IHI Integrated Report 2019 Corporate Philosophy Contribute to the development of society through technology Refine manufacturing (“Monozukuri”) skills to satisfy demands. Find solutions to key global problems for the sake of the planet and humankind. Change the future through the power of technology. In the past and onward into the future. 1 Corporate Philosophy Human resources are our single most valuable asset The will to make peoples’ dreams come true and the passion to exceed high hurdles. Combining the wisdom of individuals to accomplish grand projects. IHI’s driving force is its human resources who continue growing. 2 IHI Group Vision The IHI Group seeks to solve the various environmental, industrial, social, and energy related problems of the 21st century, through using engineering expertise to focus on “Monozukuri” technology. 3 Index About the IHI IHI Philosophy and Vision P1 History of Solving Key Issues in Society P5 IHI’s Value-creation Process P7 Value-creation Strategy IHI Group Medium-term Management Plan P9 Message from the CEO P11 Financial Strategies P15 Technology & Intelligence Strategy P17 Project Risk Management Division Report P21 Special Feature 1: Restoring Electricity for Normal Life P23 Special Feature 2: Showing the World Japan’s Ability to Restore Infrastructure P25 Business Overview P27 Business Strategies P29 Shared Group Functions P45 Foundation for Sustainable Growth Management Team P47 Roundtable Discussion of Outside Directors P49 Corporate Governance P51 Sustainability P57 Environment P59 Editorial Policy Human Resources P61 This report is issued as a communication tool to convey Supply Chain Management P63 particularly important information regarding fundamental Data initiatives that support the policies, strategies, and businesses of IHI. Please visit the following websites Financial Summary P65 for more detailed information. Non-financial Summary P67 Consolidated Financial Statements P69 For more detailed information, please refer to the following websites Corporate Data P73 Financial: https://www.ihi.co.jp/en/ir/ Non-Financial: https://www.ihi.co.jp/csr/english/index.html 4 History of Solving Key Issues in Society Source: Railway Museum Late Edo period Meiji period Taisho period – post-WW2 reconstruction Key issue Threats from Western powers Key issue Increased demand for electrical power Key issue Increased demand for land In 1853, Commodore Perry’s “black ship” sailed into Uraga. In the Age of Civilization and Enlightenment, electric lights began transportation and traffic Feeling threatened by large Western military ships, the Edo appearing in cities. Construction of railways in urban districts began, starting with Shogunate began building Western warships to strengthen Electric lights spread rapidly, through Tokyo and beyond. the opening of a line between Shinbashi and Yokohama in 1872. Japan’s coastal defense. Electricity began being used as a form of power for various In Tokyo, the construction of Central Station (present-day Tokyo infrastructure, including elevators and trains, leading to the Station) connecting diverse stations led to a rapid increase in construction of power plants one after the next. railway users. Solution Solution Solution Construction of large ships to Establishment of large-scale Establishment of railway compete with the U.S. “black ships” power plant facilities infrastructure 1856 1896 1914 Completion of the Western-style frigate Manufacture of 200 kW generator, Japan’s first Construction of steel-frame structures using Asahi Maru domestically made large-capacity generator cranes began First Western-style frigate built in Japan. Japan’s first domestically made thermal power generation In those days, the conventional way to construct high structures Toward the end of the Edo period, feeling threatened by the facility was installed in the Asakusa Power Plant of Tokyo Dento was to attach scaffolding. The project attracted much attention appearance of foreign ships in Japanese territorial waters, the Company (present-day due to its adoption Shogunate government established Ishikawajima Shipyard in TEPCO). of a creative new 1853 to build large ships The 200 kW single-phase technique for rapidly that could oppose the AC generator, built by IHI assembling steel foreign ships. and designed by Professor frames by using two The first ship built here Hatsune Nakano of the mobile cranes. was the Asahi Maru. Imperial University as The Shogunate expressed Japan’s first large-capacity extreme satisfaction with generator, boasted one the ship, which offered of the world’s largest rigidity and ample rigging. capacities for its time. Source: Electricity Museum 5 Rapid growth period Stable growth period Low-growth period Key issue Urban overcrowding Key issue Saving energy Key issue Combating global warming Due to rapid industrialization, the Japanese economy averaged Following two economically disastrous oil shocks in the 1970s, Adoption of the Kyoto Protocol at the COP3 international more than 10% annual growth in the 18 years from 1955. people became aware of the importance of energy conservation, meeting in Kyoto in 1997 obligating member countries to reduce Increased populations in urban areas led to greater overcrowding. which triggered new energy-saving policies. greenhouse gas emissions to at least 5% below 1990 levels by 2008 to 2012. Solution Solution Solution Development of space-saving Improved fuel efficiency Reduced CO2 emissions parking lots of car engines from aero engines 1962 1982 2011 Completion of Japan’s first full-scale mechanical Release of City Turbo equipped with the world’s Boeing 747-8 equipped with GEnx aero engine parking system, “Ulpa Lift” (tower parking) smallest vehicular turbocharger began operating In 1961, when many Japanese people As an example of increasing efforts to save energy, IHI IHI participated in the GEnx aero engine development program began wanting to own their own cars, developed the RHB5 turbocharger for automotive turbo engines, led by GE, assuming a 13% work share, including the design IHI completed a prototype of Ulpa Lift, which attracted attention and manufacture of major components for a low-voltage turbine Japan’s first, domestically made full- as the world’s smallest module and high-voltage scale, vertical mechanical parking system. turbocharger. Boasting compressor. GEnx offered In 1962, we delivered a working model outstanding energy- 15% better fuel efficiency to Takashimaya department store in savings and economical than conventional engines Nihonbashi (product name at the time performance, the RHB5 and reduced emissions of was Sky Parking). This same product was was adopted for Honda CO2, nitrogen oxide, etc. It later installed in the Matsuya department Motor’s City Turbo in 1982, was adopted for Boeing’s store in Ginza, the Tokyo Metropolitan the engine’s first use in a 787 and 747-8 aircraft. Police building, and other locations, Japanese-made passenger fueling the popularization of tower vehicle. parking. 6 IHI’s Value-creation Process IHI’s perspective on sustainability IHI Group’s Important Assets Value offered to society IHI contributes to realization of a sustainable society through our corporate activities. We contribute to achievement of SDGs (Sustainable Development Goals) through our initiatives relating to businesses and initiatives relating to business foundation. P17 Solutions IHI offers customers 10-year vision Net sales of a Contribute to the development Initiatives through businesses P47 Technology of society through technology 2 trillion yen scale Business foundation Our strength Shared business Problem-solving capability supported Realization of % Resources, Energy & 10 Resources, Energy & Environment goals by concentration of diverse technologies or higher stable operating margin Environment Environment Contribute to carbon-free and recycling societies by providing 2008 2018 P29 Reduce environmental impact R&D expenses ¥15.6 billion ¥36.5 billion optimal integrated solutions for each region and customer ues Ide Climate change Investment in plant and equipment ¥45.2 billion ¥67.3 billion iss ntif ial y c c us Circular economy No. of national project consignments 17 44 so t f om Environmental protection o e re rs Social Infrastructure & a ’ c Social Infrastructure & Offshore Facilities w h a Offshore Facilities a Create new value Lean and exible e l l e Contribute globally and across life cycles to materialize safe and P33 B Business model Society Flexible response to n needed for social g secure social infrastructures, centered on bridges and tunnels environmental changes transformation e s sustainability Materialize an affluent society P r Transform to Human rights o v P61 i Customer relationship management d create new value h e Industrial Systems & g Diverse human resources v u Industrial Systems & General-Purpose Machinery Human Human resources are our single s a o e General-Purpose l r Labor practices most valuable asset u c th i e v Contribute to industrial infrastructure progress by thoroughly Resources Machinery s r Supply chain management th e e Our strength r g s optimizing operational lifecycles with customers P37 o en d Corporate citizenship ug ll n Targets (FY2021) h a a Globally-connected teamwork l ch ts ife lve c (Invested capital profitability) cycl So odu % e pr ROIC 1 10 2008 2018 or more Governance Aero Engine, Space & Defense Employees (consolidated) 24,348 29,286 Aero Engine, (Profitability) 8% Principled corporate management No. of overseas affiliate companies 183 217