Hitachi Capital : Consolidated Financial Results Summary for FY 2019

Consolidated Financial Results

Summary for FY 2019

May 29, 2020

© Hitachi Capital Corporation 2020. All rights reserved.

Contents

1. Summary of Consolidated Financial Results for FY 2019
2. Summary of Performance by Business
3. Consolidated Financial Forecast for FY 2020

© Hitachi Capital Corporation 2020. All rights reserved.

1

1-1. Summary of Business Performance for FY2019

						(Millions of yen)
		FY2018	FY2019	Y on Y	Foreign	Y on Y
		exchange	(excluding foreign
		Results	Results	Change
		effects	exchange effects)
Volume of business	2,745,094	2,186,490	80%	▲45,267	81%
Revenues	453,253	464,020	102%	▲8,820	104%
Cost of sales	312,859	327,703	105%	▲5,769	107%
Gross profit	140,393	136,316	97%	▲3,050	99%
Selling, general and administrative expenses	110,997	96,442	87%	▲2,008	89%
Profit before tax	32,706	42,526	130%	▲1,075	133%
Net income attributable to owners of the parent	19,363	30,693	159%	▲828	163%
Operating assets	3,392,878	3,185,326	94%	▲98,610	97%
ROE	5.1%	8.1%	+2.9%	―
ROA	1.0%	1.3%	+0.3%	―
OHR	59.0%	61.9%	+2.9%	―
Yearly average currency	Yen / ￡	145 yen	138 yen	▲7 yen
exchange rate	Yen / US ＄	110 yen	109 yen	▲1 yen

© Hitachi Capital Corporation 2020. All rights reserved.

2

1-2. Changing Factors of FY 2019 Profit before tax

	Temporary
Business	profit
(Japan)
Expansion
▲2.6	Reviewof
+4.8
	Business
		Baddebt-
		・
		(China	related
	The Americas,etc.)
		▲	expenses
		5.8	▲2.2

FY2018

expenses (Chinese Allowancefor

32.7 BadDebt)

+20.6

（Billions of Yen）

Achieved the initial plan of 45 billion yen based on actual capabilities

Other

expenses	Effectof	Initial plan
1.3	Exchange	45.0	Impactof the
▲
	rate
		novelcoronavirus
	changes
	▲1.1	45.1	infection
		(Allowancefor
			doubtful
			accounts*)	42.5
			▲2.6

FY2019 resultexcluding the impact of the novel coronavirus infection

FY2018	Result			FY2019 Result
(Exchange rate)			(Exchange rate)
Yen/￡	：145 yen	： Increasing Factors	：Decreasing Factors	Yen/￡	：138 yen
Yen/US＄：110 yen			Yen/US＄：109 yen

【*Impact of the novel coronavirus infection (Allowance for doubtful accounts)】 Allowance for doubtful accounts was calculated in FY2019

(Allowance for doubtful accounts was calculated assuming that credit risk will increase until

first half of the year ended March 31, 2021 (about 6 months))

© Hitachi Capital Corporation 2020. All rights reserved.

3

2-1. Summary of Japan Business/Global Business

					(Millions of yen)
FY2018	FY2019	Y on Y	Foreign	Y on Y
exchange	(excluding foreign
Results	Results	Change
effects	exchange effects)

Volume of	Japan Business	993,506	1,028,643	104%	0	104%
business	Global Business	1,751,588	1,157,847	66%	▲45,267	69%
Gross profit	Japan Business	62,857	62,422	99%	0	99%
Global Business	76,633	72,892	95%	▲3,050	99%
Profit before	Japan Business	30,265	26,565	88%	0	88%
tax	Global Business	10,950	24,405	223%	▲1,075	233%
Operating	Japan Business	1,624,893	1,669,842	103%	▲637	103%
assets	Global Business	1,767,985	1,515,483	86%	▲97,972	91%
ROA	Japan Business	1.9%	1.6%	▲0.3%	―	―
Global Business	0.7%	1.5%	+0.8%	―	―
ROA	Global Business	0.6%	1.5%	+0.9%
(Local currency	―	―
basis)

*Adjustments (company-wide expense) are not allocated to gross profit and profit before tax of Japan Business and Global Business.

© Hitachi Capital Corporation 2020. All rights reserved.

4

2-2. Breakdown of Japan Business

(Millions of yen)

			Volume of business		Operating assets
			FY2018	FY2019		Y on Y	FY2018	FY2019	Y on Y
			Results	Results		Change	Results	Results	Change
Total of Japan Business	993,506	1,028,643		104%	1,624,893	1,669,842	103%
		Account Solution	802,990	828,314		103%	1,072,868	1,155,850	108%
		Vendor Solution	181,971	191,707		105%	429,184	444,484	104%
	Total of reportable segments	984,961	1,020,021		104%	1,502,053	1,600,334	107%
	Other	9,822	9,878		101%	122,839	69,508	57%

				Gross profit		Profit before tax
			FY2018	FY2019	Y on Y	FY2018	FY2019	Y on Y
			Results	Results	Change	Results	Results	Change
Total of Japan Business	62,857	62,422	99%	30,265	26,565	88%
		Account Solution	37,546	36,975	98%	22,718	20,188	89%
		Vendor Solution	16,036	16,492	103%	6,245	5,435	87%
	Total of reportable segments	53,583	53,467	100%	28,963	25,623	88%
	Other	9,274	8,955	97%	1,302	941	72%

*Adjustments (company-wide expense) are not allocated to total of Japan Business.

© Hitachi Capital Corporation 2020. All rights reserved.

5

2-3. Breakdown of Global Business(1):

Europe, The Americas

• Europe (UK, Poland, the Netherlands, Germany, Austria, Belgium, Czech, Slovakia, Hungary)

					(Millions of yen)
	FY2018 Results	FY2019 Results	Y on Y	Foreign	Y on Y
	exchange	(excluding foreign
	Change
			effects	exchange effects)
Volume of business	662,687	651,404	98%	▲35,182	104%
Gross profit	44,539	45,995	103%	▲2,503	109%
Profit before tax	18,251	18,533	102%	▲974	107%
Operating assets	879,725	874,787	99%	▲74,577	108%
ROA (Local currency basis)	2.2%	2.1%	▲0.1%	―	―

• The Americas (US, Canada)

					(Millions of yen)
	FY2018 Results	FY2019 Results	Y on Y	Foreign	Y on Y
	exchange	(excluding foreign
	Change
			effects	exchange effects)
Volume of business	721,770	332,590	46%	▲6,218	47%
Gross profit	16,385	15,492	95%	▲302	96%
Profit before tax	5,100	3,212	63%	▲60	64%
Operating assets	426,127	312,498	73%	▲6,202	75%
ROA (Local currency basis)	1.3%	0.9%	▲0.4%	―	―

© Hitachi Capital Corporation 2020. All rights reserved.

6

2-3. Breakdown of Global Business(2): China, ASEAN

• China (Mainland China, Hong Kong area)

(Millions of yen)

	FY2018 Results	FY2019 Results	Y on Y	Foreign	Y on Y
	exchange	(excluding foreign
	Change
			effects	exchange effects)
Volume of business	251,027	86,141	34%	▲2,809	35%
Gross profit	9,288	4,802	52%	▲147	53%
Profit before tax	▲13,895	1,956	―	▲52	―
Operating assets	312,594	200,541	64%	▲6,645	66%
ROA (Local currency basis)	▲4.4%	0.8%	+5.2%	―	―

• ASEAN (Singapore, Thailand, Malaysia, Indonesia)

(Millions of yen)

	FY2018 Results	FY2019 Results	Y on Y	Foreign	Y on Y
	exchange	(excluding foreign
	Change
			effects	exchange effects)
Volume of business	116,103	87,711	76%	▲1,057	76%
Gross profit	6,419	6,601	103%	▲97	104%
Profit before tax	1,493	702	47%	11	46%
Operating assets	149,537	127,655	85%	▲10,548	92%
ROA (Local currency basis)	1.1%	0.5%	▲0.6%	―	―

© Hitachi Capital Corporation 2020. All rights reserved.

7

3-1. Consolidated Financial Forecast for FY2020 (Environment Recognition)

Scenario by the spread of the novel coronavirus infection

• Capital investments and personal consumption continue to decline sharply for a while due to measures such as lockdown imposing strict restriction on economic activities
• The number of bankruptcies of SMEs, especially those in the service business, has increased, worsening the unemployment rate
• Although the strict measures will remain in place for a while, economic activities and personal consumption will recover gradually after the lockdown is eased in stages or reviewed in or after the second quarter
• It is difficult to completely end the infection, and there are concerns over the second (and third) wave, but their impact on the economic environment is expected to be limited considering we can capitalize on the experience obtained from the first wave and advancement of the cure

We incorporate decreases in business volume and revenues in its consolidated earnings forecasts for the fiscal year ending March 31, 2021, assuming that the novel coronavirus infection will have significant negative impact until June 2020 and then the economy will gradually recover towards March 2021.

© Hitachi Capital Corporation 2020. All rights reserved.

8

3-2. Consolidated Financial Forecast for FY2020 (Preliminary calculation)

						(Millions of yen)
			FY2019 Results	FY2020		Y on Y Change
			Forecasts

Volume of business		2,186,490		1,755,000	80%
Revenues		464,020		450,200	97%
Cost of sales		327,703		314,200	96%
	(of which, cost of capital)	40,027		36,900	92%
Gross profit		136,316		136,000	100%
Selling, general and administrative expenses	96,442		99,500	103%
Profit before tax		42,526		38,500	91%
Net income attributable to owners of the parent	30,693		27,500	90%
Dividend per share (yen)	150 yen(*1)	94 yen		―
Payout ratio		41.9%		39.9%		▲2.0%
			(*2)
ROE		8.1%		7.1%		▲1.0%
ROA		1.3%		1.2%		▲0.1%
OHR		61.9%		65.7%	+3.7%
		Yen / ￡	138 yen	135 yen		Exchange sensitivity (*3)
Yearly average		: Approx. 110 million yen
currency exchange rate	Yen / US ＄	109 yen	108 yen		Exchange sensitivity (*3)
			: Approx. 30 million yen

(*1)	Ordinary dividend payments 110 yen + Special Dividends 40 yen (*2) Calculated using ordinary dividend payments (110 yen share)
(*3)	The impact on Profit before tax in case JPY vs £/$ changed 1 yen (FY2020 forecasts)	9
	© Hitachi Capital Corporation 2020. All rights reserved.

3-3. Changing Factors of FY2021 Profit before tax

（Billions of Yen）

	Effect of
	Exchange
	rate changes
	▲0.6
Initial business plan
(excluding the impact
of the novel	Impact of the novel
)
coronavirus infection	coronavirus infection, etc.
+5.0
42.5	(Preliminary calculations
	based on Assumption *)	38.5
	▲
	8.4

FY2019	Result			FY2020 Forecasts
(Exchange rate)	：Increasing Factors	：Decreasing Factors	(Exchange rate)
Yen/￡	：138 yen	Yen/￡	：135 yen
Yen/US＄	：109 yen			Yen/US＄ ：108 yen

【*Impact of the novel coronavirus infection (Preliminary calculation method)】

Decreases in business volume and revenues are incorporated

(Assumption: The novel coronavirus infection will have significant negative impact until

June 2020 and then the economy will gradually recover towards March 2021)

© Hitachi Capital Corporation 2020. All rights reserved.

10

3-4. Trends of annual cash dividends per share/ payout ratio

42%*

40%

				31%	31%	40
30%			30%
		29%			28%
	27%
	25%
						110
			84	86	86	94
			46
			60
	38	48
33

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 (forecast)

Dividends per Share for the Year (Yen)

Payout Ratio

Special dividend

* Dividend payout ratio is calculated only for ordinary dividends excluding special dividends

© Hitachi Capital Corporation 2020. All rights reserved.

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Note:

This document contains forward‐looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management's views and assumptions formed using information available at the time. Accordingly, forecasts may differ from actual results due to a variety of factors.

Appendix

© Hitachi Capital Corporation 2020. All rights reserved.

Breakdown of Cost of Sales/SG&A

Breakdown of cost of sales			(Millions of yen)
		FY2018	FY2019	Y on Y Change
		Results	Results
Cost of sales	312,859	327,703	105%
	(of which, cost of capital)	38,599	40,027	104%
Breakdown of SG&A			(Millions of yen)
		FY2018	FY2019	Y on Y Change
		Results	Results
Selling, general and	110,997	96,442	87%
administrative expenses
	(of which, personnel costs)	48,703	49,246	101%
	(of which, business	34,122	35,162	103%
	management expenses, etc.)
	(of which, bad debt-related	28,171	12,033	43%
	expenses)
			© Hitachi Capital Corporation 2020. All rights reserved. 14

Quarterly Credit Trends by Region

			Credit loss ratio
		FY2016	FY2017	FY2018	FY2019
		Results	Results	Results	Results
Total	0.15%	0.20%	0.18%	0.23%
	Japan	0.04%	0.05%	0.06%	0.07%
	Europe	0.26%	0.22%	0.25%	0.30%
	The	0.41%	0.79%	0.49%	0.79%
	Americas
	Asia	0.27%	0.28%	0.22%	0.33%

Credit loss(Millions of yen)

FY2016	FY2017	FY2018	FY2019
Results	Results	Results	Results
5,103	6,452	6,156	7,383
823	812	911	1,160
1,613	1,705	2,169	2,655
1,357	2,652	2,070	2,480
1,309	1,281	1,005	1,087

*Credit loss ratio : Credit loss ÷ Operating assets

*Credit loss : This is the actual amount of bad debt losses that are different from bad debt-related expenses and the allowance for bad debt.

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