The time has come to start the web conference on Q3 fiscal year 2020 earnings for the media for Hitachi Limited. Thank you very much for attending this web conference despite your busy schedules. We have the information available on the IR site as well as the news release site of Hitachi Limited for your reference. Let me introduce the speakers to you. Yoshihiko Kamura, Senior Vice President and Executive Officer, CFO of Hitachi Limited Tomomi Kato, General Manager of the Financial Strategy Division Yasuo Hirano, Executive General Manager of the Corporate Brand and Communications Division.
The outline presentation will be provided by Mr. Kamala, who will be switching the screen. Mr. Kamura, please. Thank you very much for attending this web conference despite your busy schedules.
We will be announcing the Q3 fiscal year 2020 earnings. In the 3rd wave of COVID-nineteen, we are still able to maintain our business. We appreciate this very much. I would like to express our respect to the respect to people who have made this possible. Now I would like to start off with the basic outline.
There are 3 characteristics. Regarding the budget that we have formulated at the beginning of fiscal year, it was very conservative because of COVID-nineteen. And it seems that we are likely to achieve this budget or even exceed this. So we have achieved this level by controlling the COVID-nineteen impact. Regarding the environment, this is the 1st and foremost challenge, and we have been able to capture significant volume of environmental business.
We are able to report this to you today. Compared to fiscal year 2019, PL earnings have declined. However, on the cash flow basis, we have had a very good record. This is something that is noteworthy. So this is the basic background in which I would like to present the performance.
Please refer to Page 3. Here, I have outlined what I have just mentioned as well as the major topics for the Q3. There are 4 key messages here. First is regarding digital transformation. We have been able to capture the wave of digital transformation.
In particular, IT segment is driving Hitachi's performance overall. As mentioned here, in terms of operating income for the Q3, we have reached a ratio of 13.5%, very high level has been achieved in this regard. And number 2, promoting business expansion in China. This is something I would like to refer to later. The Chinese economy is recovering.
We are able to capture the recovery of the business in China. Especially in the area of elevators. The business is very strong for us. As for the Automotive System business, we are experiencing a market recovery in China, expanding our business. Thirdly, this is regarding the environmental and social value that I mentioned earlier.
The environmental theme is very important for the Hitachi's business. We have been able to achieve good results. As seen here, Hitachi Asimo, which has been created as integration with the Honda parts company. We have been promoting the XEV related business. In the summer of we have acquired the Hitachi ABB Power Grids, and this is referred to as Hapuji.
And more than half of the business we are capturing here is environmental related. In the 3rd quarter, backlog is more than 39,000,000,000 yen or 30,000,000,000 yen. And therefore, this is 1 quarter, and it is achieving very good levels for Q3 orders at JPY 2,900,000,000. Various applications such as touchless is being introduced, which we are capturing as our business as well. As I mentioned at the outset, cash flow remains very strong.
This is one of the major characteristics of the 3rd quarter's performance. Let me go into the numbers now. Please refer to Page 4. Here, we are looking at the revenues as well as operating profit ratio. Please refer to the graph on the left hand side.
This the curve shows the adjusted operating income ratio. And the revenues is shown by the black bar and the revenues for the fiscal 2019 as well as fiscal 2020 revenues are shown here. We are showing the numbers for Q1 to Q3. Now from Q2 to Q3, the dark gray should be noted. JPY 2,100,000,000,000 has grown to JPY 2,200,000,000,000.
COVID-nineteen is having a significant impact. However, having entered the Q3, revenues have continued to grow. And as for the curve, looking at the operating income ratio, the rent is for the this fiscal year 2020 and the gray curve is fiscal year 2019. And you can see in the gray is the ratio has been recovering from 3.7%, 5.7% to 6.1%. And you can see that on the right hand side, the Significant Growth segments are shown here.
Looking at the IT segment, for the red curve, we have shown here 13.5%, which is the highest record ever. For Smart Life segment, below Automotive in China business as well as in terms of consumer electronics, we have seen household appliances have seen a growth. Please refer to the next page. This is showing the nomada business. The major topics for the Q3 is shown in the highlight here.
We have been able to launch the alliance program with various partners, Amazon, AWS, Cisco, Google and others. Big names partners have been captured as in our Alliance program. We are working together in terms of promotional sales of these Alliance partners. So we believe that this will further accelerate our business going forward. Please look at the numbers now.
On the right hand side, in the middle is the bar graph showing the fiscal year 2019 and the fiscal year 2020 forecast. Revenues as shown here, JPY 1,37,000,000,000 and this forecast is JPY 1,100,000,000. So we are assuming that we will see growth of 6%. Let's look at the details. Red is the core business of Lumada, which is directly linked to the IT business.
Grey is the Malaysia business of Lumada. Using Aitara, IT power grid as well as railway business will also be captured. That is reflected here in gray. The core business is growing very strongly. The gray area has slowed down because of COVID-nineteen.
However, we believe that it will continue to grow going forward. Specific As Therefore, we believe that the related business will continue to contribute to growth. Please look at Page 6. Further details are shown here in terms of Q3 topics. In January, Hitachi Automotive System and the 3 Honda parts company, Keihin Showa and Nishin Kogyo have commenced operation.
The 4 companies' strength will be brought to bear going forward. As mentioned here, we will be promoting technologies in electrification, autonomous driving and connected cars. We will continue to make investments in this area. The second is relating to home appliances and services. Atelik and Hitachi Global Light Solutions agreed on a joint venture.
Archaic will have a 6% stake, and we will have 40% stake. Some people may know of Archaic. This is the home appliance of the largest conglomerate in Turkey. We will be working together with Assurant to grow the Hitachi business in terms of home appliances going forward. The environmental business is growing.
We will be integrating the Hitachi ABB Power Grid Business. This will become important arm for Hitachi in the environment related business. In addition to Norway's substation that we have already announced, we will also have our 1st Germany Norway HVDC interconnection. And testing has already begun. In terms of the railway, Eversheld Rail has signed an agreement with us to develop the intercity battery hybrid train.
These are all environment related business. Regarding social value, on the other hand, various solutions are being offered. First, the remote touchless products are being provided. The contact less elevator solution is being provided. And this is receiving high evaluation because of the current environment.
Human flow visualization technology is being demonstrated at the Tokyo Dome. The season will begin now. We believe that we can continue to develop new solutions in this area going forward. So those are the major topics. Now please refer to Page 8.
This page shows the highlights of the results. For the 3rd quarter as well as the Q1 to Q3 numbers are presented here. What is noteworthy is at the very top, we have sold Hitachi Chemicals and Power Grid business has also been included. So there were some changes in our Petroleum. Now the dark gray, the revenues and light gray is showing the adjusted operating income.
Left hand side is the Q3 for fiscal 2020 and the right hand side is for the Q3 fiscal year 2020 and adjusted operating information is shown in the curve. Looking at the revenues for Q3, we have seen growth in revenues from JPY 2,100,000,000,000 to JPY 2,200,000,000,000. For operating income, it is a decline, but revenues have continued to increase. On the right hand side, this is the performance for Q1 to Q3 at a cumulative basis. Looking at the right hand side, Q1, Q3 in fiscal 2020 shown here, it was KRW 316,900,000,000 in terms of operating income compared to KRW 445.6 percent of last year, we have reached a level of 70%.
Therefore, we are level similar to last year or similar at the level of the plan or even above. Please refer to EBIT, JPY 503,500,000,000 and air on air basis has increased by JPY 448,500,000,000 and EBITDA is JPY 855,400,000,000 year on year basis, increased by JPY 482,300,000,000 Cash flows from operating activities to JPY 426,400,000,000, an increase of JPY 100 and 18,500,000,000 year on year cash flow remains very strong for us. Page 9. Here, we have given the breakdown between the 5 secondtors and listed subsidiaries. Regarding the 5 sectors, as mentioned in the highlight, increase in revenues, but decrease in profit.
Power grid business has contributed significantly for the increase in revenues. We have 2 listed series, construction machinery as well as metals. They have been impacted by COVID-nineteen. So they have decreasing revenues as well as earnings. In terms of revenues for 5 sectors, JPY 4,800,000,000,000 for the listed subsidiaries, JPY 1,100,000,000,000 below comparing year on year basis for 5 sectors, 108% or higher than 100% for the listed subsidiaries, 60%.
Adjusted operating income is also reflecting this trend. For the 5 sectors, JPY 8,000,000,000 and listed subsidiaries JPY 8,900,000,000. Adjusted operating income ratio will also reflect this. For 5 sectors, 6.3% and the listed subsidiaries, 0.8%. Therefore, the impact was very significant for the listed subsidiaries.
Now looking at the EBIT ratio, 5 sectors at 10.8% and this is Series 2.2% negative. Therefore, there as the contrast is very strong between the 5 cities and listed subsidiaries because listed subsidiaries are focused on the upstream business, so this is inevitable. Page 9. Or rather Page 10. From the left to right, we are comparing the Q1 to Q3 fiscal 2019 to Q1 to Q3 in fiscal 2020, revenues above and adjusted operating income below The changes are shown in this waterfall chart.
Please look at the upper side looking at revenues, starting at JPY 6,300,000,000,000. This is the starting point. And to the right, JPY 5,979,000,000,000,000. And the changes are shown from the left to right. Divestiture of Hitachi Chemicals has declined.
Hitachi ABP progress increased, foreign exchange adjustment as well as others. And as a result, we ended at JPY 5,9,79,000,000,000. Looking at the adjusted operating income, similar trends can be seen. Divestiture of Hitachi Chemical increased by the Hitachi ABB Power Grids on the right hand side. Others include various adjustments, minus 19 300,000,000 yen ending at 116.9%.
Page 11. This table shows the financial position and cash flows. What is noteworthy here is the balance sheet. The total assets should be noted. The gray shaded area shows the situation as of December 31, 2020.
In terms of total assets, last year, total assets was below JPY 10,000,000,000,000. But now as of the 3rd quarter, we have been able to increase assets above JPY JPY 10,940,000,000,000. This is because of the ABB acquisition that has been reflected. And you can see interest bearing debt has increased to JPY 2,600,000,000,000 and the increase is on the right hand side. We have acquired ABB, Power Grid financed by borrowing.
That is the reason why we have seen an increase in this line. The ratio should also be noted. What I have already explained is reflected. The DE ratio was very strong at 0.35 times. But because of the financing using debt, it has deteriorated to 0.71 times temporarily.
But in the near future, we should revert back to a level of 0.5x shortly. Cash flow is shown below. Cash flow position has been very strong. Cash flows from operating activities compared to previous year increased by JPY 118,500,000,000 and cash flows from operating activities was JPY 426,400,000,000. We had the major investment.
Therefore, cash flow from investing activities was negative. But looking at the core free cash flows, excluding the M and A was JPY 181,700,000, which is an increase of JPY 174,200,000,000. Once again, I'd like to emphasize that cash flow remains very strong.
So that was the 3 months Q3 and the 1st to third quarter cumulative results. Next, from Page 13, let me explain the full year forecast for fiscal year 2020. Please turn to Page 13. The same diagram is shown here. Left side is the revenues and right side is the adjusted operating income.
Left side, revenues. The light gray is last year and dark gray is this year. As you can see, revenue is down. But as you can see on the right side, the operating income is JPY 420,000,000,000. It is a decline year on year.
But in October, we announced JPY 400,000,000,000. So after 3 months, we now improved this by JPY 20 1,000,000,000 yen. So it's both decline in revenues and operating income, but the adjusted operating income is now up from JPY 400,000,000,000 to JPY 420,000,000,000. Now the cash items on the right side, second from the top, EBIT, JPY 680,000,000,000. In October, this is up by JPY 94,000,000,000 compared to previous forecast.
And the net income is JPY 370 1,000,000,000, which is JPY 70,000,000,000 up from the previous forecast. This is the record high number. This net income is record high. EBITDA is 1,174,000,000,000 yen this is plus JPY 121,000,000,000 compared to the previous forecast. And cash flow from operating activities, as I mentioned earlier, is up by JPY 50,000,000,000 JPY 550,000,000,000 So to repeat myself, cash flow is very strong.
Next,
Page 14, please. Here, once again, let me explain the forecast by the 5 sectors and the listed subsidiaries. The trend is similar to the 3 quarter cumulative numbers. So the center part, the 5 sectors from the top revenues, JPY 6,780,000,000,000 and listed subsidiaries JPY 1,520,000,000 and year on year level ratio is around the same as the earlier numbers, so 107% 62%, respectively. And total consolidated revenue is JPY 8,000,000,000,000 300,000,000,000.
This is 95% year on year. And adjusted operating income, yen 391,000,000,000, and the total is yen 420,000,000,000 EBIT, 699,000,000,000 and minus 19,000,000,000 yen so total is 680,000,000,000 yen EBIT ratio is 10.3% and minus 1.3%, total 8.2%. So the bottom part, net income is total JPY 370,000,000,000 This is our forecast.
Next, Page 15, please.
So here, let me explain Hitachi as demo. We integrated and this is the number we are announcing for the first time, Hitachi Asitomo. Our plan is as follows: This table on the far left, you can see the previous forecast. This is excluding the integration impact, Hitachi Automotive Systems numbers. And in the center, you can see the integration impact and the forecast Hitachiya shimo numbers.
And to the right, you can see the acquisition related amortization of intangibles. And on the far right, you can see the net total. Revenues, Before the integration, the forecast was RMB 749,000,000,000. And of course, the business increases with integration. So including the integration impact, it is RMB 974,000,000,000 and the total is RMB 974,000,000,000.
Adjusted operating income before the integration, 22,000,000,000. This increases to 32,000,000,000. On the other hand, EBIT. In others, you can see minus 27,000,000,000. This is the impairment, Hitachi Automotive.
We had some partial impairment in the factory plants. So total
EBITDA
is 52,000,000,000 yen on the far right because of the amortization of intangible of RMB7 1,000,000,000. And EBITDA ratio, 5.3%. On the far left, you can see the without the integration impact, 8.1% and it's lower than this, but this is because of the impairment. It's down to 5.3% because of the impairment. So from next fiscal year onward, there will not be this big impairment.
So we think this will improve to 10%. So please understand this is a one off level, one off figure. Next, Page 16, please. So the fiscal year 2019 revenue all the way to the right side, like I explained in the Q3, similar trend can be seen here. So the divestiture of Hitachi Chemical negative and then Power Grid is added, that's a positive.
And then, ASTIMO integration impact in January and the foreign exchange adjustment and others in far right, JPY 8,300,000,000,000 Adjusted operating income, similarly, you can see the trend. RMB661.8 billion is all the way to RMB420 1,000,000,000 this year. Page 17. This fiscal year, we had large asset ins and outs. So on the far right, you can see RMB420 1,000,000,000 from the left RMB420 1,000,000,000 to RMB370 1,000,000,000 on the right.
This shows the changes. The business reorganization profit, you can see the description in small letters, Hitachi Chemical and then in Medical mortality, the diagnostic imaging related business will be transferred. So that's an impact. And Agility Trains, the European train companies, part of this East stocks, the business is going well. So we sold part of it.
So this is plus JPY435 billion. Next, Hitachi Capital, impairment loss of Hitachi Capital stock and others, this is negative RMB30 1,000,000,000 and Hitachi Metals and Automotive Systems Business, this is the impairment loss, negative RMB60 1,000,000,000. And to the right, you can see this leads to JPY 370,000,000,000. So this is the fiscal year 2020 full year forecast. And let me just touch on the Appendix 2, Page 19, please.
IT segment, the center 1 of the adjusted operating income. Left side two bar graph is the 1st to third quarter cumulative last year and this year and the right one is the full year last year and this year, 11.8%. So the operating income ratio is very strong, 232,000,000,000 operating income. And at the bottom, you can see the reasons, the factors of income and decrease increase, decrease. The new application is being developed and project management is being reinforced.
So profitability is improving, thanks to that. Next Page 20, please, Energy segment. The center part again, FY 2019 and FY 2020 in the center, the dark gray RMB43.7 billion. This is Power Grid acquisition result. And on the bottom, you can see minus RMB71.8 billion.
This is the related expenses. This is the amortization of the intangible. So the total is minus RMB14 1,000,000,000. Industry segments, likewise, on the center, adjusted operating income. In the beginning of the year, the industry controlled the entire industry controlled the investment, but now we're seeing a recovery.
So the income ratio is now up to 5%. Next, Page 22, please. Mobility segment. There are 2 main points here, elevators and escalator business and the rail business. Dark gray is the elevator and escalator business, build system building systems.
We are capturing the recovery in China. So on the far right, FY 'twenty, we are recovering to JPY 63,000,000,000 On the other hand, rail railway system light grade, the production hub is in Europe, which is heavily impacted by COVID-nineteen. And so we have a long list of the order, but we have to manufacture to turn this log into cash. Overall, this is a one off event. So we are not particularly concerned about it.
Next, 23 Life Smart Life segment. We see some strong characteristics here. Dark gray is the home appliance from RMB 23,000,000,000 to RMB 32,000,000,000 this year. In response to COVID-nineteen, people are spending more time at home, so they're replacing home appliances. So we captured such demand and grew strongly.
And like grey, this is high-tech measurement equipment and we think this is also due to COVID-nineteen. It's a slight decline, but we this is constantly contributing to our profit. Next Page 24, Hitachi Construction Machinery. As mentioned at the outset, it was heavily impacted by COVID-nineteen. So adjusted operating income in the center last year was RMB 75,500,000,000 this year RMB 39,000,000,000 and operating income ratio was 5.1%.
Profit declined sharply. On Page 25, Hitachi Metals. The financial results was already announced. So I think you know the adjusted operating income in the middle last year was RMB14.3 billion. This year, it's negative RMB10 1,000,000,000.
This is because of the impairment treatment and it's unavoidable. But the materials business is the centerpiece and therefore it's heavily impacted. Page 26 and 27 is by segment. So please take a look at later. And lastly, Page 28.
This is the revenues by market. So in a clockwise manner, North America, Europe, China, Japan, ASEAN, India and others, North America, in the circle, you can see the ratio between last year and this year, negative 8%. So it's not fully recovered. Europe is plus 5%. It's an increase.
As you see in the bottom, power grid was a positive factor, so it's a plus. China is +8%. This is that we captured the recovery in China. Japan is difficult compared to last year, minus 11%. And ASEAN, India is also difficult.
On the other hand, other areas, plus 19%. So this was areas where we Middle East and Africa, where we were not particularly strong in the past, is now growing with ABB. So this reflects the world economy now. As you see at the bottom, overseas revenue ratio is now 53%, up to 53%. This concludes my explanation.
Thank you very much.
We would now like to proceed to the Q and A session. Those of you with questions, please use the raise hand mark Please unmute and state your name and affiliation. If it's unnecessary to ask the question, please click on the hand up raise hand back once again to release the question. The floor is now open. Ihara san, please Please unmute and ask your question.
I have two questions. First question is regarding Lumada, referring to Page 5. For overseas sales, what is the ratio of overseas sales? And please give us a breakdown between core and related business. Within core, what kind of services have been strong?
Please elaborate. Regarding the partner program, how many partners do you have today in the Alliance program? Solution I think that is going to be included in core. What is the current level? And what is the contribution made in terms of increased revenues?
Regarding Lumada revenues, 21 goal of JPY 1,600,000,000,000 And I think for next fiscal years, the target is similar. Do you think it can be achieved through M and A? North America, in such regions, what is the direction that you're going to be pursuing? Is it just to increase revenues or rather to provide best solutions in answering to the questions or the problems set by customers. Is that the case?
Are you going to bring to bear your strength in manufacturing? Furthermore, do you have if you have a very significant client base, are you going to being focused on AI, such as in the case of Malaysia? Please elaborate further. That's my first question. Answer.
Regarding the Lumada breakdown, Mr. Kato will provide details. Regarding North America, I would like to elaborate further. First of all, regarding average sales. For this fiscal year, we have not disclosed a number.
So let me give you the number for fiscal year 2019. For core business, it's 30% related, 50% overall, 40%. Basically, for this fiscal year, the ratio is unlikely to change. Thank you. Regarding North America, nothing has been decided yet and there is no progress made yet.
But in the past several years, we are trying to look for candidate partners and dialogue is taking place. So all options are open in negotiating today. For Lumada's related business, how the core business can be linked to related business is the major challenge. We have to make sure that we can establish a relationship to bridge this gap In various areas, in various sectors, we are now looking for the various companies and engaging in dialogue. We will continue this process going forward, but nothing has been decided yet.
This is a process that is still ongoing. Now Tokonaga san as well as CEO of Tohonoaga san, are they going to be involved? Yes, I think the answer. That is a correct understanding. Regarding environmental value, decarbonization is being promoted, inclusive of the value chain, 50% decrease in 30% and by 50%, decreased by 80% has been proposed.
Are you going to front load these targets or review your target by 30 inclusive of supply chain, you're going to be carbon neutral perhaps? What are the activities taking place in terms of target? In order to achieve your target, will capital expenditures as well as R and D required? What is the current level that is being spent? Is there are there any initiatives that have been decided in this area?
Now in the trend of decarbonization, renewable energy, the usage visualization is becoming more important. What kind of revenues can you expect in this area? What kind of expectations do you have? What kind of inquiries are you receiving? Please elaborate further.
And if possible, give us a quantitative response. The points you have made are areas that we are working very hard today. We will have a new division in charge of the environment related business, and we'll have executive offices in charge of this area as well. So what kind of investment we are going to make? And the return expected has not been outlined in terms of the schedule going forward.
But as I have already mentioned, this is the 1st and foremost important management challenge for us. Therefore, we will not only reduce CO2 emissions within the company, but we will work with customers to reduce emissions further. So this will be an effort both internal and external. In this wider context, best measures will be considered. We have not changed the schedule currently.
But in the new organization, we will deal with the environmental issues appropriately. And this could lead to a review of the targets going forward. But I don't have the numbers to present to you regarding the specific questions that you have asked today. Mr. Doma, is he going to lead this effort?
Yes, that is a correct understanding. Thank you. I have also some supplementary information regarding the numbers. We are considering the numbers regarding carbon neutral investment that is being considered today. But in terms of substance, energy saving investments will be made renewable energies will be introduced and certificate will also be acquired as well.
So I think the investment will be several tens of 1,000,000,000 per year and details will be worked out going forward. I'm sorry to go back, but going back to Ihaba san's question regarding the Lumada Alliance program. The number of partners was asked. Currently, we have 24 companies with which we have a partner program. And within 1 year, we want to increase that to 100.
That is all. Thank you.
Thank you very much.
Next, please.
Please unmute and ask your question.
Question? Yes, we can hear you.
Thank you. This is related to the earlier question. So IT and Lumada is very strong, you said. Since the outcome outbreak of COVID, it's been a year. Are you seeing some changes on the demand side?
Any concrete products or solutions you're seeing COVID impact on? And if you look back on 1 year, in Japan, the environmental awareness is changing, I think. So do you see any new solution opportunities or you see a trend the change in the current? So that's my first question. Thank you.
The first IT related part. New solutions are now emerging and we are dealing with, for example, the work from home. So how to do the attendance management, the working hour management of the work from home staff and remote work, those who are in the field site, the construction progress and the attendance ratio. This information can be shared remotely.
And
now IT is utilized with work from home and so security becomes an issue. And so the certification authentication is done remotely. So these COVID related new applications are emerging. And so we are launching them one after another. ATO, instead of touching the hand, there's a touchless panel being introduced.
Next, on the environmental side, as mentioned earlier, the solutions are, for example, Lumada, there are more than 1,000 use cases. We have more than 1,000 Thank you. Kato would like to add some information on Lumada. Page 5, we mentioned that the 3 quarter cumulative Lumada is growth of 3%. Our first quarter was minus 2%, but 3rd quarter alone grew by 12%, and so this was a big growth, of which IT segment IT segment was a big growth driver.
So we think we are enjoying a tailwind here. Thank you very much. Question, so the record high net income, you said on Page 17, Hitachi Chemical, is it because of Hitachi Chemical deconsolidation? Or are the other factors you are enjoying this
record high net income this year?
So as I explained in the material, the 2 large asset divestiture, the chemical Hitachi Chemical and the Madrehi in medical, Those 2 contributed. That's more than JPY 200,000,000,000 in net income. Thank you. Thank you very much. I'm sorry this has not to do with the financial results, but Hitachi Metals announced the other day.
In 2018, in Hitachi Chemicals, the group wide inspection took place, I believe. So the inspection of the system, this practice continued, but you could not find it. And so what is your view on this fact? This problem with Hitachi metal is very unfortunate, and we regret and feel very sorry about this. Now Hitachi Metal is a listed company and they are run independently.
So under President Nishiyama, the new structure, we are confident that this will go back to normal. This is the 3rd party independent party's investigation report that was released last week. And so we will deal with the customers and the regulatory authorities. So under President Nishiyama, we expect things will go back to normal. So we are very regret.
We regret this, and we are very sorry. On the other hand, in the mass media, it says that the divestiture preparation is underway. So is there any information you can share with us at this point? There is nothing we can share with you at this point. Hitachi Metals is now exploring various opportunities, various opportunities.
And so at the right timing,
Hitachi Middle will come up
with a proposal and we will scrutinize and look at this proposal very deeply. There's nothing that's been decided at this point. Thank you.
We have many hands up, but in the interest of time, the next question will be the last one. Senboni san, please. Please unmute and ask your question. Question. I hope you can hear me.
Yes. Hitachi ABB power grid is what I would like to ask a question about. The profit target 24% EBIT ratio of 12% is the target by 2024. What is the possibility of being able to achieve this target? The order backlog is around JPY 1,000,000,000,000.
What has happened after 6 months? Do you think that profit targets can be met?
Are there negative
assets? Did you find any negative assets? What is the near term forecast with the impact of COVID? What are the positive and negative? Are you being able to receive orders successfully?
Please elaborate further. Let me talk about the overall situation, and Kato san will discuss the specific numbers. So far, the numbers target remains intact, and we will continue to achieve this target. Hapjei, Regarding this business, it has 4 segments basically. The first is the transformer business, the substation business and second is the high voltage DC for gas.
And 3rd is the integration in designing the overall system. And what we want to grow is the area of automation and utilizing Lumada. However, this is only accounted for 10%. We hope to grow this business significantly going forward. Now there are green shoots.
The management could become more dramatically on the cloud. This is the general flow in society. We would like to leverage this to grow the business. We have a bias on weight is significant for the transformer. And the grid automation company will be where it will be transferred.
And let me ask Kato san to give you the numbers. Regarding the backlog, on Page 3, it says USD 12,000,000,000 and that is increase of 5%. We have 4 divisions, and they are all showing growth. The HVADC as well as transformers are also included. That's all.
It seems that there is no negative factors. Is that correct understanding? We have not received any report about negative factors. So your understanding is correct. Thank you.
I'm sorry that we were not able to have everyone ask their questions, but the time has come to bring this meeting to a close. We would now like to close the web conference on the Q3 fiscal year 2020 earnings for the media. Thank you very much for your attendance.