Hitachi, Ltd. (6501) – A detailed read on the Japanese giant based on Q2 FY2025 financial results.
Hitachi, Ltd. announced its consolidated financial results for the second quarter of the fiscal year ending March 31, 2025. Revenue for the same period was
(Securities Code: 6501) announced its consolidated financial results for the second quarter of the fiscal year ending March 31, 2025 (April 1, 2024 to September 30, 2024). Revenue for the same period was 4,545,908 million yen, down 8.3% YoY. However, Adjusted EBITA (adjusted operating income) increased 24.4% to 4,047,703 million yen, and interim income before income taxes rose 16.5% to 4,670,200 million yen. Interim income attributable to shareholders of the parent company was 4,393.305 billion yen, up 36.4% from the same period last year.
The three sectors of Digital Systems & Services, Green Energy & Mobility, and Connective Industries achieved increases in both revenue and adjusted operating income. In particular, the Green Energy & Mobility sector recorded a 28% increase in sales, with strong demand for renewable energy and data center-related solutions. The Digital Systems & Services sector also continued to grow, benefiting from the tailwind of DX (Digital Transformation) and modernization.
Performance by Segment
Digital Systems & Services (DSS ): Revenue grew 5% YoY to 678.3 billion yen, and adjusted operating profit increased 8.1 billion yen to 90.7 billion yen (+9.8% YoY). Digital demand in Japan and overseas remained strong, and DX and modernization projects drove the performance.
Green Energy & Mobility (GEM): Revenue increased 26% to 901.4 billion yen and adjusted operating profit rose 30.4 billion yen to 67.0 billion yen (+83.2% YoY). Demand for power grid facility upgrades, renewable energy, and data center-related solutions were strong, with Hitachi Energy and the railroad systems business in particular boosting results.
Connective Industries (CI): Revenue increased 2% to 780.9 billion yen, and adjusted operating profit rose 9.8 billion yen to 87.7 billion yen (+12.6% YoY). Profitability improved due to firm sales of building systems and measurement and analysis systems.
ImpactofHitachiAstemoandCompanywideTrends
On the other hand, the deterioration in equity in earnings of Hitachi Astemo affected consolidated results, resulting in a 54% YoY decline in adjusted operating profit for the company as a whole. However, in the three sectors excluding Hitachi Astemo, revenue increased by 11% and adjusted operating profit increased by 46.5 billion yen. As a result, adjusted operating profit excluding the three sectors improved significantly.
Financial Position and Cash Flows
Total assets increased to 12,568.628 billion yen and total liabilities increased from 6,361.681 billion yen to 6,913.029 billion yen. Repurchase of treasury stock is also in progress, following a stock split implemented on July 1, 2024, at a ratio of 5 shares for each share of common stock.
In terms of cash flow, net cash provided by operating activities amounted to 3,233.335 million yen, an increase from the same period last year. On the other hand, net cash used in investing activities amounted to approximately 1.1 trillion yen, and net cash used in financing activities amounted to approximately 1.9 trillion yen. Cash and cash equivalents at the end of the period totaled 79,426.64 million yen.
Status of Human Resources Strategy
Significant progress has also been made in the human resources strategy. In order to secure and develop digital human resources globally, the company accelerated the acquisition of digital human resources through recruiting activities and business acquisitions. In Japan, the company is also focusing on internal development by offering more than 100 DX training programs, mainly through the Hitachi Academy. In addition, the company is fostering diverse management leaders through the Global Leadership Development (GLD) and Future 50 programs, which are training programs for candidates for the next CEO and business unit heads.
CorporateGovernance
In terms of corporate governance, efforts are underway to strengthen the independence and diversity of the Board of Directors and to increase the ratio of outside directors: as of June 30, 2024, the ratio of female outside directors reached 24% and the ratio of non-Japanese directors 31%, reflecting the diversity of viewpoints in management. Furthermore, to enhance the effectiveness of the Board of Directors, regular evaluations and improvement measures are implemented to ensure transparency and fairness in management.
In risk management, the company has strengthened its risk management system to cope with rapid digitalization and geopolitical risks. In particular, the company has put in place an AI governance structure to thoroughly manage risks associated with the use of generated AI. The company has also focused on cyber security measures and strengthened defenses against information leaks and shutdown risks.
Dividends and Equity Policy
Regarding dividends, the company plans to pay a total dividend of 180 yen for the fiscal year ending March 31, 2024, and an interim dividend of 21 yen for the fiscal year ending March 31, 2025. In addition, the company has been repurchasing its own shares, and as of the end of September, it had repurchased 123.4 billion yen (61.7% of the total amount). In addition, the company is continuing its cash-flow oriented management policy to increase core free cash flow, and in FY2024, cash efficiency improved and the debt/equity ratio declined to 0.2x. With this, the company aims to further improve capital efficiency while maintaining a balance between investment in growth and shareholder returns. In particular, the company plans to invest about 1 trillion yen in growth investments in the fields of generative AI, data centers, and semiconductor manufacturing, and intends to accelerate sales growth in these fields.
Future Outlook and Risk Factors
Hitachi has upwardly revised its forecasts for revenue and adjusted operating profit to 1.05 trillion yen and 1.95 trillion yen, respectively, in the three sectors. In particular, the Digital Systems & Services Sector is expected to grow through the introduction of DX and new technologies. The Green Energy & Mobility sector is also expected to grow steadily due to expanding demand for renewable energy.
However, there are also risk factors such as exchange rate fluctuations, financing environment, and raw material price fluctuations. The company intends to address these risks while promoting technological development and market expansion.
Concluding Remarks
The results announcement clearly showed that Hitachi, Ltd. achieved a significant increase in adjusted operating profit while maintaining growth in its main segments. On the other hand, while the deterioration of Hitachi Astemo’s equity in earnings impacted the company’s overall performance, revenue and earnings continued to increase in all but three sectors. As the company continues to strengthen its financial base and pursue its strategy of sustainable growth, future trends will be closely watched.
