euro adhoc: Fujitsu Limited
Quarterly or Semiannual Financial
Statements
Fujitsu Reports FY2003 First-Half Financial Results
for first-half fiscal period, ended September 30, 2003 - Part 2 (E)
Disclosure announcement transmitted by euro adhoc. The issuer is responsible for the content of this announcement.
Part 2
Consolidated Business Segment Information (Three months ended September 30)
a. Net Sales
Yen U.S.
(millions) Dollars
(millions)2nd 2nd 2nd
Quarter Quarter Quarter
2003 2002 Change 2003
(%)Software Unaffiliated Y 525,979 Y 537,102 -2.1 $ 4,738
& Customers
Services Interseg-
ment 19,942 19,771 +0.9 180
Total Y 545,921 Y 556,873 -2.0 $ 4,918Platforms Unaffiliated 411,572 390,622 +5.4 3,708
Customers
Interseg- 62,467 61,203 +2.1 563
ment
Total 474,039 451,825 +4.9 4,271Electronic Unaffiliated 172,100 147,047 +17.0 1,551
Devices Customers
Interseg- 16,272 18,633 -12.7 146
ment
Total 188,372 165,680 +13.7 1,697Financing Unaffiliated 29,596 30,306 -2.3 267
Customers
Interseg- 2,715 2,446 +11.0 24
ment
Total 32,311 32,752 -1.3 291Other Unaffiliated 63,949 62,315 +2.6 576
Operations Customers
Interseg- 35,210 36,755 -4.2 317
ment
Total 99,159 99,070 +0.1 893Eliminations (136,606) (138,808) - (1,230)
Total Y 1,203,196 Y 1,167,392 +3.1 $10,840
b. Operating Income (Loss)
Yen U.S.
Dollars
(millions) (millions)2nd 2nd Change 2nd
Quarter Quarter (Million Quarter
2003 2002 Yen) 2003Software & Y 32,525 Y 50,635 -18,110 $293 Services (Operating (6.0%) (9.1%) (-3.1%) Margin)
Platforms (1,286) (17,829) +16,543 (12)
((0.3%)) ((3.9%)) (+3.6%)Electronic 4,972 (15,668) +20,640 45 Devices (2.6%) ((9.5%)) (+12.1%)
Financing 1,033 1,043 -10 9
(3.2%) (3.2%) (-%)Other 3,011 4,383 -1,372 27 Operations (3.0%) (4.4%) (-1.4%)
Eliminations (20,359) (16,772) -3,587 (183)
Total Y 19,896 Y 5,792 +14,104 $179
(1.7%) (0.5%) (+1.2%)c. Sales to Unaffiliated Customers
Yen U.S.
Dollars
(billions) (millions)2nd 2nd 2nd
Quarter Quarter Quarter
2003 2002 Change 2003
(%)Software Japan Y 405.3 Y 411.0 -1.4 $3,652
& Services Overseas 120.5 126.0 -4.4 1,086
Total Y 525.9 Y 537.1 -2.1 $4,738Platforms Japan 288.9 273.9 +5.5 2,603
Overseas 122.6 116.6 +5.1 1,105
Total 411.5 390.6 +5.4 3,708Electronic Japan 89.0 77.4 +15.0 802
Devices Overseas 83.0 69.6 +19.3 749
Total 172.1 147.0 +17.0 1,551Financing Japan 29.5 30.3 -2.3 267
Overseas - - - -
Total 29.5 30.3 -2.3 267Other Japan 51.9 49.4 +4.9 468
Operations Overseas 12.0 12.8 -6.3 108
Total 63.9 62.3 +2.6 576Total Japan Y 864.8 Y 842.1 +2.7 $7,792
Overseas 338.3 325.2 +4.0 3,048Total Y 1,203.1 Y 1,167.3 +3.1 $10,840
d. Sales to Unaffiliated Customers by Products and Services
Yen U.S.
Dollars
(billions) (millions)2nd 2nd
Quarter Quarter
2003 2002 Change 2003
(%)Software Solutions/SI Y 258.9 Y 257.3 +0.6 $2,333
& Infrastructure 267.0 279.8 -4.6 2,405
Services Services
Total Y 525.9 Y 537.1 -2.1 $4,738Platforms Servers Y 88.8 Y 98.0 -9.4 $800
Mobile
Infrastructure/
IP Network 43.5 42.1 +3.3 392
Transmission 44.2 52.1 -15.2 398
Equipment
PCs & Mobile 182.0 157.2 +15.8 1,640
Telephones
HDDs 53.0 41.2 +28.6 478Total Y 411.5 Y 390.6 +5.4 $3,708
Electronic Semiconductors Y 92.0 Y 86.3 +6.6 $829
Devices Others 80.1 60.7 +32.0 722
Total Y 172.1 Y 147.0 +17.0 $1,551Consolidated Statements of Operations (Six months ended September 30)
Yen U.S.
Dollars
(millions) (millions)
1st Half 1st Half 1st Half
2003 2002 Change 2003
(%)Net sales Y 2,141,934 Y 2,150,386 -0.4 $19,297
Operating costs
and expenses:
Cost of goods 1,576,454 1,571,934 +0.3 14,202
sold
Selling, general
and
administrative 583,470 601,730 -3.0 5,257
expenses
2,159,924 2,173,664 19,459Operating income (17,990) (23,278) - (162)
(loss)
Other income
(expenses):
Net interest* (7,755) (11,327) (70)
Equity in
earnings of
affiliated 418 (2,090) 4
companies, net
Amortization of
unrecognized
obligation
for retirement (28,938) (21,938) (261)
benefits
Casualty loss** (4,700) - (42)
Restructuring (4,674) (150,000) (42)
charges
Cost of - (25,000) -
corrective
measures for
products***
Valuation loss - (7,637) -
on marketable
securities
Gain on sales of 34,470 27,980 311
marketable
securities****
Other, net (21,913) (6,811) (198)
(33,092) (196,823) - (298)Income (Loss) before income taxes and minority (51,082) (220,101) - (460) interests Income taxes 3,787 (70,141) 34 Minority (3,693) 2,522 (34) interests Net income Y (58,562) Y (147,438) - $ (528) (loss)
Note: All yen figures throughout these statements have been converted to U.S. dollars for convenience only at a uniform rate of $1=111 yen.
*Net interest consists of interest income, dividend income and interest charges.
**Casualty loss refers to repair expenses incurred to cover damages to property as a result of the earthquake that occurred off the coast of Miyagi prefecture, Japan, on May 26th, 2003.
***Cost of corrective measures for products refers to certain small form factor hard disk drives.
****Gain on sales of marketable securities in first half of FY2003 refers to 27,632 million yen of gain on sales of affiliates' stock and 6,838 million yen on sales of available-for-sale securities.
Consolidated Business Segment Information (Six months ended September 30)
a. Net Sales
Yen U.S.
Dollars
(millions) (millions)
1st 1st 1st Half
Half Half
2003 2002 Change 2003
(%)Software Unaffiliated Y 909,325 Y 918,089 -1.0 $8,192
& customers
Services Intersegment 31,867 31,688 +0.6 287
Total Y 941,192 Y 949,777 -0.9 $8,479Platforms Unaffiliated 723,821 769,713 -6.0 6,521
customers
Intersegment 104,178 103,752 +0.4 939
Total 827,999 873,465 -5.2 7,460Electronic Unaffiliated 334,746 289,037 +15.8 3,016
Devices customers
Intersegment 33,000 38,089 -13.4 297
Total 367,746 327,126 +12.4 3,313Financing Unaffiliated 50,391 55,074 -8.5 454
customers
Intersegment 4,027 5,607 -28.2 36
Total 54,418 60,681 -10.3 490Other Unaffiliated 123,651 118,473 +4.4 1,114
Operations customers
Intersegment 66,346 68,133 -2.6 598
Total 189,997 186,606 +1.8 1,712Eliminations (239,418) (247,269) - (2,157)
Total Y 2,141,934 Y 2,150,386 -0.4 $19,297
b. Operating Income (Loss)
Yen U.S.
Dollars
(millions) (millions)1st Half 1st Half Change 1st Half
2003 2002 (Million 2003
Yen)Software & Y 28,890 Y 51,501 -22,611 $ 260 Services (Operating (3.1%) (5.4%) (-2.3%) Margin)
Platforms (20,715) (30,805) +10,090 (186)
((2.5%)) ((3.5%)) (+1.0%)Electronic (1,218) (23,102) +21,884 (11) Devices ((0.3%)) ((7.1%)) (+6.8%)
Financing 2,007 2,591 -584 18
(3.7%) (4.3%) (-0.6%)Other 5,031 4,312 +719 45 Operations (2.6%) (2.3%) (+0.3%)
Eliminations (31,985) (27,775) -4,210 (288)
Total Y (17,990) Y (23,278) +5,288 $(162)
((0.8%)) ((1.1%)) (+0.3%)c. Sales to Unaffiliated Customers
Yen U.S.
Dollars
(billions) (millions)1st 1st 1st Half
Half Half
2003 2002 Change 2003
(%)Software Japan Y 671.4 Y 666.2 +0.8 $6,049
& Services Overseas 237.8 251.8 -5.5 2,143
Total Y 909.3 Y 918.0 -1.0 $8,192Platforms Japan 505.0 539.0 -6.3 4,550
Overseas 218.8 230.6 -5.2 1,971
Total 723.8 769.7 -6.0 6,521Electronic Japan 164.6 145.9 +12.8 1,483
Devices Overseas 170.0 143.1 +18.8 1,533
Total 334.7 289.0 +15.8 3,016Financing Japan 50.3 55.0 -8.5 454
Overseas - - - -
Total 50.3 55.0 -8.5 454Other Japan 100.9 93.8 +7.5 910
Operations Overseas 22.6 24.5 -7.8 204
Total 123.6 118.4 +4.4 1,114Total Japan Y1,492.5 Y1,500.1 -0.5 $13,446
Overseas 649.4 650.2 -0.1 5,851Total Y2,141.9 Y2,150.3 -0.4 $19,297
d. Sales to Unaffiliated Customers by Products and Services
Yen U.S. Dollars
(billions) (millions)1st 1st 1st
Half Half Half
2003 2002 Change 2003
(%)Software Solutions/SI Y413.7 Y403.2 +2.6 $3,727
& Infrastructure 495.6 514.8 -3.7 4,465
Services Services
Total Y909.3 Y918.0 -1.0 $8,192Platforms Servers Y154.0 Y191.7 -19.7 $1,387
Mobile
Infrastructure/
IP Network 80.9 85.7 -5.6 729
Transmission 80.6 99.7 -19.2 726
Equipment
PCs & Mobile 322.0 307.7 +4.6 2,901
Telephones
HDDs 86.3 84.9 +1.6 778
Total Y 723.8 Y 769.7 -6.0 $6,521Electronic Semiconductors Y 182.3 Y 165.3 +10.3 $1,643
Devices Others 152.4 123.7 +23.2 1,373
Total Y 334.7 Y 289.0 +15.8 $3,016Consolidated Geographic Segment Information (Six months ended September 30)
a. Net Sales
Yen U.S.
Dollars
(millions) (millions)1st 1st 1st Half
Half Half
2003 2002 Change 2003
(%)Japan Unaffiliated Y 1,616,284 Y 1,630,631 -0.9 $14,561
customers
Intersegment 201,698 155,557 +29.7 1,817
Total Y1,817,982 Y1,786,188 +1.8 $16,378Europe Unaffiliated 244,339 255,866 -4.5 2,201
customers
Intersegment 10,668 7,968 +33.9 96
Total 255,007 263,834 -3.3 2,297The Unaffiliated 117,186 134,333 -12.8 1,056
Americas customers
Intersegment 9,068 9,964 -9.0 82
Total 126,254 144,297 -12.5 1,138Others Unaffiliated 164,125 129,556 +26.7 1,479
customers
Intersegment 92,396 90,069 +2.6 832
Total 256,521 219,625 +16.8 2,311Eliminations (313,830) (263,558) - (2,827)
Total Y 2,141,934 Y2,150,386 -0.4 $19,297
b. Operating Income (Loss)
Yen U.S.
Dollars
(millions) (millions)1st Half 1st Half Change 1st Half
2003 2002 (Million 2003
Yen)Japan Y 16,195 Y 23,393 -7,198 $146 (Operating (0.9%) (1.3%) (-0.4%) Margin)
Europe (2,042) (7,642) +5,600 (18)
((0.8%)) ((2.9%)) (+2.1%)The (7,803) (19,678) +11,875 (70) Amaricas ((6.2%)) ((13.6%)) (+7.4%)
Others 5,154 2,713 +2,441 46
(2.0%) (1.2%) (+0.8%)Eliminations (29,494) (22,064) -7,430 (266)
Total Y(17,990) Y(23,278) +5,288 $(162)
((0.8%)) ((1.1%)) (+0.3%)Net Overseas Sales by Customer's Geographic Location (Six months ended September 30)
Yen U.S.
Dollars
(millions) (millions)1st Half 1st Half 1st Half
2003 2002 Change 2003
(%)Europe Y 268,964 Y 278,327 -3.4 $2,423
The 168,650 191,454 -11.9 1,520 Americas
Others 211,814 180,438 +17.4 1,908 Outside Japan
Total Y 649,428 Y 650,219 -0.1 $5,851
Consolidated Balance Sheets
Yen U.S.
Dollars
(millions) (millions)September 30 March 31 September 30
2003 2003 2003Assets Current assets: Cash and cash equivalents and Y 239,458 Y 283,985 $2,157 short-term investments
Receivables, 669,432 840,408 6,031 trade
Inventories 619,349 595,984 5,580
Other 271,703 351,263 2,448 current assets
Total 1,799,942 2,071,640 16,216 current assets
Investments 836,196 901,587 7,533 and long-term loans
Property, plant and equipment less 855,895 990,552 7,711 accumulated depreciation
Intangible 248,436 261,582 2,238 assets
Total Y 3,740,469 Y 4,225,361 $33,698 assets
Liabilities, minority interests and shareholders' equity
Current liabilities: Short-term borrowings and current Y 543,024 Y 506,091 $4,892 portion of long-term debt
Payables, 666,846 716,842 6,008 trade
Other 465,302 542,291 4,192 current liabilities
Total 1,675,172 1,765,224 15,092 current liabilities
Long-term liabilities: Long-term 933,644 1,257,678 8,411 debt
Other 313,228 285,513 2,822 long-term liabilities
Total 1,246,872 1,543,191 11,233 long-term liabilities
Minority 168,559 214,556 1,518 interests
Shareholders' equity: Common stock 324,624 324,624 2,925
Capital surplus 519,723 519,720 4,682
Retained earnings (119,409) (60,718) (1,076) (deficit)
Unrealized gains on securities and revaluation surplus on 18,177 6,090 164 land
Foreign currency (92,441) (86,517) (833) translation adjustments
Treasury stock (808) (809) (7)
Total shareholders' 649,866 702,390 5,855 equity
Total liabilities, minority interests and shareholders' Y3,740,469 Y4,225,361 $33,698 equity
Ending balance of Y1,476,668 Y1,763,769 $13,303 interest bearing loans
Supplementary Information
Yen
(billions)
1st Half FY2003 FY2002
FY2003 (Forecast)Capital Expenditure Y 66.7 Y 205.0 Y 147.6 Depreciation 97.3 205.0 264.6
Consolidated Statements of Cash Flows (Six months ended
September 30)
Yen U.S.
Dollars
(millions) (millions)1st Half 1st Half Change 1st Half
FY2003 FY2002 (Million FY2003
Yen)
1. Cash
flows from
operating
activities:Income (Loss) before income taxes and Y (51,082) Y (220,101) +169,019 $ (460) minority interests
Depreciation 137,316 172,981 -35,665 1,237 and amortization
Accrual 2,319 (5,935) +8,254 21 (Reversal) of provisions
Equity in (418) 2,090 -2,508 (4) earnings of affiliates, net
Disposal of property, plant and 9,531 31,460 -21,929 86 equipment
(Increase) 79,147 177,298 -98,151 713 Decrease in receivables, trade
(Increase) (60,294) (9,714) -50,580 (543) Decrease in inventories
Increase (11,307) (172,303) +160,996 (102) (Decrease) in payables, trade
Other, net (67,788) (56,772) -11,016 (611)
Net cash provided by (used in) operating 37,424 (80,996) +118,420 337 activities
2. Cash flows from investing activities:
Purchase of property, plant and equipment (68,766) (95,505) +26,739 (619)
(Purchases of) Proceeds from Sales of 59,252 79,901 -20,649 534 Investment Securities
Other, net (20,838) 5,053 -25,891 (188)
Net cash provided by (used in) investing (30,352) (10,551) -19,801 (273) activities
1+2 ( Free 7,072 (91,547) +98,619 64 Cash Flow )
3. Cash flows from financing activities: Increase (Decrease) in bonds, notes, short-term (39,434) 201,551 -240,985 (355) borrowings and long-term debt
Dividends - (5,005) +5,005 - paid
Other, net (11,203) (84,964) +73,761 (101)
Net cash provided by (used in) financing (50,637) 111,582 -162,219 (456) activities
4. Effect of exchange rate changes on cash and (2,110) (3,083) +973 (19) cash equivalents
5. Net increase (decrease) in cash and cash (45,675) 16,952 -62,627 (411) equivalents
6. Cash and cash equivalents at 282,333 299,418 -17,085 2,543 beginning of period
7. Cash and cash equivalents at end of Y 236,658 Y 316,370 -79,712 $2,132 period
Marketable Securities (Six months ended September 30)
1. Net Unrealized Gain on Marketable Securities
Yen Yen
(millions) (millions)September 30, 2003 March 31, 2003
Carry Fair Net Carry Fair Net
-ing Value Unreal -ing Value Unreal
Value -ized Value -zed
Gains Gains
(Losses) (Losses)Held-to-mat- Y3,068 Y3,062 Y (6) Y1,509 Y 1,506 Y (3) urity securities
Investment 158,736 449,224 290,488 202,621 391,237 188,616 in affiliates
Total Y161,804 Y452,286 Y290,482 Y204,130 Y392,743 Y188,613
2. Summary of Marketable Securities at Fair Value
Yen Yen
(millions) (millions)
September 30, 2003 March 31, 2003Cost Carry Net Cost Carry Net
-ing Unrea -ing Unrea
Value -lized Value -lized
(Fair Gains (Fair Gains
Value) (Losses) Value) (Losses)Available-for- sale:
Equity securities Y 60,024 Y 85,770 Y 25,746 Y 75,425 Y 79,372 Y 3,947
Debt 4,535 4,421 (114) 3,789 3,609 (180) securities and others
Total Y64,559 Y90,191 Y25,632 Y79,214 Y82,981 Y3,767
Fujitsu Reports FY2003 First-Half Financial Results
Net Loss Posted on Flat Sales, But Second Quarter Sales and Operating Income Rebound
Tokyo, October 29, 2003 - Fujitsu Limited, a leader in customer-focused IT and communications solutions for the global marketplace, today reported consolidated net sales of 2,141.9 billion yen (approximately US$19.3 billion) for the first half of fiscal year 2003 (April 1 - September 30, 2003), a 0.4% decrease from the first half of fiscal 2002. Net sales in the second quarter increased 3.1%, to 1,203.1 billion yen, led by strong sales of PCs, mobile telephones, logic chips, and plasma display panels. It was the first time since the first quarter of FY2001 that Fujitsu posted year-on-year quarterly sales growth. Higher sales and lower operating expenses contributed to a rebound in second quarter operating income to 19.8 billion yen (US$179 million). For the company as a whole, however, a large operating loss in the first quarter resulted in an operating loss for the first six months of 17.9 billion yen (US$162 million), compared to an operating loss of 23.2 billion yen for the first half of FY2002.
During the first half, higher pension obligation expenses, a casualty loss stemming from an earthquake in May, and foreign exchange losses resulting from the rapid appreciation of the yen in late September were partially offset by gains from the sale of a portion of the company's shares in Fanuc Ltd. The net loss for the first six months was 58.5 billion yen (US$528 million), compared to a net loss of 147.4 billion yen in the first half of 2002. The net loss for the second quarter was 18.7 billion yen (US$169 million), compared to a net loss of 91.0 billion yen in the same period last year.
Second Quarter Financial Results
Second Quarter Change from % Change
Previous YearNet Sales 1,203.1 billion yen +35.8 billion yen +3.1%
Operating Income 19.8 billion yen +14.1 billion yen Net Income -18.7 billion yen +72.2 billion yen
Net sales in the second quarter were 1,203.1 billion yen, an increase of 3.1% over the same period in the previous year. It was the first time since the first quarter of FY2001 that Fujitsu posted year-on-year quarterly sales growth. Sales in software and services were maintained at roughly the same level as the prior year, while sales of servers and other systems hardware recovered, particularly in overseas markets. In addition, sales expanded in a wide variety of product areas, including notebook PCs, hard disk drives for notebook PCs, semiconductors used in digital audio-visual equipment, and plasma display panels. Although price competition in software and services as well as hardware is becoming more severe, the IT market overall is finally bottoming out.
Operating income was 19.8 billion yen, a 14.1 billion yen improvement over the previous year. Operating income was 2 billion yen higher than the company's public projections, indicating that results are broadly in line with company expectations. These results reflect the savings achieved from last year's restructuring initiative and continued efforts to cut costs and improve efficiencies in response to ongoing pricing pressures.
Although there was an improvement in operating profit and interest expenses were lower, pension obligation expenses increased, and there was a foreign exchange loss associated with the rapid appreciation of the yen in late September. As a result, Fujitsu posted a net loss of 18.7 billion yen for the second quarter. This represents an improvement of 72.2 billion yen compared to the second quarter of last year, when there were large extraordinary losses associated with the company's restructuring.
Second Quarter Operating Income by Business Segment
Second Change First
Quarter from Quarter
Previous
YearSoftware 32.5 -18.1 -3.6
and billion billion billion
Services yen yen yen
Platforms -1.2 +16.5 -19.4
billion billion billion
yen yen yenElectronic 4.9 +20.6 -6.1
Devices billion billion billion
yen yen yenFor the company as a whole, operating income moved from a 37.8 billion yen loss in the first quarter to a 19.8 billion yen profit in the second quarter. In the first quarter, the three main segments-software and services, platforms, and electronic devices-all posted operating losses. In the second quarter, however, software and services posted operating income of 32.5 billion yen and electronic devices posted operating income of 4.9 billion yen, while the platforms segment moved close to break even, posting an operating loss of only 1.2 billion yen, supported by stronger sales and the cost efficiencies generated by previous restructuring initiatives.
Compared with the second quarter of the previous year, Fujitsu posted a 14.1 billion yen improvement in operating income. Large improvements were achieved in both platforms and electronic devices, while software and services posted an 18.1 billion yen reduction in operating income resulting from the deterioration in profitability of particular projects.
In the platforms segment, the hard disk drive business returned to profitability. In electronic devices, there was a large increase in the profitability of the plasma display panel business and success in minimizing the financial impact on the logic IC business of the earthquake at the Iwate production facility. All of these factors contributed to the improvement in profitability compared to the previous quarter as well as the prior year.
First Half Financial Results
First Half Change from % Change
Previous YearNet Sales 2,141.9 -8.4 -0.4%
billion yen billion yenOperating -17.9 +5.2 Income billion yen billion yen
Net Income -58.5 +88.8
billion yen billion yenNet sales for the first half were 2,141.9 billion yen, roughly the same level as the first half of last year. Compared with the same period last year, sales of software and services were roughly flat, sales of platforms declined 6%, as strong second quarter results could not make up for the large drop-off in the first quarter, and sales of electronic devices increased 15.8% on strong sales of LSIs (System-on-Chips) and displays.
Fujitsu posted an operating loss for the first half of 17.9 billion yen. It appears that sales of new product offerings in the platforms segment will be concentrated in the second half of the fiscal year, and major software and services sales associated with those products will also therefore be shifted to the second half, curtailing growth of these sales in the first half. In addition, the large operating loss in the first quarter exceeded the operating profit posted in the second quarter. On the other hand, even in an environment of severe price competition, because of the effects of last year's restructuring and additional cost efficiencies, the company achieved a 5.2 billion yen improvement over the previous year.
Fujitsu incurred higher expenses stemming from the amortization of unrecognized pension benefit obligations. The company also posted a 34.4 billion yen gain on the sales of marketable securities, including a portion of Fujitsu's holdings of Fanuc, Ltd. stock, a 4.7 billion yen casualty loss for damages incurred in the earthquake off the coast of Miyagi Prefecture in May, and a 4.6 billion yen restructuring charge associated with several domestic and overseas subsidiaries.
The net loss was 58.5 billion yen, an 88.8 billion yen improvement compared to the first half of last year, when the company posted large restructuring charges.
Results by Business Segment in the First Half
* Net sales represents net sales to third parties Segment information for the first half is as follows.
1. Software & Services
First Half Change from Same
Period Last YearNet Sales 909.3 billion yen -1.0% Japan 671.4 billion yen +0.8% Overseas 237.8 billion yen -5.5% Operating Income 28.8 billion yen -22.6 billion yen
Net sales in the software and services segment were 909.3 billion yen, roughly even with results for the same period last year. Sales within Japan increased, but overseas sales, which represent about one-fourth of the total, declined. The decline is partly attributable to the sale last year of some European business units as well as the currency conversion impact of the strong yen.
Operating income declined significantly compared to the prior year. The impact of new platforms product offerings being concentrated in the second half, the deterioration in profitability of particular projects, and aggressive up-front investments in middleware and Linux offerings all hurt profitability in Japan, while overseas profitability was affected by a deterioration in North American results.
Net Sales Change from
Same Period
Last YearSolutions / S I 413.7 billion yen + 2.6%
Infrastructure 495.6 billion yen -3.7% Services
Sales increased of solutions/system integration services, whereby Fujitsu provides services to individual customer projects. Higher sales were posted to the public sector, through such high-profile projects as the e-Japan initiative, as well as the healthcare sector. In infrastructure services, whereby Fujitsu provides services for business infrastructure, sales within Japan of corporate outsourcing services continued to be strong. Overseas, however, sales in Europe declined.
In order to support the global expansion of its customers, Fujitsu is enhancing its organizational structure in Europe, the U.S., and Asia. During the current period, in addition to supporting the global expansion of Japanese corporations, the company received a series of major government-related outsourcing deals in the U.K. and succeeded in winning other major global deals in Europe and North America.
Fujitsu is clearly establishing a strong business platform in Europe, and is coordinating its effort to strengthen its position in the U.S. market.
2. Platforms
First Half Change from Same
Period Last YearNet Sales 723.8 billion yen - 6.0% Japan 505.0 billion yen - 6.3% Overseas 218.8 billion yen - 5.2%
Operating Income -20.7 billion yen + 10.0 billion yen
Net sales of platforms products declined by 6% compared to the previous year. In Japan, the company posted strong sales throughout the period of consumer-oriented PCs with enhanced audio-visual and LAN functions as well as newly-launched mobile phone handsets. There was, however, only a moderate recovery in capital expenditures by telecom carriers and other corporations. Overseas, a strong market for notebook PC hard disk drives boosted sales of those products, and in the latter half of the period there were signs of a recovery in the markets for transmission systems, primarily in North America, and UNIX servers, primarily in Europe. On the other hand, for the first half overall, sales of transmission systems and server-related equipment were both down by nearly 20% compared with the same period last year, reflecting the lingering after-effects of the telecom bubble in North America and the inclusion in last year's first-half results of some major sales of server-related equipment in Japan.
The operating loss for the platforms segment was 20.7 billion yen, representing an improvement of 10.0 billion yen compared to the first half of the previous year. Improvements in PCs, hard disk drives and other business areas resulting from last year's restructuring and other cost-cutting measures were not enough to offset the impact of lower sales of servers and networking equipment.
Net Sales Change from
Same Period
Last YearServers 154.0 billion -19.7%
yenMobile / IP Networks 80.9 billion - 5.6%
yenTransmission Systems 80.6 billion - 19.2%
yenPCs / Mobile Phones 322.0 billion + 4.6%
yenHard Disk Drives 86.3 billion + 1.6%
yenIn servers and PCs, Fujitsu has integrated its development operations and is selling in the four major markets of Japan, the U.S., Europe, and Asia. In UNIX servers, the company's high-end systems have achieved top scores in a number of performance benchmarks, and sales in Europe and other areas are expanding.
Fujitsu is further enhancing its ability to provide products for the global markets, differentiating itself on the basis of its superior technology. It is also strengthening its server business by deepening the linkage with its software and services business through its TRIOLE infrastructure concept. Fujitsu is also widening the scope of its global alliances with other companies and pursuing an all-out marketing effort in Japan.
In design and manufacturing, the company is also making every effort to strengthen its manufacturing prowess through the introduction of some of Toyota's techniques. By further enhancing its ability to cut costs, the company is laying a foundation for stable profitability.
*TRIOLE is Fujitsu's IT infrastructure initiative that addresses the most pressing needs of corporate and institutional customers: scalability to expand with their requirements; quick and easy integration with partners; lower cost of ownership; and operational reliability.
3. Electronic Devices
First Half Change from Same
Period Last YearNet Sales 334.7 billion yen + 15.8% Japan 164.6 billion yen + 12.8% Overseas 170.0 billion yen + 18.8%
Operating Income -1.2 billion yen + 21.8 billion yen
Net sales of electronic devices increased 15.8% over the previous year. Sales of semiconductor products for digital audio-visual equipment, mobile phones, and automobiles were strong in Japan, Asia, and Europe. In addition, market demand for flat screen TVs has taken off, sparking very strong sales growth in plasma display panels and other displays.
The electronic devices segment moved very close to break-even, posting an operating loss of 1.2 billion yen. Aided by a market recovery and the effects of the restructuring initiatives undertaken last fiscal year, the segment achieved profitability in the second quarter. Although first quarter results were adversely affected by the disruption of the Iwate production facility caused by the earthquake off the coast of Miyagi Prefecture in May, the impact was largely offset by higher sales in the second quarter.
In addition to good results in the plasma displays business, which benefited from a strong market, improved yield rate and other cost efficiencies, the components business, which had perennially lost money, is now profitable as a result of cost reductions achieved through productivity reforms.
To achieve greater efficiencies and competitiveness, Fujitsu and U.S.-based Advanced Micro Devices, Inc. (AMD) have expanded their joint venture in flash memory production to integrate their respective marketing and product development operations. Accordingly, on June 30 the two companies transferred their flash memory operations into a newly-established joint venture company, FASL LLC, which is 40% owned by Fujitsu and 60% owned by AMD. Fujitsu will continue to handle sales as a distributor for the joint venture. The new venture's profitability relating to development and manufacturing will be reflected in Fujitsu's financial results according to equity-method accounting treatment.
Demand for flash memory during the period was extraordinarily strong, particularly for the mobile phone market. But it was only at the end of the period that prices finally stopped falling, however, so the profitability of the business continued to face very severe conditions.
First Half Change from the
same period last
yearSemiconductors 182.3 billion yen + 10.3% Other 152.4 billion yen + 23.2%
Balance Sheet Summary
As of September Change from
30, 2003 March 31, 2003Total Assets 3,740.4 billion - 484.8
yen billion yenInterest Bearing 1,476.6 billion - 287.1 Liabilities yen billion yen
Shareholders' Equity 649.8 billion - 52.5
yen billion yenTotal assets at the end of the first half were 3,740.4 billion yen, a reduction of 484.8 billion yen from the end of the previous fiscal year. The reduction in assets is a result of the switch to equity-method accounting for the company's flash memory operations and leasing affiliate as well as further progress in promoting balance sheet efficiencies through such measures as the sale of marketable securities.
Total current assets were reduced by 271.6 billion yen from the end of the last fiscal year, to 1,799.9 billion yen. While trade receivables declined by 170.9 billion yen as a result of collections from sales concentrated at the end of the previous fiscal year, inventories increased by 23.3 billion yen in anticipation of increased sales in the second half. Other current assets decreased by 79.5 billion yen from the end of the previous fiscal year as a result of the reduction of lease receivables in accordance with the switch to equity-method accounting for the leasing company.
Total fixed assets decreased by 213.1 billion yen from the end of the last fiscal year, to 1,940.5 billion yen. Property, plant and equipment decreased by 134.6 billion yen as a result of the reorganization of flash memory operations. In addition, investments and other assets decreased by 65.3 billion yen in accordance with the decrease in lease receivables and the sale of marketable securities.
Total liabilities declined by 386.3 billion yen from the end of the previous fiscal year, to 2,922.0 billion yen. In addition to a 220 billion yen reduction in interest-bearing liabilities from the change in the accounting treatment of the leasing company to the equity method, progress was also achieved in the redemption of corporate bonds and the repayment of bank loans, resulting in a total reduction of interest-bearing liabilities of 287.1 billion yen from the end of the previous fiscal year. Interest-bearing liabilities at the end of the current period were 1,476.6 billion yen, so at present the company has already achieved its objective of reducing interest-bearing liabilities to 1,500.0 billion yen by the end of the fiscal year. Fujitsu has also reduced its ratio of interest-bearing liabilities by 2.2%, to 39.5%. Through the effective use of its asset holdings, the company will continue its effort to reduce interest-bearing liabilities to the extent possible.
Total shareholders' equity declined by 52.5 billion yen as a result of the net loss for the period, to 649.8 billion yen. Because, proportionally, assets contracted by more than shareholders' equity, the shareholders' equity ratio increased by 0.8%, to 17.4%.
Summary of Cash Flows
First Half Change from
Previous YearCash Flow from 37.4 billion 118.4 billion Operations yen yen
Cash Flow from - 30.3 billion -19.8 billion Investing yen yen
Free Cash Flow 7.0 billion 98.6 billion
yen yenNet cash flow generated by operating activities in the first half was 37.4 billion yen (compared to negative 80.9 billion yen in the same period last year), resulting in part from the significant collection of trade receivables at the end of the last fiscal year. This improvement of 118.4 billion yen was also attributable to a substantial reduction in the loss before income taxes compared to the same period of the previous year.
Net cash flow from investing activities was negative 30.3 billion yen, achieved by concentrating capital expenditures in high growth segments and through sales of marketable securities.
By holding investment spending within the amount of net cash generated by operating activities, free cash flow improved by 98.6 billion yen compared to the same period last year, to positive 7.0 billion yen.
Net cash flow generated from financing activities was negative 50.6 billion yen. Cash generated from operations and existing cash balances were used towards the redemption of bonds and the repayment of outstanding debt.
As a result, total cash and cash equivalents fell by 45.6 billion yen, to 236.6 billion yen.
Dividend Policy
With respect to the disposition of profits, Fujitsu believes that a portion should be paid to shareholders to offer a stable return, and that a portion should be retained by the company to strengthen its financial base and support new business development opportunities that will result in improved long-term performance.
Although, on an unconsolidated basis, Fujitsu posted net income of 18.7 billion yen for the current period, the company is still in the midst of its plans to restore the profitability of its core business as reflected in operating income, and the company reported operating losses for the current period on both a consolidated and unconsolidated basis. Accordingly, the company has reluctantly decided to forgo dividend payments for the first half of fiscal 2003. With respect to the dividend for the next payout period, following the end of this fiscal year, the company would like to base its decision on a review of the full-year's results, and therefore no decision has been reached at the present time.
Strategic Management Direction
Management Stance
As the scope of the networked society continues to expand, IT is permeating every aspect of our daily lives, moving us ever closer to a ubiquitous networked world, where information sharing through the network is available anytime, anyplace and with anyone. Moreover, IT is playing an increasingly important role in the ability of customers to manage their businesses. Nowadays, IT vendors must recognize that customers do not simply look for suppliers of products and services when selecting partners for building and operating their IT systems. Rather, IT vendors are expected to be true partners who, based on long-term relationships of mutual trust, can make appropriate proposals and implement them through the entire IT life-cycle.
The customer is the starting point for everything we do and think about at Fujitsu. By understanding in detail the environment in which our customers operate and their overall businesses, we are able to provide them with effective proposals that are both concrete and timely. Moreover, we will continue to strive to keep pace with the fast-changing markets and needs of our customers.
As a leader of the IT industry, we are firmly committed to continuously providing total solutions that utilize high-quality products and services based on advanced technology that offers superior performance and reliability. In this way, we will further strengthen our overall capabilities -- which range from cutting-edge technology that incorporates the latest advances and applications to a full complement of services -- and at the same time contribute to our customers' businesses. We aim by so doing to become management partners to our customers and grow together with them.
Business Strategy and Priority Issues
We believe that, in today's uncertain economic and market conditions, our customers are giving priority to reducing the cost of operating their IT systems and bolstering their competitiveness in order to promote further growth.
Today's IT systems are comprised of an increasingly wide variety of hardware and software products, and along with higher performance levels comes greater complexity. Consequently, the task of operating them has become a greater burden for customers. While, on the one hand, systems are often separated along divisional lines, it is becoming increasingly important to link them with external systems, and the issue of interconnectivity among systems is becoming increasingly crucial. In addition, there is growing demand for the ability to integrate the overall structure and management of corporate IT systems.
Fujitsu is uniquely positioned to offer our customer comprehensive solutions to their business problems through the strategic utilization of information technology. We are actively using this expertise to contribute to our customers' business growth and expansion.
Below are some of the specific initiatives we are currently emphasizing.
Continually Providing Comprehensive Solutions
While increasing the level of interconnectivity among our customers' various divisional systems, we aim to achieve an integrated perspective on the overall chain of processes relating to our customers' systems - from consulting and planning through development, operation and maintenance - and thereby help them to reduce their overall IT costs and strengthen the competitiveness of their operations. We are not simply offering suggestions at the various stages in these processes but rather continuously providing comprehensive service proposals based on in-depth understanding of the customers' management policies and strategy.
Strengthening the Infrastructure of Next-Generation IT Systems
Today's IT systems are becoming increasingly sophisticated and complex. In response, Fujitsu is intensifying its commitment to develop and deploy TRIOLE, its next-generation IT infrastructure initiative. TRIOLE utilizes middleware to integrate open standard servers, storage and network resources, bringing harmony to the disparate parts of an IT system, including those manufactured by other companies. Specifically, while enhancing the technology we have accumulated in the mainframe field in high-reliability design and superior operational stability, we are utilizing our rich experience and know-how in systems integration and producing templates for highly-reliable systems integration. These advantages enable us to offer our customers operational system stability, faster system deployments, and scalability to keep pace with the growth of their business.
Business Segment Initiatives
In our services and software business, we are continuing to strive to improve profitability by bolstering the efficiency of application development and strengthening project management. We are also rapidly shifting our emphasis to growth markets such as services for top-tier manufacturers and retailers, healthcare, and local government consolidation, in addition to growth fields as outsourcing, CRM, ERP, e-learning and mobile solutions. Moreover, we are strengthening sales of our competitive middleware products and aim to increase our share of that market.
In our platforms business, we are further strengthening our manufacturing prowess by taking various measures to boost productivity, such as initiating major productivity reforms in our manufacturing facilities. Our efforts are not limited to the manufacturing process. At every stage of our operations, including development, design and procurement, we are working hard to improve product and service quality, reduce development time and cut costs. Moreover, based upon our TRIOLE next-generation IT infrastructure initiative, we are promoting coordination with our software and services unit to expand business, and we are laying the organizational foundation to expand our business globally.
In our electronic devices business, as part of the initiatives to improve our profitability, we are moving quickly to focus our resources on markets in which we expect high growth, such as logic ICs for home information appliances, mobile devices and networks. At the same time, we are moving ahead with the development of advanced CMOS technology, which will further enhance the competitiveness of our products. To launch, in a timely manner, the products that meet our customers' needs, we are working to speed up every process throughout our organization.
We have made cash flow management a major priority and are taking various steps to improve our financial structure. In the first half, we succeeded in reducing interest-bearing debt through such means as the sales of equity holdings and changing the status of our leasing affiliate into a company warranting equity-method accounting treatment. By continuing to focus on improving the profitability of our core operations as a top priority, while at the same time promoting a more efficient use of our assets, we will make further progress towards improving the company's financial position.
By continuously applying our efforts to the accomplishment of these tasks, we are striving to become a global company that is trusted by our customers and society, and that can make a significant contribution to building a prosperous and dynamic networked society.
Policy Regarding Minimum Lot Size for Trading Shares
Participation of individual investors in the equity markets is increasing, and we recognize the importance of this trend from the viewpoint of the revitalization of the capital markets and the promotion of long-term, stable holdings of the company's shares. Moreover, as a basic principle, as part of our ongoing investor relations activities, we inform investors about the company's financial condition through active and appropriate disclosure of company information.
With respect to lowering the minimum lot size for trading the company's shares, we realize that such a move could promote the participation of individual investors in the equity market and, therefore, could be an effective means of boosting the liquidity of the stock. Nevertheless, after considering the current stock price level, the number of shareholders, the current distribution of individual shareholders and the market liquidity of Fujitsu's stock, we have come to the conclusion that it would be premature to reduce the minimum lot size at the present time.
Taking into account overall trends in individual stock ownership and Fujitsu's stock price, we will carefully consider what action might be appropriate in the future.
Earnings Projections for FY2003
After having undergone two painful years of restructuring, there are signs that Fujitsu's financial results are beginning to improve, with the company posting in the second quarter its first year-on-year quarterly sales growth in two years. With respect to the market environment facing the IT industry, technological advances have made digital cameras, DVDs, camera phones, and other digital audio-visual equipment cheaper, lighter, and more sophisticated, spurring an increase in demand, and the company expects these trends to continue. In conjunction with these trends, Fujitsu fully expects demand for advanced broadband network infrastructure, particularly servers and storage systems, to also increase.
At the present time there are some causes for concern about instability relating to the situation in Iraq and the equity market, but the company feels that conditions are ripe for an economic upturn in the second half. On the other hand, globalization and technological progress are combining to significantly accelerate the downward pricing pressure on computer hardware in addition to software and services. Fujitsu itself must therefore intensify the globalization of its own operations, maintain its technological superiority, strengthen its manufacturing prowess, and implement operational reforms to generate greater efficiencies, including additional cost savings. Amid the major changes affecting the IT industry, Fujitsu will continue to emphasize, above all, the company's customer-oriented perspective and fast responsiveness.
With respect to Fujitsu's projections for the full fiscal year, the shift to the equity-method of accounting for the company's leasing affiliate has resulted in a downward revision of 50 billion yen in our net sales forecast. For operating income, because of a profit deterioration in software and services, the company expects not to be able to meet its original profit targets in that business segment. Fujitsu now expects, however, to offset that amount through improved results in platforms and electronic devices, so it is not changing its original projections for the full year. The company's projections for net income also remain unchanged.
Earnings projections for the third quarter are shown below. In Fujitsu's business, sales tend to be concentrated at the end of the fiscal year. Even though sales in the third quarter are projected to be 100 billion yen lower than in the second quarter, the company still expects to post an operating profit and lay the foundation for stable profitability.
Fujitsu Limited Consolidated Earnings Forecast for Fiscal 2003
FY 2003 Change FY2002
(forecast) Since (reported)
JulyNet Sales 4,750 billion -50 4,617.5
yen billion billion yen
yenOperating 150 billion 100.4 billion Income yen yen
Net Income 30 billion yen -122.0
billion yenEarnings Forecast for Fiscal 2003, by Quarter
Q1 Q2 Q3 Q4
(reported) (reported) (forecast) (forecast)Net 938.7 1,203.1 1,100.0 1,508.0
Sales billion billion billion billion
yen yen yen yenOperating -37.8 19.8 5.0 162.9
Income billion billion billion billion
yen yen yen yenNote:
- All yen figures have been converted to US dollars for convenience only at a uniform rate of $1=111 yen.
- FY2003 from April 1, 2003 - March 31, 2004; FY2002 from April 1, 2002 - March 31, 2003
- Due to uncertainties relating to changes in demand for products and components in key markets (Japan, U.S., Europe, etc.), currency exchange rate fluctuations, Japan and U.S. stock market conditions, and other factors, actual results may vary substantially from projections above.
About Fujitsu Fujitsu is a leading provider of customer-focused IT and communications solutions for the global marketplace. Pace-setting technologies, highly reliable computing and telecommunications platforms, and a worldwide corps of systems and services experts uniquely position Fujitsu to deliver comprehensive solutions that open up infinite possibilities for its customers' success. Headquartered in Tokyo, Fujitsu Limited (TSE:6702) reported consolidated revenues of 4.6 trillion yen (US$38 billion) for the fiscal year ended March 31, 2003. For more information, please see: www.fujitsu.com For details and supplemental information regarding Fujitsu's FY2002 financial results, please see http://pr.fujitsu.com/en/ir/
All company/product names mentioned may be trademarks or registered trademarks of their respective holders and are used for identification purposes only
This information is provided by RNS
The company news service from the London Stock Exchangeend of announcement euro adhoc 30.10.2003
Contact:
Yuri Momomoto or Scott Ikeda
Fujitsu Limited, Public and Investor Relations
TEL:+81 (0) 3-6252-2176
FAX:+81 (0) 3-6252-2783
URL:http://pr.fujitsu.com/en/news/fjcontacts.html
E-mail:pr@fujitsu.com
Branche: Hardware
ISIN: JP3818000006
WKN: 0354912
Index:
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