Machinery, Equipment & Infrastructure Business Plan

Machinery, Equipment &

Infrastructure

Business Plan

Executive Vice President, President and CEO,

Machinery, Equipment & Infrastructure

Kazuaki KIMURA

6.8.2015

Table of Contents

1

1. Business Overview

2. Review of 2012 Medium-Term

Business Plan

3. 2015 Medium-Term Business Plan

4. Domain Policy

5. Business Strategies

6. Summary

2

1. Business Overview

2

1-1. Domain Launch and Restructuring of SBUs

3

（8 SBUs)

Metals machinery

Industry and Precision

Instrument

Compressor

Advanced mechanical

systems

Environmental equipment

Machinery･ Equipment

Mechatronics system

machinery

Hydraulics & Machinery

(4 SBUs)

Turbocharger

Material handling

equipment

Engine

Agricultural machinery

(1 SBU)

Machine tool

(2 SBUs)

Air-conditioning &

refrigeration

ＣＡＣ

Machinery & Steel Infrastructure Systems

（16 SBUs)

Metals machinery

Crane and

Material handling

system

Compressor Rubber & tire machinery

Environmental equipment Injection molding machine

Mechatronics system

machinery

Food machinery

Bridges

Newspaper

printing machinery

Parking system Paper converting machinery

Other equipment

Advanced mechanical

systems

Deck machinery

Commercial

Printing machine

General Machinery &

Special Vehicles

(4 SBUs)

Turbocharger

Material handling

equipment

Engine

Agricultural

machinery

Machine Tool

(2 SBUs)

Machine tool

Precision cutting tool

etc,

Air-Conditioning &

Refrigeration Systems

(4 SBUs)

Air-conditioners

Packaged air-

conditioners

for facilities

Refrigeration unit

for trucks and trailers

ＣＡＣ

Machinery, Equipment & Infrastructure Domain

Strategic restructuring of product mix

1. With domain’s launch in April 2014, 4 business headquarters were integrated

2. 26 SBUs were consolidated into15, generating synergies

26SBU

15SBU

Production Management Division

Machinery, Equipment & Infrastructure

Automotive

Parts Division

Quality Management Division

Procurement Department

Business Strategy Division

Mitsubishi Nichiyu Forklift Co., Ltd. (Material

Handling Equipment)

Engine Division

Mitsubishi Heavy Industries Automotive

Thermal Systems Co., Ltd. (CAC)

Turbochargers

Air-Conditioning & Refrigeration Division

Machine Tool Division

Hydraulics & Machinery Division

Mitsubishi Heavy Industries Compressor

Corporation (Compressors)

Primetals Techonologies

(Metals marhinery)

Mitsubishi Heavy Industries Environmental &

Chemical Engineering Co., Ltd.

(Environmental Systems)

Mitsubishi Heavy Industries Mechatronics

Systems, Ltd. (Mechatronics System, Steel

Structure Equipment, Mechanical Parking

System)

Mitsubishi Heavy Industries

Machinery Technology Corporation

(Crane and Material

handlling System, EC)

(Paper Converting Machinery, Newspaper Rotary Press)

(Food Packaging Machinery, Injection Molding Machine

Mitsubishi Agricultural Machinery Co., Ltd.

Machinery ・ Equipment

Advanced Mechanical Systems

1-2. Organizational Chart

4

Kazuaki Kimura

Chief officer

Member of the Board,

Executive Vice President,

President and CEO

Machinery, Equipment &

Infrastructure

Vice President, Machinery, Equipment & Infrastructure,

Senior General Manager

Mamoru

Hasegawa

Kiyoshi

Okazoe

Takashi

Mikogami

Hiroki

Kato

Mr.

Ninomiya

Mr.

Shimma

Mr.

Takeda

Mr.

Kajino

Mr.

Kusumoto

Mr.

Shirao

Mr.

Tsuda

Mr.

Yamazaki

Mr.

Osaki

Mr. Doi Mr.

Watanabe

Mr.

Hasegawa

Mr.

Tottori

Mr.

Okubo

Mr. Kato

Business

Strategy

Division

Quality

Management

Division

Production

Management

Division

Procurement

Department

Horizontal QMS deployment throughout domain

Evaluation of Business strategies, potential alliances

Sharing of customer information (heat maps )

Cross-divisional sharing of production technologies;

Configuration of optimal production structure

Cross-divisional organization (shared functions)

ＳＢＵ s

1-2. Domain Conceptual Overview

5

◇Seeking growth and strengthening of

overall SBUs by building up business

foundation with cross-divisional

(4divisions) structure (shared functions)

◇Expand scale and earnings growth of

the businesses applying optimal

management methods in line with each

SBU’s characteristic

Business strengthening through the initiatives by

cross-divisional organization

1-3. Major SBUs Domestic Production Bases

6

Hiroshima

Machinery Works

・Metals Machinery

・Compressors

Mitsubishi Agricultural

Machinery Co.,

Shimane Plant

・Agricultural Machinery

Mihara

Machinery Works

・Packaging Machinery

・Advanced Mechanical

System

・Material Handling

Equipment

Iwatsuka Plant

・Injection Molding

Machine

・Food Packaging

Machinery

・Engine

・Turbocharger

Sagamihara

Machinery Works

Shimonoseki

Shipyard &

Machinery Works

・Hydraulics &

Machinery

Biwajima Plant

・Air-Conditioning &

Refrigeration

・CAC

Ritto Plant

・Machine Tool

◆ Business developments at domestic bases

Mitsubishi Nichiyu

Forklift

Kyoto Plant

1-3. Major SBUs Overseas Production Bases

7

MCCC（CAC）

MHICM

（Rubber tire Machine/

Machine Tool）

MFD

(Material Handling

Equipment）

MJA

（Air-Conditioning &

Refrigeration）

MHAQ

（Air-Conditioning &

Refrigeration）

MTA(Turbocharger）

THACOM

(Air-Conditioning &

Refrigeration）

MCCT（CAC)

MACO

（Air-Conditioning &

Refrigeration）

MVDE(Engine）

MHI-IPT

（Machine Tool)

Rocla

(Material Handling

Equipment）

MCO-I

（Compressor）

MCFA

(Material Handling

Equipment）

FBH（Machine tool）

MCCA(CAC)

MCCC（CAC）

SMTC

（Turbocharger）

MBRD

（Air-Conditioning

& Refrigeration）

MEA(Engine）

MENA(Turbocharger)

MTEE

(Turbocharger）

Product

Number of

bases

Countries

Material Handling

Equipment

3 Finland, China, USA

Turbocharger 4

Netherland, Thailand,

China, USA

Engine 2 France, India

Compressor 1 USA

Air-

Conditioning &

Refrigeration, CAC

8 Thailand, China, USA

Machine Tool 3 India, China, USA

◆ Global developments at 21 worldwide bases (Metals machinery excluded)

Metals machinery Compressor 環 Environmental systems Machine tool

Material

handling

equipment

Air-

conditioning

&

refrigeration

Turbocharger

Engine

Metals

machinery

Compressor

Environmental

systems

Machine

tool

Others

Orders received(FY2014)

1-4. Orders received / Net Sales by SBU

Material

handling

equipment

Air-

conditioning

&

refrigeration

Turbocharger

Engine

Metals

Machinery

Compressor

Environmental

systems

Machine

tool

Others

Net sales(FY2014)

Material handling equipment Air-conditioning & refrigeration Turbocharger Engine

8

Forklift trucks, air-conditioning & refrigeration, and turbochargers

account for roughly half of domain’s business scale.

1-4. Orders received, net sales & operating income by domain

28%

Orders received

33%

Net sales

28%

Operating income

◆ Domain account for about one-third of the MHI group in terms of

orders received, net sales and operating income

Ratio of orders received, net sales and operating income in FY2014

9

Machinery,

Equipment &

Infrastructure

Domain

Machinery,

Equipment &

Infrastructure

Domain

Machinery,

Equipment &

Infrastructure

Domain

10

2. Review of

2012 Medium-Term Business Plan

10

2-1. 2012 Business Plan : Targets and Numerical Results

2012 2013 2014

Target

Actual

Target

Actual

Target

Actual

Orders

received

970.0 877.1 1,100.0 1,106.5 1,250.0 1,304.6

Net sales 1,000.0 925.2 1,050.0 1,096.3 1,250.0 1,319.5

Operating

income

40.0 36.5 50.0 51.6 78.0 84.1

Operating

income ratio

4.0% 3.9% 4.8% 4.7% 6.2% 6.4%

11

◆In FY2014, the year the domain was launched, orders received, net sales

and operating income all grew significantly.

※Areas shaded in yellow indicate results above target.

（in billion yen）

2-2. 2012 Business Plan : Sales Trends of Major Business Areas

（in billion yen）

12

FY2012 FY2013 FY2014

925.2

1,096.3

1,319.5

1,304.6

1,106.5

877.1

Orders

received

Net sales

Operating income ratio

◆In FY2014 orders received and net sales both increased 40% compared to FY2012,

largely owing to the business integration promoted in metals machinery and material

handling equipment businesses and to the overseas sales expansion of

turbochargers and air-conditioning & refrigeration equipment.

3.9%

4.7%

6.4%

その他

工作機械

環境設備

コンプレッサ

製鉄機械

エンジン

ﾀｰﾎﾞﾁｬｰｼﾞｬ

冷熱

物流機器

Others

Machine tool

Environmental

systems

Compressor

Metals machinery

Engine

Turbocharger

Air-conditioning &

refrigerator

Material handling

equipment

2-3. Review of 2012 Business Plan

◆ Integrated 4 business headquarters and reduced numbers of SBUs as a result of the shift to

domain system

・Optimal business operation attributable to synergies generated with individual strength of each

SBU.

13

Achievements of 2012 Business Plan

◆ Increased domain earnings through a variety of Cross-SBU initiatives in the following areas:

・Manufacturing: Encouraging of sharing production technologies, configuration of optimal

production structure (integration of die-casting factories, etc.)

・Sales: Developing of new business opportunities, sharing customer information

・Quality: Carrying out of quality control thoroughly, deploying horizontal QMS

throughout the domain

FY2014 Business targets achieved

◆ Acceleration of global developments

・Expanded overseas sales of turbochargers and air-conditioning & refrigeration equipment

Operating income ratio in FY2013: 4.7% ⇒ Increased to 6.4% in FY2014

14

3. 2015 Medium-Term Business Plan

14

15

Orders

received

4,699.1

billion yen

3,992.1

billion yen

296.1

billion yen

Orders

received

5,500.0

billion yen

5,000.0

billion yen

450.0

billion yen

ＦＹ2014

ＦＹ2017

◎ ◎

○ ◎

○ -

◎ ◎

○ △

- ○

◎ ◎

○ ○

-

Domain

Main measures and

fluctuating factors

Orders/

Net sales

Operating

income

Energy &

Environment

Commercial

Aviation &

Transportation

Systems

Integrated

Defense &

Space

Systems

Machinery,

Equipment &

Infrastructure

・ Expanded synergies at MHPS

・ Overall expansion of servicing

business

・ Distributed power sources,

oil & gas, etc.

・ Expansion of

Boeing-related business

・ MRJ (contribution to net sales

starting FY2017)

・ Strengthening of

land transportation systems

・ Reform of

commercial ship business

・ Demand to hold steady through

FY2017; preparations for expansion

of business in equipment, etc.

・ Synergies at Primetals

(Metals machinery business)

・ Strengthening of compressors,

turbochargers, etc.

・ Accelerated business restructuring

(including M&A’s)

Net

sales

Operating

income

Net

sales

Operating

income

● Energy & Environment

● Commercial Aviation & Transportation Systems

● Integrated Defense & Space Systems

● Machinery, Equipment & Infrastructure

● Others

3-1. 2015 Business Plan of MHI group

16

Business Domain

Strategies Main Measures

Energy &

Environment

・ Simultaneously pursue short-term

earnings and mid/long-term growth,

with business expansion and

profitability at the core (swift

response to moves made by mega

competitors)

・ Promote long-term continuation

policy for nuclear power business

・ Enter markets for high-performance models (large-scale GT);

enhance lineups

・ Strengthen servicing business (employ ICT and big data; invest

human resources)

・ Expand networks of domestic and overseas manufacturing bases

・ Expand business in distributed power generation systems (joint

development with Machinery, Equipment & Infrastructure domain)

・ Full-scale entry in oil & gas upstream business (keeping

collaborations and M&A’s in view)

Commercial

Aviation &

Transportation

Systems

・ Improve profitability of commercial

airplane products

・ Advance MRJ development and

improve airframe value

・ Undertake bold conversions in

commercial and cruise ship

businesses

・ Expand business in land

transportation systems

・ Promote increased production in businesses for Boeing and

develop next-generation production processes

・ Steadily carry forward the MRJ’s development and develop a high-

volume manufacturing base

・ Develop a new infrastructure export model based on domain

synergies

・ Develop new business model for cruise ship business

・ Strengthen ability to promote business in large-scale overseas

projects (Doha, etc.)

Integrated

Defense &

Space

Systems

・ Undertake sustained strengthening

of existing businesses and prepare

for next expansion step (initiatives to

promote overseas business and

conversion to commercial market

needs)

・ Undertake concentrated strengthening of integrated defense

systems (land, sea, air)

・ Newly launch a state-of-the-art technology business department

and promote the following:

- Development of new overseas businesses through tieups with

overseas partners

- Development consumer demand-based businesses applying

dual-use technologies

Machinery,

Equipment &

Infrastructure

・ Along with the Energy &

Environment domain, pursue

achievable and immediately effective

measures from the perspective of

supporting the MHI Group’s scale

and earnings

・ Promote and accelerate PMI in metals machinery and forklift

trucks

・Expand compressor business in the field of oil & gas

・ Establish a global business structure for turbochargers

・ Further accelerate business restructuring (including M&A’s)

3-2. 2015 Business Plan of MHI Group : Growth Strategy

877.1

1,106.5

1,304.6

1,500.0

1,650.0

1,800.0

925.2

1,096.3

1,319.5

1,400.0

1,600.0

1,800.0

36.5

51.6

84.1

85.0

115.0

160.0

受注売上営業利益

Orders

received

Net

sales

Operating

income

3-3. 2015 Business Plan of Domain : Numerical Target

（in billion yen）

2015 Business Plan (FY2015～FY2017）

2012 Business Plan (FY2012～FY2014）

FY2012

（Actual）

FY2013

（Actual）

FY2014

（Actual)

FY2015

（Target）

FY2016

（Target）

FY2017

（Target）

17

Excluding impact of

15-month fiscal year

【Business expansion during the 2015 Business Plan】

・ Shifting to a highly profitable business of 1.8 trillion yen enhancing globalization &

business restructuring by M&A/alliances

（） Operating income ratio

（3.9%）

（4.7%）

（6.4%）

（6.1%）

（7.2%）

（8.9%）

18

4. Domain Policy

18

Create top businesses

in global niche markets

4-1. Basic Policies of 2015 Business Plan

19

Ⅰ. Expand scale and earnings

in growing businesses

Ⅲ. Restructure and integrate

small/medium-scale businesses

Ⅱ. Accelerate PMI of the established

joint ventures

・Turbochargers:

Establish 10-million-unit production system

・Compressors:

Capture North American oil and gas markets

Cross-divisional function sharing throughout domain

Cross-divisional sharing of

production technologies;

configuration of optimal

production structure

Sharing of customer

information

Horizontal QMS

deployment

throughout domain

・Metals machinery:

Accelerate PMI through collaboration between

Primetals Technologies Ltd. and domain

・Material handling equipment

Harvest synergies from integration with Nichiyu

・For small/medium-scale businesses that face

difficulty achieving sustained growth independently,

promote business expansion/revitalization and

strengthening of earning capacity applying optimal

means suited to each business’s traits

Expand scale

and earnings of

growth

businesses

Accelerate

PMI of the

established

joint

ventures

Restructure

and integrate

small/medium

-scale

businesses

4-1. Basic Policies of 2015 Business Plan:

Strengthening of Earning Capacity

20

84.1

160.0

FY2014

Operating income

Improve earning capacity through

achievable, immediately effective measures.

FY2017

Operating income

(in billion yen)

4-1. Basic Policies of 2015 Business Plan:

Measures for Expanding Growth Businesses

21

Development of new

businesses and new

markets through cross-

domain sharing, etc.

Global business

expansion

New domestic business

initiatives and overseas

business expansion

Business expansion

through global M&A’s

Turbo-

charger

Material

handling

equipment

Metals

machinery

Compressor

Engine

Category SBU

・Capture the North American oil and gas markets.

・Secure top share in ethylene and fertilizer markets.

・Strengthen earning capacity through expansion of

service business and incorporation of peripheral equipment.

・Further strengthen domestic business

(solutions business, etc.).

・Expand new business areas

(overseas PPP, wood biomass, etc.).

・Harvest synergies from integration with

Nichiyu.

・Expand business scale and profits through

implementation of growth strategies.

・ Joint effort between Primetals and domain

to accelerate PMI (Achieve global M&A model).

・Secure top global share in automotive market

(establish 10-million-unit production structure).

・Expand sales in growing Chinese and North American

markets; achieve global sales/production network.

・Expand into truck market and develop electric products,

to achieve further business expansion.

・Expand business scale in distributed power systems

market.

・Expand existing engine business and OEM operations.

・Expand thermal solutions business.

・Participate in total energy solutions business.

Measures

【 Turbochargers:

U.S. plant opening ceremony】

【Compressors:

Completion of U.S. plant】

【Environmental equipment:

Singapore waste treatment plant

】

Details in following pages

Environmental

equipment

Air-

conditioning

&

refrigeration

22

5. Business Strategies

22

5-1. Expand scale and earnings of growth businesses

23

Ⅰ. Expand scale and earnings

of growth businesses

Ⅲ. Restructure and integrate

small/medium-scale businesses

・Turbochargers:

Establish 10-million-unit production structure

・Compressors:

Capture North American oil and gas markets

Cross-divisional function sharing throughout domain

Cross-divisional sharing of

production technologies;

configuration of optimal

production systems

Sharing of customer

information

Horizontal QMS

deployment

throughout domain

Create top businesses

in global niche markets

Ⅱ. Accelerate PMI of the established

joint ventures

・Metals machinery:

Accelerate PMI through collaboration between

Primetals Technologies Ltd. and domain

・Material handling System:

Harvest synergies from integration with Nichiyu

・For small/medium-scale businesses that face

difficulty achieving sustained growth independently,

promote business expansion/revitalization and

strengthening of earning capacity applying optimal

means suited to each business’s traits

◆Strategies for increasing orders (customer support)

・Strengthen European operation as ‘’The second development center’’.

・Meet customers’ demand for shorter engine development period.

◆Expand sales for use in passenger cars

and develop new products for entering

into the truck field.

・Develop variable-geometry

turbochargers for gasoline engines.

・Develop new systems.

5-1. Expand scale and earnings of growth businesses

① Turbocharger

24

Business strategies

Orders received / Net sales

◆Establish 10-million-unit production structure by 2016.

(Secure top share in global market for passenger cars.)

◆Achieve sales expansion in the growing Chinese and

North American markets and a global production

structure with plants located near customers.

◆Accelerate development of new models, and pursue

differentiation through enhanced customer support.

Business environment

Turbocharger +

Electric compressor

Basic management policies

【 Downsizing 】

Netherlands

China

Japan

Asia

USA

FY2014 FY2015 FY2016 FY2017

Orders received Net sales

Fuel efficiency

Output

2.0L

1.6L

1.2L

Second stage

Supercharged engines

Naturally

aspirated engines

◆Enhance cost competitiveness and better quality

・Develop and install the world’s most automated production lines.

・Expand global procurement.

Sample turbocharger workshop (Europe)

5-axis machining center

◆Establish global production system (10 million units by 2016)

・Sustained growth is expected in demand for turbochargers in

passenger cars.

・Whereas the traditional focus has been on turbochargers for

diesel-powered vehicles, going forward demand for use in

gasoline-powered vehicles is expected to grow at annualized 10%.

・Chinese and North American markets for turbochargers for

gasoline-powered vehicles are expected to grow significantly.

2 stages

10.6

8.8

9.1

10.7

11.8

12.5

11.4

13.1

0

2

4

6

8

10

12

14

2008 2009 2010 2011 2012 2013 2014 2017

[Bil.$]

[

年度

]

25

◆ Strengthen sources of stable earnings through expansion of

service business (net sales ratio: 40%)

・Expand North American renovation and service business by

launching U.S. production base.

◆Secure significant business expansion and high

profits, to successfully compete in global market

-Improve Japanese and U.S. production/service structures

-Expand service business ratio

FY2014 FY2015 FY2016 FY2017

Orders received Net sales

◆ Strengthen competitiveness and further increase market share

in chemical plant business

Market scale / trend

Impact to come from oil prices and other factors,

but expansion will continue over the long term

・Maintain top market share in ethylene/fertilizer/methanol by

strengthening competitiveness through application of world’s

shortest delivery method (30% reduction in lead time)

◆ Build up track record and expand market share in oil & gas

・Forge collaborative structures with major players liaising with

Oil & Gas Business Development Dept.

◆ Strengthen structures to achieve global growth

・Establish tri-polar (Japan/U.S./Europe) global business structure.

・Establish production bases in Brazil, Russia and Korea.

・Improve and enhance efficiency of business processes through

introduction of global standards systems.

5-1. Expand scale and earnings of growth businesses

② Compressor

Business strategies

Business environment

Basic management policies

【Operations at U.S. production base launched in April 2015】

Orders received / Net sales

26

Ⅰ. Expand scale and earnings

of growth businesses

・Turbochargers:

Achieve 10-million-unit production system

・Compressors:

Capture North American oil and gas markets

Cross-divisional function sharing throughout domain

Cross-divisional sharing of

production technologies;

configuration of optimal

production systems

Sharing of customer

information

Horizontal QMS

deployment

throughout domain

Ⅱ. Accelerate PMI of

the established joint ventures

・Metals machinery:

Accelerate PMI through collaboration between

Primetals Technologies Ltd. and domain

・Material handling equipment:

Harvest synergies from integration with Nichiyu

Ⅲ. Restructure and integrate

small/medium-scale businesses

Create top businesses

in global niche markets

5-2. Accelerate PMI of the established joint ventures

・For small/medium-scale businesses that face

difficulty achieving sustained growth independently,

promote business expansion/revitalization and

strengthening of earning capacity applying optimal

means suited to each business’s traits

5-2. Accelerate PMI of the established joint ventures

27

◆Promote PMI/harvest synergies in Metals machinery and Material handling equipment

Metals

machinery

・Development of worldwide business network through

integration of respectively strong geographic regions

・Re-organization of domestic and overseas manufacturing bases

・Reduction and optimization of the costs of

procurement and reserch & development

・Increase in EPC work

Material

handling

equipment

・Harvest synergies from business integration such as

　sharing of components, operational efficiency enhancement, etc.

・Expansion of business scale and profits through implementation of

“growth strategies” such as expansion of warehousing and service

businesses

Prmetals Technologies, Limited opening ceremony

New model of counterbalanced electric forklift trucks for Europe

5-2. Accelerate PMI of the established joint ventures

Metals machinery

28

◆Secure orders availing of comprehensive capabilities

◆Meet the ever-increasing needs and challenges of the

customers by providing world-class technologies,

lifecycle services, and equipment with superior-quality

workmanship

◆Accelerate integration synergies and secure position of

the world leader in metallurgical plant solutions

FY2014 FY2015 FY2016 FY2017

Orders received Net sales

◆Strengthen corporate structure through

promotion of PMI activities

Market scale / trend

・Decline from approx. 3 trillion yen in FY2013

to approx. 2.4 trillion yen in FY2014

Market share, competitive status

・Estimated 10% market share in FY2013

Competitive superiority

・Response capability to market needs through formation of

full-lineup structure from upstream (blast furnace) to

downstream (galvanizing equipment)

・Market presence availing of global business bases

(24 countries)

Start up 6 task forces charged with the following tasks

１．Review and boost efficiency of sales and marketing structures

２．Optimize total company organization (flat, swift decision-making)

３．Reap synergy effects (optimization of supply chain and R&D scope)

４．Eliminate redundant products and technologies

５．Create plans for achieving optimal operation of production bases

６．Undertake cost structure analysis and strengthen competitiveness

・For each project, conduct an analysis of other companies (technology/

competitiveness) to make the proposal strategy

・Enhance maintenance and service business

(expand orders for small/medium-scale renovation work and spare parts)

・Introduce and expand sales of former Siemens’s upstream/non flat products

into the Japanese market

◆Promote development of new technologies

(including environmental) matching customer needs

◆Secure profitability through sound implementation of ordered

projects

・Strengthen project management (enhance the entry management and

the coordination among the local entities)

・Prevent reoccurrences of malfunction/complaints.

Hot rolling mill

Electric furnace

Business strategies

Basic management policies

Business environment

Orders received / Net sales

5-3. Restructure and integrate small/medium-scale businesses

29

Ⅰ. Expand scale and earnings

of growth businesses

Cross-divisional function sharing throughout domain

Cross-divisional sharing of

production technologies;

configuration of optimal

production systems

Sharing of customer

information

Horizontal QMS

deployment

throughout domain

・Turbochargers:

Achieve 10-million-unit production system

・Compressors:

Capture North American oil and gas markets

・Metals machinery:

Accelerate PMI through collaboration between

Primetals Technologies Ltd. and domain

・Material handling equipment:

Harvest synergies from integration with Nichiyu

Ⅱ. Accelerate PMI of

existing integrated companies

Ⅲ. Restructure and integrate

small/medium-scale businesses

Create top businesses

in global niche markets

・For small/medium-scale businesses that face

difficulty achieving sustained growth independently,

promote business expansion/revitalization and

strengthening of earning capacity applying optimal

means suited to each business’s traits

5-3. Restructure and integrate small/medium-scale businesses

30

For profitable, non growth businesses

1. Expand through M&As/alliances so as to be mutually complementary and

reinforce each business

2. Strengthen business structures and resources through business consolidation and/or creating

business entities

To make all SBUs profitable and expand the profit margin

within the 2015 Medium Term Business Plan

For lower profitable businesses

3. Revitalize through M&A/alliances

In case of difficulty of above measure, reallocate resources to growth businesses through

withdrawals from the businesses, etc

Measures

Business expansion/revitalization and strengthening of

earning capacity of small/medium-scale businesses

having difficulty achieving sustained growth independently

5-3. Restructure and integrate small/medium-scale businesses

31

Near-term business restructuring plans

1. Expand through M&As/alliances so as to be mutually complementary and reinforce each other’s business

Businesses Plans for implementation Timing

Electrostatic

precipitators

Integration with Hitachi Plant Construction, Ltd.

and conversion to group company of MHPS(Mitsubishi Hitachi Power Systems)

10.01 2015

Tunnel

excavation

machinery

Integration with Japan Tunnel Systems Corporation 01.01 2016

2. Strengthen business structures and resources through business consolidation and creating business entities

Hydraulic

machinery,

accelerators,

Restructuring/integration of small/medium-scale businesses and consolidation into

MHI-MS (

10.01 2015

Machine tool Creation of new business entity with sales company 10.01 2015

ITS

Mitsubishi Heavy Industries Mechatronics Systems, Ltd)

Crane and Material

Handling Systems

by

Bridges

construction

Transfer of stocks to Miyaji Engineering Group, Inc. 04.01 2015

Material

handling

systems

Integration with Sumitomo Heavy Industries Material Handling Systems Co., Ltd. 10.01 2015

Agricultural

machinery

Capital participation by Mahindra & Mahindra Ltd. of India 10.01 2015

3. Revitalize business through M&A/alliances

32

1. Expand through promoting M&As/alliances with other companies in the same business categories

so as to be mutually complementary and reinforce each other

Electrostatic precipitators（EP）

Integration with Hitachi Plant Construction, Ltd.

Tunnel excavation machinery

Integration with Japan Tunnel Systems corporation

◆Strengthen business by achieving full AQCS

(air quality control system)

・Achieve full lineup by adding electrostatic precipitators

to MHPS group’s deNOx / deSOx equipment, gas-gas

heaters, heat recovery systems

・Accelerate overseas expansion of electrostatic precipitators

applying MHPS’s overseas response capability,

and boost competitiveness through consolidation in areas

besides electric power

AQCS equipment configuration

Aims

◆Attract domestic demand and accelerate overseas expansion

・Domestic market demand will shrink after the Tokyo Olympics,

whereas overseas demand is expanding.

・In view of market trends, integration of MHI’s shield tunneling

machine business, which has outstanding technological capability

and a track record on global scale, with JTSC, which has the top

domestic market share, will be taken under consideration.

・Aim is to become a global leader in shield tunneling machines by

combining areas of strength and mutually complementary technologies*.

Ownership ratios

・JTSC 60%

・MHI 40%

Shield machine

（Tunnel excavation machinery）

（※）

・JTSC

Lineup from small/medium to large

diameter machines

・MHI

Large-diameter machines,

stone-cutting machines, bedrock

excavators, technology enabling

response to special usage conditions

Denitrification

equipment

GGH

Desulfurization

equipment

GGH

EP

5-3. Restructure and integrate small/medium-scale businesses

33

2. Strengthen business structures and resources through promoting business consolidation

and creating business operating entities

Hydraulic machinery, Accelerators , ITS *,

consolidation into MHI-MS *

Machine tool,

Creating business entity with sales company

◆Synergy from combining products/technologies;

flexible allocation of resources through achievement of

numerous areas of business strength

・Expand applications of hydraulic technology to testing/inspection

equipment, culture/sports facilities, etc.

・Accelerate integration of mechatronics technologies and provide

system products applying accelerators

・Enhance efficiency through integration of domestic ITS* installation

and maintenance work

・Expand applications of ITS and ICT** to other products

Aims

◆Strengthen business structure to compete against

specialized manufacturers

・As market demand structure undergoes vast changes, specialized

manufacturers are increasing their competitiveness through swift

decision-making.

・To compete: Strengthen market response capability through

conversion to a business entity

Enhance organizational flexibility by unifying production and

marketing.

Achieve swift decision-making and clarify business responsibilities

Gear grinding machine

Hydraulic motor

Testing equipment

(vibration-induced destruction testing system)

Ritto Plant

(Headquarters of

New business entity)

（*） ITS: intelligent transportation systems

(highway toll collection systems, traffic control systems, etc.)

ICT: information and communications technology

MHI-MS: steel structures, mechanical parking systems, testing equipment,

culture/sports facilities, etc.

5-3. Restructure and integrate small/medium-scale businesses

34

Bridges Construction:

Transfer of stocks to Miyaji Engineering Group, Inc.

◆Strengthen domestic market response capability through

expanded product lineup and synergies

・Long-term market trend looks for maturation along with contraction of domestic industries.

・Improvement of product models and service lineups, integration of technological capabilities

and knowhow, and optimal allocation of management resources

・In the future, growth capital will be invested overseas and into new products and businesses.

Crane and Material handling systems : Integration with SHI-MHS*

◆Expand OEM supplies and expand business in global markets

through procurement and technological synergies

・Strengthen response capability to domestic and overseas markets through building of

efficient supply chain and achievement of low costs

・Improve Mahindra & Mahindra’s lineup, expand Asian business through wider adoption

of Japanese type farm equipment, and expand OEM supplies to global markets

Agricultural Machinery: Capital participation by Mahindra & Mahindra Ltd. of India

Press conference announcing alliance

5-3. Restructure and integrate small/medium-scale businesses

◆Strengthen market response capability through integration of

strong fields and synergies in sales and technology

・The market for bridges construction is expected to enter a recovery phase going forward.

・By transferring stocks to Miyaji Engineering Group, having a good sales record in steel bridges,

earning capability will be strengthened through the accumulation and improvement of technological

capabilities and management streamlining.

* Sumitomo Heavy Industries Material Handling Systems Co., Ltd.

3. Revitalize business through M&A/alliances

35

6. Summary

35

6. Summary

・Expand scale and earnings of growth businesses

・Accelerate promotion of PMI at the established joint ventures

・Restructure and integrate small/medium-scale businesses

36

Business Initiatives of

Machinery, Equipment & Infrastructure Domain

Implementing effective and achievable measures to support

the foundation of MHI group’s growth in scale and earnings

37

Forecasts regarding future performance in these materials are based on judgment made in accordance with

information available at the time this presentation was prepared. As such, those projections involve risks and

insecurity. For this reason, investors are recommended not to depend solely on these projections for making

investment decision. It is possible that actual results may change significantly from these projections for a number

of factors. Such factors include, but are not limited to, economic trends affecting the Company’s operating

environment, currency movement of the yen value to the U.S. dollar and other foreign currencies, and trends of

stock markets in Japan. Also, the results projected here should not be construed in any way as being guaranteed

by the company.