Hitachi, Ltd.

Ladies and gentlemen, thank you very much for taking time out of your busy schedules to join us today. At this moment, we will begin Hitachi Limited web conference on Q2 FY2026 earnings. This time on Zoom's Japanese channel, by choosing from the language options, the English audio can also be selected. Depending on your device, the language option may appear in different sections, but in the case of PCs, the button is at the bottom of the screen. Please choose the audio of your choice. First, Kato will provide an overview of the earnings to be followed by an announced presentation, who will explain Hitachi Digital, the new company we announced today, and is the CEO of Digital Engineering and AI Solutions Business Unit. Please wait while the slides are being switched. Kato-san, the floor is yours.

I will explain our consolidated results for the second quarter of fiscal year 2026 and the outlook for the current fiscal year. First of all, I would like to talk about the performance highlights. Turning to our results for the second quarter of fiscal year 2026, Q2, revenues rose substantially, up 15% year-on-year, driven by business growth as well as factors including foreign exchange effects. As in Q1, all whole sectors, energy, led by its power grids business, DSS, connective industries, SEI, and mobility, posted higher revenues and higher profits. Both revenues and adjusted EBITDA reached record highs for the second quarter. Core net income and core free cash flow would each have exceeded the previous year's level, excluding the impact of last year's business restructuring, including the air conditioning business. Next, fiscal year 2026 outlook. Following the upward revision in Q1, we have again revised our key financial figures upward, including net income, reflecting Q2 results. that exceeded our original plan order trends and progress in productivity improvement. We raised our revenue focus by 300 billion yen, mainly in DSS and CI, and adjusted EBITDA by 40 billion yen, mainly in energy and CI. We have also revised our free cash flow and ROIC upward. In the second half and beyond, we plan to continue making CapEx, including capital investment as well as corporate group strategy investment to accelerate AI utilization and to develop the HMAC solutions. We will also continue to monitor geopolitical risks as well as the impact of rising interest rates on customer demand. As in Q1, we achieved double-digit revenue growth in Q2 with broadly similar trends. So I will go through the first half highlights by segment, starting with DSS. Now, the IT business, both orders and revenues grew 10%. In Q2, we incurred one-time loss, a cost of 9 billion yen. Profit increased for the first half thanks to revenue growth and ongoing productivity improvement through AI utilization and other measures. Adjusted EBITDA margin also improved year-on-year. For the full year, revised revenue suffered 70 billion yen to reflect Q2 results and order trends in domestic IT business. Adjusted EBITDA, we have maintained our focus year-on-year, having absorbed the lost costs. In energy, power grid orders were strong again in Q2 following Q1, rising substantially in the first half. We continued solid growth in demand for power transmission equipment. Revenue rose 32%, including foreign exchange effects. High revenues combined with productivity gains and other factors also drove substantial improvement in profit margin. For the full year, the revenue forecast is unchanged, but we revised adjusted EBITDA upward by 33 billion yen owing to productivity gains from process management, loss count containment, and other measures. Profit margin is expected to improve by 15%. Mobility railway system orders were strong again in Q2 following Q1 thanks to large signalling and control orders and foreign exchange effects rising 40% in the first half. Revenues rose 18% supported by a solid Lomado business such as railway signalling system as well as foreign exchange effects and the profit margin improved year on year. For the full year, we expect higher revenues and profit and will grow with growth in the modern business such as railway signaling system and higher adjusted EBITDA. In CI, all these rules, again, Q2 following QY, and others, up 26% around the first half. Within this, measurement and analysis system orders grew 66%, with increases in semiconductor manufacturing equipment and metrology and inspection equipment against a backdrop of growing investment demand in semiconductor business. Revenues rose 11% in one year, and profit also increased, driven mainly by the growth in measurement and analysis systems, together with expansion of the service business and building system and foreign exchange effects. For the full year, we raised revenues upward by Thank you very much. Business restructuring and one-time thanks. Hitachi Consolidated Revenue has grown 10% in the first half, and we expect this momentum to continue with growth at a similar level for the full year. The adjusted EBITDA margin also improved year-on-year in the first half and is expected to improve by 120 points. for the full year. So we have revised upward from the previous focus. Underpinning this is continued growth in orders backlog. As shown in the bottom right, the order backlog in each sector is growing steadily. I will now outline the features of each segment for fiscal year 2006 in DSS. Second half, revenue growth is Expected to exceed the first half for full-year growth of 8% in fiscal year 2036. This is two points higher than the previous forecast, reflecting growth in the domestic IT demand. The main drivers are similar to first half, AI transmission and modernization. The profit margin is also expected to improve year-on-year. In energy, we expect the second half growth at roughly the same rate as the first half for the full year, a growth of 21%. Mainly through higher production capacity from planned capital investment and headcount growth in power grids, Together with productivity improvement, we expect a higher full-year profit and a substantial improvement in profit margin. In mobility, we expect to maintain a solid growth for the full year as in the first half. The profit margin is also expected to improve thanks to better business mix across railway signalling system and vehicles and Thank you very much. Here I will explain the year-on-year comparison to the first number of revenues grew 70% year-on-year. Even excluding special factors such as foreign exchange banks want to advance and impact the Middle East situation, we achieved 10% year-on-year growth from business expansion. All four sectors posted higher revenues. Excluding special factors, adjusted EBITDA margin improved 110 basis points year-on-year to 12.8%. Now, ear-on-ear comparison for the full ear. Revenues are expected to grow 13% ear-on-ear. Even excluding special factors, we expect to achieve 11% ear-on-ear growth. We plan higher revenues in all four factors. The adjusted EBITDA margin is focused at 13% or 13.6% excluding special factors. Next, the interim net income and cash flow. First half results. Excluding the negative impact of approximately 150 billion yen from last year's business restructuring, interim net income increased to Iran-EA. Call-free cash flow also increased to Iran-EA, excluding the approximately 60 billion yen impact of last year's business restructuring, including the effect of large advance payments raised by 200 billion yen Iran-EA. Thank you very much. In terms of cash conversion ratio, 1% will be maintained. Hereafter, I will introduce the topics.

We continue to make steady progress transforming our portfolio, including the transfer of Hitachi Construction Machinery's shares, a partial sale of the share of Asimo, an auto parts manufacturer, as well as setting up a joint venture for the ATM business where we are the minority shareholder. Further, we are planning to sell a share of our electric appliances business by the end of next fiscal year. With respect to capital allocation for shareholder return, in view of the upward revisions we made to our core FCF and rising interest rates, the interim dividend payment will be increased above our initial forecast. It will be raised by 36% year-on-year. Shared buyback for the first half totaled 290 billion yen, which is half of what we have planned for this fiscal year. Regarding our growth investments, as is shown in the chart on the right, as part of organic growth investments, we increased year on year. CapEx, including those for the power grid business, as well as investments for corporate growth strategy, including those for promotion of AI use and development of HMAC solutions. On top of that, we executed an organic investment of ¥90 billion. Our company continues to proceed with the growth strategy. Under our capital allocation policy that we set at the beginning, we will make the necessary growth investments going forward as well. Here on this slide, I will explain the progress of our growth strategy in DSS, first on Japan's IT service business. In the first half, AX... Modernization in financial and social infrastructure fields drove the growth. Revenue increased by 7% year-on-year. By sector, financial infrastructure centered around insurance grew 19%. Profit margin also went up when adjusted for one-off factors. On a four-year basis as well, mainly in financial and social infrastructure fields, revenue is expected to rise 6% year-on-year, and profit margin also is projected to increase after adjusting for one-off factors. In the overseas IT business, total business of Hitachi Digital in the first half, when combined with revenue from synergies with other sectors, rose by 28% year-on-year. Revenue from synergies grew substantially year-on-year, primarily in energy and mobility. Furthermore, because the market environment surrounding the digital engineering business was severe, an order-taking strategy with a focus on profitability was implemented, resulting in a revenue at the same level as the year before on a standalone basis. The highlights of Q2 performance in FY26 are, as I described at the beginning, we steadily executed our inorganic strategy as well. Next, on page 17, allow me to discuss our financial conditions. Total assets at the end of Q2 in FY26 came to approximately 15 trillion yen, which was roughly the same level as the year before. Cash and deposits increased, but also did advances received at the same time. A CCC cash conversion cycle declined slightly, mainly due to a reduction in account receivables and an increase in advances received, resulting in improved funding efficiency. This shows the status of revenue in Q2 by region, including the impact of foreign exchange. Revenue grew in all regions, particularly in North America and Europe. In the ESS, Japan's IT business, and Europe's storage business were robust. Energy expanded in almost all the regions, in particular in North America. I would like to explain the orders received in Q2 by segment. Orders for DSS with increases in Japan's AI transformation and modernization businesses were up 14% in Q2. For energy, the power grid business grew 47% overall due to the contributions from multiple large-scale HVDC projects in Europe and data center projects in the U.S. on top of brisk demand for transmission facilities. Mobility was up by 69% in total with large orders for projects involving railway vehicle and signaling and control systems in Europe. In CEI, Against the background of expanding investment demand in the semiconductor industry, measurement and analysis systems centering around semiconductor manufacturing equipment were up 77%, leading the growth in CI overall. Lastly, I will explain the Lumada business on page 28. Lumada, the pillar of our growth business. In the first half, Lumada accounted for 44% of Hitachi's consolidated revenue, as is shown on the right. In FI26, our plan is to raise its revenue by 25% and profit margin by 17%. Primary areas of growth for Lumada have been Japan's IT business in DSS, semiconductor manufacturing, equipment in CS measurement and analysis systems and service business in building systems, amongst others. HMAX, which is the solution for Lumada's digital service business, exhibited a progress rate of 47% against the FY26 four-year forecast of 510 billion yen. HMAX mainly in CI Railway and DSS led the overall progress. This time, we made upward revisions to our four-year forecast for both Lumada and HMAX, respectively. I have just explained our Q2 earnings in FY26. Looking back on the first half, we realized that we were able to make steady progress in growth, profitability, and funding efficiency. On the other hand, in order to achieve the goals of INSPIRE 2027, management challenges still remain. In addition, the external business environment is uncertain. We therefore will continue to strengthen risk management as we take our growth strategy forward. Now, I would like to turn it over to Anand Birje, who has been supervising our overseas IT business since August. He will be discussing our policy going forward and Hitachi Digital's new organization.