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

Thank you for waiting. And again, thank you very much for joining us today at the Hitachi Investor Day, despite this weather, it's not really great. So I am Tokunaga, CEO of Hitachi. I would like to express my sincere gratitude for your continued understanding and support of Hitachi Group business activities. It has been more than 2 months since I took office as CEO in April, and we are managing the company under the new management structure. We announced our new management plan at the end of April, Inspire 2027. And afterwards, in May, I visited Europe. And CFO Kato visited North America, to directly hear various opinions and feedback from directors. I have also had extensive discussions with the IR department and are taking into consideration the opinions and questions raised by investors. I have reaffirmed the strong expectation for Hitachi's growth. And I have heard many opinions, including concerns about how to concretely achieve and execute growth, particularly regarding capital allocation. Today at the Investor Day, we have considered themes and content based upon your feedback. After the presentation, there will be also a time for Q&A session. So we would like to be grateful if you could give us your feedback again. Of course, we recognize the need to continue improving and strengthening communication with the capital market not only today but also in the future. This is an important responsibility as CEO. At the same time, we consider it crucial for management members to gain a more direct understanding and awareness of the capital market through discussions with you. Today, I'd like to first present the CEO remarks outlining Hitachi's basic management policies. Following that, the leaders of our 4 core businesses: Mobility, Energy, Connective Industries and Digital, will explain their respective growth strategies. Additionally, Lorena, the CHRO will explain the human resource strategy that supports these businesses and Kato, the CFO will explain the financial strategy. In the final Q&A session, all presenters will engage in discussing with you. Although this will be a lengthy session, we hope you will stay with us until the end. Now let me begin my explanation as the CEO remarks, I will explain the following 5 points. Hitachi is currently undergoing a transformation aimed further enhancing corporate value. Last year's Investor Day, my predecessor, Mr. Kojima presented a road map for further enhancing corporate value through the transformation into a digital-centric company. With the recent announcement, Inspire 2027, we will accelerate this transformation into a digital-centric company. As the need for innovation in sustainable social infrastructure expand, Hitachi will strive to become a global leader in social innovation businesses by creating unique value with digital at its core. As we accelerate our transformation into a digital-centric company, as CEO, I will prioritize 3 key areas: expanding the Lumada business, capital allocation and deepening governance. And I would like to achieve the financial goal set out in Inspire 2027. The rapid evolution of generative AI has enabled us to create new value from data, making a major turning point in the expansion of the Lumada business. By leveraging GenAI we believe we will further evolve Lumada and achieve high profitability and sustainable growth. To seize this significant growth opportunity at Inspire 2027, we have set new long-term target for 80% Lumada sales ratio and the 20% profit margin as our target levels, and we will continue to drive expansion of the Lumada business. By leveraging advanced technology such as GenAI, we would innovate the Lumada business model and transform Hitachi's 3 strengths: its extensive domain knowledge, massive installation base and advanced digital capabilities into drivers of exponential growth. First of all, we will leverage AI to integrate domain knowledge across IT or TM products, thereby enabling Hitachi's unique competitive advantages. This is a differentiating factor. The only Hitachi can leverage as it has cultivated domain knowledge in each of its 4 core businesses. We will also advance digitalization of Hitachi's strong global product installed base. Furthermore, as already underway in the railway business, we will provide Hitachi digital services to customers using products or assistance from other companies. This will enable us to sustainably expand Lumada's total addressable market or TAM. Additionally, leveraging Hitachi's digital capabilities, we will standardize service development across sectors and scale digital services across sectors. This would be a significant advantage for Hitachi, which aims to create synergies among its 4 core businesses. By simultaneously strengthening and integrating the 3 strengths, we will achieve exponential growth in the Lumada business. So to softly and maximally capitalize on Lumada growth opportunities, we will continue to strengthen our portfolio using the achievement of Lumada 80/20 as a judgment criteria. In addition to acquiring the missing piece to strengthen Lumada, we will advance portfolio restructuring with AI toward future growth areas and technological innovations. On the other hand, we will restructure business that have low affinity with Lumada 80/20 and lack growth potential of competitive advantage. Capital allocation is extremely important in achieving the value creation and maximizing the returns while acquiring the pieces that support expansion of Lumada through growth opportunity and growth investments. The basic approach to capital allocation remains unchanged from the past. We will prioritize returns and allocate capital flexibly and in a balanced manner between growth investment and shareholder returns. First, growth investments will be actively implemented under strict investment criteria, focusing on bolt-on acquisitions that connected to improving ROIC. Funding will be sourced by leveraging financial discipline. On the other hand, we will expand shareholder returns over the mid- to long term. Specifically, we will adopt the basic principle of returning more than half of core free cash flow in current period profits while steadily growing dividends and flexibly executing share buybacks. Through these 2 pillars of growth investment and shareholder returns, we will enhance our corporate value. To advance the transformation into a digital-centric company, as I explained earlier, it is essential to deepen governance and transform management and corporate culture to achieve sustainable growth. Hitachi operates in a global market. We have various risks of becoming increasingly complex. We will continue to promote autonomous decentralized corporate management, balancing threat mitigation with opportunity creation. At the same time, we would accelerate digital making with high agility and expand synergies within the group. Additionally, to foster mindset aimed at high growth, we will evolve our compensation system. Furthermore, we will enhance transparency in management by strengthening the dialogue with the capital market participants and improving communication with all stakeholders. The transformation of Hitachi, as I said earlier, it's supported by the integrated operation of our 4 core businesses and corporate functions. Following this, the leaders of the 4 core businesses, Human Resources and Finance will explain their respective strategies. First, Giuseppe, who lead the Mobility business will explain the growth strategy.

Thank you very much Tokunaga-san. Good day, everyone. I'm pleased to present the Mobility sector strategy. The world is changing fast and so is mobility, which has always been a key driver for economies and development. So today, we would like to present the evolution of our sector across 3 key topics. First one are the actual of the midterm management plan 2024 as a starting point for the next. Then we will talk about the mobility market, which is also the base of our vision for the next 3 years, the Plan 2027, in which we will also have the opportunity to go in detail of our digital strategy. Let me start then with 2024 highlights. We achieved solid deliveries, and we can see example of some key projects around the world like in Greece, Italy, Singapore and Australia. We recorded a robust order intake, especially in Germany, which we consider as one of the biggest [ smallest ] reference rail market worldwide. This is thanks to the acquisition of Thales GTS. We also secured an important service contract for high-speed trains. We launched HMAX, which is our digital platform for asset management, developed with Hitachi Digital and GlobalLogic empowered by edge computing and deep learning capabilities from NVIDIA. And we completed the integration of Thales GTS, a strategic acquisition for EUR 1.66 billion. Last week, it was first year anniversary. After 12 months, we can today say that we have achieved seamless integration from day 1 and that the key business processes have been aligned very quickly. The result of this integration is a combined new entity. The new Hitachi Rail, now a business in over 50 countries serving more than 300 customers worldwide. We can count on strong references, such as 16,000 train cars moving people every day around the globe as well as 26,000 kilometers of signaling in mainline and 4,000 kilometers of signaling for most important metros in cities around the world. Our global footprint is now established and we now operate as a domestic player in the most important markets in the rail industry. We have 24,000 colleagues worldwide, including a large pool of skilled engineers and technical experts working across over 100 offices, 60 service and maintenance locations, 10 factories and 25 R&D centers. Our business is in transformation, and it has been progressing over the years. You can see that we have achieved JPY 1.194 trillion of revenues, representing a CAGR of 24%. Of course, this growth is coming from the acquisition we have made. But even in an organic way, we achieved a double-digit growth of 13%. Margin performance continued to improve, reaching 8.9% last year, whilst our return of invested capital exceeded double digit. The slight decline last year is the short-term dilutive effect of the GTS acquisition as the full synergies, which we are realizing in the current midterm of course, have not yet been materialized in the first year. The key priorities for 2025 will be execution of our solid backlog, driving synergies with GTS and further acceleration on digital. Let's also review order intake. We had a successful 2024 with book-to-bill at 1.4x and margins at 22.2% with a backlog now of JPY 6.2 trillion. From the graph on the right-hand side, we can see that our margins have increased more than 1 point percent over the last midterm to 20.4%. We will be converting this into revenues for the current midterm through solid execution. I would also like to mention about cash. Cash conversion has been reduced from 65 to 37 days. This reflects healthy cash conversion and robust working capital management within our operations. Let's now explore about the market. We see the mobility market as a growing sector. The number of rail passengers will be doubled by 2050. There is a clear need for solution that can enhance efficiency. Rail is also a key contributor to sustainability and is undergoing transformation driven by seamless multimodal travel and digitalization. This is the market forecast by the industry association [indiscernible]. The expected accessible market is growing steadily towards the end of our midterm at a rate of 4% across all line of business. Let's now discuss 2027. The 3 drivers are sustainability, innovation and recurring revenues. As mentioned earlier, we do believe that rail is the way to move people more efficiently with shorter travel time while solving congestion issues and reducing carbon footprint. We will drive innovation for the mobility of the future as we stand at the crossroad of transformational changes driven by digital innovation. And our business is gradually shifting its model towards more recurring and software-based solutions. Now let's have a look at some numbers. This is our plan to achieving JPY 1.46 trillion in revenues in 2027. And it is important to highlight that the mix of revenues is shifting further from vehicles, which is in the darker gray to rail control which is the lighter gray. Our growth is 2x the market CAGR at 4.1% seen earlier, and our Lumada ratio is growing from 29.6% to 40%. Furthermore, 74% of our revenues in 2027 will come from recurring and software-based businesses. We believe that our strong installed base multiplied by the growth in digital accelerated through our HMAX digital platform will demonstrate a strong IoT x IT leverage. Our profitability will grow from 8.8% to above 11% over the midterm. This is coming from the quality backlog we have seen, synergies from the acquisition of Thales GTS and other efficiencies in our plan and a big contribution driven by the digital, that's the red part in the chart. These are the 6 pillars which we are focusing. First of the business growth, it's the acceleration in key geographies and growing markets, especially Middle East, India and Asia Pacific, also leveraging GTS footprint. We are executing the backlog. Let me explain the detail. The JPY 6.2 trillion backlog consists of 36% rail control, 21% vehicle and the largest portion of 43% coming from services, which we can count on. We're working on cost containment, leveraging our focus on productivity in AI. An initiative on product life cycle management has been launched across the organization. New M&As we are looking at potential opportunities, which could support innovation with the objective to grow further in digitalization and in the future of smart cities, realizing synergies with the rest of Hitachi. Of course, geopolitical changes do require strong attention and proper setup. We are, for instance, managing potential changes through our diversified footprint. In particular, in the United States, we have just completed a new factory in Maryland, which I will touch on later, and we have a large historical base of rail control in Pittsburgh. But it is important to know that most of our rolling stock contracts are already following under the Buy American Act with 70% of production already Buy America. Last but for sure, very important our people with our very large pool of diversified competencies, we have the strength to lead the technological challenges of the future. Now let me give you some example of cases in action. We have achieved a major framework deal in Germany. And over the next 4 years, we will be delivering more than JPY 240 billion in digital interlocking. ETCS, which is the European Train Control System, and the base of intelligence to operate trains, but also integrated control and operating systems. We also secured a 15 years framework agreement for service and maintenance of 103 high-speed trains. With our products and services, we're driving sustainability, not only for being green and reducing carbon footprint, but also as a competitive cost advantage. This is because our trains are delivering greater efficiency. For example, our Green CBTC in operation with one of our customer has achieved an 8% reduction in energy consumption directly impacting on cost efficiency. And as we said earlier in our presentation, we have a new factory in Maryland. This not only reflects our strong presence in the United States, but also it is a very important example of what One Hitachi bringing together deep expertise from all Hitachi areas can achieve. These include Hitachi digital capability for robotic inspections, automatic guided vehicle from connective industry and also the support that we are getting from Hitachi Energy on the power supply side. So those were some real world example related to sustainability and recurring business. Now we would like to shift your attention to our innovation plans, which we will cover over the next 4 slides. But before that, let me play this video. [Presentation]

I hope you found it interesting. So let me now take some time to show the detail of the digital platform architecture. HMAX collects information and data from a very wide range of sensors. From the train, from onboard and wayside signaling from rail infrastructure and even from substation for power supply that's on the bottom of the slide. And you will hear more on this, especially talking about energy from the presentation from Andreas. The data will then flow through successive layers. Firstly, integrated to be readable and then store in a common data lake, a sort of large memory where each application through algorithm and AI can access and elaborate. You can already see on the top of the chart, the number of application up and running and already delivering value to our customers. And as we continue to innovate even more will be introduced. So what are HMAX's key advantages. For example, it makes journeys more reliable with the potential to reducing up to 20% in service delays. It can also increase cost efficiency, reducing up to 15% in maintenance cost and energy consumption. And we are different -- we have proprietary advanced sensor technology dedicated to rail, which we achieved also through acquisition. Only recently we announced the acquisition of Omnicom, an U.K.-based company. Quality of the data is key. And this is therefore enabling us to collect a wide range of data from the asset you have just seen. We manage the data, thanks to a strong architecture and software developed by Hitachi Digital and GlobalLogic, enhanced by AI evolution, not only generative but also agentic AI and physical AI, which is the intelligence for autonomous vehicle. The platform is empowered by NVIDIA edge computing solution and deep learning capabilities. And we have a very solid reference. Our solutions are already fitted on more than 2,000 trains in the field. Have introduced what is HMAX and its advantages, let's now talk about our go-to-market strategy, which needs to be different from our traditional business model. The value of HMAX in bringing improvement in cost efficiency, energy efficiency and reliability across different assets, it's amplified by value-based business models. They could be profit sharing with our customer or as a service and subscription or an operational optimization on our maintenance efficiency and quality. The potential is significant. On the right-hand side, you will see estimates provided by [ Mackenzie ]. In the next slide, I will show where we currently stand. HMAX, in fact, it's not just the concept. It's already in motion and winning contracts globally because within less than a year from its launch, we achieved already quite a lot. You can see that HMAX is generating long-term recurring digital revenues, which are vital for our vision. As of 31st of May, we achieved JPY 20 billion in orders and we are working on a pipeline of JPY 200 billion, which is growing by the day. So let me summarize and conclude. We have delivered solid action over the last midterm and built a strong foundation for accelerated sustainable growth. The market is expanding and we are leading the transformation, not just adapting to change, but shaping it. Our momentum is driven by a unique combination of scale, digital capabilities and purpose-led innovation. We are working to targets for this midterm plan and aiming for the JPY 2 trillion target. Hitachi is delivering today and shaping tomorrow to build the mobility of the future to create real impact for our customers for the planet and for society. Thank you very much. The next presentation will be the energy strategy, Andreas, the floor is yours.

Thank you. Good afternoon, and thank you for spending the next couple of minutes with me to discuss the Energy business of Hitachi. In the following minutes, we will cover 4 broad areas. First, the current position and the recap of the last midterm management plan 2024, the market development and outlook, the profitable and sustainable growth strategy for Inspire 2027. And then, of course, conclusion and update on future outlook. The journey of the last MMP up to 2024, was an interesting one. We were able in the energy sector to nearly double our profits and then the Hitachi Energy field nearly doing the same. It was a continuous significant revenue growth based on our derisk strategy, leading to better margin and risk profile in the order backlog and operational excellence. Going forward, we have to execute that backlog, and we will discuss that in detail. We are aiming to become the #1 service provider in the industry. We will discuss it as well and of course, to leverage digitalization with Lumada and innovative technologies. We consider ourselves as a marker with management and with technologies. We have a solid market position, which we have earned over the last decades. And in all our areas, we are #1 or #2. Transformers, we have the highest installed production capacity doesn't matter with distribution transformers or high-power transformers, high-voltage, 1 out of 4 high-voltage switchgears in the world is invoiced, produced and installed by us. We have innovative product lines like EconiQ with SF6-free technology and good integration. We have not only invented technology in HVDC nearly 70 years ago, we have installed 150 gigawatts of connections worldwide. In grid automation, 50% of the 250 biggest utilities are customers of our software solutions for substation automation protection, grid management or market base. And then service, over the decades, we have installed the biggest installed base of more than USD 230 billion, and we strive to leverage on that. In nuclear, 2/3 of all boiling water reactors in Japan have been ours. We are working on them, and we are working on restarting them. That's the base for our continuous growth and our success. Let's look at the market development, which is fueling our growth. I think the energy market is changing in a dramatic way. If you look for last year in 2024, more than 585 gigawatts of generation capacity were added to the installed base worldwide. 85% of that number was renewable, solar, onshore and offshore wind. Only 15% of the additions were nuclear, hydro or conventional generation assets. This trend will continue because renewables are the cheapest and the fastest way to add generation capacity to our world. And if that continues, -- and you see on the bottom line that in most areas like Europe, India and China, the share of renewables up to 2035, '40 and so on, will double and will create a big impact, because renewables are cheap and reliable from a technology point of view, but not reliable from a generation, they are volatile. They're not always producing. And of course, they're adding complexity to the grid because in former times, generation and demand were always co-located. Now we have sometimes hundreds or thousands of miles between generation and consumption. And that increases complexity and ask for newer solutions. Providing inertia, frequency, stability, fault handling, complex connections across different states makes our network and our technologies more complex. And the good news is we have an Hitachi Energy, all the solutions we need starting with HVDC towards transporting energy over long distances, providing frequency services with STATCOMs, battery electric storages and all these other services. Adding on the software solutions to manage these grids, which are more volatile, more complex and avoiding blackouts all over the world. And the market is growing and growing is probably an understatement. In 2017, our market was around USD 100 billion. Last year 2024, that was already USD 233 billion, so more than doubling. And we estimate that the market in 2035 will reach USD 450 billion. If that is the peak of the market, we are not quite sure that can be even later. We're looking forward to a decade of growth and to a growth in a market, which we haven't seen as an industry in decades or probably not at all because if we see from the curve, these market volumes are never experienced in our industry. And that's the base for our profitable and sustainable growth strategy for Inspire 2027. How do we leverage on these very favorable conditions. And of course, our strategy is focusing what we have on hand. We have at the moment an order backlog, which is the biggest one in the industry with USD 43 billion. And we have, of course, manufacturing to work on this backlog, and we have to expand that because our installed capacity is not big enough to deliver all that backlog at the moment. And of course, operational efficiency will contribute, delivering on time, on budget, on quality for our customers will be the key for our success. And of course, we need more people. We are growing rapidly. If you have to hire in the next MMP 2027, more than 15,000 people net growth. So there's also replacement. From a business focus point of view, we will focus on service. With more than 500,000 power grid assets installed and the market and the installed base of $230 billion, which only 1% is covered at the moment with service agreements from us. That's a huge potential for additional growth. Of course, we have introduced in the last year's new innovative business models going away from EPC, focusing on EP and EP+, standardization framework agreements, which were radically new for our customers in our industries years ago, which are now more and more adopted by everybody. We have huge potential to nuclear energy with our joint ventures to making SMRs possible, and we have already received one FID. And of course, we will continue to leverage on our pioneering spirit, innovating, finding new solutions for our customers for the grids for tomorrow. Let's talk a little bit about our backlog because that's one of the core factors for our success. The derisking business models or no EPC anymore, framework agreements, capacity reservations and, of course, enhanced decencies have resulted in an improved order backlog gross margin, which has increased steadily over the years. While we have in 2021 looked at an order backlog of around USD 40 billion, this have more than tripled, and we have, at the moment, USD 43 billion of orders on hand. And on top of that, framework agreements and capacity reservations. The visibility of our backlog has increased as well. In 2001, we could probably foresee around 3 years in order backlog, now the combined number of backlog and capacity reservations is nearly 6 years. So for 6 years, we know what we have to deliver. And of course, that brings us to our capacity expansion in investments. To deliver that order backlog, we have already invested $3 billion in the last MMP and we're looking forward to invest another $6 billion in the MMP Inspire 2027. And you see from the -- on the landmark where we're investing. It's all across the world. It's U.S., Canada, Mexico, it's India, it's Europe, it's Brazil. All on these locations, we are expanding our production footprint. Of course, we're looking for acquisitions as well. And we are only adding capacity which is needed to deliver the backlog. We are not building any empty capacity or capacity which is on risk needs to be filled. That's the largest investment program in the industry based on hard financial data on bankable order backlog, looking forward to expanding and delivering to our customers. Because if we're looking back and looking forward, things have changed. From 2021 to 2024, actually we could grow USD 7 billion, but mainly by filling our factories. Our factories were underutilized. They were running on 1 shift or even less. And in this period of time, we have filled our factories of backlog with products and solutions went from 1 shift to 2; from 2 to 3 shifts. Yes, we hired people is where needed. And of course, CapEx was already started. And the next MMP Inspire 2027, you have to change the game. The factories are full. We have no empty capacity, so we have to expand. And the CapEx expansion will be the trick to deliver our revenues going forward for this MMP and of course, further ahead. Of course, we have digitalization of our operations. We have installed 1 global SAP S/4HANA system, where we have all countries, all factories, all customer connections on our fingertips to control our operations. Operational excellence, delivering on time and quality for our customers is underway and, of course, continuous talent acquisition because we need more people to deliver our plans. Adding new people, it sounds easy, but and sort of mention, we are talking, it's not easy anymore. Adding 15,000 new colleagues in the next 3 years, is a huge task. And we can report that we have digitalized our HR landscape in the last couple of years. And we have proven already that we are able to hire more than 10,000 people newly every year, replacing people who has left us and adding 5,000 people net. So we are quite confident that for the years coming forward, we are able to find to hire, to train and to keep these new colleagues, which will be the key for success to deliver our revenues. And digital is not only necessary for HR, digital is as well required for our market. IEA and Bloomberg is forecasting that the expenditure of our customers and software due to the changes in the grid will increase, going from 12% in 2016 to 20% in 2023 and more rising up. So changes in our industry and our grids with renewables and all these challenges will require much more software and digitalization. And that's actually a good partner for service because service and digitalization is going hand-in-hand. We have the biggest installed base in the industry, 0.5 million of assets installed over the decades, $230 billion in installed base value, but only 1% of this installed base is covered by service agreements by us. That was the reason that we started a project last year to create a new service BU, which is active since April 1 this year to really leverage on that asset. And of course, we are combining our service activity with HMAX, where you have heard from Giuseppe already a little bit, we will come to that. So the objective of this new business units are 3. Of course, becoming the #1 service provider in the industry using our installed base, growing our service business organically 4x and 5x with adding on bolt-on acquisitions and, of course, improve our margin profile. But the service strategy is a little bit longer time oriented than just that. In the next 3 years, Horizon X, we are focusing on giving them a good start, getting our acts together, looking at service on our installed base. The next 3 years after that, Horizon Y is fully roll out digital business models with AI, predictive maintenance, and, of course, focused on the huge installed base of the whole industry. And then the end game Horizon Set preparing for a service-first company for a downturn in the market, which we are not foreseeing in the next 5 to 10 years, to be very clear, but just to prepare now that we have a good base and a downward protection in case we need that. Establishing a new service business unit is easy said, but I just want to show you that it's just more complex than just saying that. The project was executed in a couple of months and in the end that more than 6,300 colleagues have to shift it from one organization to another. We have to define leadership structures, strategy, locations. And now we can report that more than 6,000 people working in over 40 countries, providing services to our customers, including call centers, which are operating 24/7. And of course, the portfolio for the Service business is quite comprehensive. Plan and build is actually the focus of our BUs, which are providing assets like circuit breakers and transformers, but the whole value chain of service from install, maintain, spare parts, train, modernize and replace as a world of service, which will drive the growth in the next couple of years. And that's definitely -- it's not only service agreements. There are a lot of add-on services, which are normal in other industries, which we will introduce to our industry as well. Let me start a short video and explain you what can change. Let's start the video, please? We have installed over the decade, thousands of substations and substations are consisting of circuit breakers, isolators, busbars and so on. Wouldn't it be good to know where all these parts are coming from and where they are installed. And not only a circuit breaker alone, but all the inner parts of that, which are used if they are working to track them back when they were produced, where they were produced, which material was used, which batches have maybe been affected by quality programs, which reducing the life cycle. Having got all digital on your fingertips planning spare parts, modernization strategies and combining the esthetic data with operational data in the cloud, which we call HMAX because this is what becomes now reality. We have already for circuit breakers, the digital passport for the whole portfolio. So we know what was produced, where who has touched it, whereas it installed, and we're doing the same for our transformers. Stop the video, please. And that's actually leading to the first business cases. And I've brought here 1 example about the Ameren Illinois customer in the U.S. We have more than 1,200 substations getting connected to HMAX with some expectations from us and the customers. Connecting these substations, getting data, static and operational data will result in the 15% improvement in asset availability and a 30% reduction in unplanned downtime and of course, the 30% reduction in resources and inventories going forward. And that's one of the examples. And I brought you a second one, which is actually a very good one from One Hitachi. Of course, HMAX and rail was already explained by Giuseppe, but the colleagues from there ask us if we could connect the substations from the rail system of one customer in the same way we would do it for electrical customers, prevent downtime, improve operational maintenance, having less assets available. And that's the true One Hitachi example because we would probably, as energy never approached the rail customer to do these services. And as I've listened to Giuseppe, there is a big potential for us to leverage on that together, rail and energy. And digital and service and HMAX is actually one of our key success factors going forward because connecting assets digital passport, cloud-based maintenance, platforms, analytics, AI, all these things will drive our Lumada revenue and quadruple it in the next MMP those value going to a much higher value than we have had before. But of course, staying #1 is not only requesting digital but is requesting as well innovations and inventing new things. And I brought you a few examples here. Starting in the left upper corner with a new transformer optimized for nuclear assets like SMRs or the EconiQ series and from circuit breakers, which are SF6-free, where we're installing the first 550 kV gas-insulated switchgear in China, which is saving tremendous amounts of CO2 or probably another unconventional example, the Hitachi Vegetation Manager, which was developed together with Hitachi Energy, Amazon Web Services and the digital arms of our house in Hitachi, dealing with vegetations under overhead lines. Overhead lines are endangered by vegetation, which is growing below them. It's starting wildfires, it's creating outages. And a lot of the fires in California, we are starting by vegetation on the overhead lines, cutting them down is a normal task for utility. But of course, it requires planning, good timing and sometimes it's not very effective. Here, we are combining images with AI and forecasting where the vegetation is becoming a threat to increase the effectiveness of the crews to cutting down the vegetation below that in a much better way. Or another example the Caithness Moray Shetland HVDC connection, the first worldwide multiterminal HVDC connection. So you don't have a point-to-point connection. You have 3 stations saving a tremendous amount of equipment and converter stations and makes the whole solution much more sustainable and cheaper for our customers. One part of our strategy is, of course, M&A. Of course, we're looking forward to acquisitions in all our businesses and the areas of strengthening the core capacity and technology add-ons, accelerate digital services in digital grids for the service BU and of course, at the edge as well, where power electronics, charging infrastructure, battery electric storages possibly a way to look for possible plug on. If you are switching to nuclear, you have maybe followed the market SMRs are definitely a new thing. 100 gigawatts of SMRs are planned in North America and Europe. So that's around 250 to 300 SMRs. You can report that with our joint venture, we have already got the first FID in Canada for the implementation. And that's the market where we definitely can make a difference. Hitachi Energy has a broad experience in BWR reactors, boiling water reactors here in Japan and designing SMRs, downscaling them and producing their internals is definitely what we are looking into it and where we see great potential going forward. And as well, digitalization. We are not only restarting here in Japan the nuclear assets together with our customers, we are as well investing into digital capabilities. You see on that picture, a digital control room in our factories in Rinkai used for training for customers and for simulations and for perfecting and improving the asset performance. Let me wrap up as a conclusion where we are standing where we want to go. Our key priorities in a nutshell is accelerate our strategic growth areas, becoming the #1 service provider enabled by digital, investing in capacity expansion, adding flexible capacity and the ability to scale, capture the opportunity with nuclear including SMRs and definitely leverage on digitalization and innovative technologies going forward. I think we have a very favorable market environment. We have profitable and sustainable growth based on our backlog, which will result in value creation for Hitachi. If you just compare what we have done in the last MMP and what we plan for innovate -- Imagine (sic) [Inspire] 2027, compared to the old plans, we are growing from 11.1% to bracket of 13% to 15% based on a volume effect, based on a margin increase by Lumada. He's spending a little bit more on R&D to stay ahead of our competition and of course, service and bolt-on acquisitions to contribute to that journey as well. Is there potential for more and better results? Yes, maybe. It depends how good we are executing our capacity expansion, how good we are growing our service business. So I would say, yes, there is potential for more, but we are at the beginning on the start of our journey for this MMP. Compared to the old MMP 2021 -- 2024, and what we're adding now, we are adding over more than $20 billion revenues until end of 2027 and more than $5 billion profits additionally to the original plans. In a nutshell, here are the figures for your information. I'd like to thank you for your attention. I'm sure we will not be able to answer all our questions in the afternoon. And I think I can announce that we're planning an Investor Days only on Hitachi Energy in autumn in Europe. And of course, if you are around, you're highly welcomed. And with that, I'd like to finish my presentation and hand over to the CI sector, Brice, the floor is yours.

Good afternoon. Good morning, ladies and gentlemen. My name is Brice Koch, and I'm in charge of Connective Industry sector from this April. Thank you very much for your time today, and I'm honored to present to you CI Inspire 2027 direction according to this table of contents. But before looking ahead, please let me recap where we come from, looking at the highlights of the 2024 mid-term management plan. Under the leadership of the former heads of Connective Industries, Aoki-san and Abe-san, TSS or total seamless solution, which is leveraging products, OT and IT combination, has been expanding and many fruitful results have been achieved as shown. First, on the connected products, which are the base for digital services as a source of data have increased from 1.2 million to 2.5 million units. These digitalized products have boosted maintenance productivity by a factor of 3. Second, recurring or service business, which is highly profitable, provide steady cash flow and keeps us close to our customers, and those could be grown by 10% operationally and via spot on M&A. Third, green business, which is expanding to support customer [indiscernible] journey in which we could increase from JPY 725 billion to JPY 846 billion. At last but not least, aiming to be more global, we could grow by 66% in Europe and 35% in North America. In summary, sales and especially profitability were improved, thanks to TSS implementation, significant growth of Lumada revenues with a CAGR or compound average growth rate of 26%, over proportional growth of recurring business with a CAGR of 10%, the expansion of our global businesses and as operational foundation, cost discipline and pricing management. On the other side, we believe that going forward, we should more accelerate our top line growth, transform our portfolio to simplify and strengthen it and expand further our global businesses. In that respect, first, let me look now at our business environment. Looking at the structural change in the industry, we see that in discrete industry, automation optimization becomes more integrated between design and manufacturing. In other words, the whole process from conception to production become more seamless and automatize supported by AI. In process industry, also with the advancement of AI development time is shortened and manufacturing efficiency improves. In the case of both industries, discrete and process as the availability of skilled workers is mission-critical domains is decreasing, AI ensures efficiency, skill and safety, providing labor productivity improvement value. Looking more in detail at the industry automation market, we see here the growth on the vertical access, the profitability on the horizontal access by industry. The size of the circle indicates the respective industry automation market size and the color of the circle shows the type of industry. In summary, we can see that hybrid industry like batteries, advanced materials, biopharma, in particular, have both high growth and higher profitability. We understand that this is because these industries have the biggest opportunity to improve their asset efficiency and labor productivity. And in light of this situation, in Inspire 2027, we will capture business opportunities there where we can deliver most values to our customers. As such, I will explain about CI profitable growth strategy in Inspire 2027. But in that respect, please let me start by showing you a video setting the scene. [Presentation]

As we show in this video, our vision is to realize our harmonized society by driving innovation for frontline workers by One Hitachi by providing integrated industry automation. Integrated industry automation is leveraging our strengths, combining our mission-critical products, their abundant installed base, our domain knowledge and our One Hitachi digital capabilities. As such, CI Inspire 2027 is based on 3 differentiating key pillars as integrated industry automation solutions partner. The first one is about capturing the opportunities in high-growth and high-value mission-critical market segment, such as hybrid industries. The second one is about living One Hitachi, differentiating by product, OT and IT seamless vertical integration powered by AI and boosting recurring business with HMAX. And the third is about achieving leadership with portfolio transformation to strengthen our integrated and synergetic core. As we have been providing so far Total Seamless Solutions, TSS, through vertical integration from products to OT and IT in process and discrete industries. In Inspire 2027, we will leverage AI and involve TSS into edge marks for industries. We will provide integrated solution, improving efficiency and productivity, especially through the hybrid industry value chain. In that respect, we will also consider further strengthening our differentiation especially around OT. And as I mentioned earlier, hybrid industries, such as batteries and biopharma need most improvements and have high growth and high profitability. Taking advantage of TSS achievements, we can now move to the next level of value of our customer with HMAX for industry. And in fact, HMAX for industry create customer value by adding AI optimization to IT, OT and products. And this diagram show the concept of HMAX for industry more in detail. As described at the bottom of the slide, we have an abundant installed base of mission-critical products. Collecting data from these digital assets and by utilizing Hitachi's domain knowledge and AI, we can deliver higher value digital services to customers, such as equipment failure diagnostics, predictive maintenance, line optimization and operational guidance and safety alert. HMAX for industry leverage Lumada 3.0 model, and it will accelerate global scaling. But what does it mean concretely? Here, a first example of the value HMAX for industry delivers to various industries. This is a core creation with NVIDIA relating to facility operation and maintenance, developing solutions to enhance safety guidance through AI to improve work efficiency and safety with guides and alerts using NVIDIA AI blueprint for video, search and summarization, VSS for facility, operation and maintenance, performance of work efficiency of periodic inspection could be double improving labor productivity. As a second example, this is another co-creation this time with Daikin related to industrial machinery. Leveraging AI with maintenance OT, we can enhance stable operation and transfers of scale. By combining OT data, such as maintenance record, operating instructions, equipment drawings and OT skills of analysis processes, AI agent accelerates equipment failure diagnostics. Labor productivity is improved by shortening the response time of the diagnostic to within 10 seconds as well as increasing accuracy to over 90%. As a third example, from the biopharma industry, we integrated advanced AI bioculture simulation and sensing to shorten scale-up period, collecting manufacturing data for mission-critical products, bioreactor and OT domain knowledge, this real-time monitoring data are simulated and analyzed by AI and connected to automation. As a result, in similar terms, we could reduce the scale up time from 3 to 2 years, basically gaining 1 year of full production time. As a last example, related to advanced material, we can expand the scope of automation optimization seamlessly between design and manufacturing. Taking advantage of our mission-critical inspection measurements, OT domain knowledge and AI, we realize data quantification and informatics, which accelerate development and improved manufacturing process. Asset efficiency can then be increased by shortening the material design time by up to 900x, also then obviously improving the production process. So as you can see, from these 4 example, HMAX for industry creates customer value by adding AI optimization to IT, OT and products. And finally, the last pillar of CI Inspire 2027, our portfolio transformation and simplification. In that respect, we will accelerate portfolio transformation by strengthening organically and inorganically an integrated and synergetic core with the aim to global leadership. To achieve this, we will execute transformative acquisition and divestment. More specifically, our organic and inorganic investment will be focused on the red area shown on the screen on the right-hand side of the screen. As you can see, it will be related to OT or close to it. And in any case, it will be disciplined, driving differentiation, recurring business and supporting our Inspire 2027 targets. Otherwise, having mentioned about Hitachi, One Hitachi several times, I would like to also highlight CI contribution to it. And as such, we will accelerate global expansion through deploying CI's products and solutions also to my broader system -- sectors, global businesses. We will provide various mission-critical assets to rail and energy and create mission-critical services by HMAX for industry, leveraging also our GSS (sic) [TSS] and scaling globally. Last but not least, our people, our human capital. In that respect, we will power our sustainable future by enhancing global management, leveraging our variety of talents globally. Believing that human capital is a foundation of our success, we are promoting a human capital global strategy for future profitable growth. And in that respect, we want to further build growth-oriented culture and global mindset and also create strong leadership pipeline, utilizing new leadership development program as well as promoting workforce transformation and talent mobility. Also, we see digital skilled professionals is very key for expanding our digital services, and we will almost double the number of our talents. At last, coming to conclusion. In summary, we will drive profitable growth. As you can see from this adjusted EBITA margin waterfall between 2024 and 2027, the improvements can be categorized in 3 buckets: revenue growth, profitability improvement and strengthening management. Related to revenue growth, we will address global mission-critical markets, expand digital service with HMAX for industry and grow leveraging One Hitachi. Related to profitability improvement, we will improve Lumada revenues ratio, boost digitalized recurring business and more specifically in 2025, increase our service business in China. Finally, through strengthening management, we will simplify and strengthen our business portfolio and organization, improve efficiency, utilizing AI and strengthen our global footprint and governance. And this leads me to my last slide. Summarizing CI Inspire 2027, we will execute the following initiatives in order to achieve our vision and targeted goals. Clear business focus on integrated industry automation and hybrid industries, leveraging the available growth and profit pool, transform and simplify our portfolio accordingly, expand our global reach, enhance recurring business with data utilization, leveraging our installed base and also HMAX for industry and last but not least, acquire and develop our diverse and global talent. With that, I would like to thank you very much for your attention. And I'm happy to introduce my colleague and Head of Digital Service and Systems, Abe-san, please. Thank you very much.

Hello. I am Abe from Digital Systems & Service sector. And I will explain the business strategy. Here's today's agenda. We will start with a review of the 2024 midterm management plan. In the 2024 MTMP, the Lumada business led the growth, resulting in an increase in revenue and adjusted EBITA. Specifically, we achieved significant results such as expansion of orders of modernization in large-scale mission-critical project, growth in service businesses centered on GlobalLogic, profitability improvement through pricing revisions. However, for the DSS sector to achieve sustainable growth, we believe we -- it is necessary to do the following. Further enhance the competitiveness of both domestic and global business and strengthen our management foundation. This slide has been restructured from the perspectives of the SI business and the service business to help you better understand the growth of the DSS sector during the 2024 Midterm Management Plan. As you can see, both the SI and service business achieved steady revenue growth and improved profitability under the 2024 Midterm Management Plan, the service SI business exceeded JPY 1 trillion in sales. Next, the vision of DSS sector in Inspire 2027, starting with the business environment. The DX market that the DSS sector focuses on is expected to continue high growth across global regions. In particular, the AI market is projected to grow at an annual rate of nearly 30%. On the right side, we have the market trends. Increased investment in upgrading mission-critical social infrastructure, and also the progression of project scaling and special commissioning is going forward. We see this as a business environment where Hitachi and DSS sector can leverage our strengths even more. Furthermore, as demand for AI rapidly increases, customers are facing various challenges and are increasingly seeking partners who can self-help solve those challenges. In response to such changes in the business environment, DSS sector will combine its strength in mission-critical IT, OT integration. And also with cutting-edge AI to globally deploy businesses that revolutionize social infrastructure with AI towards the realization of harmonized society and pursue sustainable growth. I will move on to the growth strategy of DSS sector that is Inspire 2027. So this slide outlines the growth strategy of the DSS sector. In Inspire 2027, the DSS sector will use AI as a growth driver to promote further growth in domestic business and acceleration of global business. Specifically, we have 4 strategic pillars in Japan, SI business and service recurring business, globally, GlobalLogic and One Hitachi's Lumada business. With these as 4 core pillars, we aim to achieve the goals shown below in Inspire 2027. In particular, we will contribute to expanding Lumada business across all sectors, driving improved profitability for the entire Hitachi Group. From here, I will explain the growth strategies for each of the 4 pillars. The first strategic pillar is strengthening the execution capability of domestic SI business. The performance targets for Inspire 2027 are sales CAGR of 7% to 8% and adjusted EBITA margin of 16% to 17%. We will -- as you can see on the left, we will thoroughly utilize GenAI to boost productivity and leverage our abundant domain knowledge to deliver Hitachi's unique value quickly, enhancing customer operations and advancing social infrastructure. To address the shortage of domestic talent, we will utilize engineers from -- sorry, plus 30%. So speaking specifically, the effect of GenAI in 2024 was plus 30%. That is JPY 5 billion. In 2027, we will expand that to JPY 100 billion. And as you can see on the right to address the shortage of domestic talent, we will utilize engineers from GlobalLogic and Hitachi Digital Services in India, Vietnam and Eastern Europe for domestic system development projects, further strengthening our SI execution capability. Specifically in FY '24, we will expand 650 man months to 3,500 man months. Through this, we will really strengthen our SI capability. In addition, we will introduce GlobalLogic's advanced digital technologies to establish an AI development environment, strongly promoting efficiency in software development and utilization of IP. From here, I will introduce 3 cases of value creation for customers using generative AI in Japan. The first is a financial sector use case using generative AI in a large-scale SI project. For example, with [indiscernible] fire and marine insurance, we began a large-scale core system modernization project in April of this year, migrating from mainframes to public cloud. Since the project is large and long term, a major challenge is the vast amount of information required for product management and migration development work. Hitachi plans to utilize generative AI to resolve these challenges, reducing workload and improving accuracy during migration and development. We will also expand the application scope of generative AI to further enhance precision and quality in development processes. In the financial sector, co-creation initiatives using generative AI to improve operational efficiency are expanding. And we are collaborating with many customers beyond those shown on the slide. The second case is the application of generative AI to quality assurance operation at Omika Works, which develops equipment and systems that support social infrastructure. So we have applied generative AI to quality assurance work. How to pass on the know-how and tacit knowledge of skilled experts to the next generation is a major social issue. And it is a significant challenges at our sites as well. One important quality assurance task at Omika Works is handling customer system inquiries and troubleshooting. So far, we have responded by utilizing database that store manuals and pass -- past trouble information. Seasoned workers can narrow down issues based on experience, but younger, less experienced employees often struggle to grasp the reality. We trained AI by feeding it over 100 questions and model answers related to actual on-site work, helping it learn multiple decision-making points and improve its judgment. It's like a craftsman, training and apprentice gradually transferring the senior veterans knowledge to the AI. This enabled even nonveterans to quickly search for the right information and provide fast and accurate answers. Hitachi has extensive domain knowledge, such as deep understanding of customer operations and insights into machinery and physical phenomena. As in this case, we combine this domain knowledge with cutting-edge AI technology, verify it internally and implement it in customers' mission-critical systems. This is a unique strength of Hitachi, not just having AI capabilities, but also being a manufacturer that supports social infrastructure. The third example is the application of SI to social infrastructure systems in the railway sector. With the aim of improving efficiency in railway operational management and maintenance, we will conduct joint verification with JR East from around September this year. The Atos, which manages the operation of conventional lines in the Tokyo metropolitan area is a large-scale system composed of many complexity -- complexly integrated devices. Therefore, we issued such troubles or inquiries about functional rights, dispatchers who analyze and identify the case -- causes require highly specialized know-how and knowledge. In case where solutions cannot be provided by the manuals, consultations with experienced personnels are necessary, which can result in delays from identifying the cause of them. Manufacturing to restarting operations, amidst the growing shortage of labor on site, we would collaborate with customers on initiatives such as developing an area and specialized in railway operation management that incorporates tacit knowledge, such as operational know-how and developing AI agent that duplicate the thinking of experienced professionals. Furthermore, we aim to enhance the overall reliability of railway operation systems by considering the application of GenAI to requirement definition, design and development tasks in system development. Now the second pillar of our growth strategy is a strengthening of our domestic service and recurring business. In spite of 2027's performance targets, our sales CAGR of 6% 7% and adjusted EBITA margin of 16% to 17%. As the x demand expands, among mid- to small businesses, customers are facing challenges such as shortage of AI skilled personnel, risks of leakage of sensitive information and increased costs. The DSS sector will continue to strengthen high value-add solutions such as AI agent based upon AI infrastructure that enables customers to utilize data with high liability and low cost, such as Hitachi iQ and [ HERC ] for AI. Through this, we will further strengthen and expand our service recurring business, which provides a total range of services from business transformation through consulting to AI utilization environment and AI offerings. The third growth strategy is the sustainable growth of GlobalLogic. GlobalLogic continues to achieve high growth exceeding the market average as the growth engine for Hitachi and the DSS sector's global business. At Inspire 2027, we will further enhance our delivery capabilities through bolt-on M&As and other measures to drive the continued growth of our digital engineering business. Additionally, synergies with other sectors have expanded by 67% year-on-year in FY 2024. And we will continue to contribute to the digitalization of business assets in service across the other sectors. Furthermore, we will focus on software asset-based solution businesses that integrates GlobalLogic's advanced design and engineering capabilities with cutting-edge AI technology. GlobalLogic's AI capabilities, such as generative AI, as you can see here, have already enhanced, earned leading position and high praise in the market. We will leverage our technological capabilities and extensive AI talent pool of 16,000 people to expand our solution business globally. . The fourth growth strategy is the expansion of the Lumada business under One Hitachi. Inspire 2027's performance target, Lumada sales ratio of 50% and adjusted EBITA margin of 18%. A representative example of this is HMAX as demonstrated in the previous presentations for each OT sector. As shown on the left, we will expand HMAX services, which integrates the installed base of OT sector equipment and machinery with AI and digital technologies from DSS sector into the growth market shown on the right-hand side thereby scaling up HMAX-related business globally. To expedite the rollout of the HMAX business model, we have established a new One Hitachi Advisory Board, as you can see in the center on this slide. Through this Board, One Hitachi Advisory Board, we would accelerate business growth by swiftly sharing strategies and making decisions at the top level of each sector. Here, we introduced an example of using AI to innovate operation of the transmission network of Southwest Power Pool, SPP, a regional transmission organization into the United States, which is under One Hitachi. SPP is responsible for the stable supply of electricity and development or adequate transmission infrastructure of the Midwestern United States. U.S. energy demand is increasing year-on-year due to factors such as expansion of data centers, increased production activities and accelerated electrification and this trend is creating a significant gap between supply and demand. The Hitachi business unit shown here have collaborated to develop an industrial AI system that perform AI analysis and simulation verification contributing to the resolution of the energy supply demand gap in U.S. In this way, Hitachi is expanding its unique initiatives to advance social infrastructure with AI globally under the One Hitachi framework. In advising such initiatives, collaboration with partners is becoming increasingly important. Since the 2024 midterm plan period, as you see here, we have been advancing collaboration with partners, which has led to several achievements already. In particular, we have recently concluded a global system integrator partnership agreement with NVIDIA, the first such agreement as a Japanese company. Next is strengthen our management foundation. To support this growth strategy outlined above, we will also strengthen our management foundation. At Inspire 2027, we will rigorously pursue ROIC-based management, execute planned investments for business expansion and strengthen our human resource strategy. The specific initiatives are outlined in this slide. In particular, regarding capital efficiency, we will continue to review low growth, low profit businesses, optimize pricing and reduce working capital to improve the ROIC of the DSS sector by 1, 2, 3 points compared to 2024. Finally, let me share some summary. Under Inspire 2027, the sector will focus on profitable SI in services, aiming for high profitability with an adjusted EBITA margin exceeding 16% through further productivity improvements and pricing optimization. Additionally, we'll complete the growth strategy outlined today, achieve the financial metrics shown on the table and realize sustainable growth. That concludes my presentation. Thank you very much for your attention. Next is Lorena's presentation, talking about the strategy about human resources. Lorena-san, please.

Hi, everyone. As a Chief HR Officer, I'm pleased to present our human capital strategy and our key initiatives for achieving goals for Hitachi Inspire 2027. We firmly believe that people are key to our success. And as HR, we are committing to partner with our business on delivering value and creative future of Hitachi. As you heard from our CEO and my business colleagues, our Inspire 2027 goals are ambitious. People are key to drive sustainable growth and our Hitachi Group HR strategy is anchored on 6 initiatives to enable and empower our people to succeed. The first 3 initiatives will drive the right environment and set up to achieve growth. The next 3 will enable our talent and provide HR platform for building the future of Hitachi. For creating the right setup, we fully recognize that passionate and driven individuals are required. And as such, we will pivot of incentivized people, driving high performance and develop leader to create and share value. Coming to the enablement aspect, we will keep our talent and scale AR expertise for boosting productivities and enhancing effectiveness. Equally important is our initiative on talent mobility to both accelerate synergies across the business and to provide employees with attractive career and growth opportunity across Hitachi Group and support retention. Finally, we are establishing global policy, framework and platform to enable synergies and drive seamless execution and collaboration. Let me walk through the first 2 initiatives I covered earlier. Our first initiative is to enhance the corporate value with 2 key elements: the restricted stock units and employees' stock purchase plan programs. We are significantly expanding these existing programs across the group and coverage across employees. As you would agree, this program will foster ownership, commitment and drive employee well-being. In addition, it will strengthen our ability to attract and retain top talent. Through our second initiative, we are focused not only on action and outcomes, but also on instilling the right mindset and behavioral changes that foster excellence. Let me elaborate further on the 3 elements. The first element is to invite the growth mindset, and our executive leadership team will champion this change through ongoing dialogue and engagement. In addition, we will also enhance and broaden the training program across the Hitachi Group. The second element is our new leadership development program, which is designed to shape leaders with holistic perspectives and to encourage them to calculate risk, which is key to deliver our vision as One Hitachi growth. As for the third element, to encourage the challenge-driven action of employees, we will expand measure to reward achievement of ambitious goals and offer the best-in-class compensation across the organization. I will now take you through the targets of the 2 initiatives, which we believe will create the right impact. With respect to RSUs, we are expanding globally to 2 to 3 level below the CEO or business unit head, thereby extending coverage multifold to 1,500 leaders. Our ESPP program will also be expanding significantly to offer 150,000 employees an opportunity to be part of the program. We plan to cover 50-plus countries across Hitachi Group in the future. We have also set ambitious targets to drive high-performance culture. We will develop a strong and sizable leadership pipeline of 1,000 leaders to support not only our succession planning across the group, but also to shape our long-term future. Finally, as you noticed, our engagement score is 80, which is over 10% from the current score. So we have designed a law of measures, including the ones I covered in my previous slide, and I'm confident will not only enable us to beat our Inspire 2027 goals, but also to deliver more value to our customers, shareholders and employees. I would like to thank you for your time, and we look forward to achieving greater success in partnership with you. The next session will be the CFO session. Tom, the floor is yours.

Hello, everyone. I am Kato, CFO. I will now talk about our financial strategy and risk management. As explained today, we are accelerating our transformation into a digital-centric company. We aim to evolve Lumada through generative AI to achieve high profitability and sustainable growth. Of course, we have confidence based on what we have built up over the years. In recent years, geopolitical risks have increased and global trade conflicts and regional disputes have become more apparent. Furthermore, with the rapid advancement of generative AI, we recognize that major changes are occurring in global politics, the economy and society. In this time's management plan, even in the face of this uncertain business environment, we have referred to benchmark practices and decided to present our 3-year targets not as absolute monetary values, but as ratios and ranges to better illustrate our vision. Today, I hope to help you understand this approach thoroughly. Now I will explain the 4 key points: enhancing cash generation capabilities, balanced capital allocation, improving capital efficiency and reinforcing risk management. First is enhancing our cash generation capability. Under the new management plan, Inspire 2027, we aim to expand revenue and improve margins by expanding our core Lumada business. In addition, we will enhance cash efficiency by improving the conversion from profit to cash and continuously expand core free cash flow. As explained today by each sector leader, we are promoting growth strategies centered on the Lumada business to achieve the targets shown on the left. Hitachi's overall EPS has grown at an annual rate of 15% so far. And we aim to continue improving it. Furthermore, by improving CCC and other metrics, we aim to raise our cash flow conversion rate to over 90%. Core free cash flow has grown at an annual rate of 23% so far, and we will continue to grow it steadily. Second is balanced capital allocation. Our basic policy as with the previous 2024 midterm management plan is to prioritize returns and flexibly allocate cash in a balanced manner and growth investments and shareholder returns. First, investment in inorganic growth shown at the center. In our new management plan, aiming for sustainable growth, we are considering increasing the total amount of inorganic growth investment compared to the '24 MTMP. Naturally, these investments will be focused on areas aligned with Hitachi's overall growth strategy, aiming for high profitability and capital efficiency. Specifically, as explained today, by the sector leaders, the investments will mainly target digital enhancement and service expansion. And most will likely be bought on M&A to strengthen existing businesses. In addition to strategic alignment, there are quantitative hurdle rates. Specifically, we use the margin and capital efficiency targets set out in the new management plan as benchmarks. On the financing side, we intend to utilize borrowing leverage in accordance with the financial discipline stated here. Next is shareholder returns. Our basic policy is to expand the amount of returns over the medium to long term. Specifically, we aim to return more than half of our core free cash flow and net income to shareholders. As for dividends, we will continue to pursue stable dividend growth in line with business expansion as we have done in the past. On the other hand, we will carry out share buybacks flexibly taking into account cash generation, financial condition and asset sales. To summarize, the diagram on the right shows our cash allocation approach. First, core free cash flow will be allocated to growth investments and shareholder returns as explained earlier. Next, asset sales will be used for growth investment opportunities that meet the criteria of strategic fit and hurdle rate. If such opportunities are not available, the funds will be used for shareholder returns, specifically for share buybacks. Leverage will be used for growth investments. Loan repayments will be considered as the last priority, except in short-term cases such as when we receive large advanced payments. Here, I would like to review the past trends in shareholder returns. As shown on the bottom left, based on our record of continuously expanding core free cash flow, we have maintained an increasing trend in annual dividends over the past 14 years. From fiscal 2010 as the baseline, we have achieved an annual growth rate of 16%. We also plan to increase dividends this fiscal year compared to the previous year. The upper right shows the trend of share buybacks. Taking into account our cash generation capacity, our financial condition and asset sales, we plan to increase share buybacks by JPY 100 billion from last year, totaling about JPY 300 billion this fiscal year. As a result, our total payout ratio has shown an upward trend, achieving 54% in the '24 MTMP. We expect to maintain a payout ratio of over 50% this fiscal year as well. The third point is improving capital efficiency. By expanding the Lumada business, we will increase returns and optimize invested capital to improve ROIC. We believe that inorganic growth investments are necessary for sustainable growth. Even if ROIC temporarily declines after investment, we will work toward an early recovery by not only improving ROIC, but also lowering WACC to widen the ROIC spread. Return growth on the numerator side will be driven mainly by enhancing the growth and profitability of the 4 core sectors centered around Lumada business. On the denominator side, we will optimize invested capital through asset-light strategies and capital structure optimization. Asset sales will be considered based on criteria such as Lumada's growth potential, the rationale of ownership as well as ROIC. In addition, we aim to widen the ROIC spread by reducing WACC, including the use of leverage. Number four, I will talk about reinforcing risk management. In response to the increasing uncertainty in the business environment mentioned earlier, we are promoting enterprise risk management, ERM, through collaboration among sectors, regions and corporate functions in order to centrally identify and address major risks across the entire Hitachi Group. Please let me explain the risk of reciprocal tariffs with the United States, which is a highly important short-term issue. At this point, there have been no significant changes from what was explained in our earnings announcement at the end of April. However, we are continuously reviewing the situation as it evolves, and we plan to provide an update during the Q1 earnings announcement at the end of July. As part of our risk management framework, in addition to existing structures, we have appointed RMOs, risk management officers to each sector, region and corporate function, and we operate ERM under the One Hitachi structure. In this framework, I serve as the Chief Risk Management Officer and oversee risk management activities across all of Hitachi under CEO. In our ERM, major risks are visualized and organized company-wide using a risk heat map. This image here shows examples of major risks, including trade disputes such as reciprocal tariffs with the U.S., talent acquisition and retention needed for business expansion and transformation as well as technological advancements such as AI. We are working to minimize these risks by leveraging Hitachi's diverse business and regional domain knowledge. In addition to minimizing the risk of damage, we are also committed to minimizing the risk of missing growth opportunities. Lastly, summary. First, we will improve revenue, operating profit margin and cash flow conversion to continuously strengthen our cash flow generation capacity. The cash generated will be allocated flexibly and in a balanced manner to growth investments and shareholder returns. Next, we will expand returns and optimize invested capital, increasing capital efficiency over the medium to long term, even while making inorganic investments by transforming Hitachi into a digital-centric company with the Lumada business at its core, we will enhance our corporate value even amid increasing uncertainty in the business environment. Moving forward, we will continue to engage in 2-way dialogue with our investors and strive to further enhance corporate value. So we appreciate your understanding and support. . That concludes the CFO session. Thank you for your attention.

Now I'd like to take a 10-minute break. After the break, we are going to accommodate your question at Q&A session.

Thank you for waiting. Now I'd like to start a Q&A session. Even though we call the session as Q&A, not only us answering to your questions, but also, we would like to receive your candid opinions as well so that we want to make this as a 2-way dialogue. Now let me explain the procedure for Q&A. [Operator Instructions] So Hirakawa from the site.

I'm Hirakawa, BofA Securities. Number one is about [indiscernible] Lumada. In 2030, Lumada EBITA is expected to be 20%. So it means 5 percentage point to be increased from 2025. So for AI itself, I was able to learn from you to raise the added values and you are going to reduce cost. There are 2 aspects. So the AI is helping the merger of Lumada, if we can show some business cases. If you're going to raise this margin by 5% to 2030, how [ JAR ] is contributing to that business in the future?

Thank you for your question. In the middle of the question, you pointed out in the middle, GenAI impact is there a way to improve that solution value. And also, we are reducing the cost as well. It's a contribution to improving the productivity, increasing the added value is the area that Lumada 3.0 that was explained by the examples of the each sector leader for the added value area. And in terms of the cost reduction, as Abe-san explained, like for development activities, like around 30% should be able to be improved its efficiency. And also value-wise, around JPY 100 billion of the cost impact are expected. With this area, if Abe-san have any added question, additional answer?

Yes. Thank you for your question. There are 2 aspects in here. One of them is JPY 100 billion was mentioned earlier. When we use AI, without AI, what will be the reduction we can make for the cost. We look at the 2030 in Japan, like 830 people are in shortage as IT expertise. So not cost reduction, but labor shortage should be able to be compensated by AI and how? By utilizing AI, we can accelerate speed and improve the quality so that customer to regard as a value so that we can pay for it so that we can improve profitability. The other element is that like VelocityAI, which is a GlobalLogic asset to be utilized. So software asset should be embedded into Lumada, so we can reuse that asset so that we can improve profitability through app or AI agents to utilize so that we can improve profitability. There are 2 aspects as such.

Follow-up question, the significance of JPY 100 billion revenue is -- so profit will go up by 8 percentage points. How can we interpret this JPY 100 billion? So this is a cost reduction effect. And under the negotiation with the customer, if the customer sees the value, we would like to also increase the value. Number two, about -- I have a question on the CI segment. The CI segment, I think CI has substantial upside possibility. On the other hand, the CI segment upside, if we look at that, I think there are 2 very typical pushbacks. There are like businesses, which has nothing to do with Lumada. And looking at each of the businesses, they are small. And whether can they be -- whether they can be competitive globally. And you talked about using AI and HMAX and also moving into the hybrid area. But if you keep the businesses as they are, the businesses are too small to compete globally. And also, whether CI can become a business that really leads the entire Hitachi. So it's not fully convincing to me yet. And looking at Hitachi CI business portfolio towards 2027, 2030. How will the business portfolio in CI change? I would like to hear your ideas. That was my second question.

Thank you Hirakawa-san for pointing out a very important point. Brice? So we have decided that Brice will be leading the CI sector. And since he has taken this position, this was really a central topic in the discussion since then. So to be specific to increase the profitability of CI sector, further, we need to reorganize the portfolio that is bringing in new businesses and divesting businesses. So we need to do both of this in a very active manner. And I will not mention any specific businesses here, but this is something reorganization is something that we need to do. And also, you talked about the sub-scaleness of the business, and Brice has been saying this for a long time. And in the presentation, we talked about expanding the business globally and to expand the business globally, one of Hitachi's strengths is having both discrete and process capabilities. This key hybrid area will be Hitachi's strength. That will be our core. However, of course, through bolt-on M&A, et cetera, we will continue -- we need to continue to strengthen our capabilities. Brice? do you have comments?

Thank you very much, Tokunaga-san. Yes. As Tokunaga-san said, one of the key differentiating factor will be changing the portfolio, adapting the portfolio. And it means some divestment, but that mean also doubling down on some of our strengths. As you know, we have some very key product, mission-critical product. We have very strong OT, and we have a very strong link now with IT and HMAX. So strengthening these strengths basically will be one of the focus and eliminating more where it's not synergetic. The second thing, which will be very key is to focus on certain markets and certain industries, because then we have an integrated solution, which basically almost none of our competitors have. And because of the complexity of these industries and because of our domain knowledge, but also ability to manage complexity, which is rather unique in Hitachi and in CI, we can differentiate. And the third thing which we will look at is how do we as you also say, because we are sometimes a little bit subscale, how do we globalize? How do we double down on where we are strong again, and that is more on the globalization point. And the last point I would like to highlight is this integration of CI because we have a lot of strengths, but they have been a little bit too scattered or too silo and now acting as One CI. Certainly, we recognize that we know industries like batteries, like biopharma, like advanced material extremely well, not only from an IT, OT and product point of view. So this concentration will be critical. And that also includes the way to go to market. Today, one business go to one customer, but forget about the other businesses, how do we complement that. So that will also increase our top line. And last but not least, our people. I mean, we have today, as you might have seen, we have a more diverse team and not only diverse because of passport or whatever, but diverse also because of background. We have colleague from DSS who joined CI, we have a colleague from Energy and the other way around. So this knowledge will help us to differentiate.

Let me add something to your question. You said 5% Lumada will be improving. And what will be contributing to that? That was one of the questions. So for sure, Lumada 3.0 service will be expanding. That is contributing to that, that representative example is HMAX. So HMAX is not only for rail, but we have HMAX for energy, HMAX for industry. So we can say HMAX for everything. So the way of HMAX as architecture will be rolling out for the entire Hitachi so that we can strengthen this. That's the way we think. Next, Fukuhara-sa.

Jefferies Securities, I'm Fukuhara. My first question is that CFO, I'm looking at CFO slide on Page 7 of CFO slide on the seventh page. On the lower right, you see WACC reduction is mentioned here. So taking this opportunity ROIC number is shown here, but WACC itself? If you have any number about the WACC, could you let me know? And lowering the WACC the way you lower the WACC, you borrow money or you may focus on services to lower the WACC, but there is a volatility for the share price. Not a long-term perspective, but it tended to be impacted by short-term performance. So the quarterly performance guidance that you can disclose, if possible. So this is my first question.

Thank you very much for your question. For the WACC reduction -- in the middle of the question you just mentioned, utilizing leverage and so on, on top of that approach, more transparent management should be promoted. This is really important. So that's why the dialogue with the capital market will be strengthened. So this is our policy. Actual number about WACC we haven't disclosed so far. But Kato-san, do you have any comments? .

Yes. Thank you for your question. At first, for the WACC, as you know, of course, internally, we have some management based upon some assumption and then ROIC spreads in one set to manage the company. But for the industry, this is the number decided by investors and depends on the position of the investors. So we refrain from disclosing this number. But the range or develop wise, it's a high single digit between 6% to 10% level. It depends on region and business. That's the range.

I understand. The second question is -- so business portfolio revision taking into consideration ROIC. So generally speaking, when you -- if you decide whether to keep a business or divest a business, when you make that judgment, I think business with low ROIC are candidates of selling that business. So that is generally speaking. In that sense, looking at your slide, ROIC relatively low ROIC, DSS and CI has relatively low ROIC. So my imagination is that, when you reorganize the businesses, DSS and CI -- so the businesses which will be divested will come from DSS or CI. And also acquisition by acquiring businesses, ROIC going down, ROIC may go down through acquisitions. So when you reorganize the portfolio. So with if this business, so you -- are there any businesses you are determined to keep regardless of the situation.

Thank you for your question. About the -- so thinking about the growth potential of the business and businesses that Hitachi Group wants to grow, ROIC will be one important metrics to consider. To increase ROIC, we need to advance the management further. So having said that, which businesses will be the candidate for divestiture or which businesses we intend to keep. As of now, it is difficult to really make that judgment. The market environment and business environment changes. And as it changed is, we need to make this decision or judgment in a dynamic manner. So I don't think any of the businesses will be safe at all times. So if we see any businesses we see as growth has stopped, we will be taking that into consideration as a possibility of divestiture. And looking at the current situation, some of CI and DSS has lower, relatively lower ROIC businesses and also a low affinity with Lumada 80/20. So it is true that there are some businesses, which fall under that category, but we will follow the growth of such businesses and cautiously and flexibly think about divestiture and reorganization. Kato-san, do you have any addition?

So I will talk about acquisition, M&A. So the ROIC impact, how to manage the impact of decreasing ROIC at M&A. What we are doing previously, when we did M&A, we -- net present value being positive and strategic fit hurdle rate, adjusted EBITA and ROIC. So these were the factors we considered. In addition to that, from last -- we now have an official policy if BU comes up with M&A proposal, the BU or sector, what would be the impact on the ROIC and the spread? And if the ROIC goes down, when will it recover? The BU needs to commit on that recovery timing. That is one. And the next thing we have done this since before, we do monitoring for about 5 years after acquisition. And previously, we only looked at revenue, profit and cash, but we now have new criteria. ROIC and ROIC spread recovery, whether they have been able to meet the commitment, we will also monitor that. And by doing that, we will make sure that ROIC and ROIC spread will be recovered.

Next question, Thong-san from the site.

I'm from Damian Thong from Macquarie Capital Securities. Let me talk in English. I have a question for Connective Industries. And there's a slide here on Page 6. And I know that your growth targets on all areas is going to be hybrid areas. So battery advanced materials and biopharma. Of course, the big markets here, in fact, your slide shows that chemical, oil and gas industries. And you also have a slide earlier or somewhere that says that your biggest missing pieces are DCS, Distributed Control Systems and MES. And it strikes me that a big part of the installed base actually that's in the world today and the big part of the market is actually in the oil and gas and chemical industry. So I'm just curious as to -- because there's a relatively low growth industry, but fairly mature. But of course, there's a lot of opportunity for productivity improvement, energy efficiency and there's a lot of restructuring of the global chemical and materials space, whether or not that will be a target area for M&A. I mean -- so I understand the rationale of high growth bolt-on acquisitions, but how about in areas where lower growth but where you have opportunity to add value?

Yes. It's a direct question about the FCA.

Thank you very much for the question. Yes. to make this -- the answer simple. Yes, when it creates value, we will consider, when it is complementary to our core, when it is synergetic with it, when it creates value for supporting our goals, being profit or being growth, we will consider. And as you see on the chart, there are some businesses which have very high profit, maybe a little bit lower growth, but still growing. So that will be considered. The key, though, is it need to be synergetic with the rest of CI and the second is that we can really also create value, meaning create synergies by getting these businesses. So we will go very disciplined. We will make sure that the businesses we buy are related to -- we can leverage them with Lumada model and that we can also create more recurring business, especially around HMAX. That will be the way to increase the value of our business going forward.

So just one follow-up then. This probably relates a little bit to Kato-san's, I think, point. So I understand when you do M&A, part of it is at the divisional level, the ROIC spread, and that, I think, is important. But how do you evaluate that part, that synergy with the other groups? So if you, for instance, were to buy x company to strengthen your position in, say, DCS, but then there's a potential benefit for DS&S, the D&SS, right? So DS&S, sorry. How do you evaluate that in the decision, the One Hitachi element of it? Like how do you say, I will buy this, but it creates synergy in the other divisions. That's why we should do this deal. Where does that discussion occur?

Okay. Thank you for the question. About M&A, even if -- even if a sector finds an M&A opportunity, the -- we discussed the synergy at Hitachi as a whole. And going back to more fundamental aspects by acquiring that company X, will this lead to Hitachi's growth or not? Will it lead to Hitachi's increase in corporate value? The leadership value continues -- the leadership team continuously discusses that. And through that discussion, we gauge that opportunity. What this opportunity means to DSS and using DSS capability, can we have further synergy at every M&A discussion, we discussed this. And the corporate value can now be evaluated at Hitachi as a whole. That is my addition.

I would like to take some questions from online, from Harada-san.

Harada from Goldman Sachs Securities. Do you hear me okay?

Yes, we can hear you.

I have 2 questions. My first question is about digitalization in Lumada approach. The progress of each business is the first question. So mobility was starting first presentation for this Investor Day, meaning mobility is the most advancing digitalization. I thought that was the case. That's why you put mobility from first and followed by energy, connective industry that will be digitalized as well. The progress of those businesses, the digitalization impact on the profitability can be seen from when at earliest timing after Tokunaga-san becomes CEO, when -- where -- which is proceeding, which is proceeding digitalization and Tokunaga-san see any bottleneck of the businesses? I want to know it. At the same time, about M&A -- you said you are in M&A as well because you want to promote Lumada. I thought you want to buy a company with that you can accelerate Lumada approach. So if you do not have some asset, but if you have any digitalization outside of the company so that you can earn more profitability. Is that the thinking that you have?

Thank you for your question. Harada-san actually already said some explanation already. So at Inspire 2027, the core of Lumada is Lumada 3.0, which is the right asset based upon the data delivered from digital asset and we analyze through AI so that we can provide services. So we actually run on this cycle so that we are increasing Hitachi digital assets. We want to run the cycle. So the business which is fitting to this cycle at first is mobility HMAX in our case. That's why HMAX examples were put for the first presentation. But followed by the other division leaders, by utilizing this architecture, Hitachi Lumada 3.0 will be expanding. That's the approach we are taking. So HMAX for Energy, HMAX for industry as such, utilizing DSS capabilities, we are going to scale up. We are in the middle of the transition. So the most advancing area is that since I was attached with the rolling stock and offer services. So mobility of HMAX is most advancing in our case. But your question was whether we have any bottlenecks or not. We do not have any bottlenecks. So we just want to roll out. This is a phase. About M&A. So the question is about the potential M&A. I think there are 2 areas or 2 domains. One is collecting data well in a secured manner. So security strengthening, we need to strengthen the security to collect the data safely. And on top of that, the service of digitalized in order for us to create digital services like capability of GlobalLogic may have to be strengthened and service itself will have -- may be purchased in order for us to provide secure services, we may decide to purchase service as it is. So anyway, so the Lumada 3.0, where we are going to expand digital assets where we are collecting data so that we can offer services from it. So bolt-on M&A to accelerate this approach will be considered.

Thank you, Tokunaga-san. HMAX, it's always important for us. So talking about profitability of HMAX in the case of rail, you can see Page #13, we have a bridge. So we do expect to start collecting not only revenues but profit already in this midterm plan, although the orders we are getting are multiyear orders. So we are creating structural recurring revenues. But I would like to explain a little bit the change because the HMAX type of revenues, it's really bringing a profitability change. And it's typical recurring, but it's also with more visibility on margins because we know what the results are and are less cyclical than the both system. That's why we are concentrating a lot in promoting the HMAX as a next step for this midterm plan. Thank you.

So in the energy sector, when you promote digitalization in Energy, it's infrastructure. So you might have security issues. So you need to handle security. So is that what you meant Tokunaga-san?

So when we talk about energy, so there are not bottlenecks, but there are 2 items we need to overcome. Number one is in Andreas' presentation, he mentioned we are -- we only -- we have only 1% maintenance contracts within our installed base. We need to increase this. Using digital, we need to be able to offer the maintenance services. And number two, as you have just indicated, the customers using our energy equipment such as utilities. So these are infrastructure-related businesses. These players in the past, when they think about connecting their equipment to the network, they felt some kind of hesitation or risk. So that is a fact. And so through enhancing our security solution, this is something I believe we can overcome gradually. So that's why we gave security as one example earlier. Andreas, do you have a comment?

Yes. Thank you, Tokunaga-san. I think let me add 2 things here. First of all, yes, we're talking about infrastructure. And from a security point of view, you have a point. Nobody wants to connect critical infrastructure to a strange IT system, but this is actually not necessary. We don't need actual data. They can be old or already a couple of months old because the life cycle of a transformer is 30 years. And we can use the data over a long period of time to say when maintenance is necessary, how much was the transformer loaded. So we don't need to access really physical the asset all the time. On the other hand, we have to find out or we have to state that the market is changing, yes, in the infrastructure, typically utilities, they are hesitating more connecting and delivering online data, and this is changing slowly. But there's a big group of customers with a complete different concept. If you take data center providers, the only interest is the data center has to be up and running, and they have no problem to connecting their assets to our system. Actually, they ask us, why haven't you connected them already because we would expect you to do that anyway because they have a complete different concept. And of course, our ramp-up of Lumada and service on our installed base goes as well hand-in-hand with every project, every asset we want to sell now and in the future. We want to combine with the service contract going forward. So since we have an order backlog, which is tremendous, I think the kick start for the service business is just coming out of the backlog as well. Thank you very much for the question.

My second question. It's about the -- from the capital allocation perspective, core free cash flow and profit, half of it -- more than half will be used for shareholder returns, you said. So previously, up until last year, you said return will be 1/2 in the previous MTMP, but you said more than half would be returned. I want to know why you decided to describe it. And you said ROIC spread. And you are operating globally. So each business or each region have some targets, which is based upon ROIC spread that is -- so that you can manage that regional spread and everything.

Thank you for your answer. I will answer to for my first point. And secondly, I would like to Kato-san to answer to your question. The first point is a basic stance, which is the capital allocation. We didn't change our basic policy. As I said in my presentation as well about capital allocation, but you are quite paying to more details. More than half is the area that you actually raised your question. There are 2 aspects in the background, simply speaking. The first element is as Kato-san mentioned in the presentation, in the past, based upon the past performance, past experience, 50% or more of the returns, we have established such a track record already. And the second point is it's also my learning as well. As I said in the beginning, in May, I met with investors by myself. And the capital allocation, they raised a lot of questions about capital allocations. So as I said in the beginning, if we consider our track record in the past, 1/2 or more than 1/2 is something that we are able to return to shareholders. That's what we are told. And then we are convinced by that. That's why with my strong intention, we declared or we mentioned that more than half, we will return to the shareholders. And Kato-san, could you answer the second point, please?

Yes. Thank you for your question. The ROIC, in particular, WACC. As I said earlier already, by region, costs differ. That's why when we calculate WACC, we see regionality in that calculation. And then in the sector or by sector, by BU, we actually calculate ROIC, WACC spread. That's how we manage our control. But when we evaluate regional performance, regional sales allocation, like production allocation is decided optimally by global perspective, by sector. So when we are looking region by ROIC, there are something that we cannot control the region. So by sector, by BU, which is a sector, we say vertical. So that's how we control verticality.

Going back to the venue. Yasui-san, please.

I am Yasui from UBS Securities. My first question, the connectivity. So you gave the over -- so I got the impression from the answer from CI that you know which businesses you will be reorganizing. And so it seems like businesses which have low affinity with Lumada 3.0 may be the targets. So it's -- so it does not have to be yourself, but looking at the AI and digital, so could you give us a hint on what kind of businesses have low affinity with Lumada and Digital? And also, Abe-san's team has large-scale systems and railway and power grid. So large-scale systems can be digitalized. And however, smaller systems might not be digitalized as easily as large systems. So can you give me some guidance there?

Okay. Thank you for the question. About the businesses, rather than which business will be reorganized, which businesses fit the Lumada 80/20 principle and growth can be expected. So we talk about this all the time. So the businesses to be reorganized, which businesses they are, we are continuing that discussion. And we are now also continuously looking for growth opportunities outside Hitachi. But the target businesses, what are the characteristics of such target businesses. It's difficult to define that. As Yasui-san just said, large-scale enterprise systems, the customer is feeling a big problem in managing such asset. And on top of that, Hitachi has insight and knowledge in that area. So by having these 2 factors, we can offer a very valid solution to the customer. That's why they are giving us orders. And in addition to that, businesses that -- which we do within Hitachi, Andreas in Energy, Giuseppe in Mobility, they have large-scale infrastructure business. So internally, we can proceed with digitalization of such businesses. So my message here is it's not -- we cannot just say if it's large scale, it's always easy to digitalize. We are saying that there is lots of room for efficiency by applying digital to the customers' large-scale system. And Hitachi has the skills for that. And when we talk about smaller scale businesses, so rather than saying small scale, there are many products which are dispersed in multiple regions. So that is the trend. But digital is actually utilized even in those businesses. For example, CI sectors, pumps and compressors are used by a wide variety of customers and the data can be gathered from such installed base and helping to digitalize. So we can't say affinity with digital is high just because the business is big or small. That's all. Thank you.

My second question about [indiscernible] energy area. I have a question. So the power electricity demand is increasing. So the data center is really a driving force for this demand increase. So the technology use seems to be changing rapidly. So data center little time is changing as well gradually. And for the off-grid to power management, so MSR (sic) [ SMR ] is put under data center, not for grid. So it will be off-grid. So they actually generate by themselves. So creating data center inside of the off-grid. So in particular, power grid demand in U.S., how you perceive it from outside, it will be difficult. So I want to know the investment in power grid, it will be growing even though nothing is taken as measures in the market. If there is any downside risks, in particular, data center-related downside risks, if you have any ideas, could you share that with me?

Good question, I think you touched a very interesting topic of data center. And I would be very careful to consider it as a downside risk because actually, it was so far an upside because data center was not really considered in the planning, say, a couple of years ago, especially the AI data center has developed very rapidly with a very power hungry concept behind that. And of course, the volatility of the AI data center is another challenge, which speaks probably for a little bit for off-grid solutions because if you compare an AI data center with a normal data center, if CIs are starting to learn, the power consumption is jumping up very rapidly. And if it stops learning, it's really going down, which has led to volatility. And of course, the scale of these data centers are much bigger than traditional data center. I wouldn't agree with you with the assumption that it's complete new technology or a different technology. Actually, it's the same kind of approach we have had. We need a power source for the data center, a reliable one. And actually, the topic of off-grid is more coming from the fact that the utilities can't provide the grid access. That's the biggest problem because the planning horizon for a data center is much faster than grid planning processes. Grid planning is 6 to 10 years, sometimes 15 years. I think the hyperscalers are not thinking and these are kind of dimensions they want to have it now and not in 4 years or 3 years or 10 years. So the logical thing is if I can't connect the data center to the grid, I'm making it off grid and I'm looking for my own power source, which is what is happening at the moment. For us, since we are agnostic from a grid point of view, it doesn't matter. substations and transformers are exactly the same. They are providing an upside for us. And for SMRs, it's an upside as well. But SMRs are not developed in 5 years neither. So I think we still have to work as an industry how to connect these data centers to an energy source. So overall, I would say it's a rather interesting development. It changed customer behaviors because especially in the U.S., you have seen that some nuclear assets have been restarted to provide energy for big hyperscalers. And as well, for instance, in Texas, the regulator is approached by hyperscalers and the industry to actually have the right to pay higher tariffs to soften the impact for the society. So I think we are still good prepared to leverage on all that development. We have good connections with the hyperscalers, and we can provide. So I think it's more an upside risk than a downside risk at the moment.

Any other questions from the site? Okawa-san please ask the question.

I am Okawa from Daiwa Securities. I also have 2 questions. Number one, DSS, Page 9, about generative AI. So the -- to make the system integration more efficient, you have been saying this from before. Can you elaborate on what you are doing? Are you doing anything new about that? And generative AI, your strength and competitiveness in generative AI. I think many companies are starting generative AI, and it might be difficult to compare. But is if there's anything really strong about Hitachi with generative AI, I would like to know and whether Hitachi can proclaim to be a top leader in Japan and AI?

Thank you for the question. Later on, Abe-san will add. Our large-scale system integration we are now applying generative AI, and that is progressing for sure. Before the -- we were focusing on coding, but AI is now applied to overall system development. That is a very important point on what we are doing right now. So overall, increasing efficiency by 30%, that is what I mentioned. But looking at each phases, there are areas we have more than 30% efficiency gains. And we have a good level of knowledge on where and how to apply AI. About competitiveness, it's not appropriate to separate between Japan and global. And as Abe-san said, GlobalLogic is a leader to apply AI on the global level. And we would like to import the outcomes of GlobalLogic to Japan to make things more efficient. I think in that sense, we are very competitive in the market. Abe-san, do you have anything to add?

So, there's not much to add from me. As Tokunaga-san just said, in the software development, software development is a big target. It's not only coding, but also testing. And maybe I'm getting off track a little bit. But mission-critical development, we were doing with Waterfall and Cobalt, but now we can use AI. So mission-critical engineers are getting more happier because modernizing legacy and moving to the cloud, they are working with AI engineers and utilizing AI. And some areas. So also new business models, new proposals are made to the customers. And also GlobalLogic. GlobalLogic -- GlobalLogic's overseas customers are global top players, such as Google, although I can't name all the names. So the AI level is very high. And such engineers -- so we have a big volume of such advanced engineers. That is our strength. And we can make use of them, both domestically. and also HMAX is representative. Our equipment are working on site. We gave a case on Omika, and workers are -- we have less workers and the senior employees will retire. So how to solve the problems using AI, we will have more and more use of AI going forward. .

Thank you. And when that is the case, on Page 13, domestic service business and domestic SI business, the revenue growth rate is 6% to 7%. So domestically, the revenue growth is lower than the others. So because -- is it because the revenues are recognized under GlobalLogic. Even if you use AI, why is the revenue growth so low? The -- when we look at digital and AI, I hope that you can look at the Lumada growth rate. Lumada growth rate is 22% to 24%. So even if we look domestically or overseas, it's 12% to 13%. So Lumada growth rate is significantly higher than that. And service has many businesses. That's why overall, the growth rate is low.

My second question about energy business and service business. For the service, you say I don't know nominator or denominator, it's less than 1% of service contract ratio, 1% seems to be low. So you're saying about connective network, which is the -- in the past services were not provided by the power equipment providers. That's why service contract rate. What will be the upside potential? Currently, it's less than 1%. If it's 4x more, it will be 4%. It is regarded as a big chance. So in the past, the service business model and upside, I want to have that question.

Thank you for your question. So as you pointed out exactly so-called O&M domain, where the coverage is 1%, which is really low. But on the other hand, there will be the big upside, as was mentioned in Andreas-san's presentation already. So why we are at 1%, how much potential we can have as opportunity that will be explained by Andreas-san.

[Foreign Language] On service. So all the businesses were focused on their products and service was always a little bit cumbersome, not so interesting from revenue from the beginning. It's always complicated to negotiate a service contract together with the equipment contract. So it was a little bit neglected, which is, I think, typical in a lot of industries if you're not having a dedicated unit, which lives and dies for service and for the customer every day. And this we have corrected. And therefore, we have upgraded our service aspiration. If you have followed our first publications, we said we want to grow the service business 3x, which was actually in line with our normal growth curve. And we upgraded our aspiration now to 4 to 5x because we say, look, if we are doing that, if we are focusing on service, there has to be more potential. And on our way to a $30 billion company in 2030, service will contribute with a revenue growth of 4 to 5x with some acquisitions in that area. and will contribute. And of course, focusing on the service as well as we start now offering service contracts together with the new equipment as a package to really get a start. And on the other hand, before we started the business unit, we have had a lot of interviews with customers and we asked them, hey, what do you appreciate services? Do you want it on your own? And actually, most of our customers told us, well, we appreciate very much if you would do it because our population of engineers is aging as well. We have trouble to find good people. So actually, we want to focus on our core business. So actually, there is a big potential going forward. And probably our aspiration in service is even conservative going forward, there could be even more potential, but it's too early to give -- promise a hard number.

So when it increased 4 to 5x, in the energy business, what would be the proportion of service business among the entire energy business revenue, so what would be the service portion of?

Probably I would guess around 25% in the ballpark range a little bit more, a little bit less, depends but yes.

Any other questions from the floor? [ Okinaka-san ] please.

I am Okinaka from Capital. A question one for Kato-san. When I look at the Lumada penetration over the last midterm plan, it has gone from approximately 20% to 30%, and we've seen ROIC jump 2% to 3% as a result of that. The Lumada penetration will be much higher over the next 3 years, but the ROIC increase is lower. Does that reflect kind of cushioning for M&A conservatism or I guess, is it more difficult to get higher ROIC despite rising Lumada penetration? Second question is for Andreas, I did want to ask about the nuclear business. It sounds like Power Grid is such a strong driver. Could you see it, for example, selling the nuclear business as it's kind of parallel to or perhaps not progressing as quickly as Power Grid and transformers. .

Thank you for the question. The first question about ROIC, Kato-san can answer.

Thank you for the question. There are 2 reasons. Number one is exactly how -- what you said. In this midterm management plan, we are expecting some M&A. So that is the reason. And FY '24 ROIC, first time, it exceeded 10%. So number wise, it's very encouraging. However, this is because we did not have as much M&A as we expected. So that's why ROIC was higher than expected. So maybe ROIC has not increased as much as you said, but we have these 2 reasons.

Yes. Then maybe come to your second question. Thank you very much for that. I think it's an interesting question. I try to convince you that we have a booming market in SMRs in front of us with hundreds of gigawatts of installations. And why would I exit that? Because we have great capabilities and experience in SMRs because SMRs is, from my point of view, not a new technology, but an old technology. You are scaling something down, the BWRs, the boiling water reactors, which we have all over in the world, and I was once responsible for the biggest boiling water reactor in the world in [indiscernible]. We are just scaling it down, making it smaller, making it safer, making it easy to produce in one factory, so you don't have to install it on site. And we have the experienced people here in Japan working in Rinkai. And this is capabilities you cannot buy, you can hard develop because it takes years to get a welder certified and to learn that. And we need that capabilities anyway for the Japanese markets to take care of the BWR restarts in Japan. So using that and leveraging that into a new business field, which maybe takes some years to develop, I agree with you, is from my point of view, the best thing we can do because that will be actually the next wave of growth. If maybe the electrical grids in 10, 15, 20 years are scaling down. This, from my point of view, is a very promising bet to bet on that growth then because this technology has huge potential.

Yes. As Andreas pointed out, we are focusing on currently on the new SMR project in the Ontario power plant. But at the same time, the talent itself should be a critical part for the nuclear business. So I'd like to ask Lorena to add some comment on the talent perspective. .

Thank you so much, Tokunaga-san, Yes, that's where we have to focus all our efforts. In Hitachi, we have already quite a lot of capabilities, but we need to accelerated the recruitment, and we are looking at very different services from the referral up to the job posting and so on because we are looking for a lot of electrical engineers. And we must make sure that those people are ready to be on board, and we also have to retain our senior managers as well. because we need a lot of experience. And globally, there are no more such capabilities, so Hitachi has really a competitive advantage on that. And for this reason, we are investing a lot on our new human capital strategy to have a strong recruiting engine.

So there people are raising their hand, but time is limited. [Operator Instructions] Any questions? Yes, from the floor, the [ Hara-san ] please.

I'm Hara from Indus Capital Partners. I have one question about Connective Industries. So in order to increase the [ stabilization ] by the market itself, stock market, it improved to use of the management of the portfolio management. How you consider the portfolio management for the mid- to long-term perspective? In this CI, conglomerate is the tendency going forward. So you are going to do bolt-on M&A in the future. Is it biopharma, which are contributing to this. But gradually, we will be having more in the market. so that if you consider the Lumada and also if you consider risk management as well, more accurate control or accurate management of the business is required, whether that is improving the evaluation by the capital market, I have some doubt. So personally, but in the future, your target markets, is it -- do you consider M&A so that target market will be shrinking or through HVAC industry. So if there's affinity to any market, you don't mind to having as many markets as possible in the future.

Okay. Hara-san, thank you for your very important question. So at first, let me comment and then added by Brice later. So at first, what I wanted to say was with this presentation today, this is -- it's not something that we are going to increase the number of items under CI. We are going to narrow down the items under CI in the future. So the direction for narrowing down, which direction we are going to narrow down. It's the integrated industrial automation is the one we are going to take an approach. So with that approach, if we don't see any affinity to this direction, if we can clarify that in the future, we may divest outside and core business is going to be increasing instead. That's the direction we are going to go forward. So again, let me explain. So mini conglomerate seems to be the case. We're not going to make it complex. We are going to simplify this as one of our strategy. So that's what we explained today.

Thank you, Tokunaga-san. I think, as you say, you can look at CI today like pieces of a puzzle which are pretty scattered. When we look at that, we certainly recognize that some pieces are very close to each other, and it needs very little to make a very clear picture, which we call today integrated industrial automation, and that's what we will do. So the focus on that being some industries, but big enough to create the growth we want to have, the affinity to Lumada, the return we want to have, the synergetic side of it within these pieces to create that picture, but also with Hitachi. So this combination, adding to also the service side of it, the recurring business because the recurring business will give us the margin and basically glue all these pieces together. That's where we are heading. So hopefully, in 1 or 2 years, you will see a very clear picture.

Any other questions? [indiscernible] from the floor.

Okay. Can you now hear me? So thank you very much for the interesting explanation. So collaboration with NVIDIA has been announced. And today, AI agent, generative AI. And beyond that, in the equity market, we are talking about physical AI like humanoid robots. So that is a big topic. But listening to Jensen's presentation in NVIDIA, humanoid robot is one of the possibilities, trucks and rail and autonomous vehicles and AMR. So physical AI can be applied to many areas. So HMAX, I thought was one of the examples of application of physical AI. So the NVIDIA does not have OT, so maybe they can work with Hitachi and NVIDIA can make use of OT data held by Hitachi and NVIDIA can really improve the OT. And NVIDIA's corporate value will increase. So in this partnership, Hitachi should also gain not only NVIDIA. So once again, please give us a story where Hitachi will also gain and increase corporate value.

Thank you for the question. in the collaboration of NVIDIA, where it started 2 years ago, it was March 2 years ago. Myself and Jensen met directly and we talked about Hitachi's capability. Hitachi has products, OT and IT understanding and up till now, we have a great track record in this area. And Jensen suggested this collaboration between Hitachi and NVIDIA. And that's where HMAX started and we also have Hitachi iQ, which is an IT product and the new collaboration announced by DSS. So this collaboration is really expanding very quickly. On the other hand, in the partnership between NVIDIA and Hitachi, the real value offered to the customers in a sense, that is, for example, in rail, we have autonomous vehicles, unmanned vehicles and also DSS is offering software and services. But what I want to strengthen here is, it's Hitachi, who is solving the customers' pains and problems. Of course, we are using NVIDIA solutions, but it's Hitachi, who is offering direct value to the customers. Giuseppe?

Thank you very much for the explanation Tokunaga-san. Yes, the collaboration with NVIDIA, it's at various levels. And we are working also on autonomous driving. But I would like to underline that we have been doing driverless metros for 15 years. We are leaders worldwide. Driverless metros, we have them from Honolulu to biggest town around the world. And we do believe we have a very strong expertise. So the collaboration with NVIDIA to this extent of this physical AI, it's, first of all, to have the microprocessors similar to the automotive in order to have the right computing capacity. We are using them already for some application of agentic AI, but we will be using, hopefully, this kind of computing capacity to read data. And the robot as a train, which is our ambition, it's specifically dedicated within urban environment. So already for metros, and trains that are already driverless because the environment is confined. But when we are talking about urban like street cars that are going together with cars, bicycle and pedestrian, we need a different system. But the data are our system. So the OT part is our, but also the IT part is ours. So we're doing the tokenization, which is the technical word to recognize the environment, and we already got our system that at the first level, it's supporting a Level 2 type of autonomous. Sorry, I'm going a bit in detail, but we keep the technology. So we will keep the data, the technology, we get from them the machine and deep learning tools.

I would like to summarize. In the GenAI world, the value comes from application and infrastructure layers. And Hitachi is offering this value, the application layer and the infrastructure layer is provided by players like NVIDIA. So both of you, both of us will grow, so we will focus more and more on this application layer. That was all. It's already past the expected time. So I think 2 people are raising hands. So Yamasaki-san from the floor.

I am Yamasaki from Nomura Securities. I have one question about HMAX. Expansion -- sales expansion of the HMAX, I want to know it. In particular, your installed base was mentioned earlier, over time, you should be able to handle the installed base internally, but installed base of the other company, you want to sell out. So you want to expand the TAM you said. So to your own equipment, but in the same time, you are going to sell outside at the same timing of the internal sales? Or are you going to sell in a different approach? Or do you see any difficulty in selling outside? I mean, if you are too strong, maybe you have difficulty selling this or you have the effect, you have easier selling it? Or if you purchase the asset of the customer as it is so that we can sell it to. So I want to know how you're going to approach this outside sale.

Thank you for your question. Yes, for the installed base of the other companies, if we can expand it. This is a really differentiator for the HMAX, whether we can do it or not -- so here as well, mobility sector is leading and advancing. So already the data coming from the other company equipment used for service offer. So we want to enroll it to the other sectors. So based upon the mobility sector track record, we want to consider go-to-market for the other sectors. So in rail, what approach was taken to roll out outside of the equipment? So Giuseppe, could you explain that actual track record.

I'm technical today. But our data foundation, it's the very important OT experience we have -- and we acquired 2 companies. One is Perpetuum that was done a few years ago. And this year, as I said in my presentation, we acquired Omnicom. So we do have our sensor technology. For instance, we do know how is the track geometry on our specific sensor that are specific for rail. We cannot buy sensor off the shelf because there is a specific regulation. So with this technology, the sensor are developed to be utilized on whatever train even from the competition. So they are simply bolt-on solution that can be used. And it is happening already in various applications. So more and more, we are becoming credible, and we have customers that are asking to utilize these sensors and then the platform for their usage.

And do you have any specific activities for the go-to-market?

The go-to-market. Yes, we created a different area where we call it the center of excellence. We achieved a manager from the digital area that's very important. So with the right expertise with our specific sales organization and together with every regional manager, we are again meeting different customers. And really more and more, and I received this afternoon another $4 million order. So the strategy is to go to each customer and offer. That is for the existing installed base, while new orders are already coming, most of them already with the [ Ready Now ] HMAX application. So we do install the sensor on the first application OEM, so then the platform will be utilized in the future. The truth is that digitalization in train, it's really bringing a big advantage because the train, it's a complex, same as energy, of course, or CI. But on complex asset, the effect of digitalization, it's huge. Generative AI for some statistic, agentic to improve like maintenance service will really have big application or physical AI, as we said before, for autonomous driving.

On the other hand, the overall plan -- so you have a very aggressive and optimistic plan. And I was not sure whether you will be able to achieve this plan. So what will you prioritize? So I would like to ask Tokunaga-san, Kato-san and Koch-san, on what would be your priority. To Tokunaga-san, so you have multiple KPIs as CEO, but what is your top priority? Is it M&A, shareholder returns or more than 50% return, ROIC or top line growth and U.S. tariffs and economic downturn potential. So is that -- how is that factored in? And if such thing happens, how would you respond in order to keep your target? That is my question to Tokunaga-san. And to Kato-san, applying the hurdle rate. That was very impressive. But if you -- if can Hitachi truly rigorously apply such hurdle rate. In reality, -- so even -- so if there is a very important M&A, which you need to do, even if it does not meet the hurdle rate, would you go for that M&A -- and my question to Koch-san. CI has very aggressive KPIs. I think the hurdle is very high. And what are the assumptions? I did not understand the assumptions. And if you are to prioritize will Lumada ratio come first? Or is it top line growth or ROIC or following through on the structural reform. So please tell me your priority in your strategy.

Okay. Ezawa-san, thank you for the question. I would like to answer the first question and then Kato-san and then Brice. So my question, there were basically 2 questions here. As CEO, what is my top priority as CEO? In Inspire 2027, we have 5 KPIs, which all of them are very pivotal. But if I were to choose 1, increasing ROIC would be my top choice. So when I talked directly to European investors, I asked them which KPI is the most important to them. And that is really what I learned from the investors to -- when increasing corporate value, we need to focus on ROIC in management going forward. That is my thought. And U.S. tariffs and economic downtown possibility. Maybe -- and you pointed out that our plan may be too optimistic. The U.S. tariff impact we have factored in the risk as we explained in the previous earnings announcement about economic downturn, it is very difficult to quantify that as of now. So we have not factored in the economic downturn risk. However, we are not being optimistic here. We are striving to increase our agility. And if -- and we assume that risks may become more great going forward. So we are very risk conscious. So under the thinking of enterprise risk management, the CXOs are sharing the situation on the daily level and we exchange opinions so that we can respond immediately if anything happens. So we are by no means being optimistic here. Kato-san?

So optimistic approach or perspective, I want to say something when I said in my presentation, we don't have a good visibility for the future fluctuation. So that is a trend at the moment compared to the past. So we have some tense about how to see the future perspective. And in May, we provided only the direct impact alone. So we said we do not know the indirect impact. And still, we do not know that indirect impact because direct impact, which commercial channel, if the tax rate is proper, we know about the impact on the customers, it's indirect of indirect impact, which we do not know at the moment. So we are paying attention carefully. So the question about hurdle rate. For me, as a Chief Risk Management, and I am the Chair of the Investment Committee meeting. So I cannot really say my approach in front of the sector leader here. But of course, it's the management of the company. So we don't decide anything only with the hurdle rate. As I said, we have strategic composition. So we have some other element. So I cannot mention my approach in one word. But as Tokunaga-san said earlier, the earning cash as well as ROIC is also important at the same manner. So it's not easy in managing the company, that's what I wanted to say only here.

Brice, please?

Thank you very much. So I will follow a little bit what Tokunaga-san was saying. If I have one focus point now, even though there are a few, I would focus on basically improving my portfolio and double down on where I am strong already because I have parts of my portfolio, which are already very strong, being from a growth or being from a profit point of view. And that is the part I want to develop. And that is in order to develop my growth, my profit, my return, my synergetic, how should I say, opportunities with service, Lumada, HMAX. But in a nutshell, how do I strengthen my portfolio, double down on where I am already very good. And we have a lot of these golden nuggets already in CI. Now it's a matter to grow them.

We can take one more person for a question. [ Naga-san ].

Yes, in the beginning about the governance, including the -- having the more compensation scheme as well. Currently, for directors and executive look at the compensation of the directors and executives, those compensation different by region. I think that diversification can be observed for the employees as well. This more transparent compensation policy can be achieved or not.

Yes. Thank you for your question. About compensation, -- it has some differences by region. And each region should secure or retain good potential talent, which is really important for us to maintain our competitiveness as a total. So today's Lorena's explanation, we have executives and employees, we are going to provide the employee shareholding system. The total compensation as a package we're going to review continuously. So Lorena-san, probably you can add some of the information.

Naga-san and thank you so much for your question. Actually, this is one of the key topic I look at when I started the role 1 year ago because we are a global company, and we are operating in so many different industries. And for us to leverage the mobility and the internal mobility of our people, we needed consistency across the compensation. So our new global compensation program is focusing on consistency, transparency, pay for performance. And we are looking at 2 different angles. One is the structure, which means the mix, which is the same for all the employees as well as the executive, a mix of base salary, STI, LTI, the new stock compensation program as well as we are linking the performance to the financial targets of the company. The other one is the base salary. And the base salary is very much influenced by the local regulation, by the cost of living, by the retirement scheme, and this is something that we must respect. So again, we will look at the transparency. We will look at fairness. We will look at the pay for performance. And we are trying in that way to attract talent, but as well as retain the talent that we have now.

Okay. Thank you very much. We would like Mr. Tokunaga to give some closing remarks.

Okay. Once again, thank you very much for participating in Hitachi's Investor Day. And the discussion took a long time and it went over time. So I apologize that we went over and impacted your schedule. But at the same time, through today's discussion, we were able to deepen the dialogue with the capital market, and we were able to really have this dialogue with the entire leadership team. And in order to increase our corporate value further, we would like to continue this type of dialogue and the feedback you have received -- we have received, we will share within the leadership so that they will be reflected to the management of our company. . And this was given to me the topic from my predecessor, Mr. Kojima. And for 2 months after I became CEO, this is what I really feel. So going forward, I would like to continue this dialogue with all of you so that we can deepen Hitachi's management, and we -- I will fully commit to increasing Hitachi's corporate value. And I ask for your continued support and guidance. Thank you very much to all of you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]