Profitability improved in Technology Solutions and Ubiquitous Solutions on better performance in Japan
Fujitsu today reported a profit for the second quarter attributable to owners of the parent of 25.9 billion yen, representing an improvement of 22.9 billion yen compared to the second quarter of fiscal 2015.
Consolidated revenue for the second quarter of fiscal 2016 was 1,098.5 billion yen, down 77.6 billion yen from the second quarter of fiscal 2015. Revenue in Japan rose 1.8%. Although revenue in Japan from LSI devices declined, services revenue increased, primarily from outsourcing and systems integration services, and revenues from PCs and network products also rose. Revenue outside of Japan decreased 18.8%. In addition to a decline in revenue from infrastructure services in Europe, and a decline in revenue from network products in North America, results were also significantly impacted by foreign exchange movements. Compared to the same period in the prior fiscal year, the appreciation of the yen against the US dollar, the British pound, and other currencies served to reduce revenue by roughly 75.0 billion yen.
Fujitsu recorded an operating profit of 37.1 billion yen, up 22.2 billion yen from the second quarter of fiscal 2015. Although operating profit from LSI devices was adversely affected by lower revenue and foreign exchange movements, overall operating profit improved because of cost reduction and improving cost efficiency in PCs and mobile phones, and because operating profit from network products in Japan benefited from higher revenue.
Net financial income was 0.6 billion yen, an improvement of 4.1 billion yen from the same period in fiscal 2015, primarily from foreign exchange gains.
As a result, profit before income taxes was 39.2 billion yen, an increase of 25.5 billion yen from the second quarter of the previous fiscal year.
Business Segment Financial Results
Revenue in the Technology Solutions segment amounted to 746.3 billion yen, a decrease of 6.6% from the second quarter of fiscal 2015. Revenue outside Japan fell 22.6%. In the Services sub-segment, revenue fell as a result of weak sales in Europe and the US, in addition to the impact of foreign exchange movements. In the System Platforms sub-segment, revenue fell due to a drop-off period in investment in new models of optical transmission systems in North America. The segment posted an operating profit of 46.2 billion yen, up 9.8 billion yen compared to the same period in fiscal 2015. In the System Platforms sub-segment, in addition to profitability improvements in x86 servers, the operating profit for network products improved due to a reduction in overhead costs resulting from a business reorganization carried out last year, in addition to the impact of increased revenue in Japan.
Revenue in the Ubiquitous Solutions segment was 263.7 billion yen, essentially the same as the second quarter of fiscal 2015. Revenue in Japan rose by 8.9%. For PCs, revenue rose on the back of continuing strong sales of enterprise PCs. Revenue outside Japan fell by 14.3%. In addition to a fall in revenue from PC sales in Europe, there was a large adverse impact from the strong yen. The segment posted an operating profit of 14.1 billion yen, an improvement of 18.7 billion yen over the same period in fiscal 2015. For PCs, operating profit improved due to cost efficiencies, in addition to ongoing component cost reductions at locations in Japan because of the continued strength of the yen against the US dollar, as well as the impact of higher revenue in Japan. For mobile phones, operating profit improved as a result of cost reductions and efficiencies.
Revenue in the Device Solutions segment amounted to 139.4 billion yen, down 14.0% from the second quarter of fiscal 2015. The segment posted an operating profit of 1.4 billion yen, down 6.4 billion yen from the second quarter of fiscal 2015. In addition to the impact of lower revenue from LSI devices, particularly for use in smartphones, operating profit declined for both LSI devices and electronic components due to the impact of lower revenue as a result of the continuing strength of the yen against the US dollar.
Fiscal 2016 Consolidated Projections
Fujitsu has made the following changes to its full-year fiscal 2016 earnings forecasts announced on July 28, 2016.
The assumed exchange rates for the second half of the fiscal year have been changed to 105 yen for the US dollar, 115 yen for the euro, and 140 yen for the British pound.
The revenue forecast has been revised down by 100.0 billion yen from the announcement in July, to 4,500.0 billion yen, because of revised exchange rate assumptions. The forecast for revenue has been revised down by 70.0 billion yen in the Technology Solutions segment, by 15.0 billion yen in the Ubiquitous Solutions segment, and by 15.0 billion yen in the Device Solutions segment.
Fujitsu is projecting an operating profit of 120.0 billion yen, unchanged on a consolidated basis from the previous forecast. Although the projected operating profit for Ubiquitous Solutions has been revised upward by 7.0 billion yen to account for the impact of lower procurement costs for components due to the stronger yen, projected operating profit for Device Solutions has been revised down by 7.0 billion yen to reflect the adverse impact of foreign exchange movements.
There is no change from the previous forecast in profit for the year attributable to the owners of the parent.