The time has come to start the Hitachi Limited web conference on the fiscal year 2020 earnings for Institutional Investors and Financial Analysts and Dara Media for the fiscal year 2020 earnings as well as the progress on the 2021 midterm management plan. Thank you very much for attending the web conference despite your busy schedules. I would like to, 1st of all, share with you the schedule for today. It will be conducted in 2 parts. Now we will have the earnings presentation until 4:45.
After a break from 5 o'clock, we will have the presentation on the progress of the 2021 EBITDA Management Plan. As for the materials for the presentations, Without further ado, we would like to start the earnings presentation. Let me introduce the speakers to you. Yoshihiko Kawamura, Senior Vice President and Executive Officer, CFO
of Hitachi Limited.
Tomomi Akato, General Manager of the Financial Strategy Division. Masao Yoshikawa, of the Executive General Manager of the Investor Relations Division. Now regarding the outline presentation of the earnings, Mr. Kamura will be making the presentation. We will be switching over the screen.
At the Gyo Indulgence. Mr. Kamura, please. This is Karamura. I am the CFO.
Thank you very much for participating in this meeting despite your busy schedules. Now COVID-nineteen is still running rampant, but we have been able to pursue a business. I would like to take this opportunity to thank for your support. And now I would like to talk about the results for 2020 as well as the outlook for fiscal 2021. Please refer to Page 3.
These are the key messages for fiscal year 2020. About this time last year, we were bracing ourselves for COVID-nineteen becoming serious. Therefore, we had to increase our cash flow. But in terms of foreign exchange as well as the economic cycle are areas where we have ample experience, so we have knowledge in this area. However, when we are beset with a pandemic And when there is external shock in the economy, the outlook is becoming uncertain.
Therefore, we wanted to secure liquidity. And operating cash flow, therefore, became an important focus for us during the year. In that regard, Cash flow has been emphasized in our business management over the year. And please refer to number 1. Record high will be mentioned several times under number 1 and number 2.
For number 1, we have achieved record high net income on a consolidated basis. Numbers will be presented later. Furthermore, in terms of cash flow margin from operating activities, we have achieved 9.1%, which is also very high. Against the difficult business environment. Out of the 5 sectors, we have seen that to IT segment to continue to drive our business.
IT segment achieved record high profits. It was JPY269,000,000,000. And the ratio was also the highest ever, as you can see here. Now in terms of number 3 at 13.2%. In terms of number 3, the Folio is making improvements with Hitachi AVP and Power Grids.
HypoC is what we're referring to. And Mobility segment. Elevator contributed very significantly in the Second, the Honda 3 companies have been included in Hitachi as demo. Major projects are proceeding well for the Hitachi ABB, Power Grids. The Carbon Neutral Future business is making headway.
We are receiving increasing number of orders for Q4. Dollars 2,300,000,000 intake was achieved. Order backlog was approximately $10,000,000,000 Furthermore, in terms of railway system business, the Washington Metro Area Transit Authority business was 1. And to the tune of 239,800,000,000 yen is the contract that we have been able to achieve. In terms of the building system deliveries was very strong, especially in China making significant contributions.
Number 4, We have been rearranging the business portfolio. Hitachi Chemical as well as the diagnostic imaging related business were divested. And for fiscal 2021, we are poised to digest Hitachi Metals. And Hitachi AVP power grid will be included and Hitachi's summer has been established. And we are expecting the global logical decision to be completed in fiscal year 2021.
Therefore, we have transformed to our business portfolio significantly. The 5th point is cost structure reform, a realized cost reduction of over JPY 120,000,000,000 in fiscal year in 'twenty. Now let me refer to the numbers on Page 4. This is the result of our fiscal for year 2020 as the focus for 2021. Please look at the left hand side, the light gray, the revenues.
The dark gray is adjusted operating income and the years of fiscal 2019, 2020 and 2021. From fiscal year 2019 to fiscal 2020, we have seen a reduction in revenues as well as profits, both revenues and adjusted operating income. From fiscal 2020 to 2021, we have increased revenues as well as operating income. Now please refer to the graph showing the adjusted operating income ratio. We went from 7.5% down to 0.7% and 7.8% was reached.
So we will have a V shaped recovery making 2020 as the bottom. Please refer to the right hand side. ASTIMO has been come independent from the 5 sectors for the purpose of disclosure. This is a joint venture with a demo. So it is easy to understand rather than including in the 5 sectors.
And with 5 sectors in our stream on. You can see that gray is revenues and dark grey is adjusted operating income. From fiscal 2020 to 2021, V shaped recovery is expected and going from 6.5% to 8.3% in terms of the adjusted operating income ratio. So the target number is 8.3 percent for the coming one year. We will be making efforts to achieve this goal.
For fiscal year 2021, our CEO, Mr. Higashi Aran, will be talking about the previously in the midterm management plan. And during this period, we are aiming to achieve 10%. But because of COVID-nineteen, 2021 is expected to be around 8.3%. But in the following year, we will once again aim for 10%.
So that is how 8.3% should be evaluated below showing the net income. Looking at fiscal year 2020, that is the JPY 500,000,000 to JPY 500000000,600,000,000, which is the highest ever. For next year, we want to outperformed us aiming for JPY 550,000,000,000. So this will also be another record high if realized. Please go to the next stage.
For the past 1 year, we have been focused on cash flow management. This has had a significant impact on our results. Please look at the upper front. We have rigorously implemented cash flow management. And as a result, cost structure reform, reducing working capital and scaling of capital expenditures rigorously and promoting sales assets were achieved so that the cash flow can be enhanced.
Please refer to the right hand side, especially the curve shown here. This is the ratio has gone from 6.4% to 9.1% in terms of cash flow margins, and we are aiming for 7.9% next year. Below is the information regarding the cost structural reform. We are making progress in this area as well. Please refer to the right hand side.
In terms of SG and A ratio, you can see a decline. Fiscal 2020, well, our gross margin has been declining significantly. Hapti ABB Power Grid shared service exist in Europe. And we will try to capitalize on this leverage in the coming several years for 2024 by 2025, JPY 100,000,000,000 cost reduction is what we are aiming for. And we will continue to make such efforts going forward.
Please refer to Page 6. The Lumada is core business for Hitachi, as you can see on the left hand side. For 2019, 2020 and fiscal 2021 numbers presented for fiscal 2019. It's a little bit above the 1,000,000,000,000 yen and then 1,100,000,000,000 yen for fiscal year 2020. And the focus for next here is 1,500,000,000,000 yen.
The original plan that we have been sharing was 1,600,000,000,000 yen. But up to then, we were behind by JPY 200,000,000,000. But according to According to evaluation we made, we believe that 2021 is likely to be as planned. Specific topics are shown on the run hand side. The first point is the Global Logic acquisition of the United States.
Obviously, this will have a significant contribution on the Lumada business going forward. Next is the establishment of the Lumada Innovation Hub Tokyo in on Yaesuichi side of the station, we will have a collaboration hub with our customers, and We hope that this will stimulate discussions on how Lumada can be utilized. And Hapti and Lumada will work together. And Smart Digital Substation project has been won. Using AI for 1 1,000 stores of workman company.
We have started co creation for implementation at the customer site. Level 3 Legend of Honda will have 8 gs engine control unit over the air update system has been incorporated. This is or autonomous driving level 3. As you know, level 4 is autonomous driving, but Level 5 is complete autonomous driving, but compared to that, Level 3 means that under normal times, autonomous driving is enabled. This is how we have been able to achieve.
Specific topics shown on Page 7 transform the business portfolio for further growth. That will is what we have been implementing for 2021. We are planning to sell Hitachi Metals. Proceeds are expected to be around 114,000,000,000 yen
Now
the environmental value is important in addition to economic value, and we are making good results in this area as well. In terms of the environmental value, Hitachi ABB, Power Grid, has been awarded the traditional order of Dogger Bank's HVTC, Direct Current Systems has been 1 as additional business, we have also delivered an edge storage solution for the Singapore virtual power plant. These are all environmentally friendly projects and JPY 240,000,000,000 contract that's been won in terms of Washington Metropolitan Area Transit Authority Business. For social value in Healthcare Business, as mentioned here, started collaboration with Software Genetics. This is in the area of precision medicine or customized personalized medicine.
Now with Exelined. We will be pursuing the biopharmaceutical business there is progress made here. For the social innovation business, established principles guiding the ethical use of I and track record has been achieved so far. So I have talked about the overall flow. From Now I would like to give you the detailed results of fiscal year 2020.
Please refer to Page 9. There are 2 graphs that are shown here. Left hand side is the Q4 fiscal year 2020 results comparing with the previous year. Rather than that is the fiscal year 2020 for the full year basis. And this is also comparing against the previous year.
So information provided here for the Q4 for Hitachi Chemical divestiture has been made. So there has been impact of decrease in revenues as well as earnings. But Semo as well as PAL GRID is making contribution as well for fiscal 2019.
On a
quarter to quarter basis, we have seen an increase in revenues. There is, however, a decrease in earnings. For fiscal year 2020. As mentioned above, power and grade, HitachiOS team more has been integrated, having an impact of positive revenues, but Hitachi Chemicals has been divested. So they will have a negative impact on operating income.
And in terms of 7.5% to 5.7% is the ratio decline. However, we are poised to make a V shaped recovery in 2021. Please refer to the right hand side, the highlight of the numbers presented here. First of all, in terms of overseas revenues, detailed information will be provided later. It is accounting for now 52% at 4,500,000,000,000 yen That's the amount of the overseas business, the amount of business is 1.11 trillion, and EBITDA is JPY 50,200,000,000 on a year on year basis, increase of JPY 666,600,000,000 Net income attributable to Hitachi is record high.
EBITDA, this is the largest portion of the cash flow at JPY 1,342,000,000,000. Now we have been tracking this from 2,008. This is the highest ever for what we have tracked. Cash flows from operating activities is JPY793,100,000,000 or 6.4%. For 2021, we are poised to recover to 8% level year end dividend.
This will be decided at the AGM going forward, but we are expecting to have a dividend of 55 yen per share. So that is an increase of 5 yen on a year on year basis compared to the interim last year. Please refer to Page 10. This is the result of the bisectors and leases series. Bisectors and leases juries Construction Machinery as well as the metals are shown here.
And basically, we have the indication of the revenues and others. Please look at the revenues for 5 sectors at JPY 7,150,000,000,000. For our list of 3, JPY 1,500,000,000,000. Total is JPY 8,700,000,000,000 to JPY 9.1. Trillion.
Total is JPY 8,700,000,000 to JPY 9,100,000,000,000. On a year on year basis, 13% for the prime sectors. But unfortunately, for this series, it was at 64 and impacted by coffee tanking as well as the unfavorable market. Adjusted operating income is shown below on year on year basis for 5 sectors as well as listed strategies that we have been negatively impacted. The adjusted operating income ratio is shown here, 6.5% for the 5 sectors and 1.7% for the listed streams.
The total is 5.7%. EBIT or net income rather, JPY 519.1 billion and for the list is raised minus JPY 17,500,000,000. Total was 51,600,000,000 yen That's no longer for net income. Please refer to Page 11.
This page is about revenue and adjusted operating income on the far left. The number for FY 2019. On the far right, FY 2020, and you will see what's in between. And in terms of revenues, Revenue in FY 2019 was JPY 8,767,000,000,000. As you look toward the right, JPY 600,000,000,000 because of divestiture of Hitachi Chemical and Hitachi ABD targets JPY 722 1,000,000,000 yen and with consolidation of Honda's ASIMO, 100 and 91,000,000,000 yen and then there is foreign exchange adjustment and others, making FY 2020 number 8,729,000,000,000 yen, which is a decline.
Adjusted operating income, the same process, JPY 661 is the number for For FY 'nineteen, yen 495,000,000,000 for FY 'twenty, decline in operating income. Please take a look at the next page. Net income attributable to Hitachi stockholders, you read the graph in the same manner from left to right. And adjusted Good operating income on the far left, net income on the far right, and you will see what's in between. There is reorganization of profit Hitachi Chemical and Diagnostic Imaging Business, which was divested.
And railway business agility in the UK, the shares thereof were also sold, so a total of JPY 452,000,000,000. And because of special severance pay and so 1st, as part of structural reform expenses, JPY 128,000,000,000 and then others, JPY 31,000,000,000 EBIT JPY 850,000,000,000 to its right, tax expenses. Hitachi Chemicals taxes Weigh heavy, JPY 325,000,000,000. And the net income on the far right stands at JPY 501,000,000,000.
Please take
a look at Page 13. Part of the balance sheet and cash flow is described. Top right, there's balance sheet. And please take a look at the gray shaded part as of March 31, 2021. Assets In total now are 11,852,000,000,000,000,000,000,000,000,000, and change from last fiscal year on the far right, JPY 1,922,000,000,000.
That's because of acquisition of ABB Power Grid. And typically, Take a look at interest bearing debt in the middle. As of end of 2021, JPY 2,400,000,000,000 roughly. And on the right hand side, you can see that there is an increase by JPY 900,000,000,000. So interest bearing debt has increased.
So that's a big factor. And at the very bottom, there's debt equity ratio. FY 'nineteen, it was 0.35x. But because of the borrowings, it has increased to 0.54. When it's good, our DE ratio has been 0.2 or so.
So 0.54 is a very high debt equity ratio for us. But with operating cash flow, we would like to bring it down to below 0.5%, further down to 0.4%, 0.3 in a year's time or so. And cash flow is stated at the bottom. Free cash flow As of FY 2020, it was JPY 334,000,000,000 and core free cash flow JPY 419,000,000,000. You can see the year on year number on the far right.
We're going to we're focusing on cash flow, and the result is shown here. So that was up to FY 'twenty. Let me give you a forecast for FY 'twenty one. Please go to Page 15. Here's the highlight in terms of the forecast.
Our revenue adjusted operating income are given. YOY numbers show that we're going to increase revenue, up 9% and adjusted operating income plus 244,800,000,000 is planned. Take a look at the graphs. Revenue planned is JPY 9,500,000,000,000. And on the right, Adjusted operating income targeted is JPY740,000,000,000.
This is the officially announced number. And the operating margin will be up from 5.7 percent to 7.8%. It's different from the 5 sectors, 8.3, but overall, it's 7.8%. And on the far right, as I said, Lumada is on plan. Revenue is expected to be JPY 1,500,000,000,000 EBIT, JPY 820,000,000,000.
We're going to have another record high next year. And EBIT, JPY 1.37 or rather, JPY 1,370,000,000,000, that's a record high as well. ROIC will come back to 8.3% and ForEx rate, JPY 105 to the dollar. Please take a look at Page 16. This separates 5 sectors versus This is subsidiaries from this year.
Asimo is separated from 5 sectors. And then there are a list of subsidiaries. Both the 5 sectors, plus Asimina as well as the list of subsidiaries, will See increase in both revenue as well as profit. 5 sectors plus ASIMO is going to enjoy a market recovery, acquisition of Power Grid as well as our CMOs increase in both revenue and profit. Listings, subsidiaries will also, due to market Recoveries see increase in revenue and profit.
And please take a look at the graph. For 5 sectors, JPY 7,770,000,000,000,000. List of subsidiaries, JPY 1,730,000,000,000,000, total JPY 9,500,000,000,000. And the percentage is as well in total, 109%. And you can see the YOY numbers to see that there's We're going to be increasing revenue as well as profit.
Adjusted operating income ratio, 8.3% for 5 sectors, the listed subsidiaries, 5.5% 7.8%. And at the very bottom, net income attributable to Hitachi, Hitachi, JPY 529,000,000,000 plus JPY 21,000,000,000 coming to a total of JPY 550,000,000,000. As I said operating, income is going to increase by JPY 740,000,000,000 as well. And moving on to the next page, you can see the evolution of FY 'twenty to FY 'twenty one. It's the same for revenue as well as adjusted operating income.
There's a lifting from power grid as well as Lifting effect from Asimo and GlobalLogic is acquired. It will start to kick in from July. And there's ForEx impact. And so Revenue will be 9,500,000,000,000 yen, the same with adjusted operating income. Please take
a look at Page 18. Here,
Net income attributable to Hitachi, stockholders is given. On the far right, JPY740,000,000,000. This is net income attributable to the parent, and It will come down to net income on the far right. There is proceeds from the sale of Hitachi Mato, which will be incorporated. And there will be expenses from structural reform and other adjustments.
So EBIT will be JPY820,000,000,000. Interest will worsen by JPY 20,000,000,000 and tax expenses will also weigh in. And net income will be JPY 550,000,000,000. So these are the main numbers in terms of the forecast for FY 'twenty one. Starting from Page 20, sector wise numbers are given.
Just to give you the highlights, Page 20, the IT sector. In the middle, adjusted operating income. There are 3 bars. On the left is for FY 'nineteen in the middle, FY 'twenty on the far right, FY 'twenty one. Light gray portion of the bar is service and platform.
Global logic is part of this. And the darker part of the bar is the frontline business front business. Adjusted operating income ratio will be down from 13.2% to 12.5%. And please take a look at the That's because of disposal of intangibles from GlobalLogic. On Page 21, Energy Sector, please take a look at the middle bars, adjusted operating income, FY 'nineteen, 'twenty and 'twenty one.
FY 'twenty and 'twenty one, you can see the light gray portion is underneath 0. That's because of acquisition of Hapchi. Structural reform expenses had to be paid and PPA amortization. And these are counted as negative numbers. Moving on to the next page, industry.
FY 'twenty one, Not just the manufacturing sector in Japan, but manufacturing sectors around the world are going to recover. So profit is expected to rise. Please take a look at the middle Set of words, adjusted operating income will rise from 5.5% in FY 'twenty to 8.1% in FY 'twenty one. Page 21, Mobility. Again, in the middle, on adjusted operating income, profit margin will rise quite substantially to JPY 102,000,000,000 in FY 'twenty one.
This is greatly contributed too by the elevator business. Page 24, Smart Life Sector. Again, adjusted operating income. You can see light gray portion of the bar, which is Asimu. As I said, FY 'twenty one will be separated from the 5 sectors.
So on the right hand side of the bars, you will no longer see that part. And what will happen to our SEMA, Odevoted Business? On the next page, Adjusted operating income in FY 'twenty, there was a problem with supply of semiconductors. So It was down, but in FY 'twenty one, it is expected to recover. Page 21, list of subsidiary, Hitachi Construction Machinery, again, take a look at the middle part of the page.
You will see the margin in the circle. In FY 'twenty, the situation was very severe. Margin was 3.9%, But in FY 'twenty one, it is to rise and recover to 6.9%. Page 27, Hitachi Metals. FY 2020 was unfortunate.
There was a lot of depreciation and amortization, so a negative 0 point 7% margin. But in FY 2021, profit margin is still recovering to 4% in positive territory. Page 28 onward, this is by segment. FY 2019, 2020 21, you will see the comparison. And what I would like you to focus on is the IT Sector, 3rd line, adjusted operating income ratio, YOY, on the far right.
With PPA amortization 0.7 points down year on year. But Energy's adjusted operating income ratio, 2.7% in FY 'twenty one, which is year on year 7% up industry, 8.1% mobility, 8.2% Smart Life, 9.7 percent Automotive, 6.1 percent Construction Machinery, 6.9 percent Hitachi Mato, 4%. So other than IT, all the other sectors are expected to recover. IT alone, because of PPA amortization, the number is going to go down slightly. Take a look at Page 30.
This is revenue by region or market. Clockwise, top left, starting from North America, Europe, while China. Going down, Japan to its left, ASEAN, India, other areas and other areas. This shows the growth rate year on year. North America, more or less flat Europe is recovering by 10%.
China is up by 20%, and Japan is very tough, down 8% ASEAN, India as well down by 5% and other areas up 24%. Although not shown here, North America, Europe and including other areas, because we are incorporating hap The contribution is quite substantial. Overseas is 52%. Lastly, about disclosure on Page 31. We have been working hard to improve our disclosure, and we're going to ROIC is going to be disclosed by sector, as you can see.
And as is described here, EBITDA will also be disclosed sector wise. On the far left, IT, JPY 378,000,000,000 EBITDA. This is the largest chunk of the cash flow, starting from that, energy, Power grid and conventional energy separated out. Industry Industry and Industrial Products are separated, Mobility, Building Systems versus Railway Systems. Smart Life is divided into 2, Smart Life versus Measurement and Analytics.
And then Assimo, Hitachi Construction and other listed Subsidiaries and the total comes to JPY 1,370,000,000,000. And I hope this will provide a reference for the analysts and others. That concludes my presentation. Thank you very much for your attention. I will be happy to answer your questions.
Thank you.
Thank you, Kamana san. Now we'd like to proceed to the Q and A. Those of you with questions, please utilize the question function on the Zoom screen and indicated by the raise hand button. So after raising your hand and being delegated via stage or name. And we will refer to the name on the system.
And when your question is no longer necessary, please lower your hand in the raise hand function. No, video will not be presented today. We will take questions from the Japanese channel, the media first and then the institutional investors, analysts and then go to the English channel. Now at this time, we will open the floor for the media on the Japanese channel. Please indicate by the raise hand button if you wish to ask a question.
I hope you can hear me. So I have 3 questions. First question is regarding the presentation that you presented. Hitachi Metals is expected to be that is what is going to happen to Hitachi Construction Machinery, a 6.90% recovery has remained in terms of operating profit margin done in the from the past. There are challenges for them to become globally competitive.
What is your take on that? The second is a more detailed question for ABB shared service. You are going to be consulting functions there. JPY 100,000,000,000 cost reduction is expected. What functions are going to become common in what areas?
Please elaborate further. 3rd question is regarding Lumada revenues, 42% for this year. That is a certain growth. That is expected. Global logic contribution is likely as well, what is the contribution to be made by them?
And as a result, what is going to change in terms of the overseas ratio for Lumada sales. So that's all in terms of my 3 questions. Thank you for your questions. For 12, I'd like to respond. And for the Lumada question, I would like to ask Mr.
Kato to respond. First of all, regarding Hitachi Metals, it has been decided what is going to happen to construction machinery. For 2021 meter management plan, we want to identify the direction going forward. This is Unwavering. Nothing has been decided yet, but the best capital structure will be identified, and we are now investigating all the possibilities.
And there is no change in terms of our direction for Construction Machinery. The optimization of business for Komiyao remains unwavering. And in the last year of the midterm management plan period, we should be able to identify the direction for this entity. For the shared service for Airbnb, We are thinking about 3 areas. First of all, in terms of procurement purchasing, ESP purchasing will become increasingly important going forward.
Therefore, we believe that it is necessary to integrate because they have knowledge on the part of the EKG. And In terms of human resources as well as corporate defense, this is also an area we can integrate. And finance function can also be integrated as well. In Tokyo, there are regulatory reporting. So not everything can be integrated, but we hope that we can maximize That's a possibility as well.
So for Domada, Kato san, please respond. Regarding Domada, as Conresson has mentioned, within the IT sector, the global logic impact will be €90,000,000 in terms of revenues for 9 months. That is assumed. For Lumada, basically, we believe this is going to be Lumada core business. Therefore, as shown on Page 6, in terms of the core business, SCORCH increased by 200,000,000,000 and about half of that is going to be accounted for by Global Logics according to our assumptions.
Now what about the overseas ratio? Yes. For fiscal year 2020, we mentioned it's around 40%, a core 30% and related is 50% for 'twenty one. On the other hand, for Global Logics will now be incorporated. And therefore, for overall, 50% will be our target.
That's all. Regarding question ABB, I have an additional question for shared service. That means that Tokyo's general affairs as well as finance and corporate affairs, it seems that the headcount will decline. Is that the case? Yes, that is the likely point.
But we have not yet identified But the numbers went to when the web transfers, there should be a reduction bank headcount. Thank you.
Next, Hiroko san. Please unmute and search your questions. Thank you.
The question that I have is when you acquired Globelogic, going forward, the balance sheet
will increase by 1,000,000,000,000 yen because of the acquisition. But in total, there's going to be a reduction of 2,000,000,000 yen according to the CFO, Karma san. With Hitachi Metals divestiture, I believe the balance sheet will shrink. And moving forward, Well, I'm not sure if it's going to happen in 1 year's time or 2 year's time, but how will you manage Your balance sheet, what will the balance sheet look like? What's going to be your expectation or forecast?
Well, thank you for the question and answer. At the end of March, I made a statement and that remains the same. This is part of our efforts to replace assets. At the end of FY 2020, The balance sheet, as was discussed earlier, in terms of total assets, was 11,800,000,000,000 yen and we're going to replace assets, inclusive of Hitachi Metal, which is divested. JPY 2,000,000,000,000 of assets are divested, and global logic is JPY 1,000,000,000,000 which will come in.
So on a net basis, a reduction by JPY 1,000,000,000,000. So total assets on the balance sheet will go down from 11,000,000,000,000 yen to 10,000,000,000,000 yen. It's the same as what I said at the end of March. And how will it be managed going forward? As of today, As far as large acquisitions are concerned, we don't have no further plans for that.
So The balance sheet will look like this for the next few years. But then, of course, operating cash flow will go up and debt will be repaid. So the balance sheet will turn more solid. But this is how it looks. And will the balance sheet swell in a major way?
No, we're not There's another question I would like to ask about the acquisition of GlobalLogic. I believe this is a trend in the last few years, and this is relevant to other acquisitions. It seems that in an acquisition, goodwill tends to be very large. GlobalLogic has repeat customers. 90% or over of their businesses from repeat customers.
It runs a very stable business. But because of that, acquisition price is going to be large, and that in itself could be a risk. So with increased goodwill, How do you see the risk? And how are you going to hedge the risk? If you have any views, you can share with us, please.
And so well, as you rightly pointed out, we've had large acquisitions, including HUBG and GlobalLogic this time. It's true that goodwill is increased with PPA. We do automatically Amortize goodwill as well as another part that is dealt with through the generation of cash flow. Goodwill that has the potential of impairment, we take a very close look at it. We conduct The impairment tests every year take a closer look to see if there are any uncertain factors included in Good.
Well, we are doing everything we can. And we manage balance sheet from a macro view. And how much of impairment, if it happens, is going to be absorbed by our balance sheet or cash? We're looking at it from that perspective. So what would be the maximum of Absorption that we can make in terms of impairment and also taking a macro view.
So if I may, both macro and micro view, we are dealing with this. Thank you.
Next, we'll take questions on the on the Japanese channel. Please raise your hand if you have any questions. Yasu san, please. Please unmute and ask your question.
Question?
Thank you. I have three questions. First question is regarding IT service. For fiscal 2021, the revenues and plan for profits is what I'd like to talk about. With global logics inclusive thereof.
It seems that revenue is not going up significantly according to the numbers you've presented. Recently, IT service investment is expected to increase. And looking at other companies, it seems that other companies are assuming growth in IT. So in terms of the revenues For IT, it seems that you have a conservative forecast. Why are you taking a conservative approach?
2nd question, regarding ADV Power Grid 4th quarter, And it seems that the revenue had an upside, but it seems that profit operating profit had been subject to down side. It has declined. Now why was there upside in revenues, but the downside in the profit? With the climate change with increasingly importance, power grid is an area that there is hope for growth. Now you have talked about the orders received, but what is the current market environment in this area?
3rd question, Regarding Asemo, 4th quarter was very strong in terms of performance. According to the numbers I have, in terms of revenues quarterly is around RMB420,000,000,000 and operating profit is RMB 35,000,000,000. This as you multiply this by 4 times, that's 1,600,000,000 yen and JPY 140,000,000,000 respectively. That is the expectation from the outside. In terms of the internal plan, Are you saying that it is JPY 97,000,000,000 because of a conservative approach?
Please elaborate further on these numbers. Regarding global logic as well as IT revenues will be responded to by Kakko san. And regarding ABB and Assumo will be responded by you shortly. Now regarding IT for 2021, More than half are generated in the domestic market. The outlook for the domestic market is such that we are seeing signs of recovery from fiscal 2020, but it's still gradual recovery.
And fiscal 2021 in terms of IT market, we believe it is going to be negative growth. It is likely to fully recover into the positive from fiscal 2022 onwards. DX orders are increasing in terms of revenues. However, for the overall, we believe that the numbers we presented are more likely. Regarding AABB, as you have rightly pointed out, as of fiscal 2021, It does become was very strong.
Fiscal 2020 was only not for the full year, But for fiscal 2021, in terms of revenues, 1 a little bit below 1,000,000,000,000 yen That is the outlook currently. And it's not a full year. It's only partial. That's about JPY 300,000,000,000 revenues increase. Therefore, growth is very strong.
On the other hand, As I have already mentioned today, there is structural reform cost that is increasing to the tune of 10,000,000,000 yen PPA will decrease going forward. However, the expenses will reach a certain level by adding. But with increased revenues, the profit margin should recover. For STIMO, you asked whether this is a conservative outlook. Actually, I'm Chairman of this company.
And recently, we had a board meeting where we had discussions. That is one factor. But in terms of semiconductor, there is a disruption that is taking place in the first half. There was a shortage in supply That was incorporated into the numbers for the first half. Therefore, the outlook is very conservative.
But the semiconductor, if it recovers faster than expected, we could have an upside. That is our take. But currently, we are assuming that there will be a disruption in terms of semiconductor supply. Takato san, please. Regarding Power Grid for 2020 in the Q4, I think that's the question raised.
As you rightly mentioned, it looks like a lower profit for this area. This is impact of foreign exchange rather than the main business. In foreign exchange, we typically hedge. So hedge accounting, we'll make sure that it does not it's not processed in the P and L. But there are many projects in this business.
Therefore, it does not be in process that way. Foreign exchange impact is therefore reflected here. So it looks worse because of the foreign exchange impact. Regarding Osamo, there is additional comment by Yoshikawa san. Now for this year's offer, let me weigh in.
And in terms of market data, there is likely to be a semiconductor impact, but compared to peers, Dentsu Continental and the like, the offering profit rate forecast is not to achieve 10%. So 8% or below 8% is the prevailing view. And that is the reason why for Sumo, we have a similar outlook. In terms of revenues, on the other hand, In terms of volumes, 10% to 13% recovery is expected in terms of profit according to the Street forecast, 9% to 10%. In terms of volumes, revenues are the same week.
For SEMA, last year numbers only pro form a, but it's around JPY 1,400,000,000,000 to JPY 1,500,000,000,000. That's a pro form a assumption to be made. And based on that, Revenue increased by 10%. It's not aggressive. It is in line with the overall market.
So that's what I wanted to add. I have additional two questions. Regarding IT service, domestic is likely to be a negative market according to your explanation. Specifically, do you have numbers to verify this? According to my take is that customer performance is likely to recover.
So I think investments is likely to increase, but you have a negative outlook on this. So I'm thinking that there must be rationale why you have this outlook. So please elaborate further. 2nd, regarding our stream of assumptions. In terms of expenses in Q4, profit Capacity utilization went up and it seems that Q4 was very strong.
I want to know whether this is sustainable or not. Please elaborate. Regarding IT, Kato san will respond. Now regarding IT, as you see numbers is what we are referring to. And I don't have the numbers with me, so Let me get back to you on that.
Regarding Asemo. As you have already mentioned, 4th Although the numbers were subject to significant upside. When we made the analysis of this upside, There are orders from the automobile manufacturers that we are seeing increasing orders. This is because in the first half of this year. Orders are being expedited, front loaded, and that is having an impact as well.
Therefore, going back to what I was referring to earlier, for The first half, we have a conservative outlook. So we had a significant increase in the Q4. Taking that into consideration, for we have taken a conservative outlook for the Q1 and Q2 of fiscal year 2021. What is likely to occur in Q1 and Q2 have been front loaded into Q4 of last year. Thank you.
Thank you. To continue, Yoshizumi san. Yoshizumi from SMBC. I have three questions. This is a follow-up to an earlier question.
IT, 4th quarter order intakes increase So as well as increase in order backlog, if you can elaborate on that, OP margin of 15%, it's quite high. Compared to the growth in revenue, growth in operating profit is higher. And why such high profitability? If you could please explain.
Makoto will talk about IT. Yes, 4th quarter for the IT sector.
Order intake is affected by ForEx and so forth. After adjustment, In the Q4, 96% of last year for the full year, 95%. So order intake is robust, but only slightly. And order balance for IT is up to 1,100,000,000,000 yen This is affected by COVID-nineteen, but this is about the same as a year before. Thank you.
So if you could provide a background to open margin improvement in the 4th quarter as well. With respect to the OP margin, the same with IT and others. The 4th Quarter number in IT in terms of revenue was very large. And I think the same trend applies here. And we conduct Eisai business in domestic margin and projects as well.
And the risks expected did not manifest. In overseas, last year, we performed statutory foreign, reducing fixed cost that started a year before, and that The impact was borne out, and that's why profitability came high. Well, question. In the Q4, order down 4% for the full year, minus 5%. Answer, correct.
My second point has to do with cost or expenses. So corporate elimination. There was an upside of JPY 47,000,000,000 from the plan in FY 2020. So you have not spent all the expenses. JPY 47,000,000,000 is a quite large number.
So why did this happen? And growth investment of 26,000,000,000 yen what was the actual and in the new fiscal year, how much of that is going to be spent? You're talking about the IT sector all along. I would like to turn to Kato san. Well, question I was asking about corporate overall.
Kato will answer. So corporate elimination for FY 2020, there was an From what was announced in February, that was what the question was about. It's not that there was one single large factor. There were multiple That is that came into play to contribute to the upside. And this is With respect to Hitachi consolidated numbers, there's brand revenue.
Because of increased our revenue, it went up. And in the corporate sectors, expense reduction in travels, travel expenses went down more so than expected. And in the 4th quarter, investment projects were more rigorously selected, more so than the plan. And because of these factors, The number went up. And for growth investment in FY 2020, increased by JPY 11,000,000,000.
So compared to the last announcement, it's down by JPY 15,000,000,000. I said We're being more selective in investment projects, and that is why FY 'twenty one, we're not disclosing the number for this, but Investments related to Lumada are to be increased according to our plan. Thank you. My last question, question 3. Earlier, with respect to power grid, Q4 impact in ForEx.
And for the Q4, I think in terms of profit and loss, it went down. Is that because of difference in ForEx? And in the New fiscal year, we're going to have statutory foreign PPA, JPY 80,000,000,000. And for the New Year, Down by JPY 30,000,000,000 is that going to be the case? If you could please explain.
Q4 for Power Grid, why did
it go down? Intel from ForEx accounts for 50% of the change. I think it accounts for 60% to 70% of the total difference, and That's the extent of the impact from the fluctuation of the ForEx rate. FY 2020 versus FY 2021, If you could please look at Page 21 in the slide deck, Power Grid. Paragre, it was part of ABB.
There was No consolidation systems development, PMI, PPA amortization. These are referred to as related expenses as as described on Page 21. As you asked, FY20, FY2021 related expenses have not changed. The PPA amortization in FY 'twenty one, 52,000,000,000 yen. In FY 'twenty one, it's 41,000,000,000 yen, so down by JPY 10,000,000,000.
And these related costs, systems development cost is part of that. So Systems development cost is going to increase starting from FY 'twenty one, and that's not much change from FY 2020 to FY 2021. Thank you. Next, we
would like to take questions from the English channel. Those of you who have questions, please use the recent button. Any questions on the English channel? They seem not. So we will go back to the Japanese channel once again because we have some time.
So anyone can ask questions on the Japanese channel. Any questions? There seem to be no further questions. So with this, we would like to bring the earnings presentation for fiscal year 2020 to a close. And We will take a break now and start the presentation on the premise of 2021 meter management fund from 5 Quad.
Thank you.