Fujitsu : Review of Operations

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Review of Operations

Performance Highlights

Fujitsu Group

Integrated Report

83

Performance Highlights

Fujitsu Limited and Consolidated Subsidiaries

The Fujitsu Group adopted International Financial Reporting Standards (IFRS) in fiscal 2014. Figures for fiscal 2013 are presented based on both Japanese GAAP and IFRS.

On November 1, 2017, the Company sold some of its shares in Fujitsu TEN Limited to DENSO CORPORATION. Consequently, Fujitsu TEN became classified as a discontinued business and net sales (revenue) and operating profit were reclassified in the fiscal year ended March 31, 2017.

													(Billions of yen)	(%)
			JGAAP						IFRS						Year-on-year
													change (%)
	Fiscal years ended March 31	2012	2013	2014	2014	2015	2016	2017	2018	2019	2020	2021	2020/2021*
	FINANCIAL DATA
	Net sales (revenue)	¥4,467.5	¥4,381.7	¥4,762.4	¥4,762.4	¥4,753.2	¥4,739.2	¥4,132.9	¥4,098.3	¥3,952.4	¥3,857.7	¥3,589.7		-6.9
	Net sales (revenue) outside Japan	1,506.0	1,498.2	1,801.4	1,801.4	1,879.9	1,894.2	1,461.2	1,506.8	1,435.4	1,228.5	1,172.0		-4.6
Point
Percentage of sales outside Japan (%)	33.7	34.2	37.8	37.8	39.6	40.0	35.4	36.8	36.3	31.8	32.7
1
	Operating profit	105.3	88.2	142.5	147.2	178.6	120.6	117.4	182.4	130.2	211.4	266.3	25.9
	Operating profit margin (%)	2.4	2.0	3.0	3.1	3.8	2.5	2.8	4.5	3.3	5.5	7.4
	Net profit (loss) (profit (loss) attributable to owners of the parent)	42.7	(79.9)	48.6	113.2	140.0	86.7	88.4	169.3	104.5	160.0	202.7	26.7
	Cash flows from operating activities	¥ 240.0	¥  71.0	¥  175.5		¥  176.5	¥  280.1	¥ 253.0	¥ 250.3	¥  200.4	¥  99.4	¥ 347.2	¥ 307.9		-11.3
	Cash flows from investing activities	(190.8)	(161.4)	(128.8)	(128.9)	(200.5)	(164.3)	(145.4)	(22.5)	4.1	(114.2)	(71.5)		-
Point
Free cash flow	49.1	(90.4)	46.6	47.5	79.6	88.7	104.8	177.8	103.5	233.0	236.3	1.4
2
	Cash flows from financing activities	(138.9)	100.3	(44.7)	(46.2)	(17.3)	(67.7)	(98.8)	(112.4)	(136.6)	(193.1)	(219.6)		-
	Inventories	¥  334.1	¥ 323.0	¥ 330.2		¥ 330.2	¥  313.8	¥ 298.8	¥ 293.1	¥   241.6	¥ 226.0	¥ 238.0	¥ 237.0		-0.4
	Monthly inventory turnover rate (times)	1.01	1.00	1.07	1.07	1.11	1.12	1.15	1.21	1.22	1.13	1.16
	Total assets	2,945.5	2,920.3	3,079.5	3,105.9	3,271.1	3,226.3	3,191.4	3,121.5	3,104.8	3,187.4	3,190.2	0.1
	Owners' equity (equity attributable to owners of the parent)	841.0	624.0	573.2	566.5	790.0	782.7	881.2	1,087.7	1,132.0	1,240.9	1,450.1	16.9

Point

1 Percentage of sales outside Japan

The percentage of sales outside Japan increased 0.9 of a percentage point, to 32.7%. The weakening of the yen against the euro and pound compared with the previous fiscal year pushed up the percentage of sales outside of Japan.

Point

2 Free cash flow

Free cash flow was ¥236.3 billion, exceeding ¥200.0 billion for two consecutive fiscal years. The Company aims to create free cash flow of over ¥1 trillion over the five-year period until the fiscal year ending March 31, 2025.

• The actual figures are shown in units of billions of yen, and the rate of change is calculated in units of millions of yen.

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Review of Operations

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Fujitsu Group

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Performance Highlights

Fujitsu Limited and Consolidated Subsidiaries

The Fujitsu Group adopted International Financial Reporting Standards (IFRS) in fiscal 2014. Figures for fiscal 2013 are presented based on both Japanese GAAP and IFRS.

On November 1, 2017, the Company sold some of its shares in Fujitsu TEN Limited to DENSO CORPORATION. Consequently, Fujitsu TEN became classified as a discontinued business and net sales (revenue) and operating profit were reclassified in the fiscal year ended March 31, 2017.

													(%)
		JGAAP						IFRS						Year-on-year
												change (%)
Fiscal years ended March 31	2012	2013	2014	2014	2015	2016	2017	2018	2019	2020	2021	2020/2021*1

FINANCIAL DATA

Point

3

Point

4

Return on equity (%)	5.1	(11.8)	8.1	23.2	20.6	11.0	10.6	17.2	9.4	13.5	15.1
Owners' equity ratio	28.6	21.4	18.6	18.2	24.2	24.3	27.6	34.8	36.5	38.9	45.5
(equity attributable to owners of the parent ratio) (%)
Return on assets (%)	1.4	(2.7)	1.6	3.7	4.4	2.7	2.8	5.4	3.4	5.1	6.4
Interest-bearing loans (billions of yen)	381.1	534.9	519.6	560.2	578.4	534.9	486.7	402.2	316.2	405.5	316.3		-22.0
D/E ratio (times)	0.45	0.86	0.91	0.99	0.73	0.68	0.55	0.37	0.28	0.33	0.22
Net D/E ratio (times)	0.14	0.40	0.38	0.46	0.27	0.20	0.12	-0.05	-0.09	-0.04	-0.11
R&D expenses (billions of yen)	238.3	231.0	221.3	222.5	202.7	179.8	170.0	158.6	134.9	123.3	113.8		-7.7
Capital expenditure*2 (billions of yen)	140.6	121.7	122.2	122.8	140.6	156.0	120.6	94.0	83.5	96.4	87.5		-9.2
Depreciation*2 (billions of yen)	131.5	116.5	115.1	115.9	121.2	119.8	108.6	107.0	96.9	84.5	76.0		-10.1

Amounts per share of common stock (yen)*3
Net profit (loss) attributable to owners of the parent (EPS)*4	¥ 20.64	¥ (38.62)	¥ 23.49		¥ 54.71	¥ 67.68	¥ 41.94	¥ 42.83	¥ 82.53	¥  512.50	¥791.20	¥1,013.78	28.1
Dividends	10	5	4	4	8	8	9	11	150	180	200	11.1
Equity attributable to owners of the parent*5	406.42	301.57	277.03	273.79	381.88	378.37	429.80	528.38	5,585.35	6,197.11	7,287.15	17.6

Point

3 Return on equity

Calculated through the division of profit attributable to owners of the parent by total equity attributable to owners of the parent (owners' equity), ROE was 15.1%. As a result of higher profit attributable to owners of the parent, ROE was up 1.6 percentage points year on year.

Point

4 Capital expenditure

With respect to the Technology Solutions segment, the Company invested

¥46.6 billion, mainly for facilities related to the services business and to office renovations associated with the Borderless Office initiative (reimagining the use of shared working space) that the Company is promoting as part of its Work Life Shift. As for the Device Solutions segment, investment amounted to ¥40.7 billion, mainly for equipment and facilities for the manufacturing of electronic components at subsidiary Shinko Electric Industry Co., Ltd.

*1 The actual figures are shown in units of billions of yen, and the rate of change is calculated in units of millions of yen.

*2 Capital expenditure and depreciation in the fiscal year ended March 31, 2020 do not include the effect of adopting IFRS 16 (Leases).

*3 On October 1, 2018, Fujitsu consolidated every 10 shares of stock into one share. Dividends per share for 2019 and thereafter reflect this share consolidation.

*4 Profit attributable to owners of the parent ÷ Average number of shares of common stock outstanding excluding treasury stock during the fiscal year

*5 Total equity attributable to owners of the parent (Owners' equity) ÷ Number of shares of common stock outstanding excluding treasury stock at the end of the fiscal year

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Performance Highlights

Fujitsu Limited and Consolidated Subsidiaries

												(%)
Fiscal years ended March 31	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2020/2021
NON-FINANCIAL DATA (ESG INDICATORS)
Environmental
Greenhouse gas emissions (Scope 1) (thousand tons)*1	-	225	219	197	189	208	198	147	87	75		-13.8
Greenhouse gas emissions (Scope 2 [Location-based］) (thousand tons)*1	-	790	1,105	700	686	1,021	939	808	715	583		-18.5
Greenhouse gas emissions (Scope 2 [Market-based］) (thousand tons)	-	-	-	-	-	-	912	771	663	540		-18.6
Greenhouse gas emissions (Scope 3) (thousand tons)	-	5,137	8,499	8,124	7,290	7,800	6,271	6,105	5,769	4,581		-20.7
Energy usage (thousand GJ)	-	-	19,700	18,780	18,370	20,380	19,250	17,350	16,300	13,780		-15.5
Ratio of renewable energy to total electricity consumption (%)	-	-	-	-	-	5.2	7.3	8.6	8.4	10.1
Water usage (thousand m3)	21,800	19,860	18,620	16,600	15,830	16,870	15,540	13,830	9,910	6,770		-31.7

Point

5

Social

Number of employees	173,155	168,733	162,393	158,846	156,515	155,069	140,365	132,138	129,071	126,371
Outside Japan	66,258	64,497	61,357	59,491	57,610	56,622	47,889	46,791	46,839	44,946
Percentage of female managers (non-consolidated) (%)	3.7	4.0	4.3	4.6	4.8	5.2	5.7	6.1	6.6	7.4
Employee engagement*2	-	-	-	-	-	-	-	-	56	65
Governance
Percentage of independent directors (non-consolidated) (%)	36.4	33.3	27.3	36.4	40.0	40.0	40.0	40.0	55.6	55.6
Percentage of female directors (non-consolidated) (%)	8.3	8.3	9.1	16.7	20.0	20.0	20.0	20.0	22.2	22.2

Point

5 Percentage of independent directors

As of the Annual Shareholders' Meeting convened in June 2021, five of the Company's nine directors approved were independent directors, who constitute a majority at meetings of the Board of Directors. The Company is strengthening oversight and advisory capabilities by actively appointing external directors with a high degree of independence and diverse perspectives.

*1 Figures for the fiscal years ended March 31, 2017 to 2019 differ from those presented in the ESG Highlights graphs on page 18 due to the inclusion of international business sites. From the fiscal year ended March 31, 2020, these international business sites were included, and the figures match with those in the ESG Highlights graphs on page 18.

*2 An average score calculated by assigning scores between 0 and 100 to each of the five answer options of survey questions

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Highlights by Segment

Fujitsu Group

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86

Highlights by Segment

Fujitsu Limited and Consolidated Subsidiaries

Presented based on business segments applied from the fiscal year ended March 31, 2021

Market Environment	Fiscal 2020 Highlights	Revenue	Operating Profit / Operating Profit Margin
(Fiscal years ended March 31)	(Fiscal years ended March 31)

	The growth rate of the Solutions/Services	Revenue
	market in the fiscal year ended March 31,	Revenue in Solutions/Services was ¥1,765.9 billion, down 6.2%
	2021 turned negative, mainly due to the	year on year. This decrease is due to impacts of COVID-19,
	negative impact of COVID-19 on IT	including delays of business negotiations with customers in the
	investments. In the fiscal year ending March	enterprise and healthcare sectors, a fallback after the
	31, 2022, economic activity is expected to	completion of a major business deal in the finance and retail
	return gradually to normal, with an	sector, and a nationwide development halt in the infrastruc-	(Billions of yen)		(Billions of yen)		(%)
	attendant restart of IT projects and an	ture business among local governments. In addition, the end of
	increase in new projects related to digital	the support period for Windows 7 in 2020 led to a fallback in	2,000	1,883.0	1,765.9	200	179.5	183.5	20.0
	transformation (DX). DX initiatives including	areas like PC setup and deployment support in the hardware-
	modernization of existing legacy IT systems	related business, which had performed strongly in the previous
	are expected to accelerate in response to	fiscal year.	1,500			150			15.0
	changes in lifestyle patterns and workstyles	Operating Profit						10.4
Solutions /	brought about by COVID-19.					9.5
Services		Operating profit was ¥183.5 billion, up ¥4.0 billion year on year.	1,000			100			10.0
	This increase is due to an improvement in profitability in
		Solutions/SI and operation and maintenance services, as well as
		increasing efficiency in operating expenses, which offset the	500			50			5.0
		impact of the decline in revenue.
			0	2020	2021	0	2020	2021	0
			Note: Includes intersegment sales	Operating profit (left scale)
						Operating profit margin (right scale)
Technology
Solutions	Impacted by a decline in IT investments due	Revenue
	to delays and standstills of projects caused	Revenue in System Platforms was ¥665.4 billion, up 2.8% year on
	by the spread of COVID-19, the domestic	year. Despite a decline in revenue for System Products including
	System Platforms market contracted in the	servers and storage systems due to COVID-19, revenue increased
	fiscal year ended March 31, 2021. In the fiscal	due to a major business deal related to supercomputers and
	year ending March 31, 2022, the market is	growth in demand for communication infrastructure including
	expected to return to growth with the	5G base stations and optical transmission networks in the	(Billions of yen)		(Billions of yen)		(%)
	restart of these projects and the start of	network business.
	new DX-related projects.	Operating Profit	800			50			10.0
	Driven by the switch from LTE to 5G, the				41.2
	size of the North American and Japanese	Operating profit was ¥41.2 billion, up ¥13.7 billion year on year.		440.1	420.3	40			8.0
	mobile infrastructure markets has increased,	This increase is due to factors like higher revenue in our network	600			6.2
	and demand for O-RAN-compliant base	business and increased efficiency in our IA server development					27.4
System	stations in particular is expected to grow	system globally.				30	4.2		6.0
rapidly. While the optical transmission	400
Platforms
market in Japan expanded due to increased
				20			4.0
	demand for core networks in the course of
				245.1
	the 5G rollout in the fiscal year ended March		200	206.8
			10			2.0
	31, 2021, the North American optical
	transmission market shrank due to invest-
	ment restraints amid the spread of		0	2020	2021	0	2020	2021	0
	COVID-19. Nevertheless, the market is
		System Products		Operating profit (left scale)
	expected to expand gradually, reflecting
	the growth in traffic accompanying the		Network Products		Operating profit margin (right scale)
	deployment of 5G.		Note: Includes intersegment sales

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Market Environment	Fiscal 2020 Highlights	Revenue	Operating Profit (Loss) / Operating Profit (Loss) Margin
(Fiscal years ended March 31)	(Fiscal years ended March 31)

		Please see pages 88-89, "Technology	Revenue
		Solutions Highlights by International Region."	Revenue in International Regions Excluding Japan was ¥723.7
			billion, down 5.6% year on year. Despite securing a deal for a
			large-scale IT system development project in Europe, the	(Billions of yen)		(Billions of yen)		(%)
			strong impact of COVID-19 in the regions outside of Japan, as	1,000			15			6.0
			well as business reorganization measures like the withdrawal
				766.3				11.6
			from low-profit businesses in Europe and the products business	800	723.7
			in the Americas led to a decline in revenue.
	International
Technology		Operating Profit	600			10			4.0
	Regions
Solutions		Operating profit grew due to improvements and an increase in
Excluding Japan		400					1.6
		profit in the NWE (Northern & Western Europe) and the			5	3.8	2.0
			Americas businesses and the absence of the previous fiscal
							0.5
			year's business model transformation expenses centered on	200
			North America. The decline in revenue was offset by improved
			profitability and higher efficiency in relation to expenses	0	2020	2021	0	2020	2021	0
			stemming from the first positive results of business model
			transformation initiatives.	Note: Includes intersegment sales	Operating profit (left scale)
							Operating profit margin (right scale)
		The corporate PC market in Japan in the	Revenue	(Billions of yen)		(Billions of yen)		(%)
		fiscal year ended March 31, 2021 expanded	Revenue in the Ubiquitous Solutions segment was ¥334.6 billion,	600			60			30.0
		significantly year on year overall, mainly	down 26.5% year on year. The decline in revenue was due to an				48.0
		driven by the rollout of the GIGA School	increase in demand for PCs last year following the end of the		455.2
		Program PCs in the education market.	support period for Windows 7 that did not recur this year and
		These sales compensated for the demand	the impact of the transfer of the mobile phone retail store	400		334.6	40			20.0
		for PCs last fiscal year following the end of			14.4
		business in the fiscal year under review.					26.7
Ubiquitous Solutions	the support period for Windows 7 and rush	Operating Profit
buying ahead of the consumption tax hike
		that did not recur this year. Despite	Operating profit was ¥48.0 billion, up ¥21.2 billion year on year.	200			20	5.9		10.0
		concerns over a decline in profit due to the	Excluding the profit of ¥25.4 billion stemming from special
		end of the GIGA School Program PC rollout	items such as the transfer of the mobile phone retail store
		and the impact of semiconductor	business, operating profit declined ¥4.7 billion from the previous
		shortages in the fiscal year ending March	fiscal year due to the impact of the contraction in revenue.	0	2020	2021	0	2020	2021	0
		31, 2022, a certain stable demand for PCs is
		expected to continue due to the prolifera-		Note: Includes intersegment sales	Operating profit (left scale)
		tion of teleworking.					Operating profit margin (right scale)

	In the fiscal year ended March 31, 2021, the	Revenue	(Billions of yen)			(Billions of yen)		(%)
	market grew due to a higher demand for	Revenue in the Device Solutions segment was ¥293.8 billion,	400				40			20.0
	semiconductors as a result of a shift in the	down 4.7% year on year. Revenue declined due to the transfer
			308.4							29.8
	digital landscape due to factors like the	of the semiconductor plant in Mie Prefecture in the third			293.8
				30			15.0
	proliferation of teleworking triggered by the
	quarter of the fiscal year ended March 31, 2020. Excluding the	300					10.1
	COVID-19 pandemic. Despite concerns over	impact of restructuring, revenue increased year on year due to
	ongoing supply shortages as a result of	an expansion in demand for electronic components.						20			10.0
Device Solutions	stronger administrative regulations and	Operating Profit	200
supply chain disruptions caused by disasters
					10			5.0
	and accidents, the demand for semiconduc-	Operating profit was ¥29.8 billion, a turnaround of ¥33.0 billion
									-1.1
	tors is expected to continue to expand in line	from an operating loss in the previous fiscal year. This turn-	100
	with the spread of 5G and progress of DX.	around resulted from the absence of the previous fiscal year's				0			0
						-3.2
		restructuring expenses in the electronic components business,
		which totaled ¥10.0 billion. Excluding this impact, the turn-	0	2020	2021			-10	2020	2021	-5.0
		around amounted to ¥23.0 billion, reflecting favorable results
		Note: Includes intersegment sales			Operating profit (loss) (left scale)
		from electronic components throughout the year due to a
		higher demand for semiconductors.								Operating profit (loss) margin (right scale)