M&A Announcement

Jul 2, 2020

It is time. So we would now like to start the web conference on the completion of Hitachi's acquisition of ABB's Power Grids business and establishment of a new company. Thank you very much for taking the time out of your busy schedule to attend this meeting. This meeting is held in the form of video conference to prevent the spread of COVID nineteen. The speakers will speak without their masks on to make it easier for you to listen to. This meeting is scheduled from 3PM to 4PM Japan time. Speakers' presentations and comments will be interpreted simultaneously between Japanese and English. The materials are posted on Hitachi Limited news release website and IR website, so please take a look. We will now start the web conference. Let me first introduce the speakers. Toshiaki Higashihara, President and CEO of Hitachi Limited Toshikazu Mishino, Executive Vice President of Hitachi Limited and Chairman and Director of Hitachi ABB Power Grids Tomomi Kato, General Manager of Financial Strategy Division of Hitachi Limited and Claudio Fakim, CEO of Hitachi ABB Power Grids. Four speakers will be attendant today. Higashihara, Nishino and Kato are joining from Japan and Fakin from Switzerland by web conferencing system. First, President Higashihara would like to say a few words. Good afternoon, ladies and gentlemen. Thank you very much for taking time out of your busy schedules to attend this web press conference today. As you have been informed yesterday, Japan time, Hitachi ABB Power Grids was launched as scheduled. This acquisition has brought us excellent assets that will help drive Hitachi into becoming a truly global company, not just in the energy sector, but in the overall business area where Hitachi operates. The first asset we acquired through this deal is the platform to accelerate our social innovation business on a global basis. The newly inaugurated company boasts the number one technology in the world and market share in its power grid business, operating in over 90 countries around the world with products and service offerings to over 15,000 customers. We will combine this OT, operational technology, in the form of Power Grids and Hitachi's IT platform Lumada together to create an energy platform so that it can be utilized across Akita's entire organization and to the whole of the world. Talents are absolutely necessary for social innovation business. We need to share challenges with customers and together work to provide solutions. We need such frontline staff. And in this new company, we have people from Europe, U. S, China and other parts of Asia and also from regions that we have not been able to reach very much, such as South America and Middle East. They have sites in these regions. So altogether, this company has a total of over 4,000 such frontline personnel. So by combining ABB's frontline personnel and Hitachi's frontline personnel, we would like to continue to promote our social innovation business. The second asset we gained is the platform to accelerate Hitachi's global management. In different regions, in order for us to deploy our social innovation business, we need talents that are required by that particular region. We also need to procure components that are needed in the region. So procurement, talents, finances, for these areas, we need across the board shared services. And we would like to expand this on a global basis. And this new company already has shared service functions. So by combining the global operations of this new company as well as Hitachi's, we will be able to bring the cost further down. I have, likened, the establishment of this new company, to the arrival of black ships, to Japan in 1853. Back in 1853, black ships led by Komodo Perry arrived in Japan. Japan was thrown into a confusion. But this new company that we established is like the black ships, that I myself invited. And we want the company to be the driving force for transformation just as the black steam ships were for our country in the nineteenth century. The new company is off to its start navigating in this unprecedented business environment due to COVID nineteen. But, COVID nineteen will most likely expand the use of, digital technology at an accelerating pace and elevate the importance of electricity as an increasingly vital lifeline, Building a decarbonized society with further introduction of renewables amongst others is one of the most urgent challenges of the SDGs. I am convinced that the inauguration of this new company will provide us with a significant opportunity for us to contribute to creating such a sustainable society. So I hope you all look forward to the growth of both Hitachi ABB Progress and Hitachi Limited. This acquisition deal, day one, is such that the assets from ABB were carved out. And those assets are now being checked by our auditors, and therefore, we have not been able to disclose all the financials. Our apologies for that. But at the earliest possible stage, we would like to disclose them. At the July, we're going to make a first quarter performance announcement. And at that time, to the extent possible, we would like to disclose the financials of to the extent that we can. Thank you. That concludes my remarks. Thank you. Next, regarding the completion of Hitachi's acquisition of ABB's power grid business and the establishment of the new company, Mr. Nishino will explain. Please wait till we switch the screen. Mr. Nishino, please. Nishino, speaking. Thank you. So regarding the new company, I would like to make a presentation. The next slide, please. This is the first slide. Perhaps this slide may not be included in your package, but these are answers to the frequently asked questions in the form of photos. Just briefly on the left, there are three photographs. Is there chemistry? Can we combine our forces? Well actually the answer is yes. We are fully prepared to be together. The young leaders of both companies Hitachi and Hitachi ABB Power Grids are gathered and they're working together very well. On the right hand side, the members of the management of both companies are shown. And in terms of chemistry and working together, no problem. And lower right, we had a panel discussion yesterday. And on the left, in the middle, is Doctor. Beryl of IEA, the top person of IEA. And what's going to be the future of energy? Is there going to be increased investment? We had a panel discussion with IEA, and they said that they would like to support Hitachi's business strongly. And so these are some of the pictures from yesterday's event. And as Mr. Higashi Hara explained, situation around energy is changing very rapidly, decarbonization, renewables introduction and electrification, distributed power supply, large scale centralized power supply. The next slide. This is a slide that was prepared by the IEA that I mentioned. So investment into renewables, including investments into new grids, this is to increase for the time being. That's what this says. This is the outline of the deal. There's almost no change from what we have already announced. What we would like to get across is that we have completed our deal process as scheduled. There were some concerns raised, but in terms of cash and the enterprise value, they are all in line with our expectation and was as scheduled. The next slide, please. Mr. Higashawa earlier talked about this. By combining energy technology and Lumada, we will be able to deliver social, environmental and economic values on a global basis. In order for us to be a truly global leader, what are the assets that we can leverage that we have acquired this time? There are threefold: business basis, management basis, including customer base and business infrastructure. Let me elaborate on them. Business basis, I'm repeating this many times, but we have number one market share in many areas, very good products and software solutions we have acquired. By combining this with Lumada, social systems and energy technology can be combined, creating huge changes and new business opportunities, we expect. And this is the management basis. So we have very important customers that we have acquired. Hitachi itself has an important customer base, but on top of that, we have a huge customer base added And frontline staff are as crucial. As you can see from this slide, on the left hand side by region on the right hand side by region, how many we have acquired and highlighted in red regions, we have not been able to focus on very much. We have acquired these personnel. And as a result, we will be able to increase overseas revenue quite substantially. You will see that Hitachi will be transformed quite substantially as a result of this acquisition. Mr. Higashiro said that we have to create value that is fit for the region, that meet the needs of the region. We have so many diverse frontline staff that we acquired. We will be able to create and deliver values that are right for the region. And I think this picture shows how that can be done. So I'm often asked about synergy. This is hop, step, jump. This is the value that we plan to create, and I'm often asked about value as the business value, the final year of the next medium term to term plan 2022. We think the value will be about double. Aside from products, we have very compelling software. The company's asset management or the business management can be can leverage the software, and this is used on a global basis. So Hitachi Group and Lumada will have this as part of us so we can expect bigger change going forward. Next slide, please. Now needless to say, from energy to the final users, we can combine with Lumada, and this will promote the social transformation in the medium to long term. Next, please. So Hitachi and ABB are now joining hands to back up the success of this new company. And as President Higashi Hara said, Hitachi will become even stronger top leader, and we can go up the stairs or the steps for that goal. Thank you for your attention. And lastly, this is the management team of the new company. The detail of the business will be explained by CEO, Mr. Claudio Fakin, and the directors from Hitachi. We have five and two from ABB. And the two from Hitachi are non Japanese, one in The UK and one in Switzerland. So that concludes my presentation. Thank you. Thank you very much. Let's continue with the program. From Switzerland, the new company's CEO, Claudio Fakin, will deliver greetings and a presentation. Please bear with us while we switch the slides on the screen. Mr. Fakin, the floor is yours. Good afternoon to everyone. It's a pleasure to be here and taking the time to walk you through Hitachi MB market. And you heard already from Nizhino san that there is a tremendous transformation ongoing in the energy space. And this is about, obviously, driving for decarbonization. It's about higher integration of renewables. It's about energy efficiency. And if you look at the way the transmission and distribution infrastructure is going to be managed going forward, it has tremendous additional complexity because of the change of the pattern of the generation of their electricity from centralized to decentralized, from, more renewables that create variability, in need of exchanging on bidirectional, but also very much increased complexity on the patterns of consumption of dielectricity. If you look at consumption from data centers, require highly reliable and high quality power supply. If you look at electrical vehicles and electrification of mobility, all of that is driving increase in consumption while the overall energy consumption, it's still expected to increase at a lower pace. The electricity is gaining a larger share of that energy, provisioning. And if you look at, in the next ten, fifteen, twenty, thirty years, there is a clear need to look at this overall, grid infrastructure more interconnected. If you wanna continue with investing on resilience, if you wanna make sure that that infrastructure provides electricity in crisis time like we're just living now on a on a global scale, then interconnectivity, resilience. And, obviously, in order to manage that digitalization is an essential part of technology investments and innovation. Next, please. As part of that market that we see in average growing 2% to 3% because of what I just mentioned before, there is a driver for increased electrification. There are also parts of that market that are actually growing much faster. If you look at on the right hand side, we talk about EV charging infrastructure. We talk about electrification and increased need of mobility, rail transportation. Distributed energy resources are growing double digit. Data centers, the need of providing electricity, reliable electricity to data centers, all those are what we call in our strategic plan high growth segments. They're growing two to three times the average of the of the market growth, and, we have specific initiatives. And when you look at what we're gonna share later on, where do we see opportunities to create synergies with Hitachi, that is one area where Hitachi is present both in terms of technology, but also in terms of market, in terms of customer relationship. And those are the areas that we will then be focusing on to support our growth plan. Next, please. Our global footprint, you heard also Yashi Harasan highlighting that. It's It's about our 36,000 employees worldwide. If you look at the footprint, very well balanced, onethree in Europe, onethree in The Americas, onethree in Asia, Middle East and Africa. But I think important is to also highlight that we have you know, close to 6,000 between sales engineers and field engineers that are present out there fronting, being close to our customers. And, obviously, our customer base, two thirds utility energy space, but one third and growing faster, obviously, on the industry, on the transport, and on the infrastructure. Very important also with our strengths in innovation. More than 2,000 engineers and scientists in also many parts of the world that allow us to have a better understanding and be close on developing technology in all the key, in all the key markets. Global footprint and for business units that have been also working to preserve an unparalleled installed base that we have, which is a essential part of the asset. Us understanding that installed base and sharing with our customers how to optimize managing that installed base is an essential part of our growth plan and creating value for our customers. Next, please. With a bit more granularity, Power Grids, it's four businesses. And if you start from the bottom of the chart, the foundation are the product, technology, the components. We're clearly number one across the portfolio both on transformers and high voltage, which are the essential parts of the grid on the on the transmission and distribution side. On the transformers, we have a complete range that goes from distribution to ultra high voltage, including traction transformers, including dry type liquid insulation, low losses that support the decarbonization, and, we have a unique also footprint with more than 60 factories with, many adjacent, also service centers. High voltage products, also the broadest portfolio covering all the way up to the highest voltage levels, 1,200 kV on the AC side, 1,100 kV on the DC side. And on on the next one is grid integration. That's where we concentrate our efforts to preserve our leadership and strengthen our leadership on power quality, flexible AC transmission systems that allow AC transmission lines to provide more electricity, to provide better quality of that electricity, and upgrading the infrastructure in many parts of the world. And we're also clearly leading on the high voltage DC technology. We've been the first one commercializing that technology over sixty years ago. We've been innovating since then, and we're now basically with 130 gigawatt worth of installed capacity. We're number one with more than 50% of the installed base worldwide based on ABB technology. And on top of it, we said it, we need more automation. We need more software. We need more digitalization to cope with the higher complexity. And currently, if you look at the top two fifty global electric utilities, we're supporting about half of them. And if you look at also our software solutions, whether it's on the power generation plant side, whether it's on the transmission distribution, whether it's on the utilization of that electricity, our software solutions support over CHF 4,000,000,000,000 of mission critical infrastructure assets, and that's the value that we create with our customers. Next, please. When you look at the digitalization, it's very important for us to understand that digital grid is not just about digitalizing the components, making it more intelligent. This is an essential part of what we do. We are investing in digitalization in all those four business units that we just, walked you through. It is important to also, though, digitalize the processes across the value chain. So our digital grid approach is starting with helping our customers to also digitalize, the planning phase So that that planning phase help them in optimizing OpEx, optimizing CapEx, and then moving to optimizing OpEx further down during the life cycle by providing asset performance management solutions, workforce management solutions that allow our customers to optimize operations and maintenance. And that's why you see in our strategy for for the digital grid, not only digital substations, but also asset performance management, also virtual remote management technologies, and certainly communication, which is an important part of that portfolio. And if you look at now these aspects, there is a clear opportunity for us to leverage what comes now from the Hitachi in terms of technology, in terms of IT and OT technology that will add, for instance, artificial intelligence, machine learning capabilities into our digital grid strategy. Next, please. So when you look at how we come together, it was very natural for us to draw a chart where we both started from the very beginning sharing that in order for us to support the energy transition as we've been supporting, we need to continue, and we need to do more by working together with, our customers. So we serve utilities, industries, infrastructure. We have a broadest portfolio across all those. We are a technology and market leader. And if you now come and look at the need of digitalizing, then Lumada adds and the whole Hitachi ITOT, technology with the huge investments that have been made so far on on that side will, create an opportunity for us to strengthen that position. Next, please. So how we would do this? If you start from the customer, and that also was very easy for us because if you look at the segmentation of the markets, as we mentioned, we're strong twothree of our business on the energy and utility side, but we also mentioned that segmentations, toward industries, mobility, smart life series, IT being data centers and much more, that's where Hitachi will bring a lot of value, not only in terms of access to those markets and segments, but also accessing, the technology that Hitachi brings to then create a joint approach between the digital platform and the energy platform. We are right there bringing in the all the components, all the technology needed for the energy platform, as Nishino san would mention, which is needed for all these customer segments, and then combining the strength across the value chain, be it on the generation side, be it on the transmission distribution side, or on the consumption side in terms of IT, OT, technology and services. Next, please. Here is a very simple example. Obviously, we just started yesterday live with a joint venture, but we have already identified opportunities. And here, we just wanna share one as a concrete example. On the short term, what we will be able to do is take existing opportunities that we have developed with our customers to, for instance, manage better the energy with our energy management systems and then add the capability of Lumada for real time forecasting, for helping through artificial intelligence, analyzing the data, and making sure that that energy system has that predictive aspect as well that will then help our customers reducing consumption, improving efficiencies, and obviously create value through also then decarbonizing their own footprint. Next, please. When you look at the situation that we're in, there is no doubt that the COVID-nineteen impact in 2020 is felt, is felt across the segments, is felt by our customers, and as a consequence, it's also impacting our business. And from a market point of view, Nishino san was mentioning, we had yesterday a panel session where we had concrete inputs from Fatih Biron from the IEA. There is an impact in the first part of the year in 2020. But with all the plans of investing on decarbonizing, accelerating those investments, integrating more renewables, electrification being an an essential part of that, upgrading and investing on the grid infrastructure will be coming back after 2021. And we clearly see that the fundamentals of the market despite COVID, which for us is a temporary challenge, will continue as we have seen in our plan. And on our side, obviously, during this period, we have reprioritized. We have started by saying number one priority, protecting our people, but right after that, preserving business continuity. And in some markets now, we obviously start looking at preparing for what we call the new norm and leveraging some of the learnings in this process to continue collaborating even stronger with our customers and partners. Next, please. So coming back, COVID impact is there, but it's a temporary one. We don't see a change in our Vision 2025. Our aim when we established this plan in 2017 was to grow, was to leverage the opportunities that this market transformation is offering and making sure that we support our customers, again, decoupling economic growth from environmental impact. And that, if you do it right, will create opportunity for us to grow. But what you also see in this slide represented is that in order for us to create that profitable and sustainable growth, we also have invested to shift our portfolio, to invest in competitiveness, but also to shift in terms of business models, also to add more software, more services. That's why we set ourselves the ambition that we want to double the service revenues in these strategic periods, that we want to fully digitalize our portfolio, and we want to continue to invest in being best in class, in quality and delivery and operations. And if you do all this right, that we've been investing substantially in the past, and we will continue to do this with the support of Hitachi, we will continue to grow faster than the market. We will strengthen our number one position. And I'm very excited, the Power Grids team, to also leverage the learning that Hitachi has in embedding the sustainable development goals in the strategy. We have already identified a few of those that are for sure, very relevant to our strategy. Next, please. To summarize, three key messages. Number one, we're committed as a global leader to the sustainable energy transition. Number two, we will, with all the efforts, with investments on technology, on people, on competitiveness, on operations to drive for profitable and sustainable growth, and we are in an attractive market. Number three, we will continue to focus on customers and people. We've been setting those priorities since the start of our strategic plan. We have a fantastic alignment with Itachi team on the aspect of being close to our customers and being close to our people. And, yes, there is an unprecedented situation that we're facing altogether due to the coronavirus, but that will be, at a certain point in time over, and we will come out of this, even stronger than before. Thank you. Mr. Fakin, thank you very much. At this moment, we would like to move on to questions and answers. Those of you with questions, on the screen of the video conferencing system, there's a button for you to raise your hand. Among those who have raised a hand, we will call upon your name. So please unmute. State your name and affiliation before asking your questions. Now once we designate a questionnaire, we will be releasing all the buttons for questions pressed. So if we move on to the next question, you will have to press the button once again. And the video of the questionnaire will not be shown this time. Now we would like to take questions first from those of you on the Japanese channel and then move on to those of you on the English channel. That will be the order. So those participants on the Japanese channel, may we take questions from you? Please press the button for questions if you have any questions that you wish to ask. REPRESENTATIVE:] Please unmute your microphone and start your questions. Well, thank you. Can you hear me? Yes, we can. Well, thank you. I have a question of Mr. Higashi Hara. Just once again, acquisition of ABB from Hitachi's overall point of view, well, growth investment, 2,500,000,000,000.0. I understand that this acquisition is part of it and the remainder is going to be for Lumada and IT related investment. So this time, the customer base that ABB has had Lumada's products will be sold to ABB's customers. And the business environment, therefore, after the acquisition, is going to have a major impact on Hitachi's business performance going forward. So once again, if you could talk about the significance of this deal. Answer, Higashiara speaking. We talked about this in the medium term business plan, 2,500,000,000,000.0 of growth investment, 1,000,000,000,000 out of it is spent on ABB. That has remained unchanged. And what has been Hitachi's strength? We have been asking ourselves. Hitachi's strength is that OT, IT, and products, we all have, we have all of them, and there's not many companies around the world who has all three. Well, there are lots of, cyber technology. There are lots of companies with products, who are growing, but IT, OT and products, we have them all. And we provide solutions to customers' problems, and we contribute to social innovation. I don't think there's many companies who can do that. Well, ABB power grid team is now joining hands with us forces with us. So the new company, if it engages in social innovation with their technology and ours, power grid operations can be controlled. So OT and products plus Hitachi's IT combined. By so doing, social innovation business can further be accelerated. So 1,000,000,000,000 yen of investment that we are making is not an expensive one. That's my belief. That's my answer. Thank you. Just to continue, in relation to that, in terms of Hitachi's energy business, as was reported today, fossil fuel, power generation, nuclear power, we've been talking about all along. And energy demand is shifting from power generation to transmission and distribution. So is the shift taking place? What's your thinking on energy? Well, I think what's going to happen is as you suggested, but for details, I would like to turn to Nishino. So I would like him to answer in collaboration with ABB. Well, Nishino speaking, you are right, but there's a background to it. In terms of power generation, with respect to fossil fuel power generation, we did downscale that. But Hitachi does understand the business of power generation. As Mr. Fakin earlier said, power sources are going to change. They're going to be renewables sources. And of course, hydropower will continue to be important as that's been the case all along. So we know about power sources and grids where innovation is happening a lot. That's where we're going to focus on in making investments and creating assets. That's our thinking. So as you rightly suggested, in terms of assets, we will focus on power grids and digitization. Why do you think do we think we can win? Well, as I said, on the demand side as well, on the users side, we've been creating a lot of innovations. So by bringing all of them together, we will be able to offer something special, and that's what we aim at. And in terms of that, grids are important. Well, if I may add to that, going forward, we should not look at just either demand or supply. We have to look at both, to strike the right balance and control effectively. So in that regard, power grids are going to be very important. One last question about numerical targets. Mr. Fakin, in his presentation, said that there's no change to the plan for 2025. And operating margin of 10%, that should be the threshold for acquisition for Hitachi. But right now, the margin is lower than that. So ABB is now undergoing structural reform, think. So Hitachi's 10% margin target of 2021. Given that, how will the margin change? Could it be raised to 10%? So what is the scale and the time line? Well, Nishina will answer. We had discussion on this with mister Farquhar and has, come to an understanding and has we have, drawn up a business plan. But because of COVID-nineteen, factories are suspended, so it will have to be delayed somewhat, unfortunately. So it's unfortunate, but a few percentage points reduction may have to be accepted. But as I said, we are implementing structural reform, and it's been done very well, actually. So to give you the conclusion, 2021, MTNB, the last year of the plan, I think we will be able to meet all the goals that we set. And for the next MTP, the enterprise value of this company is such that, well, 10% is on the stand alone basis, of course, we will create synergies. But in 2021, on a stand alone basis, we would like to create synergies. And as Mr. Fakin said, we are preparing for such synergies to be generated. So toward 2024, we would like to increase the size of the business to double that it was at the time of acquisition. So the size being double, does that mean operating margin is going to be double as well? Well, I'm talking based on the enterprise value. Well, if we acquired at a, it should be two a in several years' time. That's what I mean. Thank you. So next question, please raise your hand. Next. Mister Nakamura, please unmute and ask your question. Thank you very much. Do you hear me? Yes. I do. So 36,000 overseas employees will join. So Hitachi Group, more than 50% will be foreign nationals. And in the energy sector, it will be mostly foreign nationals. So the speed of Hitachi becoming a global company, especially in the energy sector, which used to be a domestic business, so I want to ask you if you can keep up and how to mix the the components. How do you think this can be worked out? Nishino will answer that. Thank you for a very fundamental question. I was a CFO for eight years. The rail business acquisition and Johnson Control and HVAC been done doing all that, and there were lessons learned. For this time, I have two answers. We prepared ourselves significantly to launch the system, establish the system. So, this template was real. When we started the rail business, we struggled, but now it's working very well. And the leadership is Japanese and an Italian or, British men. So we have a this company is run by diverse talents. And there's one British man in as the vice president in the management meeting. So after all this experience, we now have Claudio san and, other members we've discussed for eighteen months. So as I showed you at the beginning, the young members are learning each other, and they are highly motivated to create a new culture. So I have two answers to your question. So whether we can manage this, we already practiced and and trained ourselves significantly, and we've come this far. And secondly, Claudio san and others, what we've done in the past, Claudio san and other members learned so much from us, from what we've been through. And now joining the new members to Hitachi, they are now recognizing the big value. So that's a big difference. So long story short, we already practiced. Claudio san, please. Yes. Claudio san, please. Yeah. The question is the the the integration on the culture and the management. Yeah. Why? Yeah. Myself and you, I believe, yeah, it's it's it's it's can lead everybody to their success. Thank you, Nishino san. And and I think you you have described it already very, very well. There is, as I mentioned also in my in my presentation, there was almost a natural way of looking at things when we put the the two aspects on how, obviously, we manage the business, but also how we see this team and joining forces can really, on the long term, support not only the the business as such, but the bigger vision and perspective that Hitachi brings in with social innovation. And the aspect of addressing first the customer and creating an environment and business models that allow us to collaborate and cocreate with our customers. We had that same approach, but discussing with Hitachi, discussing with Nishino san and his team, we found out actually that in many aspects, they have developed that approach, already, and we can leverage from that. We can share experiences. Nishino san also triggered already a couple of, young talent sessions that helped us in understanding that we it's more what we have in common. We're all passionate about technology. We're all passionate about people. We're all passionate about this energy transition, and we're all passionate by doing it in a green way. And I think that's a fantastic opportunity and a foundation for us. Now the challenges are there, but I think together, we're much stronger to drive those changes and to deal with the short term challenge and create the opportunity with our customers. Thank you. May I ask you one more question? You already explained, but once again, ABB's existing foundation on existing foundation, Hitachi's IoT, Lumada IoT technology will be added on top of that. And by doing that, what will become possible? So if you could once again explain, what will be added? If you could elaborate once again. So Nishino would like to explain. So in the slide in my slide, ABB, Power Grids, a great software package was shown. As Claudio san explained and president Higashihara explained, this is the OT part. This is extremely strong, extremely powerful. Enterprise Asset Control, Maximo is a well known software. It is comparable to that. Claudio's team has that, and this is used in big volume globally. And this is mission critical, so it cannot be used everywhere. But by joining Hitachi, it can be used in many areas, many industries. And one more point, Hitachi is strong in the areas that are close to the management. So for example, the management optimization and the visualization and logistics, Hitachi industrial team is involved in that. So ABB strong strong strengthens in OT, and Hitachi is in IT, and ERP that is closed in management. That is strong there too. And there's overlap, but very complementary. And the customers are now expecting us to visualize with more digitalization and improve the management efficiency and capture more opportunities. So to meet that challenge, we think we are a great combination. Thank you very much for the answers. Well, thank you for the questions. To continue, those of you with questions, please press the button for questions. Now we have a person wishing to ask questions. Please unmute. Yes, thank you. Can you hear me? Yes, we can. I have two questions that I would like to ask. Question number one. In recent times, Hitachi newly introduced management indicators ROIC, ROIC. You are starting to disclose ROIC by business segment and that you're going to focus on disclosing those numbers. So Hitachi ABB Power Grid, this new company, will it play a role in increasing the ROIC for Hitachi overall, or will it be some time before it can do so? Will it take medium to long term for this new company to help Hitachi raise ROIC? The latest number shows that ROIC is 9.4%. Energy sector alone, ROIC is low at 4%. And you don't have to talk about the current numbers, but what is the role expected of, ABB Paragriz in terms of increasing ROIC number for Hitachi? Kato will respond to that question. At the outset, our CEO, Higashi Hara explained this, but we are now reviewing various aspects of our business plan at the moment. And around the end of this month, we will be announcing the outlook for Q1 results. And for the Spire Grid business, now that we have acquired it, it will be reflected in the outlook that we will be announcing at month end. ROIC will be shown at that time. So if you could please wait until then. Well, let me answer that. Just as Higashi Hara said, this business was first carved out and then brought to the group. So balance sheet is not yet finalized. So in terms of the direction, as Mr. Fakin said, digitization will increase even further. So given that direction, I'm sure ROIC for Hitachi will be raised because of this business that we have acquired. Well, thank you for the answer. In other words, the performance announcement for April through June, well, you're saying that you will not be able to come up with a definite ROIC outlook. Correct? Yes. The answer is yes. I think some of you know, but we cannot just cook up the numbers. We have to have a neutral party reviewing the numbers. ABB's auditor is different from Hitachi's auditors, so it's going to take a while to go through the auditing process, but it's the accounting rule that we have to follow. And as Higashi Harasan said, once the numbers are finalized, we will be reporting them to you. I hope you will understand understood. My second question is as follows. The just to represent the equity market, what they're thinking, one and a half years ago, Hitachi announced that, this deal will take place. And, I would like to turn to mister Fakking for an answer for this, actually. So once the deal was announced, ABB equity price, stock price went up. On the other hand, Hitachi's stock price, because of various factors, did go up as well. But then for this particular project, Hitachi was not necessarily positively evaluated. Well, actually, looking at the changes in Hitachi's stock price, this project, this deal was not necessarily positively looked at. But what you talked about and the opportunity for power grid in the future, the presentation was very robust. But then it seems that the stock market did not see it that way. They had a different view of the deal. So are you saying that the stock market is in the wrong? As you said, you're going to see increased profitability, that enterprise value of this business is going to double? Well, what, ABB cannot do but Hitachi can do and what ABB did not know but Hitachi does know. So why the discrepancy between your view and the stock market, view? Well, because you are insiders, you may know, what's wrong about, the stock, analysts' views. So what are they, if you could elaborate? Well, mister Fakin was a member of, ABB until two days ago. So if he's to answer, he may divulge, insider information. So let Nishina, myself, answer your question. Well, the stock market, the equity market, and the financial analysts, their views were that ABB's discontinued business numbers, they were not very good. And perhaps because of that, their view was not necessarily positive. And, the market was not necessarily sold. There are backgrounds to this. They are twofold. So discontinued business number disclosed by ABB was now growing. That was one aspect. And g men's GE are competitors. Their trends, I think, those were the two factors that led to that dim view. And power grid business, that's led by mister Farquhar, was not necessarily positively evaluated. I'm not in a position to say that stock analysts were right or wrong, but I think, making a judgment based on just two factors I mentioned, must have been difficult. And let me share my thinking. ABB's discontinued business, our counterpart, Timo san, the CFO, my counterpart, we had a lot of extensive discussions on this, and I cannot share all the details. But the disclosed numbers actually include non power grid business substantially. And for areas where structural reform were necessary, we performed structural reform and then carved out for such businesses. And mister Fakin has focused on this, worked on this very hard. And so one off cost was included quite extensively because of these efforts made. But just looking at the numbers, people may have concerned, and that is something that we can't do anything about. And these are all details on the ABB business side. In due diligence, we did see numbers, but we cannot share them with you at this moment. Now another part of the background is, Siemens and GE. Their performance is not very stellar. Siemens Power, the company that you know well about. This company, whether their performance is good or not, I'm not in a position to judge. But in terms of technology or Siemens power, wind power turbine, well, they have a lot of non power grid business. Their business is not necessarily power grid alone. Wind power business of theirs, their performance is disclosed, but not very good. And another company that they have, they're not doing very well either. So we don't have a comparable company that we can compare against. Those of you in the market, I'm sure you are performing a lot of analysis and have taken a hard look at what we are doing versus what others are doing, but there are no apple to apple comparison. And because of that, perhaps, they made the analysis that they did. One off cost, mister Farquharan pursued structural reform, and there is public announcement that was made about that shutdowns of several factories because of the relationship with the residents in the community, South Wharton factory, for example, we have already made an announcements. And, so I hope, what I have, said, will be of reference to you. Thank you. Thank you. Now we would like to take questions from the English channel. If you have any questions, please press the raise hand button. Please please unmute and ask your question, please. Hi. Yes. Thank you very much. Can you hear me? Hi. Yes. We hear you. Yes. So I have two questions, and maybe questions are directed to, Claudio as well as to, the other presenters. First is, can you please talk about the restructuring that has been, performed over the past couple of years? One of the speakers mentioned that restructuring was successful, but we would like to hear, more details on this. And the second is, if you could please talk about the order book because one of the market concerns has been that the order book has been declining in line with declining T and D spending since 2015. But my understanding is that you expect that trend to stabilize or maybe turn, to positive. So if you could talk about order, book, that you have on hand now. Thank you. Yes, Claudio, please. Sure. Thank you. And if you allow me, I would also add to what Nishino san said before on on the point about how we see the market and why we're firmly of the opinion that once you look at this business with the right time frame, This is life cycle. It's long. We you know, investments in mission mission critical infrastructure, it takes a long time to decide. It takes also long time to design and to implement and execute. So we've been, and I personally have been, over twenty five years in this market, we have seen and always as a leader in this market, we have seen, in the past crisis. We have seen downward market trends. We also have seen significant growth market trends in the last couple of decades. But there is one essential difference on what we see today in this market transformation is that there is while in the past, there was more of a local trend, there was more of a regionalized decision making process on where to invest, how to invest, which source of energy, what type of grid. Going forward, because of what we explained before, there is a much clearer foundation on where those investments, because of the integration of renewables, because of the different patterns of consumption, are going into. So we see those trends very much globally. And we, as a market leader globally, we are in a unique position to tap into those opportunities and share those learnings and add the value to the customers across that market. Once you look at then the period of the downturn on the market, the picking up, then obviously, you always have a lag. Now I link into your questions about the growth. If you look at the last couple of years, we've been able, despite not such a positive market trend because of the many reason we explained, we've been able to grow our top line. So our orders, our order backlog has been growing in the last couple of years, not only in terms of dollars, but also in terms of quality. Now what because of the business, the trend on the revenue when the orders and the order backlog translates into revenue, into deliveries, into execution, there is always a lag of one, two years. So we have been seeing, and you've seen it in the in the numbers that we have been disclosing before in 2017 and '19, that we did not manage to grow on the revenue side. Now the order backlog will support hopefully, we will be out soon out of this crisis, will support again that growth. So when you look at it, the long cycle, we are 100% convinced that we are in a market that will support growth. But yes, as also you were mentioning, we had to deal with I would not call it so much restructuring, more transformation. And we've been investing. Part of our strategic plan 2025 was to invest additional efforts, money, resources in transformation initiatives. And part of those transformation initiatives are related to footprint changes. Nishino san was mentioning some of those. We will have to continue to do those. We keep on adapting our footprint to the demand. That's just responsible business decisions that we make on a daily basis, we make on a monthly basis, on a quarterly basis. But what we don't change is our strategic long term plan. We know that this market will need a certain portfolio. We know that in order for us to deliver that technology, we need to also, as a market leader, shape that portfolio and shape the way we deliver with different business models that portfolio. And that's something that I see now joining forces with Hitachi that will have a tremendous opportunity to drive that change on on on the longer term. So the market, yes, there are challenges. Yes. The pandemic is creating a challenge. It's in front of us. We're dealing with this. We are setting the priorities right to deal with this, but it's a temporary window. We know that this will change. And if government, if markets and ourselves will continue to drive the decarbonization, will continue to drive the sustainable aspect of the energy, we will see a lot of these investments coming back. So there is a temporary dip on investments. We need to deal with it. We need to take the actions in order to manage the cost accordingly. But on the long term, we also don't want to compromise on investing in innovation as we have been doing in the last one hundred over years. Thank you. Thank you. UNIDENTIFIED It's now past the scheduled closing time. But one last question from the Japanese channel, I think we can accommodate. So those of you with questions, please press the button for raising your hand. I see a hand raised. Unmute yourself and start your questions, please. Yes. Can you hear me? Yes, we can. One last question. It was in the presentation, but in terms of the impact from COVID-nineteen, things are changing very much these days. But you say that this business is going to grow, why? So with the acquisition, what changes will take place? Which areas will decline? What other areas will grow? So overall, the business is going to grow, but if you could please provide the details. Well, Nishina will answer. As we discussed earlier, of course, we're impacted by COVID-nineteen. It's impacting both Hitachi's business as well as Power Grids business and customers' business. As Claudio san explained, we are receiving orders very successfully. Orders are being built increasingly, actually. So we are receiving almost record high orders. And so it's just that there's been some delay because of COVID-nineteen. So compared to when we made the decision to acquisition, our sounds remains unchanged. Why do we believe so? Of course, there are things that have changed ever since the announcement was made. Well, we've been talking about investments into renewables. Well, there's a very strong tailwind. Right now, oil and gas is down. So overall, investment is rising, but there are areas that are stalled. There are other areas that are growing. But Claudio's team is very adept in securing orders, and that's because they have a global footprint that allows them to get orders successfully. So as I said, orders are building up very successfully, and there's some delay, as I said. Well, in the meantime, we would like to pursue Hitachi's reform. Now that we have this business, we are able to elevate our globalization initiative one level, two levels higher. And of course, there are some revisions made to the original plan, but we have the same understanding, the same thinking to approve this acquisition, and that was the case. So inclusive of orders, our business continues to be robust. There's impact from COVID-nineteen, sure. But in terms of enterprise value and in terms of Hitachi pursuing reforms, there should be no delay. And because of that, we made a decision to close this deal. Thank you. Thank you. Time has come, so we will close the web conference on the completion of Hitachi's acquisition of ABB's Power Grid business and the establishment of a new company. Thank you very much again for taking time out of your busy schedule to attend this meeting.