Top Message The IHI Group will continue to support safety and security in countries and regions around the world and take on the challenge of creating value for the future

Supporting the safety, security,
and prosperity of people worldwide at its core.

Looking toward 2040, the IHI Group aims to help restore Japan’s industrial competitiveness and national strength to world-leading levels, thereby contributing to the economic, national, and energy security of countries worldwide.
To realize this vision, the IHI Group has defined its desired state as "Supporting the safety, security, and prosperity of people worldwide at its core; For Industry & National Security." This defines the IHI Group's Medium-to-Longer-Term Direction.

This strategic direction was shaped by major changes in the global landscape. When I assumed the role of President in 2020, the COVID-19 pandemic was at its height, shaking the very foundations of society. Since then, multiple challenges have continued to unfold simultaneously, including geopolitical risks such as those in Ukraine and the Middle East, energy issues, and information security threats. These developments have changed the environment in which safety and stability were once taken for granted.

In light of these changes in the operating environment, the IHI Group reexamined the role it should play. Since its founding, the Group has leveraged its technological expertise to address critical challenges at the industrial and national levels, thereby supporting essential infrastructure around the world. Building on this history, the Group’s management team engaged in extensive discussions and concluded that its role is to support the foundations of industry and help ensure that the societies and economies of each country and region continue to function sustainably.
This approach also resonates with the aspirations of many of the Group’s employees, who express a desire to "help solve social challenges" and to "work for the benefit of their countries and local communities."

The reason for including "For Industry & National Security" in the IHI Group’s vision is to clearly define the fields in which the IHI Group can leverage its strengths and make a sustained contribution to society. "For Industry" reflects the Group’s belief that strengthening the foundations of industry is essential to the long-term stability of society.
Meanwhile, "National Security" extends beyond defense alone. It encompasses energy security, resilient infrastructure, and safe, sustainable economic activity, all of which form the foundations of nations and societies. At a time of growing global uncertainty, the IHI Group deliberately chose this expression to underscore its commitment to supporting the foundations of society.

Looking back, when I became President in 2020, the IHI Group’s immediate priorities were business portfolio transformation, structural reform, and strengthening its financial foundation. Without addressing these issues, the Group would not have been in a position to execute its long-term management strategy. For that reason, the Group undertook a comprehensive review of its business portfolio and strengthened its financial position, establishing the foundation needed to pursue its mid- to longer-term management strategy. The Group is now finally at the starting line for realizing its Medium-to-Longer-Term Direction toward 2040.

Businesses that support industrial infrastructure and national security require a long-term commitment, from technology development through deployment and ongoing operations. The expertise and experience accumulated over that time become enduring sources of competitive advantage. To demonstrate that strength, the IHI Group has therefore chosen to articulate a strategic direction extending 10 to 15 years into the future.
Under this policy, the Group has established a three-phase roadmap toward FY2034: “Phase 1: Upfront Investment and Solidifying Financial Foundations,” “Phase 2: Expansion of Operating Profit and Operating Cash Flow,” and “Phase 3: Expansion of Free Cash Flow.” By the final phase, the Group aims to achieve a revenue CAGR of more than 5%, an operating margin exceeding 15%, and an ROIC of more than 13%.

First, the Group has positioned the next three years, designated as “Phase 1,” as a period for laying the foundation for growth in “Phase 2” and beyond. To meet growing demand in its key growth businesses, namely civil aero engines, defense, and nuclear energy, the Group will prioritize investments to increase production capacity. At the same time, the Group will further strengthen its financial foundation through measures such as the sale of real estate assets to support these investments. By steadily expanding these growth businesses and increasing earnings from its energy-related operation and maintenance (O&M) business, the Group aims to achieve an operating margin of 10% to 13% during “Phase 1.”

In “Phase 2,” the Group expects the investments made during “Phase 1” to begin generating returns. As expanded supply capacity enables the Group to capture more orders and improve profitability, it aims to raise its operating margin above 13%. The Group also expects operating cash flow to increase significantly.

In “Phase 3,” the Group expects to fully realize the returns on its upfront investments, delivering sustained earnings growth. While achieving an operating margin of at least 15%, the Group will further strengthen its cash-generating capability and target cumulative operating cash flow of more than ¥1 trillion over the three-year period. Discussions with investors about the Group’s Medium-to-Longer-Term Direction generated generally positive feedback. Investors agreed that, given the nature of the Group’s businesses, its performance should be assessed over the medium- to long-term rather than based solely on short-term results, and generally welcomed the 10-year roadmap. Going forward, the Group will continue discussions with investors and other stakeholders on the specific growth strategies for each of its businesses.

Growth Strategy toward 2040

Looking toward 2040, the IHI Group has defined three business domains for future growth: “Aerospace,” “Energy,” and “Infrastructure.” These domains are not based on the IHI Group’s current business or organizational structure. Rather, they represent the fields where the IHI Group aims to contribute in the years ahead. The IHI Group will look beyond its existing business boundaries to develop new businesses within these three domains.

Historically, the IHI Group has competed on a product and project basis, at times being compared with competitors primarily on price at the order stage. Going forward, the Group aims to move beyond price-based competition on individual orders and shift toward a business model that can generate stable earnings over the long term.

To achieve this, the IHI Group will focus on business opportunities that support industrial infrastructure and national security. These businesses require not only advanced technology, safety and quality, but also a proven track record built over many years and the ability to meet certification and regulatory requirements. Over the years, the IHI Group has developed its businesses in these areas by building on its exceptionally strong technological capabilities. By continually advancing its technologies, the IHI Group is able to solve challenges that are difficult for other companies to address, which is why clients choose the IHI Group. At the same time, the track record and experience accumulated through these projects strengthen clients’ trust and enable the IHI Group to take on increasingly sophisticated challenges. This continuous accumulation of technology, experience, and trust is the source of the IHI Group’s competitiveness.

Furthermore, the IHI Group's involvement does not end with the delivery of its products. The Group has continued to support their operation, maintenance, and renewal over the long term. This enables clients to use critical equipment and systems reliably for extended periods, thereby helping society maintain and strengthen the infrastructure that supports industrial activity and people’s daily lives. The knowledge gained through years of operational experience also helps improve equipment and services, strengthening the IHI Group's competitiveness. Going forward, the Group will build on these strengths to further enhance its competitiveness.

Building on these strengths, the Group will bring its technologies and expertise to global markets while pursuing new business opportunities by leveraging technologies and products developed for defense purposes in civilian applications (dual use*). Insights and experience gained in these new markets will inform future technology development, and those technologies will in turn create further business opportunities. By expanding this cycle, the IHI Group aims to achieve sustainable growth.

• *
  Dual use refers to technologies and products that can be utilized for both civil and defense purposes.

In areas where it has strong technological capabilities, the IHI Group will also seek to create new markets. Rather than simply supplying products and technologies, the Group will combine them with operations, maintenance, upgrades, and other related services, thereby creating entirely new markets and securing a leading position by becoming involved from the earliest stages of market formation.

Through this approach, the IHI Group will build on the business opportunities created by its technologies, using its extensive experience and established reputation to strengthen its competitive position. By bringing these strengths to markets around the world and working to create new markets, the Group will continue to support industrial infrastructure and national security.

• Growth Strategy toward 2040
  (Value Creation Strategy) Next

Technology and Human Capital
as the Driving Forces of Sustainable Growth

To accelerate value creation across the IHI Group, the Group will redefine and strengthen its approach to technology and Human capital in line with the future direction of its businesses.
The value creation framework outlined above can function only when supported by both technology and Human capital. Technology not only defines the business fields in which the IHI Group can compete, but also serves as a starting point for creating new markets. Human capital plays an essential role in envisioning how these technologies can be transformed into viable businesses and turning those ideas into action. Together, these two elements set the value creation process in motion and drive business growth.
For this reason, the IHI Group regards technology and Human Capital as its driving forces.

From a technology perspective, the Group is now identifying the key technology areas that serve as the source of its competitive advantage and strategically concentrating its management resources on them. At the same time, the Group is expanding its capacity to meet growing demand, including through greater use of robotics and AI.

• Technology Strategy Next

In terms of Human capital, the Group is working to attract people with diverse experience and create an environment where each individual can make the most of their abilities. To capture business opportunities, it is not enough simply to respond to the challenges presented by clients. The Group must anticipate changes in society and industry, identify future challenges and needs that clients themselves have yet to recognize, and turn them into tangible products and services. Collaboration among people with diverse backgrounds is essential to achieve this.

Bringing together people with different experiences and values can create friction within an organization. However, I do not see that friction as inherently negative. In fact, I believe it is more dangerous to avoid friction and allow everyone to converge on the same way of thinking. The IHI Group believes it is essential to create new value through open dialogue, where diverse perspectives challenge one another while maintaining mutual respect. Going forward, the Group will promote collaboration among people and with AI as part of an increasingly diverse workforce, turning this diversity into a source of competitive advantage.

The foundation supporting these efforts is an organizational culture where challenges and support reinforce each other to create new value. Crucially, the Group must create an environment that values not just results, but the act of taking on challenges itself, where people feel empowered to support one another. By creating a chain of challenges and support, the Group will accelerate transformation across the entire organization.
At the same time, taking on challenges involves uncertainty. Senior management will support these efforts by understanding risk information from the front lines and taking responsibility for risk management decisions. Rather than simply delegating authority, managers are expected to work alongside employees to determine how to turn ideas into reality and provide the necessary support. By having senior management, managers, and staff each fulfill their respective roles, the Group can take on new challenges while effectively managing risk. Supporting challenges that create new value across the organization in this way will provide the foundation for sustainable growth.

• Human Capital Strategy Next

Compliance: The Foundation of Sustainable Growth

The value creation initiatives described in this report are only possible with sound governance. Strict compliance is an essential prerequisite for sustainable growth.

Following the detection of misconduct at one of the Group’s subsidiaries in FY2024, the IHI Group has further strengthened its efforts to improve quality and reinforce compliance. The Group has clarified the respective roles of its business divisions and corporate functions in risk management, while promoting talent rotation across the Group so that operations can be regularly reviewed from fresh perspectives.

The Group has also strengthened dialogue and training to create a workplace where employees can speak up. I have continued to communicate the importance of compliance and the need to improve the Group’s organizational culture. Despite these efforts, in June 2026, the Group’s subsidiary IHI Aerospace was subject to a suspension of eligibility to participate in competitive bidding by the Group’s client Japan Aerospace Exploration Agency (JAXA). Given the priority the Group has placed on compliance, I take this situation extremely seriously. I sincerely apologize to our stakeholders for the concern and inconvenience this has caused.
The Group recognizes that high daily workloads made it difficult for employees to speak up, driven by unreasonable practices that imposed heavy burdens. The Group recognizes these issues as critical challenges that must be addressed.

In response, the IHI Group has established a Risk Monitoring Board under my leadership.
The purpose of the Risk Monitoring Board is to establish an environment that enables senior management to gain visibility into risk-related information arising in the workplace, covering all types of risks, not just quality and compliance. It also aims to identify unreasonable practices and conditions in the workplace through interviews and other means designed to understand workplace realities, and to ensure that issues identified through this process are addressed by management rather than left to individual workplaces. This will help identify problems at an early stage before they develop into quality issues or compliance violations by improving visibility into risk information and resolving unreasonable practices under management leadership, thereby reducing risks and fostering an organizational culture in which concerns can be raised openly.
Driven by technology, the IHI Group will continue to support social infrastructure, contributing to the sustainable development of industry and society. Even amid growing uncertainty, the Group will continue to fulfill its role as a company that provides functions essential to society.

To achieve this, the Group will continue to implement the policies and initiatives outlined above and work together across the Group, from senior management to each employee, to drive sustained growth.

By building on relationships of trust with all its stakeholders and continuing to deliver value over the long term, the IHI Group will achieve sustainable growth in corporate value.