NEC Corporation announced its financial results for the third quarter of fiscal year 2024 on January 30, 2025, presenting a mixed bag of outcomes characterized by declining revenues yet rising profits. The company's total sales revenue reached ¥2.3218 trillion, marking a 3.0% decrease compared to the previous year. Interestingly, when excluding the effects of the divestment of Japan Aviation Electronics Industry (JAE), the results reflect a 4.5% year-on-year revenue increase. This data was shared during NEC's earnings presentation, indicating the company's dynamic operational adjustments amid challenging market conditions.
Osamu Fujikawa, NEC’s Corporate EVP and Chief Financial Officer, reported significant progress across various segments. He stated, “3Q cumulative performance has significantly improved, primarily driven by domestic IT services and the Aerospace and National Security sectors.” This assertion points to the company’s strategic focus on high-demand areas, which have reportedly yielded operational efficiency and improved margins.
While overall revenue dipped, NEC's adjusted operating profit surged by 55% to ¥150.2 billion. Besides, the non-GAAP operating profit indicated growth of 63.3% to ¥162.3 billion, demonstrating the effectiveness of the company's restructuring efforts and strategic focus on profitable segments. Fujikawa expressed optimism, reflecting on the contributions of digital service initiatives and the anticipated recovery of profit margins as existing projects are completed this fiscal year.
Fujikawa also highlighted the promising emergence of BluStellar, NEC's latest value creation model previously dubbed the “NEC Digital Platform.” According to Fujikawa, BluStellar is on course to exceed its annual revenue target significantly, already accounting for one-third of domestic IT service revenues by the end of the third quarter. “BluStellar has performed well, achieving its annual target for adjusted operating profit by the end of the third quarter,” he noted, marking it as NEC’s growth driver moving forward.
With expectations set high for BluStellar, NEC has outlined ambitious sales goals, projecting revenues of ¥426.5 billion for FY 2024. Given past performance, it seems achievable, considering they hit approximately ¥370 billion by the third quarter. Fujikawa indicated BluStellar's revenue contribution will be pivotal, signaling NEC's shift to more lucrative IT services.
Despite the positive outlooks, NEC also faces challenges tied to broader economic factors such as inflation and operational costs. Fujikawa reaffirmed the company's stance toward employee salary adjustments amid inflationary pressures. He remarked, “We need to respond to real wage increases due to continuing inflation. We want to approach this with results-based measures.” This highlights the company’s commitment to balancing operational success with employee welfare.
To sum up, NEC's third quarter results demonstrate a company poised for future growth, leveraging innovative solutions like BluStellar whilst addressing operational challenges head-on. With the adjusted forecasts for the fiscal year indicating increased profitability, NEC appears to be strategically positioned to dominate the IT services sector and drive sustainable growth well beyond 2024.