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
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
For 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
Net 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.
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