Home > Investor Relations > IR News > 2007 > Medium-term Management Plan Update
April 26, 2007
Hitachi Plant Technologies, Ltd.
Hitachi Plant Technologies, Ltd. (Head office: Tokyo; President & CEO: Masaharu Sumikawa) was inaugurated in April 2006. At the same time, a medium-term management plan for the company was formulated to cover the period from fiscal 2006 to fiscal 2010. The plan, currently under way, is intended to bolster overall competitive strength and produce synergy-related benefits to transform the company into a global enterprise that supports social and industrial infrastructures. To this end, it seeks to mobilize the companyfs engineering capabilities, monozukuri (manufacturing) capabilities and project expertise.
Order value and net sales for fiscal 2006, the first year of the plan, were higher than expected. However, we revised earnings forecasts downward, due primarily to increased pressure on selling prices from intensified competition, and unprofitable projects in certain plants. Despite the partial revision of forecasts for fiscal 2007, targets for fiscal 2008 and beyond remain unchanged from the original projections.
Lay the Groundwork for Growth
- Further standardize operations
We will promote standardization of both working methods and products. To standardize working methods-that is, project management-we will bear in mind our ongoing globalization and ensure that all our construction projects employ a Work Breakdown Structure (WBS)*1 based on the internationally established Project Management Body of Knowledge (PMBOK)*2 , thereby making project processes more visible. The ultimate aim will be to increase earnings and avoid unprofitable projects. Standardization of products, on the other hand, will entail halving manufacturing lead times by establishing standardized specifications, designs and components and developing standardized product lines in a range of capacities.
*1 Work Breakdown Structure (WBS) is a method by which an entire project is subdivided into its detailed component tasks. The method is used at the planning stage of project management.
*2 The Project Management Body of Knowledge (PMBOK) is a term coined by the Project Management Institute (PMI), a non-profit organization in the U.S. It acts as a guide to generally accepted processes and knowledge areas in project management, and is a de facto standard widely employed throughout the world. - Bolster operating bases
During fiscal 2006 we integrated and upgraded the marketing, manufacturing and service bases that will support stronger operations. In fiscal 2007 we will continue reinforcing our network of overseas bases in the U.K., Vietnam, India and elsewhere.
- Enhance operational efficiency
In fiscal 2006 we came close to completing the integration of core IT systems and offices and other measures designed to make us highly profitable and produce synergies from integration at an early stage. The culmination of these efforts will be the relocation of our head office to the Rise Arena Building in Higashi Ikebukuro, Toshima-ku, Tokyo. At the same time, our eight Tokyo-area offices, including the current head office in Hitachi Kamakurabashi Building, Uchikanda, Chiyoda-ku, Tokyo, will be concentrated in the new head office building and two other locations. Business will commence at these new locations from May 7, 2007.
As another means of enhancing operational efficiency, we intend to conduct more concentrated and combined procurement, sourcing more materials internationally, to enable us to reduce our procurement costs by 7-8 billion yen annually.
Expand overseas operations
We will build on the success of our established bases in the U.A.E. (Dubai) and Singapore to expand into surrounding areas including Qatar, Vietnam and India. We will also expedite full-scale operations at the manufacturing bases we established during fiscal 2006 in China and the Middle East, enabling them to contribute to expanded sales as soon as possible. In parallel with these initiatives, we will increase our overseas workforce.
At the Hitachi Plant Technologies Group, we regard the Middle East and Asia as priority areas, and we will work to attract more orders from both. In the Middle East, where there is great enthusiasm for investment due to the abundance of goil money,h we will be seeking orders for office building air conditioning systems, water treatment and petrochemical plant-related projects. In Asia, meanwhile, infrastructure-related investment and construction of manufacturing plants by both Japanese and non-Japanese corporations is brisk. In this region we will be targeting increased orders for clean rooms, LCD-related business, water treatment and industrial plants, among others.
By implementing the above measures, we intend to increase the overseas net sales of Hitachi Plant Technologies from the 76.0 billion yen posted in fiscal 2006 to 100.0 billion yen in fiscal 2010.
Bolster core businesses
- Pumps
Regions such as the Middle East and Asia are demonstrating strong water- and energy-related demands. In addition to establishing an operational structure that will bolster our overseas operations, therefore, we also intend to establish full operations at our Chinese manufacturing base, Hitachi Pump Manufacture (Wuxi) Co., Ltd., as soon as possible. This will enable us to increase our pump-related net sales from the 27.0 billion yen posted in fiscal 2006 to 40.0 billion yen in fiscal 2010.
- Compressors
In the context of an extremely buoyant market for oil and gas plant compressors, we will reinforce our marketing efforts targeting major European and U.S. engineering firms and work to significantly upgrade our manufacturing capabilities. We will also expand sales of new high-pressure compressors, which save energy and are highly efficient. These measures will allow us to increase our compressor-related net sales from the 12.0 billion yen posted in fiscal 2006 to 30.0 billion yen in fiscal 2010.
- Water treatment and environmental systems
Infrastructure-related demand is robust in the Middle East, Asia, and elsewhere, while domestically there is strong private-sector demand. Against this backdrop, we will expand overseas operations centering on membrane bioreactor systems, with which we have had recent success in the Middle East. We will also target the private sector in Japan with industrial wastewater treatment systems, as well as soil and groundwater purification systems. Meanwhile, we will target the public sector by aggressively launching proprietary high value-added products. Through these initiatives we will increase our water treatment and environmental systems-related net sales from the 48.0 billion yen posted in fiscal 2006 to 60.0 billion yen in fiscal 2010.
- Material handling systems
We will apply our accumulated know-how, which relates to technologies for clean material handling systems in the liquid crystal panel field, to reinforce our ability to propose solutions incorporating both the material handling system mechanism and the accompanying control system. In this way, we will strive to develop business opportunities in the pharmaceutical, biotechnology and food domains, among others. Through these measures we will increase our material handling system-related net sales from the 14.0 billion yen posted in fiscal 2006 to 20.0 billion yen in 2010.
- Pharmaceutical plants
Against a backdrop of robust demand, due primarily to globalization of pharmaceutical manufacturersf operations and increasingly active investment in new drug development, we will seek to increase orders centering on antibodies and high potency active agent plants. To this end we will make the most of our competitive strength: an integrated approach that addresses the entire process of converting bulk chemicals into pharmaceutical preparations. This will entail leveraging our leading technologies-validation, fermentation and containment-and utilizing our Validation Services Group in the U.S. Furthermore, in the first half of fiscal 2007 we will install a facility for demonstrating the high potency active agent manufacturing process inside Matsudo Research Laboratory. We intend to use the facility to conduct trials in collaboration with clients. By implementing these initiatives, we will increase net sales of pharmaceutical plants from the 6.0 billion yen posted in fiscal 2006 to 11.0 billion yen in fiscal 2010.
- Air conditioning systems
Demand for air conditioning systems is strong, reflecting robust investment in leading-edge industries in Japan and elsewhere in Asia, coupled with an ongoing rush to construct buildings in the Middle East. With regard to clean room and factory air conditioning systems, we will tap latent demand in India-a huge new market-in addition to Singapore, Malaysia, China, Thailand and Vietnam. To maintain our top share in the domestic clean room air conditioning market, we will leverage our total clean technology and the environment control technology featured in our Cube series of high-precision processing units. In air conditioning systems for office buildings we will further deepen our partnership with the Al Ghurair Group of the U.A.E.-with which we established a relationship of trust through the Burj Dubai project-and pursue increased orders, primarily from the Middle East. These measures will enable us to increase net sales of air conditioning systems from the 86.0 billion yen posted in fiscal 2006 to 95.0 billion yen in fiscal 2010.
- Power plant construction
In nuclear power plant construction we will strive to further enhance reliability and safety by taking measures to refine our world-class digital engineering techniques. At the same time, we aim to advance into the U.S. market. In thermal plant construction, we will leverage our proprietary construction-process rationalization technologies and our well-established overseas bases to expand orders from overseas regions offering the potential for a substantial number of new-construction projects. Through these strategies we will increase net sales for power plant construction from the 26.0 billion yen recorded in fiscal 2006 to 49.0 billion yen in fiscal 2010.
- Research and Development
We will step up the pace of R&D that contributes directly to expansion of overseas operations. Conducting R&D in collaboration with universities in the regions where we do business will enable us to simultaneously develop both technologies and business models appropriate for the particular region. This, in turn, will enable us to get new projects under way more quickly.
We recently established a branch laboratory in Singapore, where we have stationed a researcher to conduct joint development of water reuse technology with the National University of Singapore. Meanwhile, we are keeping up with efforts throughout the Hitachi Group to bolster research capabilities in China by conducting collaborative research with a number of universities there. In fiscal 2006 we initiated our ACE Development System, whereby development resources are allocated according to order of priority. We will make use of this system to advance the development of groundbreaking products and technologies capable of outstripping those of our competitors. Such technologies will include ballast water purification systems, multifunctional fluid control equipment (Micro Process Servers), and super energy-saving air conditioning technology.
Enhance corporate value
As a company that supports social and industrial infrastructures-a field of activity that has a strong element of public service-Hitachi Plant Technologies is committed to a CSR-oriented approach throughout its operations. We are making efforts to create economic value with a view to securing appropriate levels of profit while rewarding stakeholders. We are also taking steps to ensure rigorous compliance throughout our organization, and reinforce corporate governance. At the same time, we are proactive in promoting activities that contribute to society, and are continually improving our performance with regard to quality, safety, the environment, and energy conservation.
Medium-term Management Plan targets (consolidated)
(Billion yen)
| FY2006 (results) |
FY2007 (forecasts) |
FY2008 (target) |
FY2009 (target) |
FY2010 (target) |
FY2010 as % of FY2006 | |
|---|---|---|---|---|---|---|
| Orders | 392.4 | 380.0 | 390.0 | 400.0 | 410.0 | 104% |
| Net Sales | 363.1 | 360.0 | 370.0 | 380.0 | 400.0 | 110% |
| • Social infrastructure systems | 132.0 | 129.5 | 134.5 | 136.0 | 142.0 | 107% |
| • Industrial systems | 110.6 | 105.5 | 103.5 | 102.0 | 108.0 | 98% |
| • Air Conditioning Systems | 86.1 | 84.0 | 88.5 | 89.0 | 94.5 | 110% |
| • Energy Systems | 34.2 | 41.0 | 43.5 | 53.0 | 55.5 | 162% |
| Ordinary income | 6.6 | 9.0 | 13.0 | 16.0 | 20.0 | 303% |
The information contained in this press release is valid as of the day of publication. Information may be revised on or after this date.