NEC Corp ((JP:6701)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call from NEC Corp painted a largely positive picture, highlighting significant achievements in revenue and profitability, particularly within the IT services sector. Despite some challenges in the submarine cable and telecom services segments, the overall sentiment was optimistic, with the company’s strong performance overshadowing the hurdles faced in certain areas.
Record Revenue Growth
NEC Corp reported a record revenue for the fiscal year ending March 2025, reaching JPY3,423.4 billion. This marks a year-on-year increase of 5.3%, even when excluding the impact of the deconsolidation of JAE. This impressive growth underscores the company’s robust market position and effective strategic initiatives.
Exceeding Mid-term Management Plan
The company achieved a significant milestone by reaching a non-GAAP operating profit of JPY311.3 billion, surpassing the mid-term management plan target a year ahead of schedule. This accomplishment reflects NEC’s strong operational efficiency and strategic foresight.
Improvement in Free Cash Flow
NEC Corp saw an improvement in its free cash flow, which increased by JPY18 billion from the previous year, totaling JPY213.2 billion. This enhancement in cash flow is indicative of the company’s effective financial management and operational success.
Strong Performance in IT Services
The domestic IT services sector was a standout performer, with revenue increasing by 12% year-on-year and profitability improving by 2.3%. Excluding NEC facilities, revenue still saw a significant rise of 9%, highlighting the sector’s robust growth and profitability.
Submarine Cable Business Losses
The submarine cable business faced challenges, recording a loss of JPY14 billion due to force majeure issues and project delays. This segment’s performance was a notable lowlight in an otherwise strong financial year for NEC.
Challenges in Telecom Services
The telecom services segment was impacted by investment restraints, resulting in various gains and losses that negatively affected marginal profit. This area remains a challenge for NEC, requiring strategic adjustments to improve future performance.
One-Off Expenses in International IT
NEC’s international IT DGDF business incurred one-off expenses of approximately JPY5 billion in the fourth quarter, contributing to a full-year cost of about JPY10 billion. These expenses highlight some of the financial challenges faced in international operations.
Forward-Looking Guidance
Looking ahead, NEC Corp anticipates revenue of JPY3.36 billion for the fiscal year ending March 2026, with a non-GAAP operating profit expected to reach JPY320 billion. The IT services segment is projected to generate revenue of JPY2.15 trillion, while the social infrastructure segment anticipates revenue of JPY1.16 trillion. The guidance reflects ongoing structural reforms and strategic investments aimed at enhancing profitability amidst macroeconomic uncertainties.
In conclusion, NEC Corp’s earnings call revealed a strong financial performance with notable achievements in revenue and profitability, particularly in IT services. While challenges persist in certain segments, the company’s forward-looking guidance indicates a continued focus on strategic growth and operational efficiency, setting a positive tone for the upcoming fiscal year.