It is time, so we would now like to start Hitachi Limited outline of consolidated financial results for the 2019. The participants are Senior Vice President and Executive Officer, CFO, Mitsuaki Nishiyama General Manager of Financial Strategy Division, Tomomi Kato Executive General Manager of Corporate Brand and Communications Division, Yasuo Hirano. So Mr. Nishiyama will explain the financial results.
If you could please take a look at the presentation material comprised of slides. Page five, Slide one-two. This is the summary of consolidated statement of profit or loss, third quarter cumulative. First line revenues, 3,344,100,000,000, down 6% year on year. Adjusted operating income, JPY 4 and 45,600,000,000.0, down by 17%, 88,900,000,000.0 reduction.
EBIT, 54,900,000,000.0 reduction by JPY $250,000,000,000. This was because of loss from South Africa project settlement. And net income attributable to Hitachi stockholders, 55,100,000,000.0, a reduction of 27,400,000,000.0, down 33%. IT industry was quite robust. There was an increase.
Smart Life, energy mobility sectors, these saw a decline. And for listed subsidiaries, also a decline in revenue. As a result, adjusted operating income, IT industry, structural reform and cost reduction were beneficial for IT, which saw an increase, but Energy Mobility and four listed subsidiaries saw a decline in adjusted operating income. Slide one-three shows the five secondtors and listed subsidiaries total five secondtors plus others. And corporate elimination are all combined.
If you could take a look at adjusted operating income, 299,300,000,000.0. That's a decline of 12,800,000,000.0 year on year. And income ratio 7.5%. This is a record high that's being kept. EBIT is in the red.
South Africa project settlement and losses thereof are posted as part of this. Conversely, net income attributable to Hitachi stockholders, 40,600,000,000.0. There was review of the tax cost and losses from the South Africa project and proceeds from the sale of Hitachi Chemical. These were one off special factors, a review of the tax cost. And in the fourth quarter, Hitachi Chemical was sold.
And inclusive of that, the full year tax burden tax rate was reviewed. As a result, it led to JPY33.8 billion increase in net income. Listed subsidiaries' adjusted operating income was JPY146.2 billion, down JPY76 billion or 2.3% EBIT, 78,100,000,000.0, a reduction of KRW 128,700,000,000.0. Hitachi Metals Magnetic Material loss was posted as part of this. As a result, net income was JPY 14,400,000,000.0, down by JPY 61,200,000,000.0 year on year.
Moving on to the next page, Slide one-four, which is factors affecting changes in revenues and adjusted operating income. This is a waterfall chart. If you could take a look on the revenues on the left, there was portfolio review. Impact of that was 168,000,000,000. Automotive system business was sold, Hitachi Kokusai Electric was also divested.
These are included. Foreign exchange had a negative impact of 128,000,000,000. Excluding these, there was others JPY 142,800,000,000.0 negative impact. Lumada business grew, but other businesses saw a decline in revenue. Hitachi Metal, Hitachi Construction Machinery, Hitachi Chemical saw substantial decline.
On the right hand side, adjusted operating income is given, 5,000,000,000 negative impact from reorganization, divestiture. Foreign exchange had a negative impact of JPY 21,000,000,000. Even excluding these, others came to negative JPY 42,900,000,000.0. Cost reduction on the order of JPY 100,000,000,000 was implemented, but revenue decline had a severe impact. On top of that, investment for growth, JPY 20,000,000,000 was posted.
And as a result, 4 and 45,600,000,000.0, a 7% decline year on year. On the next slide given is the revenue by market or region. Japan, if you could take a look at the year on year, a number on the far right, Japan was 98% of the previous year and for outside Japan, 90% of the previous year. Excluding reorganization and foreign exchange impact, 100 for Japan. Outside Japan, 95.
Asia saw a greater decline. As you can see, China was 90 of the previous year, down 10% year on year. And ex China, ASEAN and so forth, 87%. Hitachi Construction Machinery, Building Systems, Automotive Systems, Hitachi Metal, these were the businesses that experienced decline in revenue in China. In Us and India, Hitachi High Technologies, Hitachi Metal, Hitachi Chemistry, Hitachi Construction Machinery, these were the entities or units that had slower business.
On the next page given is the summary of consolidated financial position and statements of cash flows. Total assets in the first line, 10,281,300,000,000.0 increased by more than JPY 600,000,000,000. That's because of JPY $220,000,000,000 increase due to changes in the accounting system for leasing, ChassisSea Break International and other m and a brought 360,000,000,000. And CCC, third line from the bottom, cash conversion cycle was 75.3 days. Compared to March and last fiscal year, there was an increase.
By the end of the fiscal year, we shall bring this down to seventy or less days. Total Hitachi shareholder equity ratio, 31.4%, DE ratio, 0.36x. Now below, cash flow statement is given. Cash flow from operating activities, 307,800,000,000.0 year on year, an improvement of JPY 105,400,000,000.0. But cash flows from investing activities because of JR Automation, Chassis Break International acquisitions had an impact, therefore, negative JPY492 billion.
There were large outflows, and that brought cash free cash flow to a negative JPY184.1 billion. One-seven gives the numbers by business segment. For the IT sector, storage for overseas markets was sluggish, but system integration business expanded, therefore, an increase of 1% in revenue year on year and a 9,000,000,000 increase in operating income. Growth investment in order to expand the digital business, that was increased. Even absorbing that, an increase in adjusting operating income was posted.
And in the energy sector, year on year, there was new regulation that had to be responded to and projects related to new regulation in nuclear energy BU saw a decrease. And there was also a decrease in revenue due to business transfer of power receiving and transforming facilities business for the industry field. And so JPY 11,800,000,000.0 reduction year on year in adjusting operating income and revenue 90%. One-eight, the next page. At the top of the table is the industry sector.
Air conditioning system for industry saw an increase in sales. As a result of that, operating income improved by JPY 2,100,000,000.0 year on year. Mobility sector was impacted by foreign exchange. Building Systems and Railway Systems, both businesses were impacted by foreign exchange. And Railway BU in The U.
K. The IP project in 2018 contributed greatly to revenues, but this has peaked out. Therefore, revenue was 92% of the previous year in Mobility. In line with that, adjusted operating income in Mobility was down by 3,800,000,000.0 yen And there was improved profitability in the Building Systems BU for the operating income, but revenues did suffer nonetheless. One-nine, Smart Life.
In Automotive Bus System divestiture was conducted that had a major impact, bringing the number to 89% of revenue year on year. But adjusted operating income saw an improvement Electric appliances, automotive systems, health care, BU, all three BUs benefited from cost reduction and improved profitability. That's an increase in adjusted operating income. Hitachi High Technologies' semiconductor production business increased, but industrial materials, crystal display exposure decreased 96%.
As a result, adjusted operating income down by 3,200,000,000.0
yen year on year. Next Slide one-ten. First is Hitachi Construction Machinery. Due to the foreign exchange factor and sales decrease in China and India, it was 92% year over year revenue. In addition, there was a production suspension or impact by the typhoon damage.
The impact by typhoon damage will be recovered in the fourth quarter. We will see a normalization in the fourth quarter. But in China and India, sales decreased, and this will still continue to be difficult. As a result, adjusted operating income is down 26,300,000,000.0 yen year over year. Hitachi Metals, decrease in demand for automobile, semiconductor and FA and the impact of business transfer of aluminum wheel business, so 87% revenue year over year.
And with that, the adjusted operating income is down by 30,900,000,000.0 yen Stetschy Chemical. Decrease in demand for semiconductor and automobile led to 92% revenue year over year, and adjusted operating income is down by 10,900,000,000.0 yen Slide one-eleven, please. Others. Adjusted operating income is down 9,700,000,000.0 yen This is the impact of deconsolidation of Hitachi Kokusai Electric.
In Corporate Items and Eliminations, this is 19,500,000,000.0 yen down year over year. It seems that this has deteriorated from last year, but we have the increase of growth investment from last year and strategic investment and the size based business tax from the sales of Hitachi Chemicals increased. So this reflects all these factors. And in Corporate Items and Elimination, EBIT is down 48,400,000,000.0 yen This is because of the absence of gains from selling Hitachi Kokusai Electric stocks recorded in the previous fiscal year. Next page, please.
One-twelve, Topics. This shows the progress of Lumada business. The revenues of Lumada business, three quarters cumulative, is JPY839 billion. This is 111% year over year. IT, Industries, Mobility are growing robustly.
And the lower half of the page shows some topics. We completed the integration of Hitachi Vantara Corporation and Hitachi Consulting Corporation in January. Lumada this new Hitachi Vantara will lead the global expansion of the Lumada business. Next, Oumika Works was identified by the World Economic Forum as a lighthouse, an advanced factory for the first time as a Japanese company. This is we are recognized for total optimization and sophistication in the entire value chain utilizing Lumada solutions.
Next, we started the proof of concept to optimize the portfolio of insurance using CMOS annealing, a new type of computer through co creation with Sonpo Japan Nippon Kowa Insurance and Sonpo Risk Management. Next, Page 16, one-thirteen. Business strengthening and financial strategy towards growth. First, the announcement today. We decided to commence a tender offer for shares of Hitachi High Technologies Corporation.
And we completed the acquisition of the Robotic System Integration business mainly operated by JR Automation Technologies in The U. S. In December 2019 and decided to issue unsecured straight bonds up to 200,000,000,000 yen And this is to raise funds for M and A investments in fiscal twenty twenty. Next, as structuring reform as already informed, we decided to tender all shares of Hitachi Chemical Company in response to a tender offer to be carried out by Showa Denko. This will start around February 2020, and we decided to transfer the Diagnostic Imaging related business to Fujifilm Corporation.
And the closing is slated for July 2020. And lastly, as we informed in December, the settlement on projects in The Republic Of South Africa. We reached a settlement with Mitsubishi Heavy Industries on the projects in South Africa in December. And so KRW three hundred and seventy five point nine billion is posted as loss in the third quarter. Next, Slide two-one.
This is the full year outlook for fiscal twenty nineteen. Hitachi Construction Machinery deteriorated in the third quarter and including the dip in the fourth quarter is included. So the adjusted operating income is down by 16,000,000,000 yen Revenue remains unchanged, 8,700,000,000,000.0 yen But adjusted operating income will be revised downward from the previous forecast by 16,000,000,000 yen However, the net income attributable to Hitachi Limited's stakeholders will remain at 170,000,000,000 yen The tax expense review is included. So this 170,000,000,000 yen remains unchanged. Slide two-two shows the five secondtors and listed subsidiaries.
Adjusted operating income, five sectors total is 472,500,000,000.0 yen and the operating income ratio is 8.6%. These two ratio and the absolute number is the record high. And the net income attributable to Hitachi Limited's stakeholders is 146,000,000,000 yen and that's five sectors total. This is up 5,000,000,000 yen The interest rate burden is reviewed. Listed subsidiaries total adjusted operating income, 196,500,000,000.0.
So this is revised downward from 16,000,000,000 yen This is because of the revised forecast for Hitachi Construction Machinery. And net income attributable to Hitachi Limited stockholders is down by 5,000,000,000 yen So on a consolidated basis, adjusted operating income goes down by 16,000,000,000 and net income remains unchanged. Next, Slide two-three. This is the breakdown. IT, revenue was up by 11,000,000,000 yen compared to the previous forecast.
In Life, Smart Life, 6,000,000,000 down. But Automotive Systems, China, North America sales decline is expected. It's factored in. However, we can expect an IT that can more than offset that. So as five sector total, we can cover make up for the shortfall.
Hitachi Construction Machinery is Slide two-four. Hitachi Construction Machinery is 16,000,000,000 yen down from the previous forecast. As I said earlier, sales and operating income are expected to go down, especially a decline in China. In Hitachi Chemical, EBIT is down by 4,000,000,000 yen This is because of the posting of impairment loss on fixed assets and advisory fee of tender offer. So the nonoperating expenses increased.
So we adjusted the figures. Corporate items and eliminations. Adjusted operating income, down by 5,000,000,000 yen Statue Chemicals, this is size based taxation from the sales of Statue Chemicals in the fourth quarter. And an EBIT for Corporate Items and Eliminations, plus 15,000,000,000 yen This is the structural reform related costs in each sector, in each view. The portion that was not quantified is incorporated here.
So this is what was realized in each sector. Now South Africa settlement related loss and Hitachi Chemical gain on sales in the fourth quarter is shown on Page 35, please. As I alluded to earlier, left half is the settlement on South Africa project loss thereof. EBIT impact is JPY 375,900,000,000.0 in the third quarter. And on the right side is sales of Hitachi Chemical sales shares.
EBIT, $279,000,000,000. This is the expected gain on sales. And cash flow impact for South Africa project settlement, 130,000,000,000 in the fourth quarter to be cashed out and Hitachi Chemical sales in March, $422,000,000,000 cash in is expected. That concludes my remarks. Thank you.
Let us move on to questions and answers. Our staff will bring a microphone to you. If you have questions, please state your name and affiliation before asking These are earnings meeting. I would like to ask two questions related to the numbers. Page 19 and onward, you have given us details as to what has changed from the previous forecast.
If possible, as usual, up until the third quarter, of parent related and the subsidiaries for both. Yen 16,000,000,000 of downward revision for subsidiaries you mentioned. Up until the third quarter, what's been the situation against the plan? Against the plan, vis a vis the plan, in total, yen 20,000,000,000 down in revenue. And in terms of operating income, reduction of 10,000,000,000 yen So five secondtors and listed subsidiaries, if we divide between the two, for five secondtors, increase of revenue by JPY 14,000,000,000, increase of operating income by JPY 5,000,000,000.
For listed subsidiaries, against the plan, decline of JPY 34,000,000,000 in revenues and adjusted operating income against the previous plan, JPY 15,000,000,000. So in terms of the trend, the revision is in line with the overall trend? Yes. Hitachi Construction Machinery saw a greater deterioration compared to the plan. Other listed subsidiaries are more or less on plan.
But Hitachi Construction Machinery compared to the previous forecast has seen a greater deterioration and greater downward revision, and that is why we made adjustments to the full year forecast accordingly. My second question regarding IT segment. Page 30 gives the details, the breakdown. This is a simple question, actually. Adjusted operating income increase of JPY11 billion, So 6,000,000,000 in the front business and others will come from others.
Why have you mentioned others? And now if you subtract the Q4 operating income from the number for the full year from the third quarter number, it seems that there is a reduction of 11%. So what affects Q4? I'm sure there are buffers and risk factors, and there must be some declines expected. So for the Q4, it seems that the number is quite a bit of reduction.
Why? The front business, plus JPY 6,000,000,000, Services and Platforms, zero and JPY 11,000,000,000 in total. Why the gap? We continue with our efforts to reduce fixed costs and costs overall for the overall IT sector. That is what we continue to do.
And we have not been able to identify the tangible effect from that. And therefore, it's reflected in total only. And Service and Platform, overseas midrange storage business, in particular, is sluggish in terms of sales. Sales have not yet met the plan. And so that risk is also considered.
And so as it turns out, the profitability in the fraud business appears low because of those risk factors. And so these are the risk factors that are reflected. Business overall is not expecting a deterioration in the front business. I don't think there are factors negatively affecting that. For the fourth quarter or rather answer, just add to the answer.
In the fourth quarter, we're trying to bring revenues earlier than planned and projects as well. So you may think that there's quite a bit of reduction in the fourth quarter, but then you shifted revenue from 4Q to 3Q. Understood.
So the gentleman in the center, please. I have three questions. So growth investment expenses in the presentation, it's JPY 20,000,000,000 for three quarters. In the first half, it's JPY 13,000,000,000. So on a full year basis, we originally planned for 50,000,000,000 yen Does this remain unchanged?
And 7,000,000,000 you used in the third quarter. So what is the breakdown for segment? And what is the breakdown for the fourth quarter, please? Kato would like to give you the breakdown. When we announced this last time, we said it will increase by 50,000,000,000 yen This time, we said 45,000,000,000 So it is a slight decline.
Roughly speaking, the listed subsidiaries and five secondtors, half and half. So the decline is split half and half between the two. Now third and fourth quarter, I don't have the detailed breakdown, but for the year to date, three quarters, 20,000,000,000 increase from last year. And majority is for the five sectors. Large one is IT, around
JPY
9,000,000,000 industries, Life Smart Life, JPY 2,000,000,000 each and Mobility, 2,500,000,000.0 and Group, JPY 2,500,000,000.0 and the listed subsidiaries, 2,000,000,000. So IT, which is the center of Lumada business, is the centerpiece. So JPY 45,000,000,000 increase for the full year, and the increase in the breakdown is the same. About half is IT. So JPY 50,000,000,000 is now JPY 45,000,000,000?
Yes, we revised it this time. Second question, IT order. In the first half, you said the order was up 8%. Now what about third quarter, three months? And if you could give a split down for hardware and the front services front end services.
So first, second and third quarter, looking at your peers, the increase rate is changing. And so I wanted to know if there is any changes in the business sentiment. IT for three quarters cumulative year to date compared to last year, order is 106% year on year. And what we always show you is by BU. So finance, financial is 105% and social is 122%.
So social side is growing strongly. Now if you could question. You mentioned that the social side business is increasing. Any changes in the economy? The public services and power, very strong.
For nine months cumulative, I mentioned the numbers. Third quarter order financials, 106 so three months is 106% and social is 141%. So those two are growing very strongly. So we are very busy there, financial and social infrastructure. Third question.
Power grid business that you are planning to consolidate this year, what is the status of due diligence? How far along are you, if you could share with us anything? And if there is some price adjustment themes, could you hedge it? REPRESENTATIVE:] We are continuing the negotiation, but I would like to refrain from giving you the details. What we are doing now is the negotiation is progressing steadily, And the price competition law, we are promoting a clearance.
And this is also progressing steadily on plan. ABB side, the power grid business is now being carved out in each country from the headquarter, and this is also progressing steadily according to the information I got. And the latest information is that ABB's financial results briefing for the fourth quarter is on February 5. So if you could check that, please. Now any events coming out of due diligence and or hedging thereof, the details are anti monopoly law clearance has not been done.
So I would like to refrain from talking about the details of this negotiation.
UNIDENTIFIED Any other questions, please? I see a hand in the front. Please go ahead. I have three questions. My first question is as follows.
If I'm correct, in industry, I think EPC is so outstanding that needs to be settled. And what is the status of that? And how is that factored in the forecast this time? That's my first question.
There UNIDENTIFIED
is still work to be done, but most of the work is already completed. But then there is some remaining work to be done. The cost that needs to be factored in is already REPRESENTATIVE:] considered
and reflected. So will this lead to a major cost increase? We do not expect that to happen.
Just to supplement the answer, as to the work that Hitachi is responsible for, we are to complete it by the end of fiscal year 'nineteen. My second question is about the details about corporate items and eliminations. Before, in terms of corporate items and eliminations, they usually were close to zero because of additions and subtractions. But they said negative 24,000,000,000 yen or so. Why the change, I would like to ask?
And for next fiscal year and onward, what would be the idea behind corporate items and eliminations? If you could give me some hints or heads up. Well, we are making investment for growth. More specifically, we're making investments into Lumada, and that is reflected in corporate items and eliminations, and that's the number. That's the biggest factor behind this.
And year on year, compared to the previous year, business size tax is imposed on the divestiture of Hitachi Chemicals, so that's the second factor. Corporate items and eliminations, well, the group companies are charging brand related royalties, and revenues from listed companies have gone down. So this is down. But the biggest factor is the strategic investment. So business size tax, 5,000,000,000, which is larger, that or the impact from M and A?
We will look into that. Answer, we will look into that and get back to you. Question. My third question is as follows. Perhaps I should not ask this in the earnings meeting, but mister Nishiyama, he will be retiring as CFO for now.
And as you served as CFO, what achievements have you been able to make with your assess? And considering the financials for Hitachi going forward, what still needs to be done from your perspective going forward? Well, before answering that question about the collection of brand related revenue being down. Sorry. The comparison between brand royalties and business tax, the amounts of the two are roughly the same, equal to each other.
Now to address your question, what achievements have I been able to make? I think I have been able to eliminate major concerns, in particular risks related to EPC projects. So overseas industry business projects, I have been able to successfully address them. And I don't mean that we posted losses or reserves for that, but rather I say that because we have been able to make a a decision to withdraw from such markets and another is the decision regarding the Horizon project and another decision related to the South Africa project. We have been able to make such decisions and the South Africa project has come to a settlement.
So those are some of the achievements. And another aspect is overall, we have tried hard to improve profitability and project management to be carried out more rigorously. And it was the IT sector which led this effort. Previous 2015 medium term management plan, we have been doing this. And in the 2018 medium term management plan, we continued
And as a result of these continuous efforts, we have been able to stabilize our profitability better. And major risks were removed as well, and that was a major achievement as well. And this is something that I worked with Carl Maersen, who will be my successor, and that is to focus on capital efficiency so that we can engage in a better dialogue with you to improve ROIC. And for many years, I've been responsible for these earnings meetings, and I have been reprimanded by many of your colleagues. The segments are so confusing.
Everything is included as part of social. It's confusing, very difficult to understand. You complained. And I think we have been able to reorganize the segments in a matter that is easier to follow today. So reorganization of business segments is another achievement.
What is still in progress is, in terms of business. We want to be among the global top five leaders, and that's what we're aiming at. And we have to lay the foundation for that so that we can aim at global top leader, HR, financials, IT, procurement. We have to create a global operating model for all these different departments, global share service to be utilized, AI, big data, analytics to be applied to our businesses. We set up projects to achieve all of those, but they're still work in progress.
This time, Morayama san, who's a CPO, who's to become CTRO, Revent Aravachi is responsible for overseas looking after all corporate shared services. And projects are already underway for these, and these need to be followed through. Thank you.
Any other questions? Gentlemen in the center, please. I have three questions. First is this may be a bit too early, but for fiscal twenty twenty, the way you will issue the guidance is my question. So ABB and automotive are the deals that are currently moving forward.
So will you give the image as you go or at the endpoint when it's concluded? So how will you issue the guidance? For now, what we decide on will be factored in. But at the time of the guidance, the clearance anti monopoly law clearance, we don't know if it's done or not. So it may be difficult to incorporate accurate factors.
But even if it's a bit rough, we will incorporate it. And this will also be to update our medium term management plan. And it may be rough outlook for the 2020. So that is our current plan. When you do that, will you incorporate the impact on your balance sheet?
Yes. My second question is about the integration of the automotive business. So the stock market is now backward looking for the automotive related business, many of them are. So when you meet many investors, the integrated company will take majority. So after the integration and when things settle, will the 65% become 100%?
Or will you carve out again? So is it zero or 100? Which direction will you move into? If you have any strategy you could share with us at this point. The three subsidiaries of Honda, we will first complete the integration with the three companies.
Yes, the automotive related business is now in a difficult environment. But first, we will focus on reinforcing the business with the current ratio. And rather than talking about further down the road, we want to first focus on improving the cost structure in this difficult environment. So this will be our first REPRESENTATIVE:] priority. My third last question is there are many standards.
But roughly speaking, what is your view on the macroeconomy? Right now, it's not that strong. In fiscal twenty twenty, do you think there are elements, factors that will turn this around that are specific to your company? Or for this industry, any image that this industry will structurally grow in 2020? Products related business and materials related business will still be difficult in the automotive sector.
And semiconductor environment is improving now even in the material related business. The business environment seems to be improving, but the automotive related business is still far from recovery. And recently, China has the coronavirus. We don't know how long this impact will last. So the macro economy in Products and Materials business will remain difficult.
And on that basis, we are formulating our budget. However, Lumada business is now promoted strongly. Our overseas ratio is still low. But in order to reinforce our delivery and formulate the software solution and in order to reinforce the delivery resource, Hitachi Vantara in The U. S.
And HCC are now being integrated. We are promoting this kind of transformation. So Lumada business, number of use cases around seven fifty. So we want to commercialize this solidly. So with that in mind, we are reinforcing our structure in order to expand Lumada in the overseas market.
Lumada CEO, Tokunada san, will serve concurrently as a leader of service and platform. And the social innovation business will be rolled out in the overseas market. So to establish that structure, we are taking measures. And for the weak environment, we will improve our cost structure further. So transformation centering on cost will be led by CTRO, and we will reinforce that CTRO function.
So this is the changes we are making in the personnel reshufflement this time. So there are macroeconomic changes, but 10% or above profit ratio is being targeted in the medium term management plan and becoming a global leader. This basic stance has not changed. So we will move towards that target. Railway and Elevator business environment.
Elevator China may be difficult, but in Railways, I hear that Europe is promising. So what is the business environment now? Elevator, We are focusing on cost reduction, and we will continue this going forward. So sales price is declining, so we need to make up for that. And we are currently keeping the profit level, so we will continue doing that.
In Railways, the overall demand is strong. But the timing of the posting of sales is different. So we don't know how the ups and downs will turn out because there are many projects. But the overall backlog is, as of the December, on a global basis, now reaching 3,000,000,000,000 yen So given this backlog, in the medium to long term, this railway business will remain robust, strong.
Regarding Hitachi High Technologies, TOB, I have a question of CFO. $530,000,000,000, which is disclosed today. Inclusive of that, the total M and A amount is going to be around 800,000,000,000 yen or rather 700,000,000,000 yen in total. What you mentioned earlier, overseas deployment of Lumada, inclusive of that in the IT sector, M and A's in the last three years budget, they have not been performed. 800,000,000,000 yen worth of M and A, you said.
And considering what you've mentioned, I think you will be able to meet the upper limit of 2,500,000,000,000.0 yen. So what's the thinking behind that? $5.02 to 2,500,000,000,000.0 yen, you said. If it's going to be in excess of 2,500,000,000,000.0 yen as part of capital allocation, REPRESENTATIVE:] shareholder return could suffer
and return could be reduced. Could that happen?
June 4, Higashihara. In the sector IR meeting, he mentioned this at the beginning. As he said, then in terms of cash allocation, in terms of the use of funds, JPY 4,000,000,000,000 to JPY 4,500,000,000,000.0, and that's going to be the amount. Of that amount, JPY 2,000,000,000,000 to JPY 2,500,000,000,000.0 will be spent on M and A, and the rest on CapEx and shareholder return. CapEx and shareholder return will be around JPY 1,800,000,000,000.0.
That structure remains unchanged. That breakdown remains unchanged. And in terms of what to spend on or the sources of funding, 4,500,000,000,000.0. And the sources for that would be operating cash flow, 2,500,000,000,000.0. And sales on assets and borrowings, 1,500,000,000,000.0 to JPY 2,000,000,000,000.
That breakdown has remained unchanged as well. So the sales divestitures and acquisitions that we have performed, we will perform, be in line with this thinking. So because of investments we are making, are we reducing shareholder return? We do not believe so. That's not going to happen.
Any other questions? UNIDENTIFIED The gentleman sitting next. I have two main questions. First, you alluded to this earlier. The impact of coronavirus, especially in Building business, it's about half.
And it seems like the plant operation is not that easy. So how have you incorporated this? Have you revised your forecast in not just Building but also in other businesses, including your China business, if you could put things in perspective on the impact? That's my first question. The impact of coronavirus, the magnitude, it's difficult to quantify at this point.
The infection may expand further. And if the supply chain is cut, then it will have an impact. We are concerned about this impact, but we cannot quantify or incorporate this in our forecast yet. In fiscal twenty nineteen, the financial forecast may face some fluctuation, but we are accumulating the short term delivery and cost reduction and trying to accelerate the impact or the result, fruit of that so that we can finish our forecast for this fiscal year. In the mid- long term, Lumada business structure is reinforced around the world.
So with that, we want to be resilient to the environmental changes, have a robust profit structure. So far, our China operation, where it's directly related to coronavirus, in Wuhan, we have 700 employees, elevator, escalator, repair, maintenance and installation business and automotive components, factories mainly. So in Wuhan and in other provinces in China, we have many Chinese employees and many plans in operation. And there are sites which is in the scope of the extension of the Chinese New Year. So we want to know how the impact will be after the holiday, lunar holiday.
In Amurong, it does not have an operation in Wuhan, but Shenzhen, Dalian and Shanghai, the authority is changing their stance very rapidly. So it's not the voluntary decision, but they're asking to stop the operation. Is that where you are? Or to them, Omron and other companies are saying the worker is not coming back even if the plant operation is resumed. So do you have any other information?
Wuhan is now a blocked area. Other main operation sites are in Guangdong, we
have
the elevator plant and automotive parts is in Suzhou. And the Construction Machinery is in Anhui and Ikem Shenzhen, Guangdong. And Materials, Hitachi Metals has Suzhou plant and Gondonggang. And semiconductor, Hitachi Chemicals has Suzhou plant and Donggang. So those are the main plants.
For China, overall, we extended to February 3. And in some other provinces, the extension for the Chinese New Year is extended to September 9. And in Hubei province, it is extended to the February 13. And the regions that are saying Shanghai, Chongqing and Fujian and Anhui, Shandong, Hunan and Beijing, those are staying up to September 9 February 9. So after this Chinese New Year holiday, we don't know if there will be further extension or normal resumption of operation.
There are employees who are coming from other regions to our plants. So we need to watch the information closely and take appropriate measures. Beijing City is just the construction side of the business. This is not related to the financial results, but Mr. Nishiyama will move to Hitachi Metals.
So according to my understanding, Mr. Nishiyama, you are the professional in finance. But I don't know if this will be done eventually, but I think you need to first organize what is your thoughts that you have in mind. So you mentioned first you mentioned that when we acquired Solaire first, that was a disorganized. This time, I don't want it to be a disorganized business.
Yes. My profession is finance, but I do everything in my job. Hitachi Metal was a merger of Hitachi Cable and Hitachi Chemicals. First, Hitachi Chemical. I was the CFO of Hitachi Cable.
And after the metal and cable merged, I was the head of the cable business in Hitachi Metal. So using that experience, the environment is now very difficult. There are four businesses. All four businesses are facing difficulty. And the automotive ratio, direct and indirect, is 50%.
So the environment is difficult. And as you mentioned, the financial results, yes, it is rather disorganized. So President Sato is now starting the management reform. We need to accelerate this to recover our financial results, reinforce our management base and think of the next strategic initiative. But our emergent, urgent initiative is recovering our financial results.
So I want to collaborate with President Sato to realize that. In your case, this often happens. You come to Limited and then come back to the subsidiary and recover the business. So I hope you could organize and recover such metals and come back to Limited again.
Any other questions? If not, we would like to bring the earnings meeting to a close. Thank you for your attendance. Thank you.