The time has come to start Hitachi, Ltd. web conference on the third quarter fiscal year 2020 earnings for institutional investors and financial analysts. Thank you very much for participating in this web conference despite your busy schedules. The materials for this meeting will be available on the Hitachi's IR site as well as the news release site, for your information. Let me now introduce the speakers for today. Yoshihiko Kawamura, Senior Vice President and Executive Officer, CFO. Tomomi Kato, General Manager of the Financial Strategy Division. Masao Yoshikawa, Executive General Manager of the Investor Relations Division. The outline of the financial results will be seen by Mr. Kawamura. We will switch over the screen for the presentation. Mr. Kawamura, please. Thank you very much for attending this web conference, despite your busy schedules. At the outset, I would like to say that in the third quarter, impact of COVID-19 was very strong, but we are appreciative of the fact that we are able to continue business. I would like to express our gratitude and respect for the people who have made this possible. Now, I would like to report to you on the Q3 results for fiscal year 2020. Before going into the numbers, let me give you a basic outline. The impact of COVID-19 was a significant issue in fiscal 2020. This was a factor that we never experienced before. Having concluded the third quarter, it seems that we have been able to generate profits according to plan. In fact, we have had some upside as well. In terms of cash flow, we were somewhat concerned. There was a concern regarding liquidity as well. We have been able to overcome these concerns, and we have been proceeding according to plan. Having entered this fiscal year, the environment value, the importance thereof, has come to the fore as an important management issue. This will be elaborated upon later. We are going to position the enhancement of environmental value as a major management challenge going forward. Thirdly, in terms of the EBIT profits, it has declined because of factors that I've talked about. Cash flow remained very strong in various aspects. In terms of the profit and loss statement, I think I can give you further details on these matters later. Please refer to page three. These are the key messages for the third quarter. There are four points to be made. First is that we have captured the DX demand. As a result, the IT segment has driven the profitability of the company. For the third quarter, the record high adjusted operating income ratio of 13.5% was achieved. Second, with respect to the China business, this will be elaborated later. We have seen a more than faster expected recovery in China. Elevator business as well as automotive business were able to experience a market recovery, expanding our business in China. Third is relating to environmental values. Hitachi Astemo has been established from January of this year and focused on EV related business. In replacing the internal combustion engine, we are focused on electrification. ABB Power Grids has also been incorporated, and this is proceeding very well as well. $2.9 billion third quarter orders was achieved, and order backlog was $12 billion. It has been proceeding very well. JPY 1 trillion revenues is expected for the whole year. $2.9 billion for the third quarter orders is well within the plan. Cash flows remained very strong. With free cash flow basis, JPY 550 billion cash flow from operating activities have been secured. That's an increase over JPY 50 billion from the previous forecast. Cash flows remained very strong. Let me go into specific numbers. Referring to the next page, in terms of the revenues as well as adjusted operating income are shown here. Left-hand bar graph should be referred to. This is showing the revenues. The curve is showing the adjusted operating income for the first quarter to third quarter numbers are presented here. The light gray is for fiscal year 2019, and the dark gray is fiscal year 2020 revenues. In the second quarter and third quarter, you can see that revenues increased in the third quarter. We have been able to manage the COVID-19 impact to achieve these ratios. The red curve shows the adjusted operating income. It is lower than last year, it has been proceeding at 3.7%, going up to 5.7% and 6.1%. Right-hand side shows the IT segment and the Smart Life segment. IT segment remained very strong, driving the performance of the company. The red curve shows the third quarter ratio to be 13.5%, the highest record. Smart Life segment has been recovering as well. I will give you more details regarding home appliances as well as automotive. Profitability has recovered to the level of 6.7%. Page five, please. This page explains the Lumada business. This has been the core business focus for us. Major topics is shown here in the first line. We have been able to establish an alliance program in partnership with the big names such as Amazon, Cisco, Google, KDDI, Microsoft, Salesforce, et cetera. We have been able to establish an alliance. This is an open alliance to be involved in R&D, as well as developing new applications. We will deploy and sell the Lumada solutions together with these alliance partners. By so doing, we believe that the Lumada business can be further accelerated. Please refer to the bar graph below. The left-hand side is comparing the Q1 to Q3, last year and this year. The right-hand side is for the full year. The red is showing the Lumada core business. IT use case are included here. The gray area is important focus for us going forward, which is the Lumada-related business or the applications to be provided in the Power Grids, automobiles, as well as railway solutions. This is what we refer to as the Lumada-related business, shown in gray. If you look at the fiscal year 2020 forecast, core business, JPY 660 billion, related business, JPY 440 billion, will be the forecast. Total, it will be JPY 1.1 trillion in terms of the fiscal year 2020 forecast. The related business looks slowing down, but because it is in the real sector, it has been impacted by COVID-19. We believe that it will revert back to growth going forward. The applications are shown on the right-hand side in terms of mobility, IoT platform for the high value added buildings in industry. Hitachi Transport System or total support for safe driving management will be provided. Energy, Hitachi ABB Power Grids, and solutions will be promoted, utilizing the worldwide network application solutions that have been developed in this area. Please refer to page six. More detailed topics are outlined here for the third quarter. In January of this year, Hitachi Automotive Systems and the three Honda companies, Keihin, Showa, Nissin Kogyo, have been integrated. The name of the company is called Hitachi Astemo. EV and environmentally friendly vehicles will be a major focus. Technologies such as electrification, autonomous driving, and connected cars will be promoted. The second is the home appliance business overseas. With the Turkish company called Arçelik and Hitachi's home appliance business have been integrated, a new joint venture will be established. Arçelik will have 60% and we will have 40%. Arçelik is belonging to the Koç Group and pursuing a home appliance business in China, as well as Asia and Africa. They have extensive sales network. On top of their network, we will be promoting our products. By so doing, a win-win relationship can be established. Next, expanding the environmental related business. As I mentioned at the outset, this is the most important focus for us going forward. The ABB Power Grids has been very successful in terms of the environment-related business, receiving many orders. High voltage, HVDC business has been established. We have talked about Norway, another business has been concluded in the third quarter. Eversholt Rail is a railway lease company in the U.K. To this company, we have developed intercity battery hybrid train business. Agreement has been achieved. Therefore, we have been able to promote the significant business in the environment-related field. Next is social value. This is also a very important area of focus for us going forward. Against the background of COVID-19, non-contact and remote is becoming more important here. We can have contactless registration for the elevators, and various types of solutions for clean operation can be provided as well. Dr. Deng will start his season now, and human flow visualization can be enabled, aiming to prevent infections. We can provide increasing number of solutions to enhance social value. Moving on to the results, page eight. Left-hand side is showing the Q3 results as well as the Q1 to Q3 results on this page. Revenues as well as operating income, adjusted basis is shown here. The dark gray is showing the revenues, and light gray is showing the adjusted operating income. Please refer to the left-hand side, when we compare the previous year and this year for Q3, in terms of revenues, we have been able to record an increase from JPY 2.1 trillion to JPY 2.2 trillion. Adjusted operating income declined. Looking at the Q1 to Q3 results. Q1 to Q3, light gray is showing the adjusted operating income, JPY 316.9 billion. Last year was JPY 445.6 billion. It means that we have recovered up to 70% of the previous year already. Please look at the cash items on the right-hand side. The third from the top is EBIT, JPY 503.5 billion. On a year-on-year basis, increase of JPY 448.5 billion. Cash flow has been very strong as a result of this. EBITDA Q1 to Q3, JPY 855.24 billion year-on-year basis, plus JPY 482.3 billion. Cash flow from operating activities, JPY 426.4 billion increase in terms of year-on-year basis. Cash flow has been very strong in this quarter. Please refer to page nine. This page shows the results by the breakdown of five sectors and listed subsidiaries. Looking at the five sectors on the left-hand side, in terms of revenues, JPY 4.878 trillion has been recorded. Right-hand side is the listed subsidiaries, Hitachi Construction Machinery, Hitachi Metals, JPY 1.1 trillion. Contrast is very clear here. Looking at the Y-on-Y basis, five sectors was 108% year-on-year, for the listed subsidiaries remained at 60% year-on-year basis. Similar trend is shown for the adjusted operating income for the five sectors, JPY 308 billion, listed subsidiaries, JPY 8.9 billion on a year-on-year basis. Similar numbers are shown here. Looking at the adjusted operating income ratio, five sectors are 6.3%, and listed subsidiaries are 0.8%. The numbers are reflected accordingly. Looking at the EBIT ratio, 10.8% and minus 2.2%. Between the five sectors and listed subsidiaries, there is a significant difference in terms of the performance. For the listed subsidiaries, they are mainly focused on the upstream business, therefore, impact has been very strong. This is inevitable, but this is the current state. Page nine, or rather page 10. Page 10. This page shows the factors affecting changes in revenues and adjusted operating income from the Q1/Q3 of last year to Q1/Q3 of this fiscal year. Looking at the revenues above, left-hand side, starts us off with the JPY 6.34 trillion. There have been various factors during the year. First of all, divestiture of Hitachi Chemical, which was negative. The Power Grids has increased by JPY 507 billion. There was foreign exchange adjustments, and others include Hitachi Metals as well as Construction Machinery and High-Tech losses have been absorbed here. As a result, we ended at JPY 5.979 trillion. Looking at the adjusted operating income below, a similar trend can be seen here. JPY 445.6 billion ended at JPY 316.9 billion. Please look at page 11. Looking at the financial position and the cash flows. What is noteworthy here is the balance sheet above. The gray column shows the B/S situation as of 31st December 2020. Total assets. Total should be referred to. We have been able to exceed the JPY 10 trillion. Once again, it was JPY 10,141.4 billion. Because of the ABB included, that has led to the increase in total assets. We also have the interest-bearing debt. It has increased to JPY 2.6 trillion. The increased number is shown on the right-hand side, the JPY 1.115.3 trillion. This is because of the acquisition of ABB, debt has been incurred. D/E ratio should be referred to below. We had a very strong D/E ratio of 0.35x. However, because of increase in debt, in terms of financing, it has increased to 0.71x, deteriorated. In the near future, we should be able to control at the 0.5x. This is only one of the impact. Please look at the cash flow. Next. The cash flows from operating activities are JPY 426.4 billion, and there were major acquisition, ABB. Therefore, cash flows from investing activities was very significant. Free cash flow, a minus JPY 339.6 billion. Our core free cash flows, that is net of the M&A, was JPY 181.7 billion. Increase of JPY 174.2 billion, change from March 31st, 2020. This remains very strong. Next, page 13, please. From here, I will explain the full year forecast. Page 13, left side is revenues and right side is adjusted operating income. Revenues, this is FY 2019 and FY 2020 forecast. FY 2020 forecast, 8.3 trillion yen. This is a revenue decline, and adjusted operating income is also a decline. On the far right, you can see JPY 420 billion. Last time, we announced JPY 400 billion, so it is up by JPY 20 billion. 5.1% adjusted operating income ratio. This is JPY 20 billion up from the previous forecast. On the far right, you can see, second from the top, EBIT, JPY 680 billion. On a year-over-year basis, plus JPY 496.3 billion. Compared to the previous forecast, it is up by JPY 94 billion. Net income, JPY 370 billion. This is the record high number this year. This is plus JPY 70 billion compared to the previous forecast, plus JPY 282 billion on a year-over-year basis. EBITDA, JPY 1,174 billion. This is plus JPY 121 billion. Cash flow from operating activity, JPY 550 billion. This is up JPY 50 billion from the previous forecast. You can see that our cash flow is very strong. Next, page 14, please. Like I did in third quarter, five sectors and listed subsidiaries are separated, and the trend is similar to the third quarter. Five sectors, revenues JPY 6 trillion 780 billion. Listed subsidiaries, JPY 1 trillion 520 billion. On a year-over-year basis, 107% for five sectors, 62% for listed subsidiaries. On the right side, total JPY 8.3 trillion. On a year-over-year basis, this is 95%. Next, adjusted operating income. Far right, total is JPY 420 billion, as I mentioned earlier. EBIT, JPY 680 billion, and net income is JPY 370 billion. This is our current forecast. Next, page 15, please. Hitachi Astemo was integrated in and came into operation in January this year. Hitachi Astemo numbers is announced for the first time today. Far left is the previous forecast. This is Hitachi AMS. This is Hitachi's standalone basis. In the center, this is the number, the adjusted number with three Honda companies. On the far right, we have acquisition-related amortization, and the far right is total. Revenues, Hitachi AMS for one year was JPY 749 billion budget. The integration impact and the forecast this time, this is JPY 974 billion, close to JPY 1 trillion. Adjusted operating income in Hitachi AMS, it was JPY 22 billion. On the far right, this minus JPY 7 billion, this is the acquisition-related amortization of intangibles for the first year, JPY 7 billion. With that, total is JPY 25 billion. EBIT in AMS was JPY 9 billion. This time, with the adjustment items and the adjustment amortization, it's minus JPY 17 billion, and EBITDA AMS 8.1% EBITDA ratio. This time, it will go down to 5.3%. This is because of the impairment on AMS. Mainly in the impairment regarding factories and plants. It is down to 5.3%. Without the impairment, next year, we expect more than 8%, close to 10% next year. Next, page 16, please. Like I did in third quarter, this is a similar trend, FY 2019, full year revenue, and the FY 2020 forecast on the far right, JPY 8.3 trillion. The adjustment items are the same. The divestiture of Hitachi Chemical, that's a decline. Hitachi Power Grid is a plus. Astemo integration impact plus. Foreign exchange adjustment and others, leading to the far right, JPY 8.3 trillion. Adjusted operating income, similar trend, JPY 420 billion. Page 17, please. This fiscal year 2020, we had large asset divestiture and consolidation. From the adjusted operating income to net income, you can see what came in and what went out. The large ones, the far left, adjusted operating income, JPY 420 billion. Next. The business restructuring profit, this is where Hitachi Chemical divestiture and diagnostic imaging, MRI, and other medical diagnostic imaging business was transferred to Fujifilm, so that's a profit. Part of Agility Trains East in U.K., the business is mostly over, we sold part of our stocks. That's a plus JPY 435 billion. On the other hand, next is a one-off, the equity method loss and the impairment. If you go all the way, net income is JPY 370 billion. You can see the appendix. We can touch on this during Q&A. At the end, page 28, please. This shows the market status, revenues by market on a clockwise manner, North America, Europe, China, Japan, ASEAN, India, and other areas. The recovery of the world economy and ABB consolidation is reflected. Upper left, North America, the fiscal year 2019, first quarter to third quarter, and this year is compared, down 8%. North America had a big COVID-19 impact and the recovery is slow. Our revenue is down accordingly. Next, Europe is plus 5%. ABB consolidation impact was big, so this led to an improvement. China is plus 8%. As I mentioned at the outset, China market economy is recovering, so elevator and automotive-related business are leading this improvement and increase. Japan is minus 11%. We are still in a difficult situation. Next, ASEAN, India is also difficult. On the other hand, in other areas, this is Middle East, Africa, and others. This is where our footprint had traditionally been weak or small. With the ABB, we now have a plus 19%. You can see that we are growing very strongly. As a result, as you see at the bottom of the page, overseas revenue ratio is up to 53% now. That concludes my explanation. Thank you very much. We would now like to proceed to Q&A. Those of you with questions, please use the web system and press the Raise Hand button. We will designate the person to ask the question. Please unmute and state your name and affiliation before asking your question. If it is no longer necessary, please press the button again to release the question. We will first take questions from the Japanese channel, and then take questions from the English channel thereafter. First, we will take questions from the people on the Japanese line. Yoshizumi-san, please. Please unmute and ask your question. A question. I hope you can hear me. Yes, we can. Thank you for your explanation. I have three questions. First two questions is relating to automotive business integration. I'd like to ask these two questions together. First question is regarding the impact on consolidated results. Page 15 shows the numbers. The revenue is JPY 185 billion. It seems very strong, taking into consideration the last year's results. With the integration, have you received more orders? What are the assumptions in terms of increase in the revenues? The PPA is around JPY 25 billion. I think that was the explanation given. Now it's JPY 7 billion. Is this correct? From next fiscal year and onward, what is going to be the PPA? For the third quarter, operating margin. It seems that there is going to be a significant improvement. You also talked about impairment in the fourth quarter. Taking that into consideration, operating margin is around 10%, according to my calculation. For the automotive business, before or after integration, what is the actual level of margin in terms of the strength of the business? With the automotive business now consolidating, I think that is going to be added in fourth quarter. What is going to be the impact on the balance sheet? Please clarify. You have talked about the balance sheet, with the three company integration, the asset as well as the ratio and liabilities, what is going to be the impact for the fourth quarter? Please elaborate further. The other question will be asked later. Answer. Regarding Hitachi Astemo, Kato-san will provide the detailed explanation. I would like to respond to the questions one by one. First of all, page 15. As you have rightly mentioned, the impact of integration is for the three companies, their revenues and earnings are included. It's not been long since we had the integration. This is as of January in terms of the forecast. It's not just a reflection of the past performance, it was a forecast made at that time. Regarding intangibles, this is not a final number, but the number that is incorporated are as follows. Goodwill, that's JPY 60 billion. Intangible, JPY 70 billion. I think that is going to be the likely numbers. Although it is not final yet, if we look at the details, this year's impact will be intangible JPY 7 billion for the fourth quarter. For next fiscal year, JPY 5 billion is expected. We are now trying to work on numbers, and when we have clarity, it will be updated. Going back to the P&L for the third quarter, it is true that for the third quarter, it is rather bullish and it has been very strong. In terms of revenues, compared to previous year, was at the level of 111%. Up till September or to the first half, the impact of the COVID-19 and impact of the market showed that we were below the previous year level. There has been a recovery on the part of the customers. For the fourth quarter, according to the calculation that you have made, it will be high profit margin. We believe there could be various improvements to be made. That is the background of this forecast. The prolonged impact of COVID-19, as well as a shortage in terms of semiconductor parts, could have an impact on the customer's business or production. We have to watch this situation very carefully as we proceed forward. Now, the impact on the balance sheet will be explained. In terms of actual results, the numbers have been presented in the PowerPoint presentation. We are now trying to evaluate the numbers, the numbers are rough. In terms of assets, total assets, inclusive of Hitachi Astemo, JPY 11.3 trillion is the total asset forecast. D/E ratio, 0.6x is what we expect. That is all. I would like to ask my third question. For next fiscal year, what is going to drive the increase in earnings? In the third quarter, it seems that the five sectors impact of the COVID-19 has been recovered, there was no significant decline in profit. Looking at the next fiscal year, what do you think, which sector will be driving growth? From the point of view of CFO, what are the areas where you are increasing market share, such as Hitachi Astemo, where margins are improving, and what are the areas where you can expect a further margin improvement next fiscal year and beyond? Regarding the plan for next year, we'll be starting discussions internally shortly. We are now in the discussions of numbers that are still rough. For fiscal year 2020, we have made significant acquisitions. The contribution to be made is going to be very important, ABB as well as Hitachi Astemo. In both cases, there are no significant issues, and profitability according to plan can be expected. For Power Grids in North America, environmental investment is likely to be increasing, and if we can capture this for Hitachi Astemo. In China, we are seeing recovery. There could be recovery in the automotive business in North America as well. These two acquisitions could contribute significantly if all goes well. Secondly, IT is also an important focus. The investment behavior of the customers are changing. In the past, there was focus on hardware, but the control of the hardware is becoming more important, so there is increasing investment in terms of software and applications. I think we can capture this business. IT will be important focus. IT will be an important focus for us going forward on the part of government as well. I think we can have high expectations for IT. That's the second point. Third point is regarding the new areas such as medical. We have now Hitachi High-Tech within the portfolio. Hardware is outside. In terms of testing as well as analysis and data processing, the work can be promising. Environmental related business is expected to increase as well. In these three factors, the contribution by the two companies that we have acquired, IT-related business is likely to grow, and thirdly, environment as well as mobility and society-related business is likely to increase. For fiscal year 2021, it is difficult to say definitely, but I think we are likely to see a recovery. Thank you. Thank you. We'll move on to the next question. Mr. Ide, please unmute and ask your question. Mr. Ide, could you please unmute and ask your question? Mr. Ide? I'm sorry, we cannot hear you. Could you please try unmuting again? I'm very sorry we cannot hear you. For a moment, we will move to the next question. Mr. Ezawa? Yes. This is Ezawa from Citigroup Securities. Question. I have one question. In the medium-term plan, you mentioned capital allocation plan. You have a little over one year left in your medium-term plan, how do you plan to achieve this capital allocation? The situation probably changed greatly, so the cash generation and cash usage, the cash generation side, you're probably right on the strike zone, but on the cash usage side, strategic investment, do you have plan of using the cash as planned in the next one year, and the shareholder return and CapEx? In shareholder return, I think you have to increase shareholder return going forward. In the next one year or so, how do you plan to increase, or do you have a plan of increasing the shareholder return? Answer. Thank you for your question. First point on capital allocation. In the 2021 medium-term plan, we have allocation of JPY 2.5 trillion. ABB Power Grids and Hitachi High-Tech were consolidated, of the JPY 2.5 trillion, we are now up to JPY 1.8 trillion. This much has been allocated already. Based on JPY 2.5 trillion, we still have a few hundred billion JPY, and this plan remains unchanged. We are exploring various consolidation opportunities, and therefore, if we have good opportunities, we will aggressively invest. In the background, as you mentioned earlier, because we have strong operating cash flow, we do not have to borrow money to do something. We have strong operating cash flow, and asset divestiture has progressed much. This remaining portion of the JPY 2.5 trillion can be invested without impairing our balance sheet. The information related business, we are now exploring opportunities. If there are good economically reasonable deals, then we will go ahead. Next, shareholder return. This is deeply related to the first half of the cash allocation. If we invest, how much can be allocated to the shareholder return? This is part of the overall balance, and so we cannot say we will do this for sure, but dividend and buyback, share buyback, we will look at the overall capital allocation and take appropriate steps. Shareholder return is within our sight. It's part of our plan, so we will look at the overall cash allocation balance and decide accordingly. Thank you. Thank you very much. Harada-san, please. Question. Thank you very much for your support. I hope you can hear me. I have three questions. First question is, it seems that Energy BU, it seems that Nuclear and Energy BU, you have revised downward. What is the background of this? Regarding energy, ABB Power Grids has been consolidated and environment-related orders are being received. Please give me further details on this in Europe as well as in Asia. I think that is the major focus in terms of regions. What is the regional mix? What is the competitive landscape, such as competition with Siemens? In terms of the competitiveness, how do you compare against your peers? That's all for the first question. Regarding energy, please refer to page 20. Now, in the middle, we have adjusted operating income for energy business. Left-hand side, you can see the accumulated Q1 to Q3, right-hand side is for the fiscal year 2020. The dark gray is the Power Grids, the consolidation. Nuclear is the light gray. It says JPY 146 or JPY 14.6. There is a significant negative, minus JPY 71.8 billion. This is the adjusted item because of the HAPG in terms of PPA. These are numbers according to the plan. Regarding the nuclear energy business, there are reactors that are operating. We have the maintenance work for these reactors, therefore, we believe that this profit can be achieved. In terms of Power Grids, we do not see any problems going forward, it is likely that we can achieve the target, the PPA is very significant. That is the reason why we are at minus JPY 14. Kato-san will give further details. Regarding page 20, now you can see that operating income has declined. I think that was your question. It is regarding NBU. There are some decline in profitability for some projects, which is one-off. Power Grid. I would like to respond to that question regarding Power Grid and environment-related investment. After acquisition, for the smart grid related, there is the transformer in Norway has been achieved and e-mobility bus and commercial vehicles, the charging system has started using EV. The storage solutions are being provided, and this is in Europe as well as in the U.S. Page six. I mentioned here that for the first time, a high voltage DC system to connect Germany and Norway has been achieved. This is first in the world in terms of international interconnection. For 3.6 million households in Germany, the power supply can be provided in efficient manner. Therefore, we will be contributing to carbon neutral. On the 28th of January, Hitachi and Lumada will be integrated. ABB's Digital Enterprise, their asset management as well as management of the frontline or 4 trillion to asset management will be utilizing Lumada for optimization and management. IBM, GE, Schneider were competing with us. In terms of the market, enterprise asset management, and field service management, as well as asset performance management, are the different approaches we are taking. Several billions of dollars is how we are evaluating this to be a global growth area. We are global number one. By utilizing digital with the other digital technologies and a focus on environment is proving to be very successful. Question number two, from April, Mr. Kawamura, CFO, is also in charge of investment as well as our loans. In terms of cash allocation, you will be overseeing the overall area. M&A as well as the shareholder return, the right balance is very important. When you conduct M&A, what is going to be your important focus? Is it the growth possibility as well as/or profitability? What is the criteria for making decisions in M&A? What will you emphasize in your decision-making? Please elaborate. From April, as announced, I'm going to be in charge of investment, as well as loans as well. Screening will be within my responsibility as well. I will be heading the committee, and recommendations for M&A will be presented to the management committee. In the past, profitability and future growth potential was the major focus. It isn't as if I have details now, but I think the capital efficiency must be emphasized, looking at the sectors accordingly, and making sure that the investment is providing returns above the investment cost. It is not just in terms of sales potential, but we have to also look at capital efficiency as well. In terms of the environment, which is a major focus for us now, growth and profitability were the two axes that were important. Now, going forward, the environment will be the third axis that we will incorporate in making investment decisions. The specific metric will be decided going forward, but ultimately, the impact on the environment coefficient will have to be utilized in assessing investment. It's capital efficiency as well as environmental value will be an important point to bear in mind. Question. Third question is related to the previous one. Hitachi Astemo, the automotive parts business. What is going to be the positioning of this business going forward? Electrification investment could become very heavy in terms of investment. Nevertheless, is it going to be the core business for you, or is it going to be similar to a listed subsidiary? Is there a possibility that you will divest going forward? What is your basic view on this? Regarding Hitachi Astemo, it involves Honda's capital as well. Fixed cost reduction will be required because it is an integration of four entities. In making this decision, how will the discussion be made between Hitachi and Honda? Are you going to be taking the lead? How is governance arranged in this entity? Regarding Hitachi Astemo, the integration occurred in January. The future plans will be a discussion that needs to be had going forward. Hitachi Astemo belonged to Smart Life sector in the past, but the size is very large, and it is a joint venture with Honda. Therefore, we decided to separate this and have the business report directly to the president. We will have better transparency. Hitachi Astemo is now outside of the Smart Life, so there will be more clarity. Regarding the future, we have to engage in discussions going forward, but direction is clear. We might maintain this structure, or there could be IPO, there could be further alliances. The direction ultimately will be decided in one year or two years down the road, taking into consideration the business environment. Regarding the governance, from January, I am external director from January for Hitachi Astemo. I have been participating in the board meeting, and we have very good discussions, inclusive of people from Honda as well. It seems that we can have a good arrangement, a good relationship in terms of the governance, working with Honda. I don't think there will be any divergence in terms of the governance matters going forward. We will maintain the current organization going forward. Thank you. Thank you. Yoshikawa on AMS. Hitachi's role on Astemo and the value thereof. On January 18th, in the strategy meeting, we had three announcements, three points. Cloud Total System will be offered through Lumada, that's number one. Second, service business enhancement, and third is the environmental measures. Like PG, Power Grids, CO2 reduction is the aim. EV, electric value, driving management, vehicle management, life cycle management, will be done in the way only Hitachi can do going forward. R&D investment. You missed investment, so let me add some information. On the 18th of January, up till 2025, we said we will invest JPY 100 billion. DENSO and Continental investment to sales ratio, it seems low, but Astemo is very focused. A very intensive strategic investment will be conducted. The vehicle side, Astemo, cloud side, Hitachi. For example, we will divide roles and responsibilities, and for Astemo focus area, we will enhance our competitiveness. Thank you. Thank you very much, Yasukawa-san, Kameda-san. Thank you. Next question, we will take questions from the English channel. Please wait, those of you who are raising hand on the Japanese channel. Any questions from the English channel, please push the raise hand button. Hi. We do not see any questions on the English channel, so we'll come back to the Japanese channels. Mr. Yasui-san, please. Please unmute and ask your question, please. Question. Can you hear me? Yes. I have three questions. First is Smart Life. There are two questions here. After the automotive is out, it will be a smaller segment. Hitachi High-Tech, semiconductor production equipment, the positioning of that Hitachi after Hitachi Kokusai Electric, you spun off the SPE portion. Will you see this SPE as a core business? Next is the medical diagnostics equipment. The completion is delayed, you mentioned in May. If you could update on the current situation. That is on the life side question. Smart Life. Second question. Calendar year 2021, the U.S. and Europe market has more visibility. Last year, it lacked visibility due to COVID-19. In 2021, railway market, elevator market, and power grid, these three international markets, how will they evolve? Could you give us your image? Third point, the environmental value that you mentioned in your release. The electric vehicle, focus on EV and software and power grid and railway. Environmental friendly hardware is now in place, I think. If you could, once again, including the next meeting term management plan, please share with us your trend. Do you think you can capture this environmental value trend? Thank you very much. The Smart Life, Hitachi High-Tech semiconductor business. Yes. In the Hitachi Kokusai Electric, yes, we did take that action. Semiconductor, on the other hand, is the medical diagnostic, medical analysis equipment. It is a very high correlation there. Our decision now is in Hitachi High-Tech. It has high affinity with the business. We will hold this semiconductor business for now. We have no plan of spinning off in the short term. Next, the anti-monopoly law was taken up by the media, possible delay. By the end of this fiscal year, by the end of March, we think we can complete this transaction for the hardware. Second, Europe, China, and U.S. railway, as you see in this material, the main plant is in Europe. As you saw in the numbers, Europe was heavily hit by COVID-19. There's a big backlog. Once the factory comes into operation, it will be converted to cash. Because the capacity utilization is down, railway business is difficult this year. Once COVID-19 situation improves, the factory utilization will improve. This profit drop is just one-off. This will recover, we think, and the railway department thinks so. Furthermore, this was mainly centering on Europe, but now railway business, we're capturing business in the U.S. as well. As we mentioned last time, San Francisco Bay Area BART and other deals. In other regions in America, we are capturing deals. We think we can get more railway business in the U.S. Railway business can contribute greatly to the profit going forward as part of the global operation. Next, elevator. China market is very big. It's growing very strongly. The China economy recovers, and the building construction resumes. We can get more business there. We are confident in this sector. In North America and Europe, there is no elevator business, so it will be only China and Japan. In Japan, given this circumstance, new elevator order is still small. We are now focusing on maintenance service, and we're doing this remotely. In China, there are still new installations, but in Japan, it's mainly the maintenance service. Lastly, grid. We have global coverage, including China, North America, and Latin America. We have global coverage. This business, the environment will be a big theme going forward. With grid, we can minimize the leakage, and furthermore, the optimal integration with green will start. As you mentioned, it's not just U.S. and Europe. We think this business will grow globally. This global business, international business, towards 2021, will progress greatly, we think. Lastly, environment. Power Grids and Astemo, we have individual deals underway. As Hitachi-wide cooperation, as mentioned today, Mr. Dormer will lead and strategize and decide on the investment and capture return. In the future, at the right timing, we will announce again. If you could give us a little more time, we'd appreciate it. Thank you. Question, President Biden. The business opportunity from this new administration, the railway network improvement is a big need, high-speed light rail in Texas and West Coast, you're getting business, you are encouraging and promoting the traditional business. In PG, HVDC technology is used. The transmission lines modernization and the quality improvement, energy efficiency, and utilization digital. For that, it will be a tailwind for us. Lastly, the EV, electric vehicle. The infrastructure, including surrounding infrastructure, there's a Power Grid angle and the transformer angle. Vertical and horizontally, Hitachi can get on this new current, we think. Take opportunity. Thank you. Kato-san said, Power Grid, let me give you some orders and numbers in PG. I mentioned the JPY 12 billion. This is 5% growth year-on-year. Right now, we are trending very firmly, strongly. Thank you. Thank you very much. Thank you very much. We have already exceeded the allocated time, so this will be the last question. Ono-san, please. Question. I have one question regarding ABB performance. In the second quarter, profit margin is 6%, and third quarter, it has increased to 8%, net of cost. What is the background as well as sustainability for related expenses? There was a decline from JPY 36 billion to JPY 18 billion. Is this JPY 18 billion unlikely to continue going forward? That is all for me. Answer. Regarding Power Grids, PPA amortization. From the beginning of the year, we have been evaluating, and although it is not final yet, analysis has made progress, so we have reviewed this. For the full year, we estimated JPY 60.5 billion in terms of amortization, but it is likely to be JPY 55.9 billion. It is lower by JPY 6 billion. The impact of the review has been reflected and profitability has improved in the third quarter. The business remains very strong and making progress. Therefore, regarding the profit margin, we believe it is sustainable going forward. Thank you. Thank you very much.