Fujitsu 2014 Annual Report Download - page 26

A MESSAGE FROM THE CFO
Performance in Fiscal 2013
The global economy during fiscal 2013 continued to experience a
moderate recovery. In Europe, there was a resumption of economic
growth, and signs of an economic recovery, particularly in Germany
and the UK. In the US, uncertainties over the federal government’s
fiscal policies eased, and the economy continues to recover,
especially consumer spending and corporate capital investment.
In Japan, thanks to a stock market rally and yen depreciation
spurred on by the government’s economic policy and monetary
easing by the Bank of Japan, the economy is undergoing a mod-
erate recovery. Consumer spending rose, in part spurred by last
-minute demand for purchases prior to an increase in the con-
sumption tax rate. There has been a moderate recovery in
exports resulting from an improved economic environment
owing to the weaker yen and recovery in markets outside Japan.
ICT investment in Japan is gradually increasing on signs of a
rebound in corporate capital investment resulting from a recov-
ery in corporate earnings.
Under these conditions, consolidated net sales for fiscal 2013
were ¥4,762.4 billion (US$46,237 million), an increase of 8.7%
from fiscal 2012. Excluding the impact of foreign exchange fluctua-
tions, sales were up by 2.0%. Net sales in Japan increased by 2.7%.
Sales of mobile phones were down sharply in the first half, but
sales of system integration services increased, mainly to the public
sector and financial institutions, as did sales of PCs and network
products. Outside Japan, sales were up 20.2% from the previous
fiscal year, and on a constant currency basis, increased by 1.0%.
Sales of car audio and navigation equipment and optical transmis-
sion systems in North America were higher than fiscal 2012.
By segment, sales in the Technology Solutions segment
increased from the previous fiscal year. Contributing factors
included increased sales on account of expanded investments in
system integration, as well as investments in network products
by telecommunications carriers seeking to expand LTE service
area coverage and increase transmission speeds. There was also
a boost due to foreign exchange rate effects. The Ubiquitous
Solutions segment posted a year-on-year decline in sales. The
decline came despite a significant increase in enterprise PC sales
brought about by higher demand for replacements due to the end
of support for an operating system; however, mobile phone sales
in the first half fell sharply due to a revision of smartphone sales
strategies by telecommunications carriers. In the Device Solutions
segment, sales rose overall. Sales in Japan fell, mainly in digital
audio-visual equipment and IT equipment, but outside Japan,
sales of LSI devices increased, primarily for use in smartphones.
Gross profit was ¥1,269.1 billion, up ¥65.4 billion from fiscal
2012. The increase was attributable to foreign exchange move-
ments and the beneficial effect of initiatives for improving profit-
ability, although there was a decline in mobile phone sales. The
gross profit margin was 26.7%, a decline of 0.8 of a percentage
point compared to the previous fiscal year, primarily the result of
deteriorating profitability in mobile phones. Selling, general and
administrative expenses were ¥1,126.6 billion, an increase of
¥11.1 billion from fiscal 2012, attributable to foreign exchange
effects and other factors. We made progress in generating Group-
wide cost efficiencies, and selling, general and administrative
expenses declined on a constant-currency basis.
As a result, operating income was ¥142.5 billion, an increase
of ¥54.2 billion compared to fiscal 2012. The operating income
margin increased 1.0 percentage point to 3.0%. Structural reforms
in the LSI device business and a business outside of Japan con-
tributed approximately ¥30 billion to this increase, and workforce-
related measures contributed approximately ¥20 billion.
By segment, the Technology Solutions segment achieved
higher year-on-year operating income on a full-year basis. The Ubiq-
uitous Solutions segment posted an operating loss due to deteriora-
tion in mobile phone sales, although sales of PCs and
mobilewear increased. The Device Solutions segment returned to
profitability, benefiting from lower fixed costs owing to an early
retirement incentive plan and other factors in the LSI device business
and an upswing in export profitability following the yen’s
depreciation.
In other income (expenses), Fujitsu recorded a loss of ¥49.6
billion, representing an improvement of ¥90.7 billion from the
previous fiscal year. This is mainly due to Fujitsu having posted
¥11.5 billion in gains on sales of real estate and shares, while
restructuring charges and an impairment loss decreased from the
previous fiscal year. On the other hand, a loss on the reversal of
foreign currency translation adjustments of ¥21.6 billion was
recorded, stemming from the liquidation of Fujitsu Management
Services of America, Inc.
The restructuring charges of ¥31.1 billion in fiscal 2013 mainly
consisted of ¥21.0 billion for the LSI device business, ¥4.9 billion
for the mobile phone business, and ¥4.2 billion for business
outside Japan. In the LSI device business, the charges were mainly
attributable to the system LSI (SoC: System on a Chip) business,
which is scheduled to be integrated, and consisted of the costs for
covering retirement benefit liabilities and losses on the disposal
of assets. There were also charges stemming from the cost of
restructuring the production lines for standard logic devices as
well as losses on the disposal of assets. In the mobile phone
business, the charges stemmed from losses on the disposal of
assets in the process of integrating production sites as well as
expenses incurred in reallocating personnel. The charges for
businesses outside of Japan were primarily in the Nordic region,
and consisted of workforce rationalization expenses. Through
these structural reforms, Fujitsu achieved a certain amount of
progress on businesses that were presenting challenges.
As a result, net income for fiscal 2013 was ¥48.6 billion,
representing a year-on-year improvement of ¥128.5 billion.
Corporate Senior Vice President Hidehiro Tsukano
Explanations for underlined words can be found in the glossary on pages 160-162.
024 FUJITSU LIMITED ANNUAL REPORT 2014