. This is an approach that the financial institutions and business units and social infrastructure system business units to excel [indiscernible]. Next is the Domain DX type. This approach is to develop new customers by horizontally deploying original solutions developed through co-creation with customers and solutions that have already been proven in the market. This is an area where the strength of Hitachi Systems and Hitachi Solutions, which have a proven track record in the development of solutions and services can be utilized. The last is the social infrastructure DX/GX type. This is an approach that builds a new ecosystem with many stakeholders to solve complex issues that cannot be solved by customers on Hitachi alone. This is a business that only Hitachi, which was its strength in OT/IT and Product can offer and ones that will actively pursue in the future. Let me now introduce some specific examples of Lumada business based on the market approach, I have just described to explain to you about the growth and evolution. First, Customer DX type. On the left is an example where the financial institutions business unit provided CMOS annealing quasi on quantum computer to Sompo Japan and contributed to the reductions of the business risks in the insurance underwriting operations. We are also working with Sompo Japan on the development of various new services through co-creations, such as influenza and other infectious disease forecasting and corporate SX support. On the right-hand side is an example of co-creations with BMW Group. Hitachi Vantara provides various data analysis and GlobalLogic provides design and engineering support for connected cars and contributing to BMW group's innovation. Next is a Domain DX type example. Hitachi Systems ADWORLD shown on the left, has been adopted by more than 700 municipalities contributing to Municipal DX by improving resident services and administrative efficiency. In addition, Shibuya Ward has been promoting 100% electronic approval through a complete renewal of its ICT infrastructure to reform the work style of its employees. This has resulted in a 40% reduction in paper use. Hitachi Solutions PointInfinity shown on the right has been adopted by customers in a wide range of industry that build a point system, including convenience stores such as FamilyMart. The total numbers of numbers in Japan and overseas has already exceeded 300 million users, posting a wonderful track record. Next is an example of social infrastructure DX/GX. Let me first introduce a case here in Japan. As shown on the left, Social Infrastructure Systems business unit provides solutions to the social issues of aging social infrastructure facilities and decrease in the numbers of experienced maintenance workers by upgrading maintenance through remote inspections and image diagnostics using drones. Through open innovations with infrastructure operations, facility, maintenance companies and universities, the BU will realize more efficient infrastructure management and cost optimizations. On the right is an example of sustainable financial platform being promoted by Financial Institutions business unit to promote the collections and use of ESG data. By creating a new ecosystem, connecting financial institutions and operating companies, we are working to enhance the sophistications of corporate ESG management and improve transparency towards the capital market. Here are some examples from overseas. On the left is an example of Optimise Prime, a consortium supporting the expansions of EVs in the U.K. as a measure against climate change. Hitachi Vantara led the consortium activities together with U.K. Power Network, the U.K. electricity distributions company to promote large-scale demonstrations projects that included the optimal placement of charging facilities and demand peak control. To the right is the Lumada Inspections Insight, which was announced late last month. Lumada Inspections Insight uses a proprietary AI image analysis technology to analyze data from satellite images and LiDAR to detect incidents at an early stage and reduce the risk of large-scale forest fires. Next is strategy three: Hitachi Digital, which was established in April, is to lead the development and executions of the digital strategy across the Hitachi Group as a central command of Lumada business. Specifically Taniguchi, CEO of Hitachi Digital, will lead the company at Silicon Valley, the leading edge of digital, and will work closely with Hitachi Vantara and GlobalLogic as well as OT sector, including Hitachi Energy, Hitachi Rail and JR Automation to strongly drive formations and executions of Lumada strategy. Toward the growth of Lumada business, Hitachi Digital will also play an important role in identifying necessary growth investment and lead their executions. In MTMP 2024, we plan to concentrate our investment in the areas shown here. Finally, strategy four. The key to expanding the Lumada business is to strengthen and expand digital talents. GlobalLogic has an excellent scheme in this area. In addition to continuously evolving the scheme, we will roll it out here in Japan as well. By expanding the mutual exchange of talent between DSS sector and GlobalLogic, we will strongly promote strengthening and expansions of the digital talent. The progress of these growth strategies I have just explained will be continuously followed by 4 KPIs. The first is the revenues of GlobalLogic, which represent the growth of Lumada business. The second is the ratio of Lumada service business, which indicates the customer engagement and business continuity. The third is revenues of overseas, which indicate the globalizations of Lumada business. The fourth is the revenue of the whole Lumada business driven by DSS sector. We will closely monitor these 4 KPIs in order to achieve MTMP 2024. From this point onwards, Shashank, CEO of GlobalLogic, will now discuss the GlobalLogic's overview as well as its growth strategy.

Thank you very much, Tokunaga-san.

Shashank Samant, the President and CEO of GlobalLogic, and I'm very happy to be here with you today. GlobalLogic is the digital engineering services wing of Hitachi. We partner with the world's leading brands, Fortune 1000 companies, to help them see their digital world the way it is today -- it should be and not the way it is today. In such, we build amazing products, connected platforms and engaging and intuitive experiences, net digitally transforming our clients' business. How do we do that? We bring design creativity, engineering depth and experience and data science together to make it happen. Next slide, please. We are engineers, and we love to quantify everything, especially the success, and here are the numbers of our business in those quantification. We serve over 500 clients globally, of which 60% of the business is with Fortune 1000. In fiscal '21, we clocked USD 1.28 billion revenue at 38% year-on-year growth. And the growth is at a very healthy margin, 23% EBITDA. As we make our clients successful in their digital quest, it is also benefiting global margin. GlobalLogic is the magnet for the best talent around the world. We deliver the scale of digital transformation with 9 design studios, 38 engineering labs and 2 data science hubs, totaling to 25,000-plus employees in 14 countries. And with our growth, these numbers are just getting outdated as we speak. Next slide, please. Digital transformation magic happens when the physical and the virtual world come together; physical being the operating technologies and virtual being the digital technologies. To make it happen, you need design, engineering and data progress to come together. Design challenges the status quo and gives us the art of possible, which means -- envisioning the more and intuitive and engaging customer experiences as a service business and services models and redrawing the supply chains for our clients. Further, deep and complex engineering makes it feasible. It brings the experiences and solutions to life. And that data makes it more into intuitive and actionable, making business viable through the insights. Bringing these very different disciplines together and hum like a music symphony is the GlobalLogic's secret sauce. Next slide, please. Marrying with Hitachi to create a digital synergy is all about accelerating Hitachi's Lumada flight. GlobalLogic serves the key industries that are both disruptive and getting disruptive. Disruptive are the blue balloons over there, which are the high-digital engineering services demand industries, which are listed over there. And disruptors are the one which are asset-heavy industries like Hitachi's Energy, Rail and Industrial, who want to disrupt the business model as a service way and those are the red balloons. These sectors have a high demand for digital solutions and create tremendous headroom for growth for all of us. The life cycle for digital transformation start with ideation, followed by the engineering and build, then the integration and then the runoffs, which are running the businesses or ongoing operations. At the heart of this digital life cycle is Lumada to capture the enabling digital assets to power that life cycle, making the life cycle faster; drive the cost of build and TCO, total cost of ownership for the clients lower, and also to build and nurture cross-industry and cross-technology use cases, which means that capturing, cataloging and cultivating the tools, methodologies and the use cases leading to the solutions, repeatable solutions. As you can see, GlobalLogic fits in perfectly well in the broader Hitachi Lumada ecosystem. Next slide, please. A tangible example is the recent solution we reimagined and developed in partnering with Hitachi Energy. APM, Asset Performance Management, is the solution. As you can see here in the chart, GlobalLogic utilized our own design studios to reimagine the asset performance management, APM business case and then our deep engineering and data practice to deliver the Hitachi Energy's Fortune 500 client and such is being commissioned and managed by Hitachi Vantara in the field as we speak. Next slide, please. So how are we managing growth? Traditionally, GlobalLogic is always strong with American clientele. Almost 60% of our revenue is accounted in Americas. And we have high ambitions supported by our Europe growth, which is 30% of our business. Europe is getting further accelerated by Hitachi's BUs like Energy and Rail, which have a sizable presence over there. In less than a year since our acquisition, we have also established our presence in Japan and are seeing great traction on early engagements with Hitachi clients in Japan. To support all these growth aspirations, we are aggressively expanding our delivery footprint in Europe, in Americas and APAC. APAC is largely driven by India and Japan. In closing, I would say, as we have gathered by now, GlobalLogic is on an aggressive growth trajectory, largely driven by global digital demand, geographic expansion and fueled by Hitachi partnership. Being part of the Hitachi family has enabled us not only to accelerate our own stand-alone growth strategy but also find significant new opportunities in transforming Hitachi and Hitachi's clients. Thank you for your time. At this point, I will turn it back to Dr. Masao.

Thank you very much, Shashank-san. We will now proceed to Tokunaga-san once again. Tokunaga-san, over to you.

This is the summary for today. DSS sector will dramatically expand our Lumada business in the high-growth DX market and aim to become a world-leading company in growth and profitability by 2024. Our goal is to become a global leader in social infrastructure DX and realized sustainability -- sustainable growth. Thank you very much for your kind attention.

Thank you, Tokunaga-san. We now will entertain the questions from the floor. I will switch the screen. Please hold on. Joining Tokunaga, Samant to answer to the questions is Vice President and Executive Officer, CEO of Hitachi Digital, Jun Taniguchi; and CFO Digital Systems and Services, [indiscernible]. Those of you who have questions, please utilize Raise Hand functions, utilizing the Zoom functions. Of those who raised their hand, I will call upon you and please unmute and identify yourself with name and affiliations and state your questions. I will call upon the name, which is shown on the screen. If no longer needs to raise the questions, then please cancel your question. Your video won't be shown. We will first entertain the questions from those in the Japanese channel, followed by those in the English channel. Well then, I will now entertain the questions from those joining us in the Japanese channel. [Operator Instructions]

UBS Securities. Yasui is my name. I have 2 questions. My first question. It's been a while after integrating GlobalLogic, post-merger integration, to retain the talent in that front, there might be some churn over, some people leaving the company. So inclusive of the fusions and integrations of the business, Shashank-san and Tokunaga-san, please comment on the changes to the personnel, the talent. Second, CEO Kojima has talked about the GlobalLogic, which is good at recruitment. They do have wonderful know-hows in acquiring the talent, which shall be applied here in Japan more. Now digital engineering seems to be a very interesting business. I hope that you will firmly establish the positions here in Japan. So from Japan, from the viewpoint of Shashank and Mr. Tokunaga, what are the opportunities both in Japan as well as in the overseas market? Those are my 2 questions.

Yasui-san, thank you very much for your question. First of the questions, first of all, let me comment first and then invite Shashank to provide some supplementary comments. First of all, the first point, now that we have integrated with the GlobalLogic, what is the status of PMI? In a nutshell, before what we assume in acquisitions, it's going well -- very well. That's what I honestly feel. Let me give a specific example. Level 1 leadership. Within the leadership team, after integration, those -- there was no one leaving the GlobalLogic. So same leadership remains compared to the pre-integrations. And they are extremely happy now that they can work for Hitachi. So we are now working together. Now how about the lower-level talent as well as the status of integrations? We are showing a good progress. From Japan to GlobalLogic office, we are sending a lot of talent. Shashank and other leadership team, at this moment, they are working together. So that's my response to your first questions. Now moving on to the second questions, recruitment functions of the GlobalLogic as well as transitioning here in the Japanese market. As you have rightly pointed out, GlobalLogic, when it comes to global recruitment as well as providing training and educations is one of the strengths that GlobalLogic has, I believe at the end of March, when we announced integrations at the March of the previous year, but there's about 20,000 personnel working for GlobalLogic. And it's now reached 25,000. So in that sense, hiring has been progressing smoothly as well as we are fostering highly capable talent. And this approach will be rolled out here in Japan. At the same time, GlobalLogic Japan shall be the basis for us to do the digital engineering as well as to provide to the Japanese customers. Shashank, please provide us with the supplementary comments.

Thank you, Tokunaga-san. I think you answered it very well. We -- since the time we actually merged the companies, July 2nd week, we do not have any attrition on the executive management or the senior management of the company. To the extent, our overall attrition of the company is running almost 700 to 800 basis point lower than our competition. And our attrition actually also came down. Our engagement -- employee engagement score, the service which we run internally, are actually running at higher, an 80 plus, for the overall company. And I give a lot of this credit to even Hitachi senior management who are actively engaged and explained the employees the rationale and also -- also showing that collectively what we can do together and of which the success is already happening on that particular front. So both actually our inside surveys as well as the surveys on the Glassdoor and others, all point out in the one direction that is this merger is highly successful, not just for our clients but also for our employees. Thank you.

Thank you very much. We will take another question from the Japanese channel, [ Hiroshi-san ].

I have a question for Tokunaga-san. I have 2 questions. The first question is a confirmation. Regarding KPI, you said the Lumada service ratio is presented. What does this mean? Please elaborate further. In the presentation, you talked about recurring. I believe it is -- these 2 are related, so please confirm this. Second question is regarding JPY 500 billion, the investment that you are making. What is the substance of this? GlobalLogic has been acquired. This was a major acquisition. And as promoting Lumada, are you going to supplement what is required? So what kind of areas are you intending to invest in? So that's all in terms of my question.

Thank you for your question. Those 2 points you mentioned are both very important. To your first point, regarding the service business ratio in KPI, as you have rightly pointed out, recurring ratio is what we mean by this. To elaborate further for -- in the Lumada growth model, we want to make sure that Hitachi can create business from all areas. That is our strength. And in this context, one KPI is GlobalLogic sales profitability. This is a growth KPI for us. It is because customer challenge is understood. And by GlobalLogic creating business, which will mean that SI, system engineering and services, will also benefit from this growth. So this is a KPI -- this is the first one, the KPI for growth. The second one is Lumada service ratio. This is more recurring basis. What is the continuation of the business for that customer is reflected in this KPI. Therefore, the Lumada's benefit to be evaluated by the customer so that they will continue to engage with Hitachi. That is an important KPI for this purpose. Now to your second question, JPY 500 billion, the investment for growth has been included. And as I have mentioned, as Hiroshi-san knows, you have mentioned that this is not just one investment that we are considering. It is going to be utilized for multiple investments in order to promote Lumada further. Strategy three is Hitachi Digital strategy, I mentioned here that at the very bottom of the slide, the various domains where we are considering investment has been outlined. As [ Hiroshi-san ], you have mentioned, GlobalLogic capability enhancement is one area that we'll focus on geographical footprint as well as expansion into new domain. In order to support GlobalLogic, bolt-on investment is being considered. The second KPI is the service enhancement. For the cloud and managed services, enhancement will be the focus for M&A inorganic growth in order to enhance our capabilities. So that is what we are contemplating today. So these are the 2 areas of investment for us to the tune of JPY 500 billion investment for growth is being considered. That is all.

Thank you. I see more hands from the Japanese channel. So let me continue. Harada-san?

This is Harada. Do you hear my voice? I have 2 questions. One, Page 20 -- as is shown on Page 20, moving forward, your OT area as well as the product as well as how to liaise these 2 areas will become very important. At this point in time, my impression is that synergy can be generated from the field of energy. So I would like to confirm the domain as well as the timing. And also, at this point in time, there will be sensors attached to various products to collect information. So what will be the percentage of product that has the sensor? And how ready are you to start the business? So that's my first question. My next questions have to do about KPI. The KPI of Hitachi is shown. But on the other hand, as GlobalLogic, what are the KPIs do you have? So that's my second questions. On Page 25, net retentions ratio, EBITDA may be the KPIs you have. But once again, please talk about the GlobalLogic's KPI.

Harada-san, thank you very much for your question. Now on the first point, let me make some comments. And then Taniguchi will provide you with some supplementary comment. And then regarding the second question, Shashank will talk about the specifics of the KPI of the GlobalLogic. Now about liaising with OT. As you have rightly pointed out, energy -- in the field of energy, Hitachi Vantara, GlobalLogic, collaborations is going fairly smoothly. And specific asset performance management, development of solutions is already underway. Now geographically speaking, DX market is rapidly expanding in North America. So North America is a very important market for us. So in that sense, in North America, Rail, which has a high presence or the Connective Industries, partly collaboration is underway. Take, for example, the Connective Industries, compressor comes with sensors, so signs leading into diagnosis or to monitor the utilization is now made available. How many sensors centers? What shall be the coverage of the sensors? That's very difficult to respond because I don't have any information at hand. So I'm not in a position to respond right away. However, moving forward, to strengthen the product through digital, from that perspective, in almost all the product, in one way or the other, we would like to have the sensor being attached. And how you collect the data? Sometimes on a real-time basis, sometime on a bulk basis. There may be some different approaches, but we would like to utilize digital so as to provide enhanced value to the customers. I believe that will be the very important point. Now over to Taniguchi-san about the collaborations with OT.

This is Taniguchi speaking. Can you hear me?

Yes. We can hear you.

Thank you. Now about the first point, as you have rightly pointed out, in the field of energy, as Tokunaga has mentioned, there are already multiple projects underway, Asset Performance Management. On top of that, energy, take for example, stability of the grid is another project that is already underway. Let me further specify. The renewable energy use is spreading. Then the balancing of energy is becoming more difficult, and digital can make the adjustment and coordinations for the stable supply of energy. It has very high affinity with GlobalLogic or with Hitachi Vantara. These OT sector players, we have already started addressing that. That's one point. And similarly, as Tokunaga has mentioned earlier, Rail industry, similar projects have already commenced. Let me cite some examples. Take for example, industrial sectors product. Prior to my current position, I was in the air-conditioning as well as the home appliance business. Now for the future product that we will be launching, it will become more connected. Now this is related to your second question. Take for example, elevators and escalators. To have more sophisticated and efficient maintenance, it's being highly connected. On the other hand, industrial products. For the future products to be launched, it comes with the connected functionality. So it's still in the transitional phase. So in this area, performance will be enhanced over the air, for one thing. And also, service subscription is a key. We will see further spread of service and subscription services, particularly in North America. So Hitachi Digital still serves as a control tower to give a positive influence within the Hitachi Group. So that's what we are working on. This concludes my response.

And Shashank, can you talk about KPI too?

Tokunaga,-san, GlobalLogic is a hyper-growth company, but we are not measuring GlobalLogic by stand-alone growth, but how we are actually working together with Hitachi to give that benefit to digitally transform the front views. So we are measuring GlobalLogic on GlobalLogic revenue growth. We are a stand-alone revenue growth. We are measuring on the synergy business, which we can create along with Hitachi front views along with their clients. We are -- at the same time, we are looking at net dollar retention rate that indicates essentially how many customers we have repeat business and how -- as we are growing, can the growth sustain in terms of the commitment, multi-year commitment, over the next few years. On the margin side, as earlier said, if we are doing so good with our clients, that should also rub that success on our margins. So we're looking at EBITDA margin growth and EBITDA margin. And last but not the least, we are also checking our attrition, how we are comparing against the industry. If you see across all these 5 parameters, we performed in fiscal '21 better than fiscal '20. So our quest is actually how to continue, as we are hyper-growing, how that growth could be very secular with the clientele which we have, how we can grow with them stand-alone as well as with Hitachi. And most importantly, our people are happy while doing so, and that is net creating actually the great EBITDA margin. So these are the 5 KPIs we follow very religiously. Thank you.

Thank you very much. There is also a question from Japanese Channel, but we will take a question from the English channel at this time. Are there any questions on the English channel? Please press the Raise Hand button if you have any questions on the English channel. Bolor-san?

I am Bolor from Jefferies. I have 2 questions. My first question is to Mr. Tokunaga. Could you please share with us some examples of how the role of Hitachi's domestic IT business will change within the new medium-term plan versus the previous one. I'm assuming its role should expand in terms of collaborating with other business sectors and shift away from pure system integrator business model. Could you please share with us any action plans, operational changes you want to make to domestic DSS business?

Thank you very much for your question. As I explained earlier, in -- up until the 2021 plan, DSS business, has undergone a significant transformation. First point is that the profitability is higher in terms of the business we pursued. With the acquisition of GlobalLogic, we have made the preparations poised for growth going forward. And as you have rightly mentioned and as you have asked, domestic business will also undergo change. And it shows the direction for change in the domestic business. There are 2 points to be mentioned here. The conventional SI business will maintain profitability and further enhance profitability. We must continue this objective going forward. There are many customers who have been engaging with Hitachi over the years. Mission-critical system integration ability of Hitachi has been highly evaluated by our customers over the years. So we want to enhance this capability further going forward. The second point is the DX business in Japan. We want to expand this further. GlobalLogic Japan has now been established. With this, the engineers in terms of Japanese business in the past have been given stimulus. They are feeling very much encouraged. And more than ever, we believe we can provide digital value to our customers in Japan as well. So there is significant excitement for our business in Japan as well. The DX business expansion in the domestic market will be an important focus going forward. And that's it for my response.

My second question is to Mr. Shashank and Mr. Taniguchi. So to Mr. Shashank, it has been almost 1 year since GlobalLogic has been integrated into Hitachi Group. What are some of the new market opportunities and technological capabilities GlobalLogic has obtained to capture further growth just because of being part of Hitachi Group. From your presentation, I understand you mentioned Energy and Rail verticals, there are some enhanced synergies and also APAC market is an opportunity. Any other synergies or technological capabilities? And in the same way to Mr. Taniguchi, what are the new business opportunities or technological capabilities, some examples or changes happening at Hitachi Vantara now that GlobalLogic has joined?

Thank you for the question. After actually GlobalLogic merged with Hitachi, across 3 different vectors, we are getting benefited in terms of expanding our business. The first one is aligning our service lines with the firms which Hitachi has, with Hitachi Vantara. GlobalLogic traditionally is an ideation and engineering and trying to create the products and platforms and services, but we never operationalized that or try to run those systems in the market. Hitachi Vantara's capabilities in the cloud, and running the systems is actually helping us to complete the value chain. And we have won several deals. We bid on several deals. We've won several deals of the marquee brands, and that is actually achieved in the first 6 months after we actually closed the transaction. So number one is actually helping us to complete our service line, which is very important, both to compete against the larger IT players, but also to offer the single-point shop solution to our clients. On the second part of the lever or the second access is the geographical expansion, which GlobalLogic is doing. GlobalLogic is operating in 14 countries, Hitachi we actually added almost close to 40-plus countries and most important of that is Japan. It's a very large market for many of our core sectors like automotive, like communications and media, like banking and finance and retail and many other areas. And I'm very excited about it. It is 6 months after the acquisition happened, around month of March, we announced GlobalLogic Japan. And we actually -- we seeded an entity from both Hitachi and GlobalLogic. And as we speak, you might have seen the announcement, we already announced actually our first contract within 9.5 weeks since the time actually we announced it with Nojima, which is one of the very famous brand in Japan. So we feel that both in the countries like Japan and some of the other countries in Western Europe, we are expanding our presence and offering our service to those areas. And last but not the least, which is most profound is actually working with Hitachi Energy, Hitachi Rail, Hitachi Industrial, and Taniguchi-san himself is sitting over there, he's helping me in that particular line. These are the areas which are not the industry traditionally GlobalLogic dealt with or if dealt with it, we dealt with on a very small scale. So we believe that both our design engineering and data, combining with Hitachi Vantara, we can offer the end-to-end solution to these industries. And last but not the least, all this comes together using Lumada. Lumada has over 1,000 plus business cases. And we just started exploring those business cases, trying to take those both horizontal and vertical trying to take those to our clients and also enrich those business cases as we move forward. So you can see from my actually voice that I'm very excited. It's like a kid in the candy shop to a large extent in terms of what we can do. If 38% growth of GlobalLogic last year was one indicator, I think this only they're going -- supposed to go upward. Thank you. These are the areas which are not the industry traditionally GlobalLogic debit pay. Or if we debt pay, we debit pay on a very small scale. So we believe that both our design engineering and data, combining with Hitachi Vantara, we can offer the end-to-end solution to these industries. And last but not the least, all this comes together using Lumada. Lumada has over 1,000-plus business cases, and we just started exploring those business cases, trying to take those both horizontal and vertical, trying to take those to our clients and also enrich those business cases as we move forward. So you can see from my actually voice that I'm very excited is like a kid in the candy shop to a large extent in terms of what we can do. If 38% growth of GlobalLogic last year was 1 indicator, I think this only here going -- supposed to work for it.

[indiscernible] from Taniuchi. Let me also respond to your question. Conventional Hitachi OT or Hitachi Vantara. Let me comment from the perspective, the newly acquired opportunity is what I would like to talk. As Shashank has mentioned. So this is similar to what Shashank has mentioned. Now from the OT sector perspective, there are 2 things that we have acquired. One is the user experience, UX, or user interface, UI, based upon which the digital engineering. So new customers' business growth as well as the opportunity toward that and utilizing the domain knowledge of OT, we can take up the challenge. In other words, to the customers, the new business opportunity can be now acquired. So that is 1 thing that we have acquired. Now as a result the way we conduct the business is now in the field of service. We've been making sales and the servitization. The representative of that is the subscriptions with working with the GlobalLogic or with Shashank, that is something that we have acquired. We will be acquiring as well as this will further grow. Now talking about Hitachi Vantara, as Shashank has already mentioned, our customers in the journey of DX, take, for example, with the new digital engineering of the digital logic, by concluding the contract, then his or her start. But after that, in the business of the customers, it has to be steadily implemented and you have to continue the operation. That is also necessary element in the service operations on the cloud, and this is the area where Hitachi Vantara have a strong. So from the eyes of the customers, the end-to-end capability can be asked for as a one-stop service. So this is value for the customers as well as the newly acquired opportunity for us. So those are the 2 things that we have acquired compared to Conventional Hitachi business now that we are working with Shashank and the GlobalLogic colleagues. So those are the opportunities that we have acquired. This concludes my response. Thank you very much.

Sorry, can I just confirm 1 additional question with Mr. Shashank, please?

Please.

So you mentioned 1,000-plus business cases of Lumada Solutions, have you started actually offering some of them to your existing customers and due to the enormous opportunities from this with minimal additional costs because they are already existing solutions?

Yes. So Lumada business case has come across both horizontal, which is around data as well as industries like automotive in which we operate. At this point, actually, as we are looking at it is, as we're collaborating together and with [indiscernible]. We are trying to figure out how to enrich these cases as well as how to take these cases and try to get solutions out of it. Often time business cases or use cases trying to solve a point problem. You need to get the multiple cases together and apply that to the service model in order to actually change in order to make something data to happen. So those are the areas. So it has -- it is a 2-way solution. One is actually working on the engineering front to create a use case or use the use case. But at the same time, it's a design problem how to apply that in trying to change or trying to modify how the customer is selling, our customer is transacting how to remove the friction in the data side. So those are the areas. I mean, just to remind you, actually, we are just 9 months since the time we closed the transaction or 10 months. So we just actually started that, but our early science in terms of talking to the clients creating the common clients and creating revenue out of that is very promising.

The time has being completed for the Digital System and the Service Sector. We like to bring this session to a close. Thank you. The next session is Green Energy and Mobility Sector. We will start at 3:00. Thank you. [Break]

It is now 3:00 p.m., so we will start the presentation on the Green Energy and Mobility Sector. The speakers are Keiji Kojima, President and CEO and General Manager of Green Energy and Mobility Strategy Planning Division; Claudio Facchin, Senior Vice President and Executive Officer, CEO of Power Grids Business Unit and CEO of Hitachi Energy Limited; and Andrew Barr, Vice President and Executive Officer, CEO, Railway Systems Business Unit and Director of Hitachi Rail. In addition to the 3 individuals, [indiscernible], CFO of Green Energy & Mobility Strategy Planning division, a total of 4 will answer the questions from the audience after the presentation. Please wait a moment while we switch the screen. Kojima, please start.

I will now explain the Green Energy and Mobility Sector. I, Kojima, will give the sector overview and CEOs of Hitachi Energy and the Railway Systems Business Unit will explain their respective business. These are my 4 key messages. I will explain them in order on the following slides. When we announced our MTMP in April, I mentioned that we will use data and technology to create a sustainable society where each and every one of us can play an active role while protecting the earth. The Green Energy and Mobility Sector is a newly organized sector to realize Hitachi's goal. This is the diagram of the sector structure. There are 2 major challenges in this sector. The first is to improve profitability by increasing the ratio of service business using digital technology. The second is to proceed with the integration of large assets from a company-wide perspective, such as Hitachi Energy, which we have already acquired; and Thales GTS, which we are in process of acquiring in the railway sector. With the objective of getting this off the ground, I decided to lead this sector directly along with 4 other CEOs. This sector generated sales of approximately JPY 2 trillion in fiscal year 2021, accounting for about 18% of Hitachi's consolidated sales. As shown on the right, energy-related businesses, including Hitachi Energy, account for 70% and the Rail Systems 30%. The business is expanding globally with overseas revenue accounting for 80% of total sales. It is very high. In fiscal year 2022, we expect to post year-on-year increase in both revenue and profit due to steady business growth and profitability improvement despite the peaking of onetime expense from the integration of Hitachi Energy and the continuing impact of rising material prices. In fiscal year 2024, the final year of the MTMP, we will continue to grow in aim to achieve JPY 2.6 trillion in revenue, 10% adjusted EBITDA and 8% ROIC. Next is market. On the macroeconomic level, investment in Energy Transformation and Electrification is, in fact, increasing due to factors such as climate change and the Ukrainian crises. In addition to high-growth areas such as EV infrastructure and micro grids, new business opportunities are emerging such as services for achieving decarbonization. We feel that this is a strong tailwind for us as we have a wide variety of products and solutions to offer to those markets. Many of the projects in this sector are long term in nature, and we have a large number of customers and installed base around the world. As I mentioned at the outset, the key to high profitability is to expand the service business for this installed base by leveraging digital technology. Using the Lumada framework, we will develop a variety of products and services, combining IT, OT and products as One Hitachi. Hitachi aims to contribute to the reduction of 100 million tonnes of CO2 emissions in fiscal year 2024 by providing products and services and more than 80% of this contribution will come from this sector. We will invest R&D expenditures in themes such as energy conversion, energy transition, electrification and energy conservation to expand our business and contribute to society at the same time. To achieve global growth, it is essential to improve the efficiency of the management infrastructure through digital technology. Hitachi Energy is already operating a global operation that utilizes digital technology, and we are now working on a project to expand this operation to the entire Hitachi Group. This is the major benefit of our acquisition of global business, ABB Power Grids. This concludes my explanation. After this, Mr. Facchin and Mr. Barr will explain the business strategies of our 2 main businesses, Hitachi Energy and Railway Systems, respectively.

Thank you, Kojima. Over to you, Facchin to present on Hitachi Energy.

And good to be here to share Hitachi Energy, where we come from and the prospects, the ground that we have covered and also where we're heading together with Hitachi Group and certainly sharing with you how we see that we're well positioned to drive sustainable and profitable growth. . I wanted to start with sharing a slide that has been already shared with this team in the past just to recap why we see we're well positioned across the markets, the sectors, geography and portfolio, also how the market is growing, how we are tapping into high-growth market segments and how the transformation program that we have launched is yielding results driving the growth, but also driving the shift in the portfolio as well as driving continuous improvement initiatives across the business to improve operation and execution. And all of that leading then to the ambition level that we have to grow profitably, sustainably shifting the portfolio, doing more digital, doing more services and by that, strengthening our #1 position. If we then look at the content of Hitachi Energy's essentially 4 businesses, they all form synergic portfolio across the transmission and distribution technology. Starting with grid automation, it's really at the center of digitalizing the grid. We're leading in that space, both software as well as systems and services, then grid integration, which is key core technologies such as HVDC power quality where we are their #1 in those specific technologies that are needed to do the transition on the electrical energy system. High-voltage products as well as transformers, uniquely positioned, clearly #1 on both areas, leveraging technology, innovation, footprint and also an unparalleled installed base and installed base is a very important part of also how we're going to drive growth, differentiating and leveraging the tremendous opportunities that we have by tapping into the Lumada ecosystem that Hitachi is bringing forward. Where we come from and what we have achieved since we are together with Hitachi, starting with the growth path, roughly 10% on during the period as we started the closing in July 2020. You all know there was a tough 2020, but we have seen a stronger recovery in 2021. And that has led for us to also drive revenue growth and retain a profitability of 7% and building also a very strong backlog, not only driven by volume, but also driven by the shift, leveraging business models, leveraging the portfolio that we have and, for instance, delivering roughly $2 billion worth of HVDC orders with the risk business model in partnership with other leading players, for instance, on the offshore wind. Last but not least, very important also we delivered roughly $0.5 billion worth of cost savings driving supply chain footprint, productivity initiatives that helped us mitigating the impact on the headwinds that we heard Kojima mentioning also earlier. All of this gives us a very strong starting point of a backlog which is record high of $14 billion that will help us in taking the right first step for the midterm plan. Before I go into the midterm plan, just to position that we are leveraging the scale that we bring as Hitachi Energy on the energy technology platform side, but also leveraging the scale that we bring from a Hitachi standpoint with Hitachi Vantara, with GlobalLogic now to deliver both a combination of IT, OT, which is needed to deliver IoT at scale and at speed. And I really -- I'm convinced also seeing the first outcome of the synergies that this is a very strong point for us to deliver the growth in order to deliver the extra value to our customers for the energy transition. You all know, essentially energy transition means decarbonizing the entire energy system, which means in turn that the current share roughly 20% of fossil-free energy supply needs to go by 2050 to 80%, which means in turns that the current power system from an electricity standpoint will have to be able to handle 3x the amount of energy and that with a much more complex system because of the complexity on the renewable side, but also the additional complexity on consumption patterns that are coming from electrification across the sectors. Three key areas from a technology standpoint that we're driving in order to make sure that we maintain the leadership in innovation: Number one, design and produce and deliver sustainable products to decarbonize the assets, the infrastructure; number two, power electronics really central to this part of the journey. And as I mentioned, no doubt, digital will be a must in order to manage the higher complexity. And all those areas have good synergies also with Hitachi, as we heard also today with the presentation on innovation. Therefore, our Hitachi Energy 2030 plan is a commitment to drive growth and to try to growth aligned with our partners. Three areas: number one, we continue to strengthen our Power Grids core; number two, we want to double up our efforts in Digital and Service but also expanding at the edge of the energy system. And how do we do this? Driving innovation, that's why we're leading in this space, but also leveraging more of the synergies, synergies obviously with Hitachi and creating partnerships and leveraging M&A to accelerate. And this will be done to help the customers across the entire value chain, plan, build, operate and maintain. This will translate into the first key milestone of our 2030 plan, which is essentially the 2024 commitment to deliver on the midterm plan. We have seen, because of the starting point, as I mentioned before, a stronger growth opportunity for us in terms of revenues. Therefore, we have upgraded the range between 4% and 6% revenue growth in that midterm plan, which, in turn, will help us delivering the commitment to stay at the upper end of the margin corridor 8% to 12% by 2024, which means in terms of adjusted EBITDA by 2024 being on the 10%. Important also, we said we want to grow sustainably on earnings and cash and therefore, our ROIC ambition level moving from 10% to 18% by 2024. A few examples, concrete examples on how we are already implementing the strategy. Number one, on strengthening our core, continue to invest in HVDC. HVDC is a technology that also helps making the whole transmission system more efficient, lower losses, therefore, lower carbon footprint. We have invested a lot across the portfolio to present to the market a highly equiefficient portfolio that once again will help decarbonizing the infrastructure on the energy side. Lumada at the center of our efforts for Digital and Service growth. And then, of course, expanding at the edge, whether it's battery storage, micro grids, but also connecting new sectors, as for instance, e-mobility. On the other side, when we look at how do we do this, investing in innovation, as I mentioned before, but also investing in partnership. We have great examples in the past 18 months, for instance, partnering with ABB and their pioneering subsea power technology. We provide subsea technology for transformers. We also have recently announced a partnership with Schneider Electric, that will help us in positioning with our customers a stronger portfolio and a stronger value proposition across the transmission and distribution asset base, which is essential, as I mentioned, for the energy transition. Also co-elaborator in terms of innovation with partners, with our customers to drive, for instance, interoperability, which is necessary for parts of the portfolio such as HVDC and also investing in pioneer solution, which is a bolt-on that help us being closer to our customers when it comes to their planning, their operation and maintenance optimization. When it comes to Lumada, you've already seen the cycle, and this fits really nice with the strategy that we had before joining the Hitachi family by increasing our digitalization of the portfolio and increasing the services that we drive with that, and this Lumada cycle is right at the center of that journey. We have just announced our distributor in the U.S., a very positive feedback from the customers on our Lumada Inspection Insight portfolio, and you heard some of that also in the previous session. To conclude, we're well positioned. We're here to accelerate the clean energy transition, join the efforts with Hitachi, with our partners, and we're here to drive profitable and sustainable growth on the 3 building blocks that I mentioned before. We, of course, will continue to do more and put more efforts on the digital, on the energy, creating services, and we're committed to deliver that growth with accretion on the earnings, as I mentioned before, to become -- to maintain the leadership on the 2024 plan. And with that, thank you for your time and hand over back to the team.

Thank you very much, Mr. Facchin. Next, for Railway Systems Business Unit, Mr. Barr, please start.

Good afternoon, everyone. Today, I'll provide you with an overview of Railway Systems BU strategy as we head into the next midterm plan. This will include addressing future growth and the plan for expanding our digital capability to meet the demands of the market. To turn to the first page of the presentation for key messages, in FY '21, RSBU delivered high levels of revenue and the order intake has been strong despite difficult conditions due to the impact of COVID-19. We plan to continue this trend, delivering the highest financial performance ever during the current midterm management plan for rail. The acquisition of Thales GTS due to complete by the end of the financial year will transform our capabilities and provide a step change in revenues, moving our revenue mix towards high profitability route control. In order to meet the demands of our customers in an evolving market, the business model will adapt to deliver our current core offering, complemented by new digital innovations in smart mobility and provide sustainable products for future greener growth. On the next page, as a full service global provider of transportation solutions with market-leading products and services, RSBU is strongly placed against the competition. Recently, the business has been reorganized into 2 lines of business: rail vehicles, which includes manufacturing and maintenance of rolling stock; and rail control, including signaling products, operations and maintenance and integrated turnkey solutions. RSBU is a global Hitachi business with customers across 5 continents. Japan remains a core market for both lines of business and accounts for 20% of revenues. Of the remainder, 55% of FY '21 revenues are from EMEA. In FY '21, 58% of our business was from the vehicles LOB. With the acquisition of Thales in FY '23, this is forecast to change. In the current midterm plan, you will see later on in the presentation. For the next page for overview of FY '21. FY '21 was a challenging year for the rail market, but our performance remains strong despite this. Importantly, revenues and order intake were ahead of budget, providing a strong platform for the business moving into the current midterm plan. Profitability was impacted by certain one-off events in some legacy projects and decreased asset efficiency due to the impact of COVID-19. However, we're confident of a strong future, and our performance will grow as the global passenger numbers continue to recover post-pandemic. Please turn to the next page. Slide 4 sets out our midterm plan to FY '24, in which we're targeting to reach almost JPY 1 trillion in revenue and 10% adjusted EBITDA margin, the highest levels ever in Railway BU's history. The strategy for this midterm plan is clear and focused on 3 key areas: focusing on business as usual, our vehicles business is matched to customer demand as the market recovers from the impact of COVID-19 with a focus on winning high-quality projects with attractive long-term services contracts; successful integration of Thales GTS business to capture the synergies and shift our revenue mix towards higher profitability rail control segment and expand our digital capabilities, utilizing the strength of Hitachi Group to optimize our processes and open new revenue streams in adjacent markets. The Rail Industry has undergone a recent period of consolidation. The acquisition of Thales GTS will cement our position as a market leader in rail control as well as being a key player in the overall industry. The rail market is strong and growing. Our customers are investing in growth for sustainability as well as capacity and governments across the world look towards expansion of low carbon efficient transportation solutions. Looking now at some of the key business challenges and investments we are making currently to achieve our goals. We strengthened our senior management team in Japan and implemented a new organization structure as well as enhancing our internal processes, simplifying our business to deliver for our customers. This reorganization will prepare us for the integration of Thales GTS and will be complemented by investment in digital and green products as well as solutions to anticipate the future needs of our customers and provide the base for our transition to the as-a-service business model. For the overview of Thales GTS, we announced our intention to acquire the Thales business in August last year and now regulatory approval is currently ongoing to enable the transaction to complete. This is anticipated before the end of the current financial year. Thales is very complementary to the current rail control business in terms of products and the geographic coverage, and it opens up new key markets such as Germany, Canada and Singapore. Planning for integration is already underway as we look to capture synergies and expand in new markets and bring the benefits of Hitachi Group's digital capabilities to the combined new rail control business to create other opportunities in smart mobility. This is a key pillar in our business growth and will be an exciting next chapter in our expansion to become a global leader in transportation solutions. To cover how we will grow our Lumada business, digitalization of our business increases efficiency in both design and build phases during our projects, providing benefits to all of our customers. Core services such as maintenance are also being transformed to become predictive remote-based services, and these will bring reduced cost while improving safety. The new smart mobility business is developing. And through Lumada, we are targeting technologies such as smart ticketing. This is using customer solutions on our new product platform, which is currently undergoing pilot trials in Genoa in Italy. This is building on our existing ticketing capabilities already in Japan. To focus on our green initiatives, as a green mode of transport already, rail is strongly influencing the future of travel and RSBU is investing to improve and expand rails green credentials. We're reducing the impact on our manufacturing sites by investing in Green Power Alternatives. For example, at our plant in Tieto in Italy, which is now over 50% powered by solar panels. We're also providing green solutions to our customers. Our hybrid rolling stock platform is capable of running on both electric and battery power and is designed to be up to 95% recyclable. In the U.K., we're retrofitting batteries onto the Class 800 fleets, removing diesel engines from the network. And in Japan, the Hybari hydrogen train in partnership with JR East and Toyota is now on trial. To conclude, RSBU is strongly placed in the market in Japan and globally. Transport systems and passenger numbers are recovering well from the impact of COVID-19. The acquisition of Thales GTS will be transformative for our business, bringing added scale, new markets and the springboard for new opportunities in smart mobility. The investment in digital capabilities will be key as we move towards the as-a-service business model. This will take place during this midterm plan, and will complement the core business, which together will ensure growth into the future. Thank you very much.

We now will entertain the questions from the floor. Let me switch the screen. Please use the raise hand function on the Zoom screen for those of you who have the questions. And of those of you who has raised the hand, I will point to, upon being called on, please mute yourself and then identify yourself of name and affiliations and state your question. I will be calling in the name shown on the screen. If you no longer will ask the questions then please cancel your question. No video capturing your face will be shown. I will entertain the questions first on from the Japanese channel. Now I will entertain the questions both from Japanese or the English channel, but let me start with Japanese channel. over to you.

[indiscernible] is my name. I have 2 questions. My first question is to Kojima. Toward the expansion of Lumada business and please talk about the framework in [indiscernible] presentation in the social DX expansion is what is being aimed for, that's like he has mentioned. So OTT product. being combined as well as through its maximization, expand the Lumada business. What are the different roles given take, for example, on the OT side, Hitachi Energy, Hitachi Rail, these are the businesses? But on the other hand, in IT, Hitachi Digital, Vantara and GlobalLogic, so there are different teams. What is the team being formulated? How will the point of contact with the customers to take the lead in development in order to have a recurring business? What should be the continued touch point? Will it be project by project? Or do you have the different framework? So please explain about the framework that is in place. So that's my first question to the extent you can share. The second question is Page 19 of Facchin's material, EBITDA margin is 8% to 12% to 2024, that is a target that is written on that particular page. Now if you run the factorial analysis, how you intend to raise the profitability? Take, for example, the revenue would go up, mix should improve or the grid automation may further enhance or the high voltage may further go up or to be the risk and to reduce the unprofitability or to improve the operations. And please share some of the major factors to achieve that percentage?

Thank you. So responding to your first question, I, Kojima, will respond. The framework or the business model, the original framework of Lumada. From the very beginning, the starting point is the co-creation with the customers. So if you are to start the co-creation with the customers, the customer will become the starting point. Therefore, [indiscernible] have joined or the GlobalLogic is now joining the team, and they have their customers as well. So that shall become the starting point to roll out the Lumada business. So that is the basic thinking. Therefore, take, for example, the utility customers, Hitachi Energy do have wonderful customers in the footprint, then that customer will become the starting point. So take, for example, in the field of grid automation, which is closer to the team doing the -- and they will provide the support directly. We will further enhance that, and Lumada cycle will create more point of businesses and the GlobalLogic will do the digital engineering part, for example, or the cloud service can be utilized and then the Vantara will also be involved. In this what we do the plan, build, operate and maintain. So this cycle will be monetized as a business and to further being enhanced. So that is the original thinking that we have. In other words, so the point where there is the strongest intimacy, that will be the starting point and then we will add some other elements to further enhance the entire cycle or the circle of business. So that is the original way of how we are considering of expanding the Lumada business. Now moving on to the second point about Hitachi Energy, the profitability. Claudio, could you respond -- Facchin, could you respond to that question?

Thank you for the question. And maybe just to complement also what Kojima just mentioned. We -- when we looked at the synergy opportunities across our portfolio with Hitachi, we clearly saw the opportunity on joining forces with the IT and the OT dimensions that you mentioned. And we have now been a high level of engagement with weekly follow-up meetings. We have customer engagements jointly on both sides. So I would say that was probably trying to understand the opportunities, but now we have structured in a very positive way with collaboration. And of course, we are in a learning and exploratory way, and as Kojima mentioned, also jointly with our customers. On the margin corridor, the 8% to 12%, if you look at where we are today, we're not yet into that margin corridor. We aim to be there in 2022 and then aim to be by 2024 at the upper end of that margin corridor. How do we get there? The 3 pillars that we have been driving in the current strategy, driving growth, shift in the portfolio, so the mix that you mentioned, but also driving operational excellence, productivity initiatives, white collar productivity, working capital initiatives to optimize our cash flow as well. All of that will contribute. And of course, we will have to navigate the challenges, the headwinds that we see on the supply chain, on the inflationary trends. But at the same time, we clearly have a better position than we thought pre-pandemic. Now with the growth I showed to you the very strong backlog that we have now entering into this new midterm plan with also a better quality profile of that backlog, which gives us the additional point to start by delivering revenue growth, which will be essential to achieve that profitability. That said, we have to, as you rightly mentioned, drive the mix. Therefore, the extra efforts in this midterm plan on service and on digital, both are accretive business, both shift the pool of the profitability of our portfolio to drive that sustainable and profitable growth. And last but not least, as I mentioned, $0.5 billion every year needs to come in, in that plan in order to mitigate and compensate the headwinds that we see in the supply side.

Thank you. So another question from the Japanese channel. [indiscernible], please ask your question.

This is [indiscernible] speaking question. I have 2 questions. First is Hitachi Energy to you, Mr. Facchin and another for Mr. Barr, Hitachi Rail. So first, starting with Hitachi Energy. Slide 15, so there's the order backlog increasing and HVDC, the order amount is growing, you mentioned. In the past year, the deal businesses that you acquired and became the backlog, the ones the new businesses for the future. In the initial stage, the profit margin that you anticipate in the initial stage, will this become high or is becoming higher than in the past? Or is the profitability declining? So that is my question. So when we record the revenue in the future, can you use creativity to improve profitability, profit margin up going forward? Thank you very much so if you could share with us your idea. And second question is similar. Slide Page #27, Rail order is shown. So Railway Systems profitability had been on the declining trend until now. But the businesses that you acquired recently is the profitability, profit margin recovering or is on the uptrend or not? And when you post the sales in the future, what are some of the measures you can take to improve the profitability going forward?

Thank you for the question. Well, then Claudio first?

Very important question, and that's why we have highlighted in our presentation. When you look at the mix, an important part of this growth comes from the projects that you mentioned, we clearly see HVDC as an essential part of the technology needed to drive this energy transition on -- in the electrical system. And as part of that, we being a leader, we have not only been driving innovation in terms of technology, but also driving innovation in terms of how do we create a business model that allows us together with our customers and our partners to deliver on time, on quality and on cost, very large and complex projects. We've been going through this learning for quite some years. And if you look at the $2 billion that I mentioned that we have been acquiring in the last 18 months, they are all with these new business models. They're all in partnership where we concentrate on delivering our core technology. That's where we are leading. But we also selected key partners that are leading and have the competence, the capabilities and the experience to deliver everything around it so that, that technology can be deployed and utilized to decarbonize the energy system. Two areas. One is improving the profitability before acquiring the project, meaning delivering on better margins when we do the costing also preparing much better in terms of engineering so that we can define in much more detail together with the customer and partners all the interfaces where the risk lays. The second part is also securing that the execution plan allows us to deliver as we before acquiring the order. And for that, we have implemented systematically now for the last few years, so what we call design to cost, design to value initiatives that allow us to better have understanding before acquiring the project on what the costs are and also having then a stronger starting point instance by sharing more engineering upfront. So all of that gives us the comfort that we will deliver according to that plan. Of course, the next question comes give the current inflationary trends, how do we deal with the continuous headwinds on the supply chain side. And for that, we have also been -- looking at what are the terms, the conditions, the pricing, the variation clauses that allow us to secure that once again we deliver on time, on cost and on quality as per customer expectation.

Thank you, Claudio Facchin. And so, Andrew on your side, could you talk about the trend of the profitability and the response to the question, please?

Thank you very much question. Slide 27 shows the FY '21 results, and this were adversely affected because of the impact of COVID-19 on the business as well as -- and that's more number of one-off events, which affected our overall profitability. However, we are targeting orders into the future, which are long term and give us the opportunity to access maintenance market as well as to use all of our capabilities within the business to remain highly efficient. So as you can see on the slide, we were successful in gaining new orders such as the High Speed 2 rolling stock in the U.K. and the operation and maintenance contract in Riyadh. The benefit of those 2 is that they attract a profitability in line with our future aspiration and also have long-term maintenance contracts as part of the main delivery aspects of the project. This gives us access to a long-term backlog but also enables us to target the growth in our business and ensuring that our profitability remains in line with that. Alongside this, we were able to guarantee the book-to-bill above 1. And we continue to target a higher number towards 1.2 as a result of this targeting of these new projects. We have focused very hard on making sure that our business is running efficiently, and this is why we've been targeting our business as usual as well as looking for projects which match this outline, which enables us to gain the profitability in line with the future aspirations and to remain as efficient as we can be, maximizing the capacity of our factories. And this will continue to be a key feature of our projects that we're tendering for into the future to ensure that our backlog remains strong and enables us to continue to grow as well as through the acquisition of Thales and into our long-term aspiration in the business.

Thank you very much. Have that responded to the question that has raised. Thank you very much. From Japanese channel, I see some more hands. So let me call upon the next person. [indiscernible], Please take your question.

Thank you. This is [indiscernible] speaking. I only have 1 question. Now, I've been watching the past meetings and there are something in common, which is adjusted EBITDA. Now, the 10% comes first, it seems. Usually, more higher numbers such as 20%, some outstanding figures may be presented. However, looking at the past materials, this seems to be the bad aspect of the old Hitachi and all coming with very mediocre numbers, nothing stands out OT, IT and there are so many such wonderful solutions. However, all shows the target of 10%. So the business model seems to be very mediocre. That concerns me. So what don't you come up with more prominent and standing out numbers? What the reason?

Thank you very much. So Kojima will answer your question.

Depending on the sector and the business unit, well, the numbers comes with range, take, for example, GlobalLogic, 24% or 25%. And many of the IT businesses, 15% or 16%, on one hand. On the other hand, some are 7% or 8%. So in actual, there are some differences, but OT, IT and Product is the initiative to enhance the overall number. The service, the recurring shall increase for those having the low ratio as well as to improve the profitability is a bit so in that phase. Now we are talking about 10% Well, it's -- there are some differences. But OT, IT and product is the initiative to enhance the overall number. The service recurring shall increase for those having the low ratio as well as to improve the profitability. We believe that they are still in that phase. Now -- we are talking about 10% in this particular sector. That is why you are left with that impression. This particular sector, as I mentioned at the outset, well, this has a very long tail. From the order take until the revenue each of the pipeline have the hundreds of billions of yen. And this will change -- well, it will take some time for -- before it starts to change and monetize. So -- the digital will take some long time. The lead time is very long. Now in 2024, we have to reach 10%. As was mentioned, the quality inside the pipeline has been going up considerably and toward the 2027 further raise it to 14% or 15% of gradual increase. So that is the intentions behind this planning. So is [Shashank] have mentioned your -- what you said is not correct at all. Is around 10%? No. We have higher perspective and trying to further promote digital.

If that will be the case, level of contributions of Lumada and how that is reflected into the profit. And please disclose that -- the Lumada's profit margin at each businesses. How the Lumada is pushing up the profitability of each business or the sector? If you can visualize that, I would appreciate that very much. Please give considerations to do that.

As you have rightly pointed out, that is indeed the directions that we are considering. Now core business as well as the affiliate related business on other 2 categories, however, we will divide into [ 4 ] in the monetized business. And we will disclose the volume as well as the margin level. We will change the disclosure so that we can have even closer and better communication.

Thank you very much. We are almost running out of time. So this will be the last question. One more from the Japanese channel. Tom-san, please ask your question.

Can you hear me?

Yes.

This is Tom speaking. I have one question about digital. So rail and energy, IT development, the internal in-house development, the organization -- what kind of organization will you be? How will you change? You talked about Lumada and the synergies being pursued. So the internal IT development method and the -- method -- how do you plan to change in terms of organization? So in Thales, rail, what kind of organization change are you thinking of?

Thank you, Tom-san. So Kojima would like to respond.

In each business unit, where in each sector digital and IT development capability resides, IT development resource was explained by Tokunaga-san, most resides in DSS. But -- there are others, domain-specific IT development in other areas, too. In rail, for example, Thales GTS will come on board. And there's a good solid IT team there. And in energy, Hitachi Energy grid automation team is very much an IT team. So the development going forward will be in each business unit, each sectors, IT unit as well as DSS, especially GlobalLogic and Vantara, we'll do this very intensively. So collaboration within Hitachi will be the main part. And Connective Industries, which we'll present after this, Industries is the IT development team. So GlobalLogic and Vantara will work together on a global basis. There are specific domain IT teams in sectors, and there are general IT team in DSS. Those two will collaborate and pursue the development going forward. So that will be the development organization.

So for example, let's say, one rail project coordination. This will be on the domain side people -- domain side people will do it mainly? So project coordination -- so how will this change? How will this be addressed? In a different way or...

Yes. the customer-facing team will take the lead to coordinate the project. So utility-related customers will be Hitachi Energy grid automation team taking the lead. And in rail-related, control, for example, will be Thales GTS IT team, they face the customer. So they will take the lead in this coordination.

Thank you, Tom-san. Thank you very much. Now the time has come to end the session. With this, we would like to end the green energy and mobility sector to a close. Thank you very much. Next session is on Connective Industries sector, will start from 4 p.m. Thank you. [Break]

The time has come to start the session on the Connective Industries sector. The presenter will be Masakazu Aoki, Executive Vice President and Executive Officer and General Manager of the Connective Industries division. Please enjoy the video presentation press. [Presentation]

Aoki-san? Please, we are going to be switching over the screen for Mr. Aoki. Aoki-san, please start.

Hello, everyone. This is Aoki speaking. I will explain the business strategy of our sector. First of all, the purpose of the Connective Industries will be explained. As mentioned in the short movie at the beginning of the presentation, we have brought together our 3 strong business groups of the Urban, Advanced Technology and Industry in this April in order to provide the total solutions to complex and multifaceted social issues that transcend the boundaries between different fields. By collecting data from each of these business groups, we will create new values and transform the industry and society. Today's key messages are shown here. First of all, responding to complicated and complex social issues and the reason for establishing the Connective Industries. Number two, the evolution and the expansion of total seamless solutions and expansion and the strengthening of the current business. Three, accelerating global growth and creating green value. So I shall follow this table of content. First of all, I will give the overview of the Connective Industries. Now this is the positioning of our sector. We have the Urban group comprising Building Systems business unit and Hitachi Global Life Solutions and Advanced Technology Group, which is centering on the Hitachi High-Tech and Industry group comprising Industrial Digital BU, Water & Environment BU and the Industrial Products business. In particular, the Industrial Digital BU is responsible for creating the digital synergies, not only for our customers but also for the sector as a whole. This is the business overview. The revenue from Connective Industries as a percentage of Hitachi Social revenue is 25%. This is the largest sector. The right-hand side shows the breakdown of the revenues of JPY 2,752.8 billion revenues in terms of Urban, Advanced Technology and Industry. Now I will explain the business domains of the Connective Industries. First, in the product business in the fiscal layer, we have a strong industry-leading products in the sector, including those marked with the -- which indicate the top 3 global market shares, and we are promoting these products globally. Now based on these product business, OT controls and manages operations, and at the upper layer, management controlled by IT and workplace system are connected by strong products additionally. Therefore, enabling us to provide solutions in many fields through strong product and digital capabilities. This is our organization. Under my leadership, together with the heads of Urban, Advanced Technology and Industrial groups, and the global leaders of the various regions around the world, we will further increase our ability to solve problems for society and our customers by combining the sector's strong product and digital capabilities. Next, let's look back on the 2021 midterm management plan. This is a display of the main measures taken under the 2018 and 2021 medium-term management plans in order to improve profitability, which you can see on the bottom. We have strengthened our management base by withdrawing from the unprofitable businesses, transferring the Diagnostic Imaging business and establishing a global joint venture with Arçelik in home appliance businesses. Meanwhile, the growth investments shown above include the acquisitions of JR Automation in North America and Kyoto Robotics and the launch of Hitachi Automation, which will strengthen the robotics SI business. In the 2024 midterm and management plan, we will further evolve and expand the total seamless solution business. This chart shows the performance of the Industrial group, the group that I led until last year since the 2018 midterm management plan, showing the significant improvements in earnings due to portfolio realignment and focus on total seamless solutions. The Connective Industries group is a high-growth business unit that brings together the industry group and the Urban and Advanced Technology groups, which have strong management foundations. The graph on the right shows the performance of the new sector shown in terms of the 2021 midterm management plan. Now I will talk about the aim of the Connective Industries business. I will discuss changes in the market environment and the aims of the connected industries. This is mapping of trends in the urban industrial and health care sectors. And the events that image as a result of rapid changes in the social environment such as COVID-19 impact, increased natural disasters and geopolitical risks. As you can see, each of these social issues straddle the sectors and are becoming more complex and multifaceted. The traditional boundaries between organizations and companies and the total boundary between sectors are becoming more and more important, Hitachi is focused on planetary boundaries and well-being as the most important things. Therefore, it is important to link the total to provide -- total seamless solutions by combining product Ñ and transcending the product areas as well as by linking domain knowledge. This is the image of the Connective Industries and what we are aiming for. The diagram shows the CPS in the Physical label and the Modeling layer and the Service layer above. Based on domain knowledge, based on the CPS of the Physical layer, which plies the strength of our strong product business groups, we more business operations and create solutions. We will expand and evolve total seamless solutions from the industrial field to the urban and health care fields. This is the positioning of Hitachi and its competitors in the industrial field, as explained in last year's IR meeting. The vertical axis shows the range of solutions offered from the partial layer to the whole layer. And the horizontal axis shows the sophistication of the business model from left to right. The circle shows the size of each company in terms of sales and a rapidly complex social environment, high-level customer collaborative problem-solving at overall is becoming increasingly important. Therefore, we aim to develop our solutions to the right -- top right of the diagram, new additions of Healthcare and Urban will also in for the right-hand direction. By further expanding the scope of total seamless solution, overlapping amongst the sectors, we believe we can further differentiate ourselves from our competitors. Next, I will talk about the business strategy for the midterm management plan 2024. This is the basic policy of the 2024 midterm management plan. And -- based on the Lumada growth model, which is the data-driven cycles of value co-creation with customers we engage with 3 key points to achieve our goals. Visible in the area of digital engineering, we will strengthen the front engineering capability. In system integration, we shall evolve and expand our total seamless solutions. In the managed services, we will expand and strengthen functions of the connected products by doing -- strengthen recurring business. The goals for fiscal year 2024 is revenues of JPY 3.2 trillion, adjusted EBITDA ratio of 13% and then other revenues of JPY 1.1 trillion. Now let me give you details of the basic policies one by one. The first point is the strengthening of the front engineering capabilities. Hitachi offers a seamless range of solutions and services, including business concepts and problem analysis to clarify objectives and measures. In April of this year in order to accelerate the creation of digital synergies in the sector, the industrial products BU doubled the number of digital consulting staff to around 120 who are the key to front engineering and DX needs. By strengthening our front engineering capabilities, we will further increase our agility in the Lumada business cycle. The second of these basic policies is the evolution and the expansion of total seamless solutions that transcend laundry issues, which has been our focus of the sector since 2019. The boundary challenge exists in each area of very between management and the frontline horizontally between supply chains and in the places where different industries meet, we sold the boundary issues by utilizing our strengths by combining our products, OT and IT and by co-creating with our customers, in particular, it is becoming more and more important to provide a place where Urban Healthcare, Industrial and other fields can collaborate and connect and response to the complex and compounding issues of recent years. As mentioned during last year's meeting, this is the update of our total seamless solution. In the 2024 midterm management plan, we will accelerate the expansion of our solutions, which have been expanded into a wide range of fields, such as Urban and Healthcare. Today, I would like to show some recent examples of the solutions highlighted in yellow. So the first case example is our work with Suntory Beverage & Food in the industrial sector. Please look at the green box on the right. We are realizing further product safety and security with single bottle traceability and a next-generation factory that continues to evolve. We collect a large amount of data from each line, integrate and consolidate the data in various formats and utilize the data for traceability and visualization of factory data which leads to the pursuit of safety and security as well as workstyle reform, realizing an IoT infrastructure from the perspective of overall optimization. In addition, we contribute to system sophistication with products such as marking systems capable of high-speed special printing on the physical layer and Racrew, a compact automated guided robot. Second case example is an expansion into the semiconductor field, as shown in the green box on the right, the development phase shortens the development period of new products and processes, the prototype phase improved yield rate and the mass production phase improves the productivity of mass production lines. we will greatly improve development and manufacturing efficiency by utilizing product data to address the issues of increasingly complex semiconductor device structures and manufacturing processes. This is an example of how we are already accelerating the creation of solutions at our collaborative creation sites near our customers. The third case example is the expansion into the Medical field. It shows a business model where devices are connected, operation data is connected, collected and data is provided to customers and partners to optimize service based on the analysis. As shown in the green box on the right, this business model reduces device downtime, improves the quality of testing results and improve the efficiency of testing work. The fourth case example is expansion into the Urban field. Please see the green box on the right. This system improves building management efficiency and operating quality and provides building users with safety, security and comfort. The building IoT platform in the center is connected to product solutions in our sector, including pumps, power supplies, elevators, lighting, security, human flow analysis and air conditioning in order to visualize and analyze all data in the building, optimize the building and improve services for users. The fifth case example is regenerative medicine field connecting the field domains. In addition to the digital platform for integrated management of regenerated medicine MES and OK capability that we explained last year, we have added a wealth of new products such as CPC facilities, CPC modules and automated cell culture equipment which are key components in the manufacture of regenerative medicine product as shown in the photo below. The new products will link the industrial and health care sectors to optimize the entire value chain, dynamically linking data-driven manufacturing progress and therapy planning to post marketing treatment results. The third basic policy is to strengthen the recurring business. The graph on the left shows the revenue from the entire sector and the recurring business for fiscal year 2021. And the graph on the right shows the service model development on the vertical axis and field service activities development on the horizontal axis, representing the positioning of each group in the sector. Towards fiscal year 2024, we expect revenue from the recurring business to grow faster than the overall growth rate, aiming to achieve business growth and build a solid profit base. As shown on the right, each group will continue to advance its recurring business model in the upper right direction shown in the arrow, thereby further solidifying its foundation. One of the measures to strengthen the recurring business is enhancing development of new recurring services business model based on connected products, multiplied by digital, taking advantage of the business portfolio expansion in the new sector. First, by dramatically expanding the number of connected products from the current approximately 800,000 to approximately 2 million units, we will gain a deeper understanding of the actual status of customer issues. Then we will merge and strengthen our own advanced suite of recurring service applications that utilize data from products collected through the IoT platform. We will thoroughly utilize Hitachi's broad customer base and develop a new service business model through our product business knowledge and digital capability. As one example of the recurring business cycle, I will introduce our approach to the circular economy of air compressors. The circle in the middle shows the air compressor recurring business cycle. In this business cycle, we are developing a 4R Re business, including remanufacturing and rebuild in Japan and the U.S., contributing to a CO2 reduction by reducing the use of virgin materials, expanding the recurring business model from connected products and expanding the business value in the circular economy. Next, I will explain our development for our global growth. This shows overseas revenue by region for Europe, Asia, India, China and North America with fiscal year '21 results on the left and fiscal year '24 targets on the right. As you can see, we plan to expand our business in all regions, and we will increase our overseas revenue ratio from 47% in fiscal year 2021 to 51% in fiscal year 2024. Of these, I would like to talk about North American business, which is targeting high-growth CAGR of 22% from the next slide. This slide shows the time line of business strengthening in the North American market. By the end of MTMP 2021, the industry group acquired JR Automation following the acquisition of Sullair in the North American market and established the foundation for the Robotics SI business. In Advanced Technology Group, we strengthened our global product lineup, including semiconductor manufacturing and measuring equipment and particle therapy system. In MTMP 2024, we will continue to work on building foundation for North American OT solutions business, strengthening Robotics SI and digital, actively developing products connectedness, expanding recurring business and strengthening semiconductor manufacturing and measurement equipment and digital multiplied by digital in order to establish a total seamless solution system in North America and expand our business. Here, let me introduce a case example of the integration of Robotics SI and digital solutions in North America. Last year, we introduced JR automation's case study on Rolls-Royce. In this time, I'm presenting a case example, Peak Nano, a company that manufactures special lenses and other products. JR Automation has collectively designed and built a recipe management database system that works in conjunction with the robot system in the custom lens manufacturing process. The main feature of this project is that JR Automation partnered with Rockwell, ABB and other companies to realize the entire project on a turnkey basis. This is how JR Automation is strengthening its Robotics SI business in North America, utilizing digital solutions with the aim of further expansion. Next is our initiatives to generate green value. This is our environmental business road map. Hitachi's overall environmental targets are shown on the left. The red box is on carbon neutrality, and we aim to achieve zero greenhouse gas emissions at our business sites by fiscal year 2030, and throughout the value chain by fiscal year 2050. The blue box is on circular economy. To achieve these goals, we will strengthen products that contribute to zero CO2 emissions in carbon neutrality and work to build a foundation to resource recycling in circular economy. In addition, we will reduce the environmental impact in the entire value chain and contribute to Hitachi's goal of CO2-free society in an advanced recycling society. These are products that contribute to zero CO2 emission and carbon negative. The photo on the upper left shows a process compressor for ammonia plants at hydrogen ammonia plant and accepting base. And the photo below shows our CCS compressor in operation at the CO2 injection facility for Japan's first large-scale CCS demonstration test in Tomakomai, which has achieved a cumulative injection of 300,000 tonnes of CO2. In the next section, power generation and supply hydrogen, we are focusing on power generation, transportation and charging stations using hydrogen. And in consumption on the right side, we are focusing on the development of next-generation high-efficiency electrification system in the motor field, our original business. In addition, the IT, OT system shown at the bottom connects these products. We will contribute to CO2 reduction through the value chain with these products and key technologies. This is an example of building and accelerating the infrastructure for resource recycling. Hitachi Global Life Solutions built a resource recycling platform by using Lumada, and is expanding its lineup of environmentally friendly products designed with recyclability and other features in mind. We are converting to a recycling business through subscription of these products and extension of refurbished products. We are aiming for a resource recycling business model where products are collected after disposal and recycled plastics are reused in products again. The last part is conclusion. This is Connective Industry's key investment policy for future growth. In Urban Group, we will strengthen our building IoT solution capabilities. In Advanced Technology group, we will improve our proprietary semiconductor and health care technologies. And in Industry Group, we will acquire global and digital businesses and aggressively invest in focus fields to facilitate business growth and enhance value, leveraging the characteristics of connected industries. We plan to invest JPY 300 billion in R&D cumulatively in the 3 years of MTMP 2024, an increase of more than 30% over the previous MTMP Revenue from inorganic investments is expected to increase by JPY 170 billion. These are the target figures for MTMP 2024. The left graph shows the revenue of Lumada in the recurring business. We aim to achieve revenue of JPY 3.2 trillion and adjusted EBITDA ratio of 13% in fiscal year 2024 by evolving and expanding total seamless solutions with Lumada at the core and growing through the recurring business. This is the conclusion. To repeat my message, our focus is to evolve and expand total seamless solutions, expand and strengthen recurring business accelerate global growth and generate green value to become a sustainable value creator by co-creation with our customers. Thank you very much for your attention.

Aoki-san. Thank you very much, Aoki-san. We will now proceed to the Q&A session. We will be switching the screen now. Mr. Aoki will be joined by Takashi Iizumi, General Manager of Healthcare Business division and President of Hitachi Hi-Tech Corporation; Shinya Mitsudomi, Vice President and Executive Officer and CEO of the Building Systems Business Unit; and Masakazu Aoki, CFO of the Connective Industries division. [Operator Instructions] We will be taking questions on the Japanese channel as well as English channel together. Any questions? From the media, from the institutional investors as well as the analyst, anyone present can ask your question. On the Japanese channel, [indiscernible] please.

A question. Regarding Hitachi High-Tech, I have a specific question. Now regarding the semiconductor production equipment in terms of operating profit, I think it is highest in terms of profitability within the business unit. Now for the semiconductor business to have -- to expand further profitability, is that included in the plan going forward?

Thank you for your question. My name is Iizumi of the Hitachi High-Tech. As Aoki-san has already mentioned, we will utilize co-creation centers with the customers, not just for the SCE but based on the customer challenges, new solutions -- new values will be very [vital] not only by product but by combining our capabilities to deal with the difficult problems and to also make contributions to improve the management of the customer side. That is how we are trying to improve the profitability of this business.

A question regarding [indiscernible]. I understand that your profitability has been very high in the past, but for SCE, there's becoming smaller geometries and applications are expanding increasingly. So I think there is a significant business opportunity for you. Do you have the intention of expanding into business domains that will be new to you? Going forward, is that something that you're contemplating?

As you have rightly mentioned, the geometries are becoming more fine and there is also 3D. And the analysis is becoming very difficult. The general purpose microscope will be combined in offering solutions to our customers. So the more we will look at the status in considering the addition of new business, going forward. That will be an option open to us.

We are welcoming questions from Japanese channel. Okawa-san, please ask your question.

This is Okawa speaking. I have 2 questions. First is Page 46. Lumada revenue JPY 1.1 trillion is mentioned from '22 to '24, up by JPY 300 billion. So what part will show growth? So from fiscal '21 to '24, Hitachi Hi-Tech -- so given the current number, we want to know if this growth -- number will really grow like this between '22 to '24.

Thank you, Aoki will respond.

So Lumada revenue growth, the biggest part is lower left, connected products. As the Lumada business, this is clearly defined this time. So the products that are not connected, there are many unconnected products. So equipment, devices will be all connected in the future. We've started some as the sector-wide policy, we will pursue the connectiveness, building an elevator, they are connected from the beginning -- so our domain knowledge and expertise and -- will be fully leveraged to connect all products in our sector. So we have this commitment and the strong enthusiasm to enhance the connectedness. So that is why we see the strong growth in Lumada. And using the data that we gained from that. This is the next phase in Lumada, managed service. We will link this to managed service. That is the second way we plan to grow the numbers. In the lower right, SI business, industrial digital is the new name. So digital SI will grow. This is the third increase. So from these 3, we plan to grow Lumada significantly. Any other comments to add Mitsudomi?

Thank you for the question. So -- yes, so as Aoki-san said, Urban is my department, building business and consumer electronics and air conditioner and other businesses. As Aoki-san just said, in buildings, there are many that are already connected. But the biggest business is in China. In china, the maintenance, so there's still room for more penetration in maintenance. So in the next 3 years, we want to grow the maintenance using solution, using Lumada. So this is where we think the big growth potential lies. And next, consumer electronics. Now we are getting good response. So we are growing. And the market will grow further in home appliance. So connected home clients products. And the service using that has good big growth potential. Thank you very much.

Second question is on building business. Last year in the IR Day, you talked about JPY 1 trillion, 12% in 2025. But today it seems like the target is changing a little. So what are the changes from last year?

Last year, we said we will aim for JPY 1 trillion in 2025. And the changes from last year is we are confident that we will see a recovery, but the biggest China -- China, biggest market, the real estate overheating real estate is now entering in the adjustment phase. So we will try to ascertain when we will see a recovery and move towards 2025 and add numbers to achieve the target. So in 2025, maybe 1 year later, but 2026 or '27, we will continue aiming for JPY 1 trillion. Thank you very much.

Next question is from the Japanese channel, Ayada-san, please proceed with your question.

I also have 2 questions. My first question is regarding the connected products that you just mentioned. So let me clarify, compared to your competition, what is your offense strategy? Because I'm sure that other companies are also enhancing their efforts in this area. So you are -- the strong physical strength and having products. So what is the strategy working with IT vendors or acquire IT vendors. So what are the competition doing? And what is your strategy in terms of bringing to bear your strength, having IT within the group and to achieve this CAGR of 29%? I -- so should I do the second question at the same time?

So let us respond one by one. I think that would be better.

So this is Aoki speaking. I would like to respond to the first question. It is true that in terms of connected, this is an area of interest by other companies and the industry as well. So what is our differentiation edge? Connected is easy to say, but the mechanism of providing data is very important. It starts with the hardware device. So why it is hardly exist anymore. So why signal? We have to be concerned. In terms of working with the communication companies is a possibility. In the absence of knowledge, it is not so easy. And security is also an important factor to bear in mind if it's only for the Japanese market, the barrier to entry may be low. But to execute this globally is a different issue to the machines that are operating in the United States to be controlled from Europe and Japan is more difficult because radio law will have to be respected. And in China, there are complicated loans as well. So connected is becoming a hot domain recently. That is true. But to realize this and to be effective is more important. Otherwise, it doesn't make any sense to be connected. So what can be brought about through connectedness is very important. And we have all the capabilities to enable this within our group. We have many technology in various sectors is a good case in point. Tokunaga-san also mentioned this in his remarks, in the United Sates, IoT platform is what they are working with in terms of collaboration. Therefore, in this regard I know that other companies are entering this field. And information is being disclosed accordingly. But utilizing the real industry, IoT, is where we can bring to bear our edge. But utilizing the rail industry IoT is where we can bring to bear our edge. I was wondering whether colleagues have other comments. So the activities of other competitors in the building, the one company out of the global top 4, is working with another company in terms of IT. But no, our strength is not just connectivity, that does not itself provide value. But we have a wide range of products. We have also engagement with customers. We have been able to accumulate the domain knowledge, which can be combined to bring about digital solutions. We have in-house knowledge, not just working with the external partners. This is our overwhelming strength. Furthermore, as Aoki-san's presentation mentioned today, [indiscernible], the new platform means that the building factors are included. And so we have domain knowledge. We don't have to work with other partners, we have the internal knowledge to identify the minimum use of energy and best environment to be provided for the workers of the building. I believe that this is also a strength for our group. So that is all.

[interpreted]I have a second question. This is somewhat different to what we have been discussing so far. But in terms of material cost, it is increasing recently. And EBITDA, 13% target, how is this going to be impacted? How much is factored in? Or are you assuming the current inflation level? Do you think that 13% is still achievable? Or is it a stretch target? For urban advanced and industry, perhaps the impact will be different from group to group. So please elaborate further on the impact of material cost increase. .

Thank you for your question. As you have rightly mentioned, the situation is very opaque in terms of material cost increase. So there are areas that we can pass on the cost increase and there are other areas that is not so easy. And we are factoring in the improvements in this budget. So in terms of profitability, I think the impact is around a little bit less than 1%. So it's less than 1%, 0-point-something percent. Direct impact is more significant, but we have implemented mitigation measures. So therefore, we have implemented measures to contain it to a 1% impact. But what is more problematic is the lack of availability of products, such as semiconductors. It's not just cost increase. Because we have backlog in our sector, it is significantly increasing. Therefore, by -- we can generate profit by posting revenues. That means that we have to ensure the supply chain availability. That is very important. I think [indiscernible] your area has been impacted most significantly.

Yes. In terms of procurement, this is an issue that is being continued from last year. It is likely to continue this year as well. We are implementing measures that are needed to mitigate the impact. And cost increase is significant as well Aoki-san has mentioned, that we are trying to pass on the cost increase to the customers to increase the selling price. But we are trying to make sure that the impact on performance will be minimal in terms of our operation, but the situation is very opaque. But currently, it is our aim to contain the impact to less than 1%.

Because of time constraints, we will take one question per person from now. [ Yamasaki-san ], if you could ask just one question, please. .

This is Yamasaki. So one question. On Page 14 and 15, the 3 areas are now in one sector. So how do you understand the synergy? Lumada, I think, cuts across all functions, but this connected industries. In connected industries, what kind of synergy do you anticipate?

Thank you, Yamasaki-san, that is a very important question. So the business units gathering in a solid fashion is probably the first of its kind in Hitachi. I've been with Hitachi a long time, but this is first time. We've had discussion before this was established, and we think and feel that we can have more synergy than we anticipated. And the word recurring, I've been in charge of industry sector and started using this word recurring from 2019. In this recurring model, companies in this sector are all thinking the same way. The method that we apply is slightly different, but the thinking is the same. And I think we've had exchange relationship before. But as we came under the sector under one roof, the contents are now being disclosed to each other, the worries and problems and the schemes and the mechanism are now being exchanged and discussed. As mentioned today, so we can come up with common plan and think of how to improve the profitability of this recurring business. Various types of synergy is possible. Of course, digital and recurring, we can utilize digital and recurring and the market needs and [ sees ] capturing and how to accelerate the development, and how to manufacture products globally, efficiently, and how to link this to total seamless. We have 7 business units. From your perspective, you may think different businesses have come together, but I think the way business is run is very similar. So we can standardize and commonize many things and evolve together. So Mitsudomi-san, anything else to add?

So there are many forward-looking factors, promising factors. For example, urban is building and home appliances and air conditioner, we're discussing together. For example, in Japan, there are many service basis and logistics. The transportation of parts is very complex. So if we can do this together, we can enjoy cost synergy. So cost-side synergy can also be expected. Just an example, thank you. [indiscernible]? Hitachi High-Tech was listed in the past. So anything you could add? .

So we discussed recently what I have high expectation is in the fourth -- 4 quadrants of Lumada. The first CI sector, it's still 0. Our BU had been doing this very naturally, but it is not thought of as a business. It's a free range. So to have the products used, we do that process, but this process is now becoming complex and customers cannot solve by themselves. And so we need to connect the boundaries. This business will become valid. So we need to commercialize this business and find a big value in this business. If we can do that in our sector, there may be new businesses that were not clear in the past. So that is business creation by Lumada. So maybe that is the biggest point that we need to aim for. We're only discussing, but we want to flesh out the details going forward and crystallize. Thank you.

Thank you very much. With this, we would like to bring the Connective Industries sectors sessions are closed. Thank you. The last session will be the Independent Directors' session. We'll be starting at 5:05 p.m. for the... [Break]

[Interpreted] It's now time. So let's get started with the Independent Directors session, the first attempt at the Investor Day. We are very sorry that we are delayed by 5 minutes compared to the original schedule. And please held on, before I can switch the screen. In the Independent Directors session, we have received the questions on the governance of Hitachi. Mr. Harufumi Mochizuki, Independent Director; and Mr. Helmuth Ludwig, Independent Director, will be responding to the questions. The session will be moderated by Yoshihiko Kawamura, Executive Vice President and Executive Officer. Over to you, Kawamura-San.

[Interpreted] Good afternoon, everyone. Thank you for the kind introduction. My name is Kawamura. This will be the final session for today. I shall serve as a moderator of this Independent Directors session. Very happy to be here. From 1 p.m., today's meeting has started. And you have heard the presentation from the executive side. In this final sessions, we invited 2 independent directors. So from the viewpoint of outside independent directors, what is the status of Hitachi's management is the main topic that we will take up. The 2 speakers was just introduced. We have Mr. Mochizuki in the studio here in Tokyo. The other person is Helmut-san and he is overseas. He is joining us virtually online. Thank you. Without further ado, why don't we get started? First of all, I would like to invite the 2 independent directors to introduce themselves as well as to give the opening remarks. Mr. Mochizuki, could you introduce yourself? And you've been serving us as -- 10 years as independent outside directors, so how has the Board changing in the past 10 years? And I believe that the role of the independent director has been changing. So please also comment on that as well.

[Interpreted] Good afternoon, everyone. Thank you for the kind introduction. My name is Mochizuki. As was just mentioned, 10 years ago or 11 years ago, Mr. Kawamura, then a Chairman, visited me and said and please assume the [ close ] of the outside independent director of Hitachi. In the past 40 years, I was with METI, so from the viewpoint of administration, economic policy, industrial policy, trade policy, as well as the energy policies, are the main areas that I was in charge of. So when it comes to corporate, I've been looking from outside the industry. And with regard to the relationship with Hitachi, up and having certain relationship with Hitachi, However, being in the company, to be involved in the management strategy was the first experience for me. So I thought that, that was a challenging job, but I decided to accept the offer. Particularly, Mr. Kawamura said in 2009 or 2008 -- or 2009, Hitachi has generated a large amount of deficit. Therefore, managerial reform is needed. That was conducted for 3 years. The company did not go under. So he was considering what next? Because if nothing is done, the same thing may occur once again. Therefore, he was determined to continue the path and he asked me to provide the support. So I was happy to be a part of that. And then I've been serving in the Board of Hitachi for 10 years. The Board of Hitachi, I'm the oldest person and Buckley-san, and there is another person. But we have the 10 years of experience. In the meantime, managerial reform was underway in a significant way at Hitachi. So many things have changed. I can be the witness of this managerial reform. I think I myself have grown through this process. Now talking about the managerial reform. In the meantime, in the domestic market, Hitachi always has been a big conglomerate. 70% of the sales is generated domestic and 30% in overseas. Particularly as a prominent customers, tower industry, telecommunication, rail, Hitachi had this wonderful customers. In other words, Hitachi was supported -- being enjoying a stable management supported by these companies. However, a Japanese company was a domestic demand-led and supporting the CapEx. However, there was a time that we -- japan lost those CapEx, capital expenditures. And so that was the fundamental issue that Hitachi was facing. So what becomes the subsequent target, Hitachi shall not repeat the same mistake once again. However, the technology of Hitachi is at one of the highest level in the world. So Hitachi have to change the market. Therefore, Hitachi decided to tap into the global market. So the Hitachi's technological capability can be leveraged, will become a company that never go under, continue to evolve. And towards 2015, in the MTMP, the third or fourth MTMP, I've been following, these different versions of the MTMP. In the initial phase, to change the company so that you will never go bankrupt. Unless the profit margin or operating margin shall exceed 5%, it no longer will be a viable business. And it shall always have to exceed 5%. So there were some businesses that were struggling, 35%. So they were deemphasized. And so that Hitachi was changing to stably generate profit. So that was at the time of the first or the second midterm management plan. But -- so those were the difficult days and never to repeat the same experience. Then Hitachi chose to go global. So Hitachi went to a global market, to compete in the global market. So that was the core message in the MTMP, 2018. However, once Hitachi has become a global player, the companies that Hitachi was benchmarking totally changed. Hitachi used to compete with tower company, the heavy industries. However, the Siemens and ABB, among other companies, has become the company that Hitachi started to benchmark against. In other words, Hitachi once again have to aim for the higher profit margins then in the 2 business, so Hitachi worked really hard. And currently, Hitachi is so close to achieving the double-digit profit margin. So now in the MTMP 2024, rather than becoming the global player, Hitachi should become the global leader. In other words, Hitachi be the winner, that is the new message incorporated into the new MTMP 2024. And you heard the message from the executive leaders today. So from very stable conglomerate here in Japan to become a global leader, Hitachi has been going through the managerial reform. That is a 10 years of history that I witnessed at Hitachi. I shall not comment further. However, Mr. Kawamura, what he expected me is the governance has changed or else Hitachi cannot generate the profit that enjoys a double-digit profit of margins and start winning in the global market. There were many changes, but one of the major changes is to change the governance. Because looking at the successful CEOs who enjoy the success in the business, it was instrumental in inviting those successful CEO into the Board of Hitachi. So that was what I've witnessed in the past 10 years. Thank you very much.

[Interpreted] Thank you very much for summarizing nicely over the past 10 years of history. Now moving on to Mr. Helmuth. Could you introduce yourself? Looking at your career background, you belong to Siemens, one of the companies that Hitachi was benchmarking against. You have a long history working for Siemens. So on top of your self introductions, what are the commonality between the Hitachi and Siemens? As well as what are the point of difference? So please refer to those points as well.

[indiscernible].Thank you very much, Kawamura-san. I'm more -- one of the more younger members on the Board, so let me give you a little bit of background. Originally from Germany, then studied engineering and business in Germany, U.S. and Spain. And then beginning of the '90s, I joined Siemens. And about 30 years at Siemens, I was running different businesses with global and local P&Ls. And one of them was expanding the traditional automation business into the digital world. Today, we will talk about the digital twin, the virtual and physical integration. And they are running the post-merger integration process. We heard today a lot about the successes of bringing, for example, Global Logic into the family of Hitachi. And these were similar experiences that we had at Siemens, and happy to go deeper into this later on. I also strongly believe that today, industrial companies that want to be competitive, they need to integrate to their deep domain knowledge. They need to integrate software and IT competence, something which we also see in Hitachi. And for example, when I was a global CIO at Siemens, my team and I, we focused on bringing IT back very, very close to the business and changing processes from the traditional engineered waterfall processes into more agile processes. From a personal perspective, today, I work with the next generation of leaders teaching strategy and entrepreneurship at the Cox School of Business in Dallas. I represent shareholders and investors on different private and public boards, and advise a global private equity firm in identifying opportunities for value creation in the industrial space. At Hitachi, I have to admit, Kawamura-san, I felt sincerely at home from day 1 on. And the reason probably was that from a cultural perspective, from its roots, roots going back to [indiscernible] in Hitachi, where my former company runner from Siemens that these you can really feel in the DNA today. So you could almost say sustainability building. One of the common mindsets -- and they are addressing your question of comparing Siemens and Hitachi, one of these common mindsets is to never give up the future for short-term profit, for a short-term gain. And I can see this in both companies. So sustainability of the company, but all the sustainability at large. At the same time, a very strong innovation mindset. And we heard today Suzuki-san, how he spoke about how do you invest in R&D and increases the investment. And I think we had in the Board, a very robust discussion, one of the Board members who was one of the leaders and a leading innovator worldwide and has an incredible and proven track record, he focuses much more on the vitality index, meaning what is the output. Something that I think we can even improve further at Hitachi. When you look at differences from the experience I had at Siemens, I had now seen in Hitachi, I think the very robust midterm management plan. Meaning, a 3-year plan, which is supported bottom-up by really every level of the organization. And you can see that -- and you saw it also today, but you will see when you speak to other levels in the organization, you see there's a clear commitment. And this has a very, very strong foundation. That's something which I thought is very, very strong at Hitachi. If you look at something which I experienced at Siemens was, for example, the robust metrics, meaning the robust development between regional autonomy, to be able to make very fast decisions locally versus global strategies. And I think there is something which we probably want to take a closer look at Hitachi. Maybe one similarity, which I think we also saw today, for example, when Shashank spoke about the engagement index. I think it's really impressive to see the very strong dedication to the talent of today, but even more the talent of the future, in both companies [indiscernible] expressed. Putting it together, I have to say I feel Hitachi is a very cool company with enormous potential, but I think Kawamura-san we'll into this later in the discussion today.

[Interpreted] Thank you very much. I think you've covered a lot of the topics that we wanted to take up in this discussion, and we will like to take that point later. We have received many questions beforehand. The time is very limited, but we would like to go to as many questions as possible.

[Interpreted] So first of all, regarding the 2024 midterm management plan, it was announced by President Kojima in April. So I'd like to ask a question about this midterm management plan. [indiscernible] said at the outset that upon the formulation of this midterm management plan from very early on, there was discussions initiated at the Board level. Very deep discussions were held at the Board level for the major management plan. Mochizuki-san, what kind of discussions did you have at the Board in formulating the midterm management plan? Please share.

[Interpreted] Regarding the midterm management plan, it's a specific plan for the 3 years out. But prior to that, we also talked about the vision of the company. Preceding the formulation of midterm management plan, the Board and the executive management must have a common understanding regarding the vision, [indiscernible] discussion on MTMP. And between the Board and the executive members, we discussed the vision, and this has been shared within the organization. And in the coming 3 years, the priorities have been identified. In proceeding forward, in the coming 3 years, so that was the process of formulation of the MTMP. As a result, around the latter half of last year, we had 3 opportunities to discuss the plan. At the Board, we had discussions on 3 occasions. And Hitachi's Board is very heated, everyone is expressing their views. So one topic can go on for 1 hour in terms of discussion. We had very extensive discussions. And we have started this from initial stages. And therefore, alternative ideas were presented as well. So we listen to everyone about the direction we should be pursuing. Now we have a sharing of strategy. So that means that the differences in views are rather minor, but the pace as well as the time frame and the emphasis differ. Because there is such a wide process that we have to discuss, all the views were all positive that was expressed. And there was encouragement for further specific measures to be included in the midterm management plan. Based on that, on the executive side, what do we mean by specifics is not because it's easy for us to understand, but that presentation is made, it has to be communicated accurately to outside of the group as well. That's the reason why we asked for specifics. That was the nature of the views expressed. Therefore, the midterm management plan became easier to understand. And the essence was focused upon in the plan.

Helmuth-san, regarding the midterm management plan formulation process, as already mentioned today, Lumada is at the core supporting this effort. You are a specialist in the digital field, what is the relationship between Lumada and the midterm management plan? How do you evaluate? What is your take?

It's all today, Lumada is core [ practically ] of every of our businesses. And this goes into the same discussion we had shortly before that, today, industrial-leading companies need to integrate deep domain knowledge with software and IT competence. Specifically to Lumada, I think what we are seeing is that, today, almost everybody thinks more in platforms and wants to establish the platform of the industrial world when you go back to industrial companies. What do we have in Lumada is something which I think is based on 3 major pillars where I believe is very, very strong basis. Number one is this focus on co-creation. Meaning, if you think about value cost, it's all about creating first value for your customers. And to create best the value of your customers, understanding how they actually improve their processes, how they generate well. So co-creation is number one. Number two is how do we translate this into repeatable solutions. And there's this concept of containerization, just meaning that you can -- that you're able to use different parts of the solution and reuse them in different applications at other customers and other situations. That's key. And if you do this well and you combine it with the domain knowledge of our different areas, be it in mobility, be it in energy, be it in the different industrial areas which we heard about today, then there is a real potential for creating scalability with the downstream potential of margin expansion. Now it's I've seen this happening at my former company, where we translated into the mobility space, a business which was purely a product business and relatively low single-digit profitability and translated this into an outcome-based contract based on identifying and analyzing data, identifying and assuring on-time performance, and creating by this a double-digit profitability business. I think this is the opportunity. So if Hitachi is able to press Lumada of combining co-creation approach, this codified repeatable containerized solutions, then we are on the right track to have the scalability which really generates the margins we expect. I think we are on the right track. It's not an easy path, but it's the right start and a lot of great competence on Board at Hitachi.

[Interpreted] Thank you very much on these questions. I'd like to continue the discussions. However, we are pressed with time, so why don't we move on to the next question? Next question is about the major acquisition. I would like to solicit your views and ideas. Hitachi Energy in 2020 and GlobalLogic. This was very large scale in JPY 1 trillion scale. So these were acquired and taken into Hitachi. But it comes with risk, for example, the level of cash flow that it can generate or the process of integration. Acquisitions comes with various risks. If I may look at the other companies as examples, there are many companies that were not successful. So major acquisitions that comes with risk, how does the Board evaluate?

[Interpreted] As I mentioned at the outset, we have to determine what to take in, what to shy away from. So that was what Hitachi was doing in the structural reform. Now for the entire Hitachi, are we really coordinating? Are we discounting the business that we should not be focusing on. We should retain the business that shall generate synergy, and we should work on the acquisitions that can further strengthen the core business. And Hitachi has divested many of the businesses. You said that there were 3 major acquisitions, which have JPY 1 trillion scale, so Hitachi divested and then made some acquisition. So even with that acquisitions, that did not hurt very much financially speaking or did not give a major blow to the balance sheet. At the same time, as a basic thinking, within the very major pillar of the corporate strategy, what is needed was acquired. Therefore, you talked about the 3 major acquisitions inclusive of that major acquisitions. What is the purpose of the acquisitions? What synergy can be generated? Against those points, Hitachi was very clear. However, at the time of acquisitions was proposed, since this was such a major acquisitions, there was so much discussion took place at the Board. However, there is common share. So the point of discussion was very clear. Is this acquisition instrumental to the further growth of Hitachi? Will it generate synergy? So the Board members checked those things out which led to the strategic discussions and led to the go-ahead of the acquisition. Another point, many of the Japanese companies had the failure experience of major acquisition. What were some of the learnings? Some of the Japanese large companies when they acquire major businesses from overseas, know-hows and the level of expertise was very low 10 years ago. So 10 years ago, we witnessed many failures. And then Hitachi learned from those failures. And by going through the series of mergers and acquisition, when mergers and acquisitions was conducted, there were some discipline that definitely has to be protected. And Hitachi has become very sensitive. So Hitachi has upgraded its skill level. Simply put, after the acquisition or before the acquisition, the due diligence has to be conducted. Everyone will conduct the due diligence. But even after the acquisitions, PMI becomes very important, post-merger integration. How hard do you work on the PMI? You should follow through until the point to generate synergy. So that is very important. But this is very important process. Independent Directors was working that when I started 10 years ago and compare the skill level now, the skill level has enhanced considerably. And so having that high level of skill done these major acquisitions. So with the global standard and conducted the risk alleviation for the acquisitions and [ sort on for ] the synergy. And then very good follow-up inclusive of the follow-up on the talent. So Hitachi is doing all of that. So from that perspective, I can say that this is a global standard acquisition, Hitachi have the capability showing the result, which is the world class.

Thank you very much. Helmuth-san, from the expert of the digital, regarding GlobalLogic, it was JPY 1 trillion scale acquisition. Sales is JPY 100 billion and it has grown by 10 -- well, the acquisition price was tenfold. So with regard to this acquisition, what is the role that GlobalLogic to play in order to show the good result of the acquisitions? Please comment on that.

Number one, building on what Mochizuki-san just said, now the question we always have to ask is, why Hitachi is the best owner? And that's exactly the question we asked was GlobalLogic. That GlobalLogic is a very well-run company with a fantastic growth traction. That's something we saw already. But now why is it better together with Hitachi? So this is synergistic value, but not simply in some Excel spreadsheets, but really from a strategic perspective. And that's the robust -- very robust discussion we had in the Board around the value that GlobalLogic actually brings to Hitachi and brings to Hitachi's individual businesses, supporting them in their journey to offering much more value to their customers. Now this has to be done, and Mochizuki-san mentioned, the importance is, of course, identifying the right target and making the deal happen. But then what all matters is the post-merger integration process. How do we bring the different talents effectively together? And there, you have to be very careful about the right speed. And when we listen to Shashank today, we could see how, on one hand, GlobalLogic keeps its dynamic as a stand-alone company, and at the same time, is able to enhance the Hitachi business and is able to be more attractive for its talents. And I think that's fascinating to see that the engagement index went further up because there is now much more opportunity for the talent on a broader canvas in Hitachi. When we look specifically at GlobalLogic, so besides the stand-alone, what we looked at in the Board and also asked management is how does it transform the different Hitachi business units and businesses. And that's really made the main difference and why we believe Hitachi actually is the best owner for GlobalLogic and took finally the decision to acquire GlobalLogic.

[Interpreted] Thank you very much for that. If I may move on to the next question, which is about the validity of Hitachi's strategy. We received a lot of questions about Hitachi's strategy. For one thing. Hitachi has more than 100 years of history, and the sales is very large at JPY 8 trillion or JPY 9 trillion. So economically speaking, there may be some profit started to diminished. However, with the strategy, we are going to chain that. Mochizuki-san, on this point, the large companies to continue to grow. From that perspective, what are your views?

[Interpreted] How do you define a large company is one of the questions here. Hitachi is JPY 10 trillion company, it's been operating for so many years, but there are several challenges to become a global leader. Hitachi has to generate larger profit to enhance the profit margins to have ample cash to compete. Unless Hitachi have all these, it just become just big in its size and Hitachi will not be able to win. Hitachi will recognize these drawbacks. So to aim for global leader, Hitachi is well qualified to aim for global leader. In the past 10 years, I witnessed the history of Hitachi in order to evolve the strong leadership and the vision with a strong leadership, steer the business under the strong leadership. The other one is never forget the challenging spirit. Earlier, Helmuth-san has made the same point, similar points. Hitachi do have ample challenging spirit. Never to lose a challenging spirit. If we keep on to that mindset, even if the size may become very large, I believe that we can further expand and grow.

[Interpreted] Helmuth-san, at business school, I understand that you teach the business school and you know many different theories of -- the economic theories. Now Hitachi has many of the listed companies and Hitachi is still a conglomerate. So with regards to conglomerate at this stand, what do you think of that? And because Hitachi is a conglomerate, it can observe bigger risk. So the fact that Hitachi is a conglomerate, could you tell us your view?

I would differentiate conglomerate in the old sense of a conglomerate and maybe the conglomerate as the future. So if you think about the conglomerates which we have seen in the past, very often -- so more businesses that we're in, the better it looked like. So -- which then the capital markets realize that this is probably not the best structure to have and that the capital markets can differentiate so much better than individual companies can do. So just being in different businesses is not the answer. From my point of view, a conglomerate of the future means something different. It means having is -- first of all, having a very clear vision and strategy. And this was expressed also today by saying that as we at Hitachi, we do have a very strong innovation strategies. This is clear focus specifically on sustainability and on digital. So this is the framework we're in, then you can go back and say, so which kind of domains do we answer the question that we are the best owners? And we have to ask this question not only for acquisitions, we actually have to ask -- or to answer this question also for the businesses we have today. And so when we go back into the history and that Mochizuki-san addressed, the last decade, there were a lot of businesses whereas leadership supported by the Board made the decision, that those businesses potentially would not be best part of the family and could be better stand-alone. But if you look at the portfolio today, it's a much more streamlined portfolio, which comes so much closer to the conglomerate of the future. And this is where I believe there is a significant value creation potential. We talked about digital and domain knowledge, I strongly believe you will find a similar development and sustainability. And the attractiveness of an entity, especially in the times we're in right now, where we see a lot of external unexpected shocks, where you look for entities that have a certain resilience. Resilience for investors, but all the resilience for talent, which have a much broader area to develop into, I think that has a strong attractiveness. So just being broad is not the answer. Being focused with a clear vision and seeing their synergetic behavior between different parts of the business, that's critical. Maybe last comment there regarding synergies. I think we always have to reflect over synergies as something that hinders speed of decision-making. So what we have to make sure is to keep speed of decision-making in the forefront and not being hindered by artificial synergies. So for me, it's very clear, speed over synergy is really what matters in the environment and in the future.

[Interpreted] Thank you very much for the very interesting comment. We are running out of time very quickly. We only have the 5 minutes left. So let's go to the last question, which is the effectiveness of the outside directors. Now, the traditional directors' discussion is looking at the -- or supervising the management. That has been the traditional role. But in Hitachi, as Mochizuki-san has mentioned, obviously, there is a supervision function as well. But there are other activities, engagement between the management and the outside directors. So how do you evaluate the effectiveness of the outside directors, Mochizuki-san? .

[Interpreted] In the case of Japan, there is a significant discourse regarding the role of the outside directors in Japan today. But we have to be very careful. Because if we take the Western approach and the outside directors, the Western style is becoming more prevalent and the majority being the outside directors on the Board. And if it's just a formality, that's not -- it is not effective. The function of the Board is more important. I feel that I have -- as I have already mentioned, to share the vision is very important. And to have a discussion on the strategy that is the objective of the Board of Directors. So it's different to the executive management's discussion. Sharing of vision is very important because it necessitates the discussion on the vision of the company going forward. Now when we discuss outside directors in Japan, and I don't want to be too long-winded, but the most -- the obvious mistake that is being make is that dividing -- making differentiation between the management and the directors. But if you look at the English translation thereof, there are 3 types: supervise and oversee -- oversight and co-share. These are the 3 meanings. Otherwise, you cannot have the full understanding of outside directors as we see in the Western world. Both FSA as well as TFC are using the word [indiscernible] for all 3 functions that I just mentioned. So in the context of we start sharing the vision to formulate the strategy, and in that context, oversight is most important. But if you use supervise, it may be necessary if there is a conflict for a special reason. But that is not the case normally. Hitachi's Board is engaged in oversight as well as co-sharing mainly.

[Interpreted] Helmuth-san, I wanted to ask you more questions. But in fact, we have run out of time, which is 40 minutes. So we will hear from Helmuth-san on a separate occasion going forward. Now from the afternoon. Thank you very much for participating in the Investor Day meeting. I hope that this initiative has facilitated your understanding of Hitachi. On the part of Hitachi, I would like to ask for your continued support and guidance going forward. Thank you very much for your participation today.

With that, we would like to bring the Hitachi Investor Day 2022 to a close. Thank you very much for participating in today's event despite your very busy schedules. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]