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Step to Hitz 2016 Vision
May 12, 2011Hitachi Zosen Corporation
President & Chairman Minoru Furukawa
1
New Mid Term Business PlanFY2011 thru. FY2013
Contents
II. Hitz 2016 Vision and New Mid Term Business Plan
2
I. Background of New Mid Term Business Plan
I. Background of New Mid Term Business Plan
1. Changes in Business Environment2. 130 Years History of Hitachi Zosen3. Review of former Mid Term Business Plans
- (HI & HI-II) Start of Company Reform -4. Inauguration of Hitz 2016 Vision
- Evolution to Highly Profitable Companywith Public Recognition
3
1. Changes in Business Environment
Global
Europe
US
Japan
?
IT Innovation
Industrial Plant
Innovation
Electric Power
Innovation
1890
1930
1990
20?0
2010
TechInnovation Region
Globally
- Economic growth mainly in developed countries (Europe and US)
- Rapid growth of population- Increase of energy consumption
(mass production and mass consumption)
Japan- Post war high economic growth- Became a developed country
Globally
- Economic growth mainly by newly developed countries (China and others) Soaring price of raw material and food => Social unrest Impact over environment => Limit of growth potential
Japan- Decrease of population, Aging of the populationMarket contraction
Paradigm Sift
4
Until now:
Going forward:
2. 130 Years History of Hitachi Zosen
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Oil Shock
Japan
Korea
China
Europe
Shipbuilding volume-by country
1881 E.H. Hunter, a British entrepreneur, founded the Co.
1950-1973Post war economic growth Growth driven by Shipbuilding
1974-2002Slump of Shipbuilding mkt. Fierce competition
(Note) Hitachi Zosen started its business as shipbuilding company. Company’s name “Zosen” means shipbuilding in Japanese.
Market Contraction
Fierce Competition
Yen Appreciation
(100.0)
(50.0)
0.0
50.0
100.0
150.0
200.0
300200100
0100200300400500600
Sales other than Shipbuilding Sales of Shipbuilding Oper. Profit
Financial Results of Hitachi Zosen
Sales other than Shipbuilding
5
Unit: '000 Gross tons
Net Sales(unit: bil. Yen)
Ordinary Income(unit: bil. Yen)
Strategic Reform of the Co.
- Booked substantial loss- Restructuring of the Co. - Separation of Shipbuilding business
3. Review of Former Mid Term Business Plans- (HI & HI-II) Start of Company Reform -
✦ Control of Business Process
✦ Transform Business & Corp.
Prevention of Loss Making Large Contracts
Approval process before Order intakePeriodical review at construction stage
Stop Deficit Operation Sale or withdrawal via portfolio management
Transform Corporate Culture Compliance committee, External consultants, President/employee forum
Enhance Group Unity Merger of 10 affiliates, On-going seminars for directors
Set up Business Strategy and Implementation
Business strategy meeting
New Products and New Business R&D conference, Development to meet customer requirements
Human Resources Training Training of management class officers, Review training system, Career plan, HR committee
Corporate Culture (Priority in BU Profit & Consensus)
Promotion of corporate culture reform, Priority for optimization over whole co.
⇒ Mostly Achieved
⇒ In Process
○
○
○
○
△
△
△
△6
4. Inauguration of Hitz 2016 VisionEvolution to Highly Profitable Company with Public Recognition
[Restructuring of Company Basis]- Prevent Loss of Large Contracts- Group Company Unity- Corporate Culture Reform
[Evolution to Highly Profitable Company with Public Recognition]- Expansion of Net sales to Yen 500 billion- No. 1 Profitability in each business segments - Shareholders’ equity ratio over 30%
HI Plan HI Plan - ⅡNext Mid Term Business Plan
H i t z I n n o v a t i o n H i t z 2 0 1 6 V i s i o n
6% 15% 19% 19% 23% 23% 30%
Hitz Vision
Shareholders 'e q u i t y r a t i o
Net sales(unit: bil. Yen)
Oper. profit(unite: bil. Yen)
7
II. Hitz 2016 Vision and New Mid Term Business Plan
1. Hitz 2016 Vision 2. Key Measure for New Mid Term Business Plan
2-1. Innovation of Business2-2. Innovation of Management Control
3. Financial TargetNew Mid Term Business Plan and FY2016
8
[1] Expand Net sales to Yen 500 billion While investing Yen 20 billion (4% of Net sales) inResearch & Development, secure Yen 30 billion Operating profit (6% of Net sales).
[2] No.1 profitability in each business segments[3] Achieve shareholders’ equity ratio of 30% by FY2013
Evolution to Highly Profitable Co. with Public Recognition
1. Hitz 2016 Vision
9
Innovation of
Business
✦Define Growth Area Define Business Domain and Target Market
✦Strengthen the Growth Area
✦Global Business
Newly established Global Business Promotion Division Expansion of overseas office
✦Proposal for Solution
Promotion of Customers' View ActivitiesNew R&D System
✦Improvement of Fundamental Earning Power
Well-balanced Business Portfolio
✦No. 1 Profitability in each business segments
PDCA of Business Strategy
Innovation of
Mgmt. Control
✦Organization Promotion of Flat Matrix Management
✦Financial Position Shareholders' equity ratio of 30% by FY 2013Further improvement of credit rating
✦R&D to Future Profit
New R&D Organization (Business & Product Development HQ)Joint Work with Business Planning Dept. and Business & Product Development HQ
✦Transform Corporate Culture
Secure Aggressive, Growth Driven, Efficiency-minded culturePromote Proactive Staff
✦Define Growth Area
Innovation of
Business
2. Key Measure for New Mid Term Business Plan
10
[Business Domain]A. Green EnergyB. Social Infrastructure and
Disaster Prevention
✦Define Growth Area [Technology of Hitachi Zosen]✓Technology to cope with Japanese
social issue- Environmental issue and energy saving
- Social infrastructure for safety and security
✓Advanced technology for future
[Economic & Social Changes]✓Economic growth in
newly developed countries- Environmental problem- Requirement for infrastructure- Shortage of energy and water✓New issues for developed countries- Aging of infrastructure- Attain social safety and security
2-1. Innovation of BusinessDefine Growth Area (1)
[Target Markets]- Newly Developed Countries- Advanced Business Field
Growth Area
11
HitzSaturated Mkt. Japan Top-tier track record
=> Promotion of O&M
Growth Mkt. China No. 1 in new EfW EPC+ Promotion of O&M
InovaSaturated Mkt. Germany, Swiss Top-tier track record
Growth Mkt. UK, Spain, Scandinavia, US
Achieve No. 1 position in new EfW EPC
EfW: Energy from Waste O&M: Operation & Maintenance
Saturated Mkt.
Growth Mkt.
Potential Mkt. in future
Acquisition of Hitachi Zosen Inova
2-1. Innovation of BusinessDefine Growth Area (2)
A. Green Energy (1) --- Refuse Incineration (EfW)[Current Issue] - Source of energy with
low environmental impact-Waste treatment with social safety and security
Global strategy of EfW
12
A.Green Energy (2) --- Solar Power
2-1. Innovation of Business Define Growth Area (2)
★ Dye Sensitized Solar Cell--- Indoor power generation, Low cost
★ Laser patterning technology--- Cost reduction via automation
★ Film Circuit manufacturing process--- Light weight and low cost[Current Issue]
- Heavy and difficult to handle- High cost- No indoor power generation
13
★ Ethanol Dehydration System--- Reduction of Co2
A.Green Energy (3) --- Reduction of Nox & Co2
2-1. Innovation of Business Define Growth Area (3)
★ ORC (Organic Rankine Cycle) Mid to Low Temperature HeatRecovery Power Generation--- Reduction of Co2
★ Selective Catalytic Reduction (SCR) system for industrial plants
★ SCR system for Marine Diesel Engines --- Removal of Nox
★ Electronically Controlled Marine Diesel Engines--- Reduction of Co2 & Nox
[Current Issue]- Mitigation and reduction of Nox- Reduction of greenhouse gases
such as Co2
14
B. Social Infrastructure & Disaster Prevention (1)
Shortage of water
Shortage of water
Requirement of social
infrastructure
Requirement of social
infrastructure
Aging of social infrastructureAging of social infrastructure
Countermeasure
for Tsunami
Countermeasure
for Tsunami
2-1. Innovation of Business Define Growth Area (3)
[Water Related Business]-Desalination and Potabilization Plants
- Water Treatment System
[Infrastructure]- Bridges- Hydraulic Gates- Shield Tunneling Machine- EfW
[Maintenance of Infrastructure]
Maintenance and replacement of Bridges and Hydraulic Gates
[Disaster Prevention]- GPS Comprehensive
Oceanographic Monitoring System
- Flap Gate-Type Wave Breaker 15
2-1. Innovation of Business Define Growth Area (3)
B. Social Infrastructure & Disaster Prevention (2) --- Shield Tunneling Machine
ChinaTaiwan
Korea
South
East Asia
India
Expected Market SizeAsia (Excluding Japan) Year 2011-2013
95 billion Yen
16
2-1. Innovation of Business Define Growth Area (3)
B. Social Infrastructure & disaster prevention (3)
GPS Comprehensive Oceanographic Monitoring System
Deployed 15 systems Data released (12 systems)Under installation (3 systems)
Flap Gate-Type Wave Breaker
17
Innovation of
Business
✦Define Growth Area Define Business Domain and Target Market
✦Strengthen the Growth Area
✦Global Business
Newly established Global Business Promotion DivisionExpansion of overseas office
✦Proposal for Solution
Promotion of Customers' View ActivitiesNew R&D System
✦Improvement of Fundamental Earning Power
Well-balanced Business Portfolio
✦No. 1 Profitability in each business segments
PDCA of Business Strategy
Innovation of
Mgmt. Control
✦Organization Promotion of Flat Matrix Management
✦Financial Position Shareholders' equity ratio of 30% by Year 2013Further improvement of credit rating
✦R&D to Future Profit
New R&D Organization (Business & Product Development HQ)Joint Work with Business Planning Dept. and Business & Product Development HQ
✦Transform Corporate Culture
Secure Aggressive, Growth Driven, Efficiency-minded culturePromote Proactive Staff
2-1. Innovation of Business
18
✦Strengthen the Growth Area
Newly established Global Business Promotion Division Expansion of overseas office
Promotion of Customers' View ActivitiesNew R&D System
Innovation of
Business
✦ Enhancement of Overseas Business[Establishment of Global Business Promotion Division]
Global Business Promotion
Division
Sales Dept.
Other DivisionBusiness Promotion Dept.
Overseas office
Investment Project Dept.
Administration Dept.
2-1. Innovation of BusinessStrengthen the Growth Area (1)
Acceleration of Global Business
◆ Research and intelligence of global business◆ Strategy for company-wide optimization
and synergy19
Co-work
Management
Engineering HQ
Product Development
Center
Respective BU
Machinery & Infrastructure
HQ
Product Development
Center
Respective BU
Precision Machinery HQ
Product Development
Center
Respective BU
Business & Product
Development HQ
ProductDevelopment Project Dept.
TechnicalResearch Institute
R&Ds to provide solution for Customers' Issue
✦Proposal for Solution [Customers’ View Oriented Activities] - Find Customers’ issue and R&D task[Move to New R&D System]- R&D to provide solution for Customers, Speed-up creation of new business
2-1. Innovation of BusinessStrengthen the Growth Area (2)
20
Innovation of
Business
✦Define Growth Area Define Business Domain and Target Market
✦Strengthen the Growth Area
✦Global Business
Newly established Global Business Promotion DivisionExpansion of overseas office
✦Proposal for Solution
Promotion of Customers' View ActivitiesNew R&D System
✦Improvement of Fundamental Earning Power
Well-balanced Business Portfolio
✦No. 1 Profitability in each business segments
PDCA of Business Strategy
Innovation of
Mgmt. Control
✦Organization Promotion of Flat Matrix Management
✦Financial Position Shareholders' equity ratio of 30% by Year 2013Further improvement of credit rating
✦R&D to Future Profit
New R&D Organization (Business & Product Development HQ)Joint Work with Business Planning Dept. and Business & Product Development HQ
✦Transform Corporate Culture
Secure Aggressive, Growth Driven, Efficiency-minded culturePromote Proactive Staff
PDCA of Business Strategy
Well-balanced Business Portfolio
2-1. Innovation of Business
✦Improvement of Fundamental Earning Power
✦No. 1 Profitability in each business segments
21
Innovation of
Business
✦Improvement of Profitability[Well-balanced Business Portfolio]
Unit: billion Yen FY2010 FY2016Domestic 237.5 83% 300.0 60%
Overseas 49.6 17% 150.0 30%
New Business/Products - - 50.0 10%
Total 287.1 100% 500.0 100%
(Including O&M and others) (115.5) (40%) (250.0) (50%)
[Domestic sales
vs. Overseas sales]Overseas 17% 30%
[New Business& New Products]
Yen 0.1 bil. 50bil.
[O&M]40% 50%
2-1. Innovation of BusinessImprovement of Profitability (1)
[Cost Reduction]Int'l Procurement, Expand inter-group trade, Utilize ICT
22
✦No1 Profitability in each business segments[Ensure PDCA of business strategy]Plan : Business strategy as per
company-wide standard measurement
- Define the value provided to customers- Growth thru. new & global business- Secure stable income source- Business model to provide solution to customers
Do : Promote concrete measures
Check : Check business strategy and concrete measures by Management
Action : Feedback, advice and instruction to business strategy
: Check business strategy and concrete measures by Management
2-1. Innovation of BusinessImprovement of Profitability (1)
- Define the value provided to customers- Growth thru. new & global business- Secure stable income source- Business model to provide solution to customers
23
Innovation of
Business
✦Define Growth Area Define Business Domain and Target Market
✦Strengthen the Growth Area
✦Global Business
Newly established Global Business Promotion DivisionExpansion of overseas office
✦Proposal for Solution
Promotion of Customers' View ActivitiesNew R&D System
✦Improvement of Fundamental Earning Power
Well-balanced Business Portfolio
✦No. 1 Profitability in each business segments
PDCA of Business Strategy
Innovation of
Mgmt. Control
✦Organization Promotion of Flat Matrix Management
✦Financial Position Shareholders' equity ratio of 30% by Year 2013Further improvement of credit rating
✦R&D to Future Profit
New R&D Organization (Business & Product Development HQ)Joint Work with Business Planning Dept. and Business & Product Development HQ
✦Transform Corporate Culture
Secure Aggressive, Growth Driven, Efficiency-minded culturePromote Proactive Staff
Innovationof
Mgmt. Control
2-2. Innovation of Administration
24
3. Financial Target
Actual Hitz-V Plan Hitz2016Vision
FY2010 FY2011 FY2012 FY2013 FY2016
Order intake 246.0 370.0 440.0 500.0 600.0Net sales 287.1 310.0 340.0 400.0 500.0
Operating profit(ratio)
13.3(4.7%)
14.0(4.5%)
15.5(4.6%)
20.0(5.0%)
30.0(6.0%)
Ordinary income(ratio)
12.0(4.2%)
13.0(4.2%)
13.5(4.0%)
16.0(4.0%)
25.0(5.0%)
Net income 9.6 10.0 10.5 11.5 15.0Int. bearing debt 104.6 114.4 100.0 100.0 Below 100.0
Shareholders’equity ratio 22.9% 24.2% 29.1% 30.0% Above 30%
(unit: billion yen)
25
3. Financial Target (Investment)
FY2008-2010〈HI Plan-ⅡActual〉
3 years total
FY2011-2013〈Hitz-V plan〉3 years total
R&D expenses 16.0 25.0Capital investment 27.3 30.0
M&A & others 4.0 20.0
Total 47.315.7/p. a.
75.025.0/p.a.
No. of personnel 8,528March 2011
9,693March 2014
26
(unit: billion Yen)
3. Financial Target(Order Intake by Segment)
Actual Hitz-V Plan Hitz 2016Vision
27
Order Intake(unite: bil. yen)
3.Financial Target (by Segment P&L)
Actual Hitz-V Plan Hitz2016FY2010 FY2011 FY2012 FY2013 FY2016
Net sales
Oper.profit
Net sales
Oper.profit
Net sales
Oper.profit
Net sales
Oper.profit
Net sales
Oper.profit
EnvironmentalSystems 93.1 5.7 130.0 6.1 138.0 7.0 165.0 9.2 180.0 12.0Plants 29.6 -2.2 39.5 0.4 48.0 0.7 62.0 1.3 86.0 4.6
Machinery 60.9 3.0 58.0 2.6 60.0 3.0 63.0 3.4 88.0 4.8Process
Equiment 17.3 1.6 9.0 0 14.0 0.4 19.0 0.9 30.0 1.5
Infrastructure 38.4 1.2 35.5 1.5 37.0 1.3 42.0 1.7 56.0 2.8Precision
Machinery 38.6 3.2 29.0 2.6 34.0 2.3 40.0 2.6 50.0 3.3Other 9.2 0.8 9.0 0.8 9.0 0.8 9.0 0.9 10.0 1.0Total 287.1 13.3 310.0 14.0 340.0 15.5 400.0 20.0 500.0 30.0
28
(unit: billion yen)
3. Financial Target (by Segment)
✦Environmental SystemsActual Hitz-V Plan Hitz2016Vision
FY2010 FY2011 FY2012 FY2013 FY2016Order intake 94.1 175.0 205.0 215.0 225.0Net sales 93.1 130.0 138.0 165.0 180.0Oper. profit 5.7 6.1 7.0 9.2 12.0
0.0
5.0
10.0
15.0
050
100150200250
FY 2010 FY 2011 FY 2012 FY 2013 FY 2016
Order intake Net sales Oper. profit
Oper. profit(unit: bil. yen)
29
(unit: billion yen)
Order intake & Net sales (unit: bil. yen)
✦PlantsActual Hitz-V Plan Hitz2016Vision
FY2010 FY2011 FY2012 FY2013 FY2016Order Intake 29.7 49.0 63.0 75.0 95.0Net sales 29.6 39.5 48.0 62.0 86.0Oper. profit -2.2 0.4 0.7 1.3 4.6
-2.5
0.0
2.5
5.0
-50
0
50
100
FY2010 FY2011 FY2012 FY2013 FY2016
Order intake Net sales Oper. profit
30
(unit: billion yen)
3. Financial Target (by Segment)
Oper. profit(unit: bil. yen)Order intake
& Net sales (unit: bil. yen)
✦MachineryActual Hitz-V Plan Hitz2016Vision
FY2010 FY2011 FY2012 FY2013 FY2016Order intake 43.1 52.0 60.0 70.0 110.0Net sales 60.9 58.0 60.0 63.0 88.0Oper. profit 3.0 2.6 3.0 3.4 4.8
0.0 1.0 2.0 3.0 4.0 5.0 6.0
020406080
100120
FY2010 FY2011 FY2012 FY2013 FY2016
Order intake Net sales Oper. profit
31
(unit: billion yen)
3. Financial Target (by Segment)
Order intake & Net sales (unit: bil. yen)
Oper. profit(unit: bil. yen)
✦Process EquipmentsActual Hitz-V Plan Hitz2016Vision
FY2010 FY2011 FY2012 FY2013 FY2016Order intake 13.1 19.0 24.0 39.0 40.0Net sales 17.3 9.0 14.0 19.0 30.0Oper. profit 1.6 0.0 0.4 0.9 1.5
0.0
0.5
1.0 1.5
2.0
2.5
0
10
2030
40
50
FY2010 FY2011 FY2012 FY2013 FY2016
Order intake Net sales Oper. profit
32
(unit: billion yen)
Order intake & Net sales (unit: bil. yen)
Oper. profit (unit: bil. yen)
3. Financial Target (by Segment)
0.0
1.0
2.0
3.0
4.0
0
20
40
60
80
FY2010 FY2011 FY2012 FY2013 FY2016
Order intake Net sales Oper. profit
✦InfrastructureActual Hitz-V Plan Hitz2016Vision
FY2010 FY2011 FY2012 FY2013 FY2016Order intake 33.2 34.0 40.0 48.0 65.0Net sales 38.4 35.5 37.0 42.0 56.0Oper. profit 1.2 1.5 1.3 1.7 2.8
Order intake & Net sales (unit: bil. yen)
(unit: billion yen)
Oper. profit (unite: bil. yen)
3. Financial Target (by Segment)
33
✦Precision MachineryActual Hitz-V Plan Hitz2016Vision
FY2010 FY2011 FY2012 FY2013 FY2016Order intake 23.3 32.0 39.0 44.0 55.0Net sales 38.6 29.0 34.0 40.0 50.0Oper. profit 3.2 2.6 2.3 2.6 3.3
0123456
0102030405060
FY2010 FY2011 FY2012 FY2013 FY2016
Order intake Net sales Oper. Profit
34
(unit: billion en)
Order intake & Net sales (unit: bil. yen)
Oper. profit (unit: bil. yen)
3. Financial Target (by Segment)
35
Technology for the earth and people
36
Cautionary StatementForward-looking statements are based on information currently available to Hitachi Zosen Corporation. Therefore those forward-looking statements include unknown risks and uncertainties. Accordingly, you should note that the actual results could differ materially from those forward-looking statements. Risks and uncertainties that could influence the ultimate outcome include, but are not limited to, the economic conditions surrounding Hitachi Zosen Corporation and/or exchange rate fluctuation.