Presentation

Financial Results for 1H
Fiscal Year Ending March 31, 2016
October 29, 2015
NEC Corporation
(http://www.nec.com/en/global/ir)
1
© NEC Corporation 2015
Index
Ⅰ. Financial Results for 1H, FY16/3
Ⅱ. Financial Forecasts for FY16/3
Ⅲ. Formulation of New Mid-term Management Plan
Financial Results for 1H, FY16/3 (Appendix)
Financial Forecasts for FY16/3 (Appendix)
Reference (Financial data)
* Net income/loss (actual or forecast)for fiscal year ending March 31, 2016 refers to profit/loss attributable to owners of the parent
for the same period
2
© NEC Corporation 2015
Ⅰ. Financial Results for 1H, FY16/3
3
© NEC Corporation 2015
Summary of Financial Results for 1H
Net Sales
YoY
-1.3％
Operating
Income
YoY
-8.2B Yen
1H Results
▐ Decreased slightly year on year
• Decrease in Others due to deconsolidation,
despite significant increase in Enterprise business
▐ Decreased year on year
• Decrease in Public and Telecom Carrier business
despite increase in Enterprise and System
Platform business
▐ Decreased year on year, remained breakeven
Net Income
YoY
4
-12.2B Yen
© NEC Corporation 2015
• Recorded approx. 8.0B Yen profit in the previous
fiscal year through the acquisition of noncontrolling interests from making NEC Fielding,
Ltd. a wholly-owned subsidiary
Summary of Financial Results for 1H
1H Results
(Billions of Yen)
Q2<July to September>
Net Sales
Operating Income
% to Net Sales
Ordinary Income
% to Net Sales
Net Income
% to Net Sales
Free Cash Flow
FY15/3
FY16/3
Actual
Actual
YoY
1H<April to September>
FY15/3
FY16/3
Actual
Actual
YoY
726.1
721.5
- 0.6%
1,324.8
1,308.1
- 1.3%
28.6
23.4
-5.2
21.5
13.3
-8.2
3.9%
3.2%
1.6%
1.0%
26.7
19.1
16.7
11.4
3.7%
2.7%
1.3%
0.9%
22.6
10.2
12.5
0.2
3.1%
1.4%
0.9%
0.0%
-66.7
-71.6
-7.6
-12.3
-4.9
-13.4
9.4
-5.3
-12.2
+22.7
Note: Average exchange rates for 1H of FY16/3 $1= ¥121.82 €1= ¥134.3
(Assumed exchange rates for FY16/3 as of July 30, 2015 $1=¥115, €1=¥130)
Average exchange rates for 1H of FY15/3 $1= ¥102.24 €1= ¥139.44
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© NEC Corporation 2015
1H Results by Segment
1H Results
(Billions of Yen)
Net Sales
Public
Enterprise
Operating Income
% to Net Sales
10.2%
6.9%
Net Sales
72.3
4.0
78.4
6.2
Operating Income
% to Net Sales
Net Sales
Telecom Carrier
Operating Income
% to Net Sales
Others
Adjustment
7.3%
187.6
5.8
% to Net Sales
3.5%
3.1%
Net Sales
Operating Income/Loss
95.8
2.2
81.5
2.6
% to Net Sales
2.3%
3.2%
-16.3
726.1
28.6
-17.9
721.5
23.4
3.9%
3.2%
Operating Income
Operating Loss
Operating Income
% to Net Sales
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© NEC Corporation 2015
7.9%
184.9
13.6
6.8%
Net Sales
Total
5.6%
181.5
12.3
178.5
6.2
Net Sales
System Platform
Q2<July to September>
FY15/3
FY16/3
YoY
Actual
Actutal
198.1
189.2
-4.5%
20.3
13.1
-7.2
1H<April to September>
FY15/3
FY16/3
YoY
Actual
Actual
344.5
334.6
-2.9%
21.9
12.6
-9.3
6.3%
3.8%
+8.4%
+2.2
126.7
2.3
146.6
9.0
1.8%
6.1%
+1.9%
+1.3
332.5
16.6
327.5
10.3
5.0%
3.1%
+5.1%
-0.4
345.4
8.7
347.8
10.7
2.5%
3.1%
175.8
-2.7
151.6
-4.4
-1.5%
-2.9%
-25.2
1,324.8
21.5
-24.8
1,308.1
13.3
1.6%
1.0%
-14.9%
+0.4
-1.5
-0.6%
-5.2
+15.7%
+6.7
-1.5%
-6.3
+0.7%
+2.0
-13.8%
-1.7
+0.4
-1.3%
-8.2
1H Results
Strategic Investment Update
Invested 12.0B Yen in 1H, an increase of 6.0B Yen YoY
▌Incremental spending in SDN, Big Data, Cyber Security
Strategic Investment
FY16/3
Forecast
28.5
Breakdown of incremental
spending (YoY)
+6.0
（+15.0 YoY）
12.0
(Billions of Yen)
*SDN: Software-Defined Networking
Cloud
SDN
Cyber
Security
6.0
FY15/3 1H
FY16/3 1H
Big
Data
*Forecasts as of October 29, 2015
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© NEC Corporation 2015
1H Results
Public Business
(Billions of Yen)
YoY
Sales
344.5
303.3
+13.6％
Operating
Income Ratio
14.5
334.6
-2.9％
21.9
6.3%
12.6
4.8%
FY14/3
1H
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© NEC Corporation 2015
3.8%
FY15/3
1H
FY16/3
1H
▌Sales
334.6
(-2.9%)
 Sales for central government decreased due
to decline in large projects in the last fiscal
year
 Sales for local governments performed well
due to higher demand for My Number
projects
+9.5％
Operating
Income
Billions of Yen (YoY)
▌Operating Income
12.6
(-9.3)
 Decreased due to a sales decrease, increase
in costs to reinforce operations
and loss making projects
1H Results
Enterprise Business
(Billions of Yen)
YoY
Sales
+9.5％
126.7
+15.7％
9.0
-2.6％
6.1%
Operating
Income
Operating
Income Ratio
0.6%
0.7
FY14/3
1H
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© NEC Corporation 2015
2.3
1.8%
FY15/3
1H
▌Sales
146.6
(+15.7%)
 Increased due to large projects in
manufacturing, as well as retail and
services
146.6
130.1
Billions of Yen (YoY)
FY16/3
1H
▌Operating Income
9.0
(+6.7)
 Improved due to a sales increase and
higher profitability in system construction
services
1H Results
Telecom Carrier Business
(Billions of Yen)
YoY
Sales
334.0
332.5
327.5
-2.5％
-0.5％
-1.5％
10.3
3.1%
© NEC Corporation 2015
FY15/3
1H
(-1.5%)
10.3
(-6.3)
 Decreased due to a sales decrease
16.6
5.0%
10
327.5
▌Operating Income
5.8%
FY14/3
1H
▌Sales
 Decreased in Japan
 International sales increased in submarine
cable systems and TOMS
Operating
Income
Operating 19.4
Income Ratio
Billions of Yen (YoY)
FY16/3
1H
*TOMS: Telecom Operations & Management Solutions
1H Results
System Platform Business
(Billions of Yen)
YoY
Sales
350.7
345.4
347.8
-4.5％
-1.5％
＋0.7％
Operating
Income
Operating
Income Ratio
1.8
8.7
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© NEC Corporation 2015
347.8
▌Operating Income
10.7
3.1%
2.5%
FY15/3
1H
▌Sales
(+0.7%)
 Increased due to solid performance of
servers, despite a decrease in business PCs
0.5%
FY14/3
1H
Billions of Yen (YoY)
FY16/3
1H
10.7
(+2.0)
 Improved due to a sales increase and
higher profitability mainly in hardware
1H Results
Others
(Billions of Yen)
YoY
Sales
175.8
151.6
-33.6％
-13.8％
Operating
Loss
Operating
Income Ratio
-4.5%
-11.8
FY14/3
1H
12
▌Sales
151.6
(-13.8％)
 Decreased due to deconsolidation of
logistics business and a decrease in the
mobile handsets business
264.9
-22.6％
Billions of Yen (YoY)
© NEC Corporation 2015
-1.5%
-2.7
FY15/3
1H
-2.9%
-4.4
FY16/3
1H
▌Operating Loss
-4.4
(-1.7)
 Decreased due to a sales decrease
1H Results
Variance from 1H Forecasts by Segment
Full year forecasts unchanged while some projects were pushed forward and costs
were front loaded
Sales
Sales
Operating
Income
+/-0.0
Telecom Carrier
-9.0
▐ Sales
 Maintained good momentum both
in manufacturing and retail/service
industries
▐ Operating Income
 Outperformed forecast due to
higher profitability in system
construction services
Expect to outperform full year
forecast
Sales
Operating
Income
-10.0
+2.0
▐ Sales
(Billions of Yen)
Public
Enterprise
 Missed forecast as projects were
pushed forward in aviation/space
and defense business
▐ Operating Income
-5.0
Operating
Income
Variance
-5.0
▐ Sales
 Missed forecast as projects were
pushed forward in mobile backhaul
international business
and implementation services in Japan
▐ Operating Income
 Missed forecast due to sales
decrease, as well as front loaded
 Missed forecast due to sales
business reinforcement costs in
decrease, as well as front loaded
Space and Smart water business
development costs and marketing
and loss making projects
expenses in mobile backhaul
*Forecasts as of July 30, 2015
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© NEC Corporation 2015
Net Income Change（Year on Year）
Non-operating
Income/Loss
+2.9
Retirement benefit
expenses
Equity in earnings of
affiliates
Subsidy Income
Foreign exchange
gains/losses
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© NEC Corporation 2015
(Billions of Yen)
Enterprise
+6.7
System Platform +2.0
Adjustment
+0.4
Others
-1.7
Telecom Carrier -6.3
Public
-9.3
Operating Income
-8.2
FY15/3
1H
12.5
1H Results
+5.6
+2.4
-2.0
-2.2
Others
-6.9
Profit/Loss attributable to
non-controlling interests
Income taxes
Business structure
improvement expenses
FY16/3
1H
0.2
-7.8
-1.2
+1.7
II. Financial Forecasts for FY16/3
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© NEC Corporation 2015
Forecasts
FY16/3
Summary of Financial Forecasts for FY16/3
Increase sales and profits, achieve 65.0 billion yen in net income
(Billions of Yen)
(Billions of Yen)
Full Year
FY15/3
FY16/3
Actual Forecasts
Net Sales
2,935.5
YoY
Net Sales
Public
3,100.0 + 5.6%
Operating Income
% to Net Sales
Net Sales
Operating Income
% to Net Sales
Ordinary Income
% to Net Sales
128.1
135.0
4.4%
4.4%
112.1
120.0
3.8%
3.9%
57.3
65.0
Enterprise
+ 6.9
Operating Income
% to Net Sales
Net Sales
Telecom Carrier
Operating Income
% to Net Sales
+ 7.9
Net Sales
System Platform
Operating Income
% to Net Sales
Net Income
% to Net Sales
2.0%
+ 7.7
Net Sales
Others
2.1%
Operating Income
% to Net Sales
Adjustment
Operating Loss
Net Sales
Free Cash Flows
40.4
80.0
Total
+ 39.6
Operating Income
% to Net Sales
Note1: Assumed exchange rates for 2H16/3
Full Year
FY15/3
FY16/3
Actual
Forecasts
821.9
865.0
74.8
86.0
9.1%
9.9%
270.5
8.3
290.0
11.0
3.1%
3.8%
740.2
62.0
780.0
64.0
8.4%
8.2%
728.9
31.4
760.0
33.0
4.3%
4.3%
374.1
4.0
405.0
4.0
1.1%
1.0%
- 52.4
2,935.5
128.1
- 63.0
3,100.0
135.0
4.4%
4.4%
YoY
+ 5.2%
+ 11.2
+ 7.2%
+ 2.7
+ 5.4%
+ 2.0
+ 4.3%
+ 1.6
+ 8.2%
0.0
- 10.6
+ 5.6%
+ 6.9
$1=¥115, €1=¥130
*Forecasts as of October 29, 2015 (Unchanged from July 30 forecasts)
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© NEC Corporation 2015
IT Investment Environment in Japan
The order trend for IT investment in services and hardware in Japan remains strong
▌ IT services in Japan show stable growth from Q4, FY15/3, particularly in the
public, retail and services areas
▌ PC servers show stable growth in 1H, particularly in Q1
IT Services Order Trend in Japan
（by Quarter, YoY）
116%
110%
1H FY16/3
Order growth
112％
108%
100％
FY15/3
1Q
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© NEC Corporation 2015
2Q
3Q
4Q
FY16/3
1Q
2Q
My Number Related Business Update
Aim to attain 100Bil Yen in infrastructure development (FY15/3 – FY17/3 total)
-Revised the target up from 70Bil Yen, considering stable order intake (including security)
▐ Booked order of 20B Yen to hit full year target of 15B Yen
Expect further order intake
▐ Secured face recognition order relating to the issuance of My Number for
all municipalities nationwide
My Number related Order/Sales
(Billions of Yen)
60.0
30.0
25.0
FY15/3
Order
10.0
FY15/3
Sales
20.0
1H Actual
7.0
FY16/3 1H
FY16/3
Order
Sales(Forecast)
FY17/3
Sales(Forecast)
*Forecasts as of October 29, 2015
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© NEC Corporation 2015
Safety/Cyber Security Business Update
Aim to achieve growth through the Global Safety Division and Cyber Security
▌ Promote “Locally-led” business through the Global Safety Division
▌ Deploy total value of NEC with the most advanced engineering, information and technology as
well as system implementation capability for cyber security
Japan, Greater China,
APAC
*AFIS: Automated Fingerprint
Identification System
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© NEC Corporation 2015
▐ Provide security monitoring service
for more than 800 organizations
under 100 entities in Japan
▐ Implement new AFIS* for the
Philippine National Police
▐ Provide face recognition solution
for Northern Territory Police Force,
Australia
▐ Collaborate with Id-SIRTII/CC, an
agency under the Indonesian
Ministry of Communication &
Information Technology, for cyber
security
The Americas
▐ Provide face recognition solution
for Arizona Department of
Transportation
▐ Provide face recognition systems
for customs at 14 international
airports in Brazil
▐ Provide security solutions for the
port of Açu, Rio de Janeiro, Brazil
▐ Conducted trials of landslide
simulation technology in Rio de
Janeiro, Brazil
SDN Business Update
Expanding proposals and verification tests for global carriers with more than 40
projects
▌ Aim to become one of the top global technology solution vendors leveraging strengths such as
technological leadership in virtualization, collaborating with TOMS products, SDN/NFV solutions
(vEPC/vMVNO/vCPE), contributions to the open standard eco-system and partnerships
EMEA
▐ Swisscom AG
 Partnership in SDN/NFV
▐ Portugal Telecom
 Successful trial of vCPE
▐ Etisalat
 Successful trial of vCPE
*
NFV: Network Functions Virtualization
vEPC: virtualized Evolved Packet Core
vMVNO: virtualized Mobile Virtual Network Operator
vCPE: virtualized Customer Premises Equipment
Japan, Greater
China, APAC
▐ NTT DOCOMO, Inc.
 Selected as partner for
development of NFV
The Americas
▐ Telefónica Brasil S.A.
 Massive vCPE trial using
commercial network
▐ KDDI R&D Labs
 Joined trials of SDN/NFV
▐ KT Corporation
 Partnership for 5G
network and SDN/NFV
*Case studies listed from press releases after January 2015
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© NEC Corporation 2015
III. Formulation of New Mid-term Management Plan
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© NEC Corporation 2015
Progress on Mid-term Management Plan 2015
(Looking back at two and a half years)
Mid-term
Plan
▐ Focus on Solutions for Society

Achievements
Business model evolution (One to Many), Seized opportunities from political
initiatives (e.g. My Number), Strengthened core technology in focal areas,
Decisions based on portfolio management
▐ Creation of a foundation for global growth

Created foundation for “locally-led” solutions (e.g. Establishment of Global
Safety Division)
▐ Stabilize financial foundation

Improved ROE, Stable dividend, Improved balance sheets,
Optimized profit structure by minimizing loss
▐ Strengthen global competitiveness

Next Steps

Expand business in focal areas and international markets,
Build a corporate culture of creating business models
Business Process Optimization, Reduce costs related to quality issues,
Enhance group management
▐ Customer Satisfaction

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© NEC Corporation 2015
Thorough compliance activity
Fundamental Policy of New Mid-term Management Plan
Mid-term
Plan
Mid-term Management Plan 2015:
Ensure credibility and create a foundation for future growth
New Mid-term Plan: Achieve growth and establish international business
infrastructure in focal areas
▌Maintain the fundamental policy of the Mid-term Plan 2015
 Set clear action plans considering outcomes and lessons from MTP 2015,
and complete outstanding action items
▌Important points to achieve growth
 Becoming a value provider
 Strengthening the financial base (improve OP margin)
 Reinforcing global competitiveness (set clear focus in international business)
 Establishing the most effective corporate culture (Education System)
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© NEC Corporation 2015
Define Focus Areas of International Business
Mid-term
Plan
Establish a business infrastructure with a clear definition of focus areas
under the “One to Many” strategy
Business
Area
Safety
Discuss “locally-led” business model mainly in surveillance and cyber security
Smart
Water
Enter the market with water leak detection and water pipe deterioration diagnosis
solutions leveraging sensor technology. Expand to smart water/smart city business
Retail
Deploy unique solutions attained through Japanese convenience store chain
business to global markets
Network
24
Discussion Point
Support and contribute to telecom carriers gaining higher revenue and optimizing
their costs through NEC’s unique solution leveraging SDN and TOMS expertise
© NEC Corporation 2015
Mid-term
Plan
Business Process Optimization
Changing the way of operations for the 100K members of the NEC Group,
designating NEC Management Partners, Ltd(NMP) as a core force
-250 personnel shifted to growth areas to maximize outward efforts
Progress
Integrate
back-office
management
Business Process
Optimization
25
© NEC Corporation 2015
Next Steps
 Shifted back-office
functions of NEC
Corporation (1,700
personnel) to NMP
 Aggregate All NMP functions in
Tamagawa business facilities
(from Nov 2015）
 Consolidate back-office
functions of subsidiaries
(from Apr 2016)
 Moved common IT assets
to NMP for optimization
 Launched activity to
optimize internal
management meetings
 Detect and eliminate
unnecessary procedures and
build standard business
processes
 Apply standard business
processes to whole NEC Group
Thorough Compliance Activity
Ensure a deep corporate culture of ethics and compliance throughout the
entire NEC Group
▌Top management’s message to share the compliance policy
 Continuous messages from executive members and division heads, in their own
words, addressing the importance of ethics and compliance as a top priority
▌Enhance educational activities for ethics and compliance
 Enhance the variety and depth of compliance education
 Offer opportunities for workers to review actions on their own
▌Reinforce internal rules and organizations
 Continuous review of internal rules and organizations to reduce compliance risk
 Review and advisory process by a third party
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© NEC Corporation 2015
To be a Company Generating Value for the next 100 years
Mid-term
Plan
Growth
Achievement
Preparation
• V-Camp
• Structural
Reform
• V2012
FY11/3-FY13/3
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© NEC Corporation 2015
1. Focus on Solutions
for Society
2. Creation of a
foundation for
global growth
3. Stabilize Financial
Foundation
FY14/3-FY16/3
Strong growth
based on
foundation built
by MTP2015
+
Next growth
foundation
CCC : Cash Conversion Cycle
FY17/3-FY19/3
NEC aims to achieve full-year forecasts for a
fourth consecutive year and intends
to increase its dividend.
We demonstrate the NEC Group’s capability to
make solid contributions to society
in the final year of our three-year
Mid-term Management Plan 2015
*Forecasts as of October 29, 2015
28
© NEC Corporation 2015
29
© NEC Corporation 2015
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© NEC Corporation 2015
Financial Results for 1H, FY16/3 (Appendix)
31
© NEC Corporation 2015
Results for 1H by Segment ( three-year transition )
（Billions of Yen）
Net Sales
1,383.1
303.3
Public
Enterprise
Telecom
Carrier
System
Platform
Others
130.1
334.0
350.7
264.9
FY14/3
1H
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© NEC Corporation 2015
1,324.8
Operating Income/Loss
21.5
1,308.1
0.4
344.5
334.6
126.7
146.6
332.5
327.5
Enterprise
14.5
0.7
Telecom
Carrier
19.4
System
Platform
1.8
-11.8
Public
Others
345.4
1H Results
347.8
175.8
151.6
FY15/3
1H
FY16/3
1H
Adjustment
13.3
21.9
12.6
2.3
9.0
16.6
10.3
8.7
-2.7
10.7
-4.4
-25.2
-24.8
FY15/3
1H
FY16/3
1H
-24.3
FY14/3
1H
Financial Results for 1H by Segment
(Billions of Yen)
Net Sales
Operating Income/Loss
Others
12%
Public
25%
System
Platform
27%
Sales for 1H
FY16/3
1,308.1
Telecom
Carrier
25%
33
© NEC Corporation 2015
1H Results
Public
12.6
Enterprise
9.0
Telecom
Carrier
10.3
System
Platform
10.7
Operating
Income for
1H, FY16/3
13.3
Enterprise
11%
Others
-4.4
Sales Change (Year on Year)
Increased due to large
projects in manufacturing,
as well as retail and
services
1H Results
(Billions of Yen)
Enterprise
+19.9
Telecom
Carrier
-4.9
System
Platform
+2.4
Increased due to solid
performance of servers
despite of a decrease in
business PCs
Decreased due to
deconsolidation of
logistics business and a
decrease in the mobile
handsets business
Public
-9.9
Decreased in Japan, while
international sales increased
in submarine cable and TOMS
FY15/3
1H
1,324.8
34
© NEC Corporation 2015
Sales for central government
decreased due to decline in large
projects in the last fiscal year,
while sales for local governments
performed well due to higher
demand for My Number projects
Others
-24.2
FY16/3
1H
1,308.1
Operating Income Change (Year on Year)
1H Results
(Billions of Yen)
Decreased due to a
sales decrease
Public
-9.3
FY15/3
1H
21.5
Enterprise
+6.7
Telecom
Carrier
-6.3
System
Platform
+2.0
Improved due to a sales
increase and higher profitability
Decreased due to a sales
decrease, increase in costs
to reinforce operations
and loss making projects
35
Improved due to sales increase and
higher profitability mainly in hardware
© NEC Corporation 2015
Decreased due to a sales
decrease
Others
-1.7
Adjustment
+0.4
FY16/3
1H
13.3
International Sales
1H Results
Sales by Region
22.8%
International
Sales Ratio
The
Americas
19.7%
20.9%
Greater
China,
273.1
276.4
102.2
96.9
The
112.4
115.6
129.2
EMEA
58.5
63.9
65.2
FY14/3
1H
FY15/3
1H
FY16/3
1H
5.0%
9.9%
Americas
7.9%
Greater
China,
APAC
EMEA
APAC
298.0
103.5
(Billions of Yen)
Sales for 1H
FY16/3
1,308.1
Japan
77.2%
*Sales are classified by country or region based on customer locations.
36
© NEC Corporation 2015
Financial Position Data
1H Results
(Billions of Yen)
End of March
2015
Difference
from end of
March 2015
End of Sep
2014
2,620.7
2,465.5
- 155.1
2,447.7
Net assets
884.2
861.1
- 23.1
757.9
Interest-bearing debt
520.8
530.8
+ 10.0
570.6
Shareholders' equity
823.7
800.1
- 23.6
695.8
31.4%
32.5%
+ 1.1pt
28.4%
D/E ratio (times)
0.63
0.66
-0.03pt
0.82
Net D/E ratio (times)
0.41
0.43
-0.02pt
0.57
181.1
188.5
+ 7.3
176.0
Total assets
Equity ratio (%)
Cash and cash equivalents
37
End of Sep
2015
© NEC Corporation 2015
<Ref.> Balance Sheets (At the end of September 2015)
1H Results
(Billions of Yen)
Current Assets
1,441.1
Liabilities
-132.0
-135.7
Collection of
accounts
receivable-trade
Total Assets
2,465.5
Noncurrent Assets
1,024.4
38
© NEC Corporation 2015
1,604.4
Decrease in trade notes and
accounts payable-trade, and
accrued expenses
（-155.1 compared to
end of March 2015）
-19.4
Compared to
end of March
2015
-23.1
Dividends paid, and
a decrease in the valuation
difference on available-forsale securities due to
declining stock prices
Net Assets
861.1
Free Cash Flows
40.0
20.0
1H Results
(Billions of Yen)
+Improvement
of working capital
+Improvement in income/loss
before income taxes
and working capital
32.8
27.8
9.4
0.0
-20.0
-27.3
-13.4
+Decrease in cash
outflows for M&A
-60.0
-80.0
-41.1
-67.6
-40.0
-23.5
-Increase in cash
outflows for M&A
-94.8
-100.0
-Acquisition of trust
beneficiary rights, etc.
-120.0
FY14/3
1H
Cash flows from operating activities
39
© NEC Corporation 2015
FY15/3
1H
Cash flows from investing activities
FY16/3
1H
Free cash flows
Notable Achievements in 1H
-Focus on Solutions for Society (1)
Number of customer wins in international markets and focus areas such as
SDN, Safety/Cyber Security, etc.
▌ SDN
 Collaborated with Swisscom AG in SDN/NFV
 Collaborated with Portugal Telecom to test CPE virtualization for residential markets
 Participated in SDN/NFV trials at KDDI R&D Labs
 Collaborated with KT on 5G network and SDN/NFV
 Conducted trials successfully with Telefónica on vCPE for business solutions
 Conducted trials successfully with Etisalat on vCPE
▌ Big Data
 Provided Sumitomo Mitsui Banking Corp. with system that automatically analyzes
customer feedback
 Conducted water leak detection trial for the City of Arlington, Texas
 Enhanced "Fingerprint of Things“ technology for commercial deployment
to identify counterfeit products for Ergobaby’s baby carriers.
40
© NEC Corporation 2015
1H Results
Notable Achievements in 1H
-Focus on Solutions for Society (2)
Number of customer wins in international markets and focus areas such as
SDN, Safety/Cyber Security, etc.
▌ Safety/Cyber Security
 Selected to provide face recognition system for terminals to access My Number
by Koshu City, Japan
 Selected to provide face recognition system for the issuance of My Number
for all municipalities nationwide
 Selected to provide face recognition systems for customs at 14 international airports in Brazil
 Implemented new Automated Fingerprint Identification System (AFIS)
for the Philippine National Police
 Selected by Arizona Department of Transportation to provide face recognition solution
 Selected to provide face recognition solution for Northern Territory Police Force, Australia
 Collaborated with Id-SIRTII/CC, an agency under the Indonesian Ministry of
Communication & Information Technology, in the area of cyber security
 Selected to provide security solutions for the port of Açu, Rio de Janeiro, Brazil
 Conducted trials of landslide simulations in Rio de Janeiro, Brazil
41
© NEC Corporation 2015
1H Results
Notable achievements in 1H
–Establish foundation for global expansion
1H Results
Customer wins in new business areas, in addition to Telecom Carrier business
▌ Telecom Carrier
*OSS: Operation Support System
 Selected to supply end-to-end OSS* transformation for Indosat, Indonesia
 Selected to supply additional OSS for Maxcom, Mexico
 Selected to supply “SKR1M" submarine cable system to connect
between Peninsular Malaysia and Borneo Island
 Signed a global agreement with Telenor to deliver transport network solutions
 Selected to provide all outdoor ultra-compact microwave radio systems from Turkcell for LTE services
▌ New Business Promotion
 Invested in XON, an ICT company based in South Africa
 Signed an MOU with the government of Andhra Pradesh, India to collaborate on
safe city development
 Selected to build telecommunications and security systems for a large-scale oil refinery in Kuwait
 Signed an MOU with Colas, a Bouygues Group company, on the development of
efficient mobility and car sharing
 Selected to provide ICT infrastructure for the aquatics center under construction in Rio de Janeiro, Brazil
42
© NEC Corporation 2015
Financial Forecasts for FY16/3 (Appendix)
43
© NEC Corporation 2015
Forecasts
FY16/3
Financial Forecasts by Segment (three-year transition)
(Billions of Yen)
Net Sales
3,043.1
Public
738.4
Enterprise
272.3
Telecom
Carrier
725.8
System
Platform
Others
780.8
2,935.5
821.9
270.5
740.2
Operating Income/Loss
128.1
3,100.0
865.0
290.0
780.0
728.9
760.0
525.9
374.1
405.0
FY14/3
FY15/3
FY16/3
Forecast*
135.0
106.2
74.8
86.0
Public
58.6
Enterprise
6.5
8.3
11.0
Telecom
Carrier
60.3
62.0
64.0
System
Platform
Others
30.7
-1.4
31.4
4.0
33.0
4.0
Adjustment
-48.6
-52.4
-63.0
FY14/3
FY15/3
FY16/3
Forecast*
* Forecasts as of October 29, 2015
44
© NEC Corporation 2015
Forecasts
FY16/3
Financial Forecasts for FY16/3 by Segment
Net Sales
Operating Income
Operating
Income
Forecast for
FY16/3
Public
86.0
Others
13%
Sales Forecast
for FY16/3
3,100.0
Telecom
Carrier
25%
135.0
Telecom
Carrier
64.0
Public
28%
System
Platform
25%
(Billions of Yen)
System
Platform
33.0
Enterprise
9%
Enterprise
11.0
Others
4.0
* Forecasts as of October 29, 2015
45
© NEC Corporation 2015
Forecasts
FY16/3
Public Business
(Billions of Yen)
YoY
Sales
821.9
738.4
+11.3％
+8.5％
Operating
Income
74.8
865.0
+5.2％
86.0
Billions of Yen (YoY)
▌Sales
865.0（+5.2％）
 Increase mainly in the public areas
▌Operating Income 86.0（+11.2）
 Improve due to sales increase, cost
reduction and a decrease in loss making
projects
58.6
Operating
Income Ratio
7.9%
9.1%
9.9%
FY14/3
FY15/3
FY16/3
Forecasts*
*Forecasts as of October 29, 2015
46
© NEC Corporation 2015
Forecasts
FY16/3
Enterprise Business
(Billions of Yen)
YoY
Sales
272.3
270.5
290.0
+7.2％
+8.2％
-0.7％
11.0
Operating
Income
Operating
Income Ratio
8.3
Billions of Yen (YoY)
▌Sales
290.0
（+7.2％）
 Increase in manufacturing, retail and
service industries
▌Operating Income 11.0（+2.7）
 Improve due to sales increase and better
profitability
6.5
2.4%
FY14/3
3.1%
FY15/3
3.8%
FY16/3
Forecasts*
*Forecasts as of October 29, 2015
47
© NEC Corporation 2015
Forecasts
FY16/3
Telecom Carrier Business
(Billions of Yen)
YoY
Sales
725.8
+2.3％
740.2
+5.4％
+2.0％
60.3
780.0
62.0
64.0
Operating
Income Ratio
8.3%
8.4%
8.2%
FY15/3
FY16/3
Forecasts*
Billions of Yen (YoY)
▌Sales
780.0（+5.4％）
 Japan: Slightly decrease
 International: Increase in mobile backhaul,
TOMS and submarine cable systems
▌Operating Income 64.0（+2.0）
 Improve due to sales increase mainly in
international businesses
Operating
Income
FY14/3
*Forecasts as of October 29, 2015
48
© NEC Corporation 2015
Forecasts
FY16/3
System Platform Business
(Billions of Yen)
YoY
Sales
780.8
728.9
+4.9％
Operating
Income
760.0
+4.3％
-6.6％
30.7
Operating
Income Ratio
3.9%
FY14/3
31.4
33.0
4.3%
4.3%
FY15/3
FY16/3
Forecasts*
▌Sales
Billions of Yen (YoY)
760.0（+4.3％）
 Increase in solution platform including
servers, network and software
▌Operating Income 33.0（+1.6）
 Improve due to sales increase and cost
reduction
*Forecasts as of October 29, 2015
49
© NEC Corporation 2015
Forecasts
FY16/3
Others
(Billions of Yen)
YoY
Sales
374.1
- 0.3%
Operating
Income/
Loss
405.0
405.0
▌Operating Income 4.0
+8.2％
-28.9％
Operating
Income Ratio
▌Sales
（+8.2％）
 Increase in energy business while sales for
mobile handsets decrease
525.9
-23.3％
Billions of Yen (YoY)
4.0
4.0
（+/-0.0)
 Remain flat with a profitability improvement
in energy business offsetting one-time
patents-related income for FY15/3
1.1%
1.0%
-1.4
FY14/3
FY15/3
FY16/3
Forecasts*
*Forecasts as of October 29, 2015
50
© NEC Corporation 2015
Forecasts
FY16/3
Sales Change (Year on Year)
A slight decrease in sales in Japan
Increase in MBH, TOMS, and submarine
cable systems in international markets
Increase in
manufacturing, retail
and services
Public
+43.1
Enterprise
+19.5
Increase in energy business
while mobile handset business
decreases
Telecom
Carrier
+39.9
System
Platform
+31.1
(Billions of Yen)
Others
+30.9
FY16/3
Increase in solution platform
(servers, network and software)
Forecast**
3,100.0
FY15/3
Increase in public
2,935.5
*MBH: Mobile Backhaul
51
© NEC Corporation 2015
**Forecast as of October 29, 2015
Forecasts
FY16/3
Operating Income Change (Year on Year)
Improve due to sales increase
in the international business
Improve due to sales increase
and better profitability
Public
+11.2
FY15/3
128.1
(Billions of Yen)
Remain flat with a profitability
improvement in energy business
offsetting one-time, patents-related
income in FY15/3
Enterprise
+2.7
Telecom
Carrier
+2.0
System
Platform
+1.6
Improve due to sales increase,
cost efficiency and a decrease in
loss making projects
Increase in costs
Others
+/-0.0
Adjustment
-10.6
Improve due to a sales
increase and more cost
efficiency
FY16/3
Forecast*
135.0
*Forecast as of October 29, 2015
52
© NEC Corporation 2015
Forecasts
FY16/3
Net Income Change (Year on Year)
(Billions of Yen)
Operating
income
+6.9
Non-operating
income/loss
+1.0
Decrease in profit/loss
attributable to noncontrolling interests
and improvement in
extraordinary income/loss
Others
-0.2
Decrease in retirement benefit
expenses (+10.4), and
decrease in foreign exchange gains
FY15/3
57.3
Public
Enterprise
Telecom Carrier
System Platform
Adjustment
+11.2
+2.7
+2.0
+1.6
-10.6
FY16/3
Forecast*
65.0
*Forecast as of October 29, 2015
53
© NEC Corporation 2015
Forecasts
FY16/3
Capital Expenditure, Depreciation and R&D expenses
(Billions of Yen)
Capital Expenditure
R&D Expenses
Depreciation
% to Sales 4.7%
50.0
45.2
48.5
142.7
Public
16.0
Enterprise
Telecom
Carrier
1.8
6.8
System
Platform
5.3
Others
*
Public
37.4
16.1
0.3
5.9
Enterprise
20.0
0.5
9.0
9.0
16.1
0.6
Telecom
Carrier
54.0
System
Platform
40.1
Others
32.0
7.6
10.8
7.5
FY14/3
FY15/3
11.5
FY16/3
Forecast**
*Not including acquisition of trust beneficiary rights
4.7%
50.0
*
40.8
4.6%
FY14/3 FY15/3 FY16/3
Forecast**
134.2
145.0
18.0
1.2
52.6
39.8
22.5
FY14/3 FY15/3 FY16/3
Forecast**
**Forecasts as of October 29, 2015
54
© NEC Corporation 2015
Reference (Financial data)
55
© NEC Corporation 2015
Net Sales, Operating Income/Loss
(Billions of Yen)
3.0%
3.9%
3.3%
959.6
- 3.4%
Net Sales
743.0
700.4
640.1
- 1.2%
726.1
+6.4％
677.2
-2.3％
-3.0％
+1.4％
3.2%
586.6
Q1
<Apr-Jun>
-2.0%
28.6
23.4
14.1
-7.1
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY14/3
© NEC Corporation 2015
Q4
<Jan-Mar>
-0.6%
92.4
23.4
-21.8
721.5
-3.3％
82.5
22.2
- 1.7%
-2.7％
-6.5％
Operating
Income/
Loss
YoY
2.1%
933.5
598.7
-9.0％
56
9.9%
8.6%
Operating Income Ratio
Q1
<Apr-Jun>
-10.1
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY15/3
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
FY16/3
International Sales
(Billions of Yen)
23.1%
International Sales Ratio
18.9%
20.5%
20.9%
19.7%
20.8%
21.1%
18.0%
16.4%
International Sales 152.3
120.8
157.8
138.2
+22.9％
+11.8％
+14.1％
Q1
<Apr-Jun>
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY14/3
57
© NEC Corporation 2015
151.1
125.3
167.8
142.6
+6.3％
-0.8％
Q4
<Jan-Mar>
Q1
<Apr-Jun>
162.3
135.6
+7.4％
+3.2％
+3.7％
+24.0％
22.5%
+8.2％
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY15/3
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
FY16/3
YoY
Sales, Operating Income/Loss (Public)
(Billions of Yen)
Operating
Income Ratio
0.3%
8.0%
10.7%
10.2%
9.8%
12.5%
YoY
8.7%
1.1%
6.9%
295.9
271.0
-0.4%
+9.2％
+6.5％
176.7
Sales
126.6
+10.1％
164.0
+9.1％
Operating
Income
/Loss
+9.9％
146.4
26.5
17.6
14.2
198.1
189.2
181.4
37.1
+12.1％
145.5
-4.5％
+10.6％
+15.7％
20.3
-0.6％
15.8
13.1
1.6
0.4
-0.5
Q1
<Apr-Jun>
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY14/3
58
© NEC Corporation 2015
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY15/3
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
FY16/3
Sales, Operating Income/Loss (Enterprise)
(Billions of Yen)
Operating
Income Ratio
-4.1%
7.4%
4.4%
6.7%
5.6%
0.9%
-0.3%
82.6
72.3
71.3
60.7
58.7
+10.7％
+3.7％
+1.3％
+1.3％
78.4
68.3
+25.5％
+0.8％
+8.4％
-7.4％
Operating
Income/
Loss
6.0
3.1
-0.2
-2.4
Q1
<Apr-Jun>
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY14/3
59
54.4
61.2
+2.8％
+17.4％
7.9%
-3.3%
81.5
Sales
4.1%
© NEC Corporation 2015
4.0
0.5
5.5
6.2
2.8
-1.8
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY15/3
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
FY16/3
YoY
Sales, Operating Income (Telecom Carrier)
(Billions of Yen)
7.7%
3.6%
7.2%
219.0
Sales
15.4%
13.0%
Operating
Income Ratio
180.0
172.7
154.0
-4.0％
181.5
151.0
+3.8％
-0.7％
Operating
Income/
Loss
+9.4％
2.9%
28.5
13.8
5.1%
170.8
+0.8％
-1.1％
7.3%
236.9
-2.3%
184.9
+8.2％
142.6
+1.9％
36.6
-2.0％
12.4
5.6
6.8%
YoY
-5.6％
12.3
13.6
8.8
4.3
-3.3
Q1
<Apr-Jun>
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY14/3
60
© NEC Corporation 2015
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY15/3
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
FY16/3
Sales, Operating Income/Loss (System Platform)
(Billions of Yen)
8.6%
4.3%
Operating
Income Ratio
4.3%
1.5%
3.5%
YoY
3.0%
2.6%
3.1%
244.3
- 4.2%
213.0
193.1
Sales
8.6%
157.7
185.7
-5.4％
+16.4％
166.9
+11.0％
+5.9％
-3.3％
178.5
170.5
-7.5％
8.4
8.0
-12.8％
160.2
+5.1%
-8.2％
20.9
Operating
Income/
Loss
187.6
-4.0%
18.3
2.5
6.2
5.8
4.9
4.4
-6.6
Q1
<Apr-Jun>
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY14/3
61
© NEC Corporation 2015
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY15/3
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
FY16/3
Sales, Operating Income/Loss (Others)
(Billions of Yen)
9.4%
6.7%
Operating
Income Ratio
-6.9%
-1.6%
YoY
3.2%
2.3%
0.7%
-3.4%
-6.1%
-9.9%
Sales
143.1
143.7
121.8
117.3
-3.5％
-12.1％
-37.2％
-34.9％
80.0
95.8
93.3
-21.3％
Operating
Income/
Loss
-9.9
Q1
<Apr-Jun>
0.8
-2.0
Q2
<Jul-Sep>
Q3
<Oct-Dec>
© NEC Corporation 2015
Q4
<Jan-Mar>
2.2
Q1
<Apr-Jun>
-26.9％
9.9
-3.1
-4.9
FY14/3
62
9.6
-20.5％
-44.1％
105.1
Q2
<Jul-Sep>
Q3
<Oct-Dec>
FY15/3
81.5
70.1
-14.9％
-12.4％
2.6
-7.0
Q4
<Jan-Mar>
Q1
<Apr-Jun>
Q2
<Jul-Sep>
FY16/3
Exchange Rate
（Yen）
140
134.3
130
121.82
120
110
4/1
63
4/30
5/29
Dollar/Yen Exchange Rate (Actual)
© NEC Corporation 2015
6/30
7/31
8/31
Dollar/Yen Assumed Exchange Rate
Dollar/Yen Average Exchange Rate
Euro/Yen Exchange Rate (Actual)
Euro/Yen Assumed Exchange Rate
Euro/Yen Average Exchage Rate
9/30
Stock Price
(Yen)
April 28: Full year
earnings release
21,000
430
20,500
420
20,000
410
19,500
400
19,000
390
18,500
380
18,000
370
June 22: Ordinary general
Meeting of shareholders
17,500
360
17,000
350
16,500
September 29
Public Business Briefing
July 30 Q1 earnings release
16,000
4/1
4/30
5/29
6/30
The Nikkei Stock
64
© NEC Corporation 2015
7/31
NEC
8/28
340
330
9/30
CAUTIONARY STATEMENTS:
This material contains forward-looking statements pertaining to strategies, financial targets, technology, products and services, and
business performance of NEC Corporation and its consolidated subsidiaries (collectively "NEC"). Written forward-looking statements
may appear in other documents that NEC files with stock exchanges or regulatory authorities, such as the Director of the Kanto
Finance Bureau, and in reports to shareholders and other communications. NEC is relying on certain safe-harbors for forward-looking
statements in making these disclosures. Some of the forward-looking statements can be identified by the use of forward-looking words
such as "believes," "expects," "may," "will," "should," "seeks," "intends," "plans," "estimates," "targets," "aims," or "anticipates," or
the negative of those words, or other comparable words or phrases. You can also identify forward-looking statements by discussions of
strategy, beliefs, plans, targets, or intentions. Forward-looking statements necessarily depend on currently available assumptions,
data, or methods that may be incorrect or imprecise and NEC may not be able to realize the results expected by them. You should not
place undue reliance on forward-looking statements, which reflect NEC’s analysis and expectations only. Forward-looking statements
are not guarantees of future performance and involve inherent risks and uncertainties. A number of important factors could cause
actual results to differ materially from those in the forward-looking statements. Among the factors that could cause actual results to
differ materially from such statements include (i) global economic conditions and general economic conditions in NEC’s markets, (ii)
fluctuating demand for, and competitive pricing pressure on, NEC’s products and services, (iii) NEC’s ability to continue to win
acceptance of NEC’s products and services in highly competitive markets, (iv) NEC’s ability to expand into foreign markets, such as
China, (v) regulatory change and uncertainty and potential legal liability relating to NEC’s business and operations, (vi) NEC’s ability to
restructure, or otherwise adjust, its operations to reflect changing market conditions, (vii) movement of currency exchange rates,
particularly the rate between the yen and the U.S. dollar, (viii) the impact of unfavorable conditions or developments, including share
price declines, in the equity markets which may result in losses from devaluation of listed securities held by NEC, and (iv) impact of
any regulatory action or legal proceeding against NEC. Any forward-looking statements speak only as of the date on which they are
made. New risks and uncertainties come up from time to time, and it is impossible for NEC to predict these events or how they may
affect NEC. NEC does not undertake any obligation to update or revise any of the forward-looking statements, whether as a result of
new information, future events, or otherwise.
The management targets included in this material are not projections, and do not represent management’s current estimates of future
performance. Rather, they represent targets that management will strive to achieve through the successful implementation of NEC’s
business strategies.
Finally, NEC cautions you that the statements made in this material are not an offer of securities for sale. Securities may not be
offered or sold in any jurisdiction in which required registration is absent or an exemption from registration under the applicable
securities laws is not granted.
Note: The consolidated financial statements in this presentation have been prepared in conformity with the Japanese GAAP. In this
presentation, the accounting periods of the fiscal years for March 31, 2014 and 15 were referred as FY14/3 and FY15/3 respectively.
Any other fiscal years would be referred similarly.
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© NEC Corporation 2015