TOKYO (Reuters) - Japan’s Hitachi Ltd (6501.T) said on Tuesday that it aimed to cut annual operating costs by 5 percent in four years, enabling the company to invest more in its growing infrastructure and telecommunications businesses.
The industrial electronics company has been overhauling its sprawling empire of some 900 firms and 360,000 employees - about the population of Honolulu - after plunging to a record loss for a Japanese manufacturer just three years ago.
It has shifted its focus towards growth areas such as infrastructure, which includes rail systems and urban planning, while shedding unprofitable operations such as its U.S. hard disk drive business.
Hitachi said that it aimed to achieved the 5 percent cost reduction by the financial year ending in March 2016 through increasing overseas purchases of materials and trimming office and production expenses.
It did not provide a target in yen terms, but such a reduction would amount to 450 billion yen ($5.4 billion) based on current annual costs of about 9 trillion yen, a company statement showed.
“Major global companies have operating margins of over 10 percent,” much higher than at Japanese firms, Hitachi executive Makoto Ebata told a briefing. “That’s a theme behind this cost structure reform.”
Hitachi expects an operating profit of 400 billion yen on sales of 9.5 trillion yen for the financial year ending March 31.
That gives it an operating margin of only about 4 percent - meaning it makes 4 cents to the dollar before taxes and special items - much lower than 14 percent at General Electric Co (GE.N) and about 11 percent at Germany’s Siemens AG (SIEGn.DE), Thomson Reuters data shows.
Shares of Hitachi, more than one-third owned by foreign investors, closed up 2.3 percent at 529 yen after the announcement, in line with the benchmark Nikkei .N225 average.
($1 = 82.8300 Japanese yen)
Reporting by Chris Gallagher; Editing by Jonathan Hopfner