Hitachi Ltd Ord

Thank you very much for taking your time to join us today for Hitachi's financial results briefing. We will now begin Hitachi Limited's financial results briefing for the first quarter of the fiscal year ending March 31, 2027. Let me first introduce today's speakers. Tomomi Kato the Senior Vice President and Executive Officer, CFO, Hitachi Limited, Masashi Hatakeyama, Vice President and Executive Officer, Deputy CFO, Shinichiro Tanumai, General Manager, Investor Relations Division. Those are today's three presenters. So Mr. Kato, the floor is yours. I'm Kato, good afternoon. Before I begin today's presentation, I'd like to express my deepest condolences to those who lost their lives in yesterday's Kumamoto earthquake of 2026 and extend my heartfelt sympathies to everyone affected by this disaster. At this time, we have confirmed no material impact on the Hitachi Group. However, we will continue to closely monitor the situation and take any necessary actions as appropriate. In addition, based on conditions and needs in the affected areas, we are considering what support Hitaju can provide to assist with the recovery efforts. Now, I would like to walk you through our consolidated financial results for the first quarter of fiscal 2026, as well as our outlook for the fall year. Let me begin with the key highlights of today's earnings announcement. In the first quarter of fiscal year 2026, the revenue increased 20% year-on-year reflecting business expansion as well as favorable foreign exchange effects. Both revenue and adjusted EBITDA reached record highs for our first quarter. Led by the continued strong performance of energy power grids business, all four sectors, DSS, energy, mobility, and connective industries achieved double-digit revenue growth. The impact on the situation in the Middle East during the first quarter was smaller than we had initially anticipated. The quarterly profit was broadly in line with the previous year despite the impact of the approximately ¥50 billion special dividend associated with last year's air conditioning business reorganization. On a comparable basis, we regard this as an increase in profit. Core free cash flow also exceeded the previous year's level despite the absence of large advance payments supported by improved collection of trade receivables. Now, our outlook for fiscal year 2026. Reflecting our stronger-than-planned first quarter performance, order trends, and revised foreign exchange assumptions, we have raised our forecast for revenue, adjusted EBITDA, net income, core free cash flow, and ROIC. To support organic growth, we plan to increase capital expenditures, including investments in production capacity, and also expand corporate strategic investment aimed at accelerating AI adoption. Diplomatic developments in the Middle East remain a potential source of significant volatility depending on how the situation evolves. We will continue to monitor them closely. The results include several special factors including foreign exchange effect when comparing with the previous year. Let me explain the year-on-year changes in revenue and adjusted EBITDA. Revenue increased by 10% year-on-year given primarily by business expansion. After taking into account the negative impact of the Middle East situation, one-time effects from large projects and positive foreign exchange effects, revenue increased 20% year-on-year. Adjusted EBITDA followed a similar trend. The adjusted EBITDA Margin improved by 110 basis points through business expansion and other factors. After reflecting higher corporate strategic investment, the impact of the Middle East situation, one-time factors, and foreign exchange effects, adjusted EBITDA margin came to 11.9%. The outlook for FY2026 follows the same trend. Revenue is expected to increase by 9% YOY, primarily driven by business expansion. In addition, after taking into account the impact of the restructuring of home appliances business and ATM business and the foreign exchange effects, full-year revenue is expected to increase by 11% year-on-year. For this forecast, we have revised our foreign exchange assumptions for the second quarter onwards to 160 yen per US dollar and 185 per euro. Adjusted EBITDA is expected to follow the same trend as revenue. Business expansion and other factors are expected to improve the margin by 100 basis point. After reflecting corporate strategy investment and the impact of the Middle East situation, foreign exchange and other factors, we expected the adjusted EBITDA margin to reach 13%. Next, first quarter results and full year outlook by segment, as shown in here, including special factors, DSS. First quarter orders increased 7% YOY, revenue rose 11%, and profit also increased. In Japan, growth was driven in particular by our AI transformation business, which supports customers' AI adoption together with our modernization business. which upgrades at the underlying systems. Profit increased thanks not only to higher revenue but also to stronger project management, expansion of the Lumada business and productivity improvements through AI. For the fall year, we have raised our forecast by 30 billion yen for revenue and by 8 billion for adjusted EBITDA. In energy power grids, orders increased significantly YOY in the first quarter. Supported by continued strong demand for transmission equipment and including foreign exchange effect, revenue increased 37%. Higher revenue together with productivity improvements also led to higher profit. For the full year, we have increased our revenue forecast by 360 billion yen and adjusted EBITDA forecast by 76 billion yen. Adjusted EBITDA margin is expected to improve by 130 basis points to 14.2%. Mobility. First quarter orders increased 25% YOY driven by large signaling and control projects together with foreign exchange effects. Revenue and profit also increased, supported by strong performance in Lumada businesses such as railway signaling systems together with favorable foreign exchange. For the full year, we have raised our revenue forecast by 100 billion yen and adjusted EBITDA by 9 billion yen. The adjusted EBITDA margin is expected to improve by 120 basis points YOY, reflecting growth in Lumada business such as railway signaling. In Connective Industries, first quarter orders increased 25% YOY led by the measurement and analysis equipment. Revenue increased 13% YOY including foreign exchange driven by the expansion of service business in building systems and growth in semiconductor manufacturing equipment as well as semiconductor measurement and inspection equipment. For the full year, we have raised our revenue forecast by 100 billion yen and adjusted EBITDA by 14 billion yen. Consolidated basis, first quarter revenue increased 20% YOY. However, as I mentioned before, differences in the scale of special factors, including foreign exchange effects, mean that foliar growth is expected to be 11%. Next slide. I will explain the results excluding these special factors. I'll explain the first quarter results and the foliar up book by segment, excluding special factors. Excluding special factors such as foreign exchange and business reorganization, Hitachi's consolidated revenue growth Thank you very much. resulting in foliar growth of 6% in FY26. As in the first quarter, AI transformation and modernization are expected to remain the primary growth drivers. We also expect the profit margin to improve. In energy, the revenue growth rate may appear to moderate from the second quarter onwards. However, in absolute terms, revenue growth is expected to exceed YOY increase recorded in the first quarter. Supported mainly by planned capital investment in the power grids business, expanded production capacity through workforce growth and productivity improvement, we expect revenue to increase 21% year-on-year for full-year Excluding special factors with the corresponding improvements in the profit margin in mobility, we expect to maintain the first quarter revenue growth rate throughout the year. We also expect the profit margin to improve through a better business mix in railway signaling and roading stock business with cost reductions. In connective industries, we expect to sustain the first quarter revenue growth rate through the remainder of the year, resulting in foliar growth of 6% year-on-year. The key growth drivers include expanding demand for semiconductor manufacturing equipment and clinical analyzers, measurement and analysis systems, equipment, and as continued building service business grows. And also expansion, including the mother business, is expected to improve profit margin.

So from here, I will explain the progress of the DSS growth strategy. First, I would like to talk about domestic IT service business. In the first quarter, revenues increased by 8% YOY, so was profit. Growth was centered around the AI transformation and modernization by industry, the financial sector, lead-bind insurance, and the social sector, including government agencies and local governments and transportation. Each grew by double digits or more, driving us to overall domestic IT services business. For this fiscal year, we are aiming to increase orders by 7% YOY. To accelerate the growth of this AI transformation business, we newly developed and announced last week the Agendic AI Integration Platform. This platform, combining Hidachi's domain and knowledge with our partner's frontier AI, enables us to achieve both high-quality and rapid development speed. We'll apply it to large projects for system integration, starting in September. Next is Overseas IT Services Business, specifically GlobalLogic and Hitachi Digital Services. These two have been operated as one entity from this fiscal year. The total of synergy and standalone revenues increased by 28% year-over-year in Q1. Synergy revenues expanded significantly compared to last year, primarily in energy and mobility. Despite a challenging market environment surrounding the digital engineering business, standalone revenues exceeded the previous year's levels. For further growth in S-energy, we opened an experience center in India in Q1 where customers experienced benefits of HMAC's solution for building systems. We're also strengthening our physical AI capabilities with other companies through Alliance. Moreover, Chris selling projects that offer end-to-end services from digital engineering to operations expanded in high-tech and manufacturing sectors contributing to the revenue increase in Q1. As announced today, we welcome Anand Biljai, who will lead overseas IT service business to accelerate business transformation. Next is the impact of the Middle East. In Q1, a large project in the Middle East was affected, along with some raw material shortages and a cost increase. However, the impact was rather limited than initially anticipated. We have factored in the risk of impact from Q2 onward in the current forecast, but there will be so much uncertainty and subject to change. We'll continue to monitor it closely. From here, I will explain the highlights of the Q1 FY2026. Revenues and profit increase across all four sectors as of core free cash flow. We spend more on organic growth, primarily capex for facility investment with focus on energy. For inorganic growth, Mobility completed the acquisition of Clever Devices, IT service company for public transportation in North America. Moving forward, we will expand our business into the multimodal domain beyond the railway sector. With regards to shareholders' return, we bought back ¥150 billion of our shares in Q1, reaching 27% of the plan for this fiscal year. Here I will explain the quarterly profit and cash flow on a year-on-year basis. Quarterly profits remain roughly the same as the previous year, despite the impact of special dividends associated with the air conditioning business reorganization in the year before. As for record free cash flow excluding the impact of large advance received, it increased by over ¥200 billion year-over-year attributed to higher adjusted EBITDA and improvement in net working capital driven by better turnaround of receivables. Now I will explain the financial position. Total asset at the end of Q1 FY26 stood at about 15 trillion yen, staying at nearly the same as the end of FY25. Cash conversion cycle dropped from the end of FY25 mainly due to less receivables and more advanced payments to improve the capital efficiency even more. Next is revenue by region. We expanded overseas led by Europe, including forex impact, energy grew across all regions including Europe and North America, hitting 35% in total. Mobility grew by 18% total overseas led by the rail control business, particularly in Europe. CI grew by 21% in total over the years, mainly in China driven by an expansion in building system services as well as semiconductor manufacturing and inspection and measurement equipment system. This page is order result by segment. DS has increased by 7% driven by growth in the domestic AI transformation business, modernization business, and global storage business. Energy saw a significant increase despite nuclear energy's rebound from large The power grid business benefited from solid demand for power grid equipment in several large-scale HVDC projects in Europe. Order backlog exceeded 10 trillion yen. Mobility increased overall due to large orders in a rail control project. Order backlog increased compared to the end of FY25, including for ex-impact. CI expanded as a whole, driven by increases in semiconductor manufacturing and inspection measurement equipment, as well as clinical chemistry and immunology analyzers. These are the highlights of the FY26 forecast. As for organic growth investments, we plan to increase capex by over ¥170 billion with focus on power grids and energy. With regards to shareholders' return, there is an unexecuted buyback of about 400 billion yen for Q2 onward, and it will continue with share buyback. We are also revisiting a forex rate set for Q2 onward. Here I will explain the net income and cash flow on a YOY basis. Net income is expected to increase year over year due to higher operating income despite a fluctuation in non-operating gains and losses from business reorganization and portfolio reforms executed in FY25. Core free cash flow is expected to increase while excluding the impact of large advance received. Despite increase of capex such as capital expenditure for production expansion and a rebound from special dividends tied to last year's business reorganization, higher adjusted EBIT DOT and a better networking capital will contribute. Finally, I will explain the Lumada business, a key pillar for our growth on page 27. Here is the performance of Lumada and HMUX, which is the solution for Lumada digital service business. Lumada accounted for 43% in Hitachi's consolidated revenue. For FI26, we plan to reach approximately 5 trillion yen, 22% increase YOY, which accounts for 44% of revenue, while improving adjusted EBITDA by 17%. The Q1 revenue growth was mainly driven by the amount of business such as domestic IT services and global storage and DSS building system services, NCI, and semiconductor manufacturing equipment and medical analyzers in a measurement in As for HMAX, Q1 revenue reached approximately 110 billion yen. We achieved a 22% progress towards the full-year forecast of 505 billion yen for FI2026. Key drivers are HMAX in the railway, CI, and DSS. This concludes the briefing on the Q1 performance in the full-year forecast for FI26. We recognize that Q1 represents a good start for the second year of the INSPIRE 2027. In particular, we believe that the growth drivers, excluding the one-off factors explained today, are highly sustainable. On the other hand, the Middle East affairs and external business environments remain uncertain. We'll push forward growth strategies while continuing to enhance risk management. Thank you, Mr. Kato. We will now move on to the Q&A session. Those who have a question, please press the raise hand button shown on your Zoom screen. We will call names from among those who have raised their hands, so please unmute your audio, state your company name and your name, and then ask a question where your new name is called out. Please turn off the raise hand button when you no longer need to ask questions. Please note that questionnaires video won't be displayed today. We'll take questions in order of the Japanese channel first. We'll take questions from the press and institutional investors and analysts during the same Q&A sessions. So if you have questions, please use the on the raise hand button.

Mr. Sakizawa, could you please unmute yourself and please ask questions in Japanese. My name is Sakizawa from Fidelity. Thank you very much for this opportunity. My first question about Q1 energy business, the improvement of the margin. Compared to your assumption, was it better? And compared to the fall year, I think the number is higher. And what is the reason for that? And after Q2 and onwards, do you think with the same reason it's going to be higher? Could you please explain that? Yes, thank you very much for your question. Yes, this time, Q1 performance of energy business, at first, we had a plan. However, compared to that, the number was better. There were some factors behind that. In terms of yen, There was an impact from the foreign exchange. However, in dollars, it's increasing. Mainly, the order situation, compared to our assumption, it was very strong. And the Q1 order situation I explained, large-scale orders we have received as well. But other than that, what we call base orders, They are not large orders, however, for example, transformers and those equipment, those are very Thank you very much. We have a lot of products we are making and we have so many different projects going on so as much as possible we would like to strike a very good balance and we were spending our investment on IT and that is really contributing and during the explanation I was talking about the foreign exchange and also other than temporary factors and other than special factors we have added some explanation at page 7 of the slide as you can see here. As for the revenue, the percentage I talked about after Q2, it looks modest compared to Q1. However, looking at the value in Q1, there is an increase more than three times as much. In Q2 and Q4, you can see it in terms of the growth rate. The growth rate year-on-year might be the same as Q1, and the margin as well. 100 basis point and over is our assumption. So that means basically that this should remain. However, having said that, what we cannot project right now is the enhancement of the efficiency of production in the field. This is really the contribution of the field and the effort of them, but it's possible that it might change up and down. Thank you very much. Thank you. My second question, it might be related to your explanation, and you are talking about H maxi vita ratio was 22%, and you have four segments. H-max exposure, for example, it should be different from the breakdown of Lomada business. So what is the specific sub-segment or segment that has a contribution of H-max or the improvement of the margin, profit margin? Yes, H-max last fiscal year We only had the fiscal year's number, so year-on-year Q1 growth cannot be disclosed. I'm sorry, we don't have the number here. However, we believe that there is a two-digit growth, especially the contribution comes from CI building and high-tech business and mobility, railway business. They had contributions and as for building as we have announced H-max for building for remote monitoring and as for high tech especially the predictive analysis for the equipment and also each of them really contributed and as for the margin about 20% and over evenly so Compared to the other sectors, profit margin, the growth here really looks significant. This really is attraction. Thank you very much. Thank you.

On to the next questionnaire. Hirakawa-san, please unmute yourself and ask your question in Japanese, please. DOB and the securities, my name is Hirakawa. Thank you for taking my question. The first question is about the domestic IT, as explained, AX and the modernizations really driving the performance. I understood that. And on the other hand, during the Investors' Day, You said 7% growth. If you continue to do that, then that will reach to the 3 trillion yen of revenue at some point. However, the 5 trillion yen, which is the significant figure, has been already represented, and there's a significant demand for the AX. So right now, you're numbering the 7% of the revenue growth. Can you actually foresee the double-digit growth? And if you have that visibility, when that's going to be realized? And what will be the, do you have enough capacities, leverage to buy the AI, for example? That's my first question. So for this year, domestic IT service is the domain that you asked. So the late single digit order is visible now. But as asked, this is not enough to hit the 5 trillion yen. There are two drivers. One is the leverage of AI. How much of the productivity improvement we could achieve is one key. So as of the end of 25, 10% of the productivity improvement was achieved. So we're trying to push this number up. So for the next year, FY27, this number goes up to 30% from 10%. So that's the internal target. This is an ambitious target, so how far we could achieve it is still not really visible, but this is a great contributor to the improvement of the productivity. Another one is inorganic growth investment. For the domestic and IT service, we don't do that much around it. However, So some specific targeted domain, if there is any opportunities out there, we would like to see at the moment. So these two factors, if these two drivers work, then we could actually start to foresee a 5 trillion within the range of achievement. So as for the productivity improvement effect, That would contribute to the higher profitability, but profitability improvement itself, how does it work? So because now you have a better visibility, that's actually how it's explained? Yes. So in a domestic market, we have a limited number of the IT resources. So we haven't been able to fully accommodate all the demand. So if we can improve the productivity leveraged by AI, we could accommodate more the customer's needs in demand. Thank you. The second question is about the HMACs. During your presentation, on the HMUX. You brought up the CI specifically and the buildings and IT as a contribution, drivers. But to me, the railway is the starting point of HMACS so that the railway business accounts for the significant part of the HMACS. I'm sure that it's difficult to express, but for FI26 ending in March 27 or the following year, How this H-max exposure would change how the H-max is going to grow and how the energy is going to be playing its role in this context. So 110 billion yen is the actual result as of the end of the Q1 and half of this 110 billion is CI. So specifically building and high-tech. followed by railway business and also the DSS and energy follow and as of now in order to number the CI since it has a significant exposure compared to the mobility so that's the result but The ratio, I cannot really refer to it, but every sector, every BU expect it to grow. So all of them will be SD on contribution drivers in a midterm perspective. Thank you. That's all.

Thank you very much. Next, Mr. Yasui. Could you please unmute yourself? Thank you. My name is Jesse from UBS. About energy, that's my first question. At first, you were talking about efficiency improvement. So could you please elaborate on this in concrete? At new factories, you have increased, so the lead time for production is getting shorter. and this is a new factory you have new machines is that the contribution for the efficiency so in terms of the continuity going forward if you can achieve high margin per revenue is that true or the cost for materials is increasing so how are you passing the course into to the end users and customers and what's the significance of this continuity that's my first question yes for FY25 the trend is the same so FY25 the revenue increased It's not only about increase of the capacity of production. We cannot explain it only with that. I don't have clear numbers. However, to some extent, yes, production capacity increase was the contribution. That is really true. There is a significant contribution. To what extent we can continue this trend. But before efficiency, looking at the backlog situation, always the margin per backlog is what we are checking. And so far, the average backlog, we are looking at the gross margin. It's improving. It has been improving. So in that sense, By managing the backlog, we can increase the gross margin ratio and the production efficiency. FY26, we saw a great improvement. Thank you very much. Thank you very much. We have had so many large projects and orders such as HVDC. The period is very long for those projects, so we might have some risks associated. However, we are doing de-risking out of EPC, ENP. Engineering and procurement are our focus as for civil deconstruction projects. We don't include the C part in the construction to receive orders. So in terms of project management, we always make an effort. So the cost, excessive cost to make it efficient, well compared to the past, that kind of cases are really declining. So in terms of project management, we are really improving the situation that really contributes to the profitability. Additionally, about price situation, so many products are increasing costs. So your procurement cost increases and selling prices are increasing. So I'm not talking about increasing prices because of the cost, but because of the tight demand and supply situation. Can't we just expect the profit increase because of the price increase? Yes, as for you point out, HVDC projects might have five to six years in the project. So how to reduce inflation risk is one. So project management includes what I have described. I'm sorry I didn't explain that clearly, but basically we're using a lot of indices. So when costs increase, We can reflect them on the selling prices to customers. That is our system. These are indices. There are not so many cost reductions, but cost increases could lead to a path through. So this is not profitability. This is not really increase of the profit, but we can, of course, increase the margin, but we can stabilize the business. That is our recognition. Yes, thank you very much. My second question about the overseas global logic and storage business. Block storage business have been very good you said at the same time DRAM and NAND well they are getting very high in terms of the prices so for a storage business did you enjoy increased profit selling prices are increasing so it looks like you have increased revenue and a global logic especially in the US Well, because of the death of SARS, you have a negative situation. So when you look at the market situation, it looks like the situation is deteriorating. Could you please elaborate on this part? Yes, about storage business, block storage. For high-end products, we have made an announcement about new products, and they are well accepted by the market. They are selling very well. Because of that, the storage business is really growing the revenue. And DRAM, as you have pointed out, the prices are increasing. As for this one, basically, we are passing through the cost to the selling prices. The volume is increasing overall, so that is why we have increasing revenue and profit next fiscal year. Q1 was not very good. That is part of the factors. But the direction is an improvement, stably. And Global Logic. As a company, it's separated. However, from April this year, Global Logic and HDS are integrated in operation. So there is a cross-cell effect, and HDS itself Logistics and also manufacturing accounts. They have them and they have additional industrial and automobile industries accounts as well. So they are increasing profits and revenue, both of them. And global logic, the market situation is very difficult. And also they want to increase profitability. That is their focus. So strategically for lower profitable businesses, They make decisions about orders are receiving or not. So they have a growth and same but last year's acquisition that is contributing as well. And when you look at this one, unfortunately, the revenue In Q1 only, unfortunately, the revenue slightly declined and profit, unfortunately, declined slightly. But for the fiscal year, well, some of them are increasing, so we'd like to increase the increasing part so that we can achieve increasing... Profit and Sales, both of them. And since the integration is going on, and they have a lot of collaboration, it's very difficult to split. So please look at the entire picture. Thank you very much.

Then Harada-san, please unmute yourself and ask your question, please. This is Harada speaking from Goldman Sachs. Thank you for taking my question. I have two questions. The first question is about energy. You've been stating a strong order intake for Q1. I believe you receive a large scale project. So in a normalized basis on where we are right now, and as for the midterm target for revenue, Are you outperforming or rather in line? Can you give us more sense? And also, what I would like to know is 800-voltage data center architecture. You'll be in a partner link with NVIDIA for development. And the other day, Jeeval Nova, Meta comments on the solid state on transformers for these. So if you have any trend on your end, I would like to know more in detail. So that's the first question, thank you. Can I go on the second question as well? Yes, I'll answer to the first question as for the power grid. As an energy sector, first quarter in the 37% in revenue, However, considering as the one-off effect in the forex, it will be 24% increase. And out of 24%, so I said a 37% in gross and a breakdown is here. So the power grid is a 35% increase in a breakdown and a dollar basis. Hitachi Energy is 22%, so 1 billion year over year increase. But that's for the full year. So for the full year, we were expecting the similar growth. So in that sense, in the mid-term perspective, for this year, particularly as a late teen is what we anticipated. But for the full year in the US dollar basis, 20% of the increase is expected. So the growth ratio wise, we are outperforming. We cannot really make decision based on this year as a Thank you very much. And as for the 800-voltage demython, do you have any follow-up comments on that, as you pointed out? 800-voltage architectures and technical development has been supported by ourselves in the architecture itself. The 2028 is the year when the subject architecture is going to be applied and adopted. So for us, the early adoption and delivery, taking advantage of the existing technology, so that's the area where we can make an early contribution. So that's the area where we're trying to expedite the pace of a partnership. So it's the power, the conversion, the specialty, from the grit to the lack. And this project is plans to be rolled out in early 2027. And once we can deliver, then we can make it simpler and reduce the space for the deployment of the system. So the early pace that we can make and a quick contribution to the data center. As for the SST, the control technology is power electronics and other technologies are integrated. Any of them are the oldest strings in a capability that the Hitachi Energy already has. So R&D, together with an R&D, will continue to work on for the future deployment. And a conversion to the SST will take a long time. So the data center's entire solutions, the early bump up of the data center is not the area where we can immediately contribute with an SSD. So as I said, to control the system is the area where the statue energy can make a contribution in the early stage. Thank you. The second question is about on the page 10 DSS. Global Logics and Synergy Hitachi Digital Services has been growing strongly. But as for the margin, as a Hitachi as a whole, what kind of impact can we expect? Especially if the energy mobility, so in-house system development could contribute to the higher margin. I assume so if you could share some numerical numbers or quantified numbers that would be very helpful and also on the same page the UNDRA will be assuming the new position in this domain and with this new organization and change in the organization and what kind of expectation you have. On to the first question Hattak Amazon and can you answer to that? As for the indirect synergy in our definition, taking advantage of the global moche, rail or mobility, as well as the energy synergy, it should be an answer by myself. Please refer to page 27. All these numbers are the energy and rail. These fall under the Lumada business. And out of the Lumada revenue, global logic in a digital domain for energy and mobility for the customers contributes to the revenue. So when you look at the margin of profitability, for example, FY2026, RIMADA's digital service says 20% in total, and digitalized asset is 14%. And as for the HMOX business, the global logic is involved in HMOX business as well. So all these business, once it starts to grow, the indirect synergy will grow accordingly. And on to your second question. As announced within the DSS, DEAIBU is there. This is the place where Hidachi Digital as well as the Global Logic, HGS, and also the Hidachi Vantara. So in a nutshell, the Hitachi is a digital business driving center as a business unit. So the head of this business unit used to be Mr. Abe. He is concurrently this position. But now the Ananda will assume this position as the head of this BU as it stated during the investors days. Because of AI, there's a huge tailwind for Hitachi and not just the HMX business, but we're trying to deliver the productivity improvement for your customers while pursuing the internal operation improvement. So DIBU... needs to cover the vast area. So we decided to have exclusive personnel leading the team. So Anando taking advantage of the AI in a global arena, he has an extensive track record around that. So leveraging his Experience the IBU should be led by this great leader. And because of this organizational change, AI leveraged business expansion should be achieved. So I myself have a high expectation on this change in organization. That's all from my end. Thank you.

There are so many people who are raising their hands. However, we'd like to switch to the English channel to receive questions. For those on the English channel, could you please use the button to raise your hand? There is no person to raise their hands, so we'd like to switch back to the Japanese channel. We still have some time, so those on the Japanese channel, if you have any questions, please raise your hand using the button. Mr. Ryugen, could you please unmute yourself?

Thank you.

Thank you very much. Thank you again from Nikkei Newspaper. I have one question about energy business. Continuously your order situation is good, favorable, And in the early stage, you might have a strategy to make it a revenue, maybe production increase and the others. Could you please elaborate on that part? Yes, thank you for your question. Yes. Investment to increase capacity and capex spending. As I explained today, we have a plan to increase the capex spending, especially FY24, 25, 26 and next year as well. Probably the same level of CAP expanding will be implemented. And right now we are hiring out as well. And as planned, the progress has been good. And additionally, we are using AI for higher efficiency. That is our aim. And as for making systems, we are spending on IT systems. And since last year, the efficiency has improved. So there is a contribution. And by utilizing AI, The cycle of our operation can be shorter going forward. We are going to tackle this initiative as well. So when our aims are clearer, we would like to talk about that. Thank you very much.

Thank you. Moving on to the next question. Nakanishi-san, unmute yourself and ask your question, please. Thank you. Can you hear me fine? Yes. Thank you. My name is Nakanishi from Nikkei BP. I have two questions. First question is about the energy market outlook, mid and long term perspective. I would like to know your outlook for both perspective. So based on the order intakes, as well as the external environment including as the anacostas trend and also the semiconductor trend what kind of the items are factored in so you you asked about the mid and long-term perspective so as for the short and long-term perspective for the short term perspective The industry outlook, we have a higher visibility. So based on the order intakes and the actual development of the orders, we have a better visibility on the short-term perspective. As for the mid- and long-term perspective for the large project, multiple on a project a precondition terms in on a condition and need to be decided as a part of the framework agreement and also our production and capacity needs to be reserved as a part of the capacity reservation this is a part of the an agreement with our customers and based on that we make a decision on the capital capex investment but that actually only give us it in this sense for the large-scale projects so basically The power demand is constantly monitored, including the demand for the other energy resources and also the industrial trend using multiple different methodologies. Recently, we tried to foresee in 10 years' time So, for example, in last year, as we stated, we are expecting our further growth until 2030. That's what we could say until last year. But for that large system, or like a delivery plan, go beyond the 2030. So, until 2030, we are expecting a further growth until 2035. Thank you. Just to follow up questions, capacity is decided based on the customer's demand and needs. So for example, if the customer, does a customer make an advance payment for the sake of the CapEx investment? for example in a case of framework agreement so we have let's say if we have a multiple on different contract terms and conditions including the payment all these is defined and decided between us and customers even for the multiple one we try to get as a framework but the timing of the payment Payment is actually the timing is usually comes at the time of the signing of the contract. But at the time we are on we usually we receive the advance payment. Another question is about the physical AI. Taking advantage of the domain knowledge you try to deploy it in the infrastructure. As for the physical AI, compared to the global benchmark, how do you measure your capability and the strengths in terms of the physical AI and what are the challenges that you need to address? Thank you. So as for the global benchmark, it's really hard to say. In the case of physical A, our absolute strength is OT in a product that we have. We have business as a customer's energy or the CIs or real businesses. So using the multiple different physical AI together with the DSS which tries to deploy it and this is the competitive advantage over the others. The model itself is not internally developed. However, the Frontier AI-leveraged alliance is formed with other counterparts, so that would allow us to use the state-of-the-art technologies, and we try to maintain this kind of environment. And that itself is the foundation of ourselves. But what really matters to us is speed, because when it comes to the competition, how fast we can bring ourselves, move ourselves is key. So focusing on the speed, then we can even greatly leverage our capabilities and strength. Thank you.

Thank you very much. There's still some people who are raising their hands, but I'm sorry, it's time to close. So with this, we would like to close a March 2026 earnings result presentation. Thank you very much for your participation for such a long time. Thank you.