Financial Results for the
1H ending March 2016
(For Press Conference)
October 29, 2015
NEC Networks & System Integration Corporation(TSE: 1973, NESIC)I. Results for 1H FY2016/3

1H FY2015/3 Summary▐ Net sales & incomes decreased year on year The environment for business with telecom carriers
worsened beyond our expectations.
(Bil. ¥)

1H FY15/3 1H FY16/3

ChangeForecasts

as at Apr.28

Diff.

Orders Received

156.4

141.5

-10%

150-8.5

Net Sales

130.6

127.8

-2%

130-2.2

4.5

3.5

-1.0

4.5

-1.0

(3.4%) (2.8%)-0.6pt

(3.5%)-0.7pt1.9-0.7

2.4-0.5(2.1%) (1.5%)-0.6pt

(1.8%)-0.3ptOperating Income(to Sales)

Net Income *(to Sales)
Free Cash Flows

2.7
4.4

13.5

9.1

*Profit attributable to owners of parent
3© NEC Networks & System Integration Corporation 2015

1H FY2016/3 Sales/Orders Received by Segment▐ Orders declined, mainly reflecting a decrease in orders for the FF & DP networks
business (-¥11 bil.) & the impact of investment cuts by telecom carriers (-10).
 Orders from general corporate customers and overseas increased.
▐ Sales remained almost flat, offsetting the impact of investment cuts by telecom
carriers (-7), as the sales of Enterprise NW and Social Infrastructure businesses
increased.
FF: fire fighting, DP: disaster prevention

Orders(Bil.¥)

156.4
138.6

OthersSocial Infra.

2.7

52.3

2.5

Sales
141.5 -10%
2.9

56.8

115.2

51.0 -10%

43.3

34.7 -20%

Enterprises 41.7
Networks

53.8

52.8

1H
14/3

1H
15/3

1H
16/3

Carrier
Networks4

41.9© NEC Networks & System Integration Corporation 2015-2%

130.6

127.8 -2%

2.9

1.9

38.4

39.4

41.2

35.6 -14%

41.348.1

51.0

1H
14/3

1H
15/3

1H
16/3

2.3

31.4
40.3

+3%

+6%

1H FY2016/3 Enterprises Networks Business▌ Sales increased as the EmpoweredOffice businessremained strong.
 Sales of EmpoweredOffice business： +10%
 Orders from general corporate increased.
Orders53.8(Bil.¥)

52.8 -2%

41.7
30.5
SI/Construction

Service5Sales

48.1

51.0 +6%

41.3
28.9

23.7

25.4 +7%

21.7

24.5

25.5 +4%

1H
14/3

1H
15/3

1H
16/3

-5%

19.6

21.7

20.0

23.3

23.9

1H
14/3

1H
15/3

1H
16/3

© NEC Networks & System Integration Corporation 2015+3%

1H FY2016/3 Carrier Networks Business▌ Both orders and sales decreased because of the impactof investment cut by telecom carriers.
 Business for public and corporate customers increased
utilizing assets for telecom carriers. (Order/sales: +15%)
Orders(Bil.¥)

41.9

43.3

SI/Construction

30.5

35.6

Service

11.4

34.7 -20%
28.0 -21%

1H
14/3
6Sales

7.7

6.8

1H
15/3

1H
16/3

© NEC Networks & System Integration Corporation 2015

-12%

40.3

41.2

30.9

32.6

9.3

8.6

7.0 -18%

1H
14/3

1H
15/3

1H16/335.6 -14%
28.6 -12%

1H FY2016/3 Social Infrastructures Business▌Sales rose year on year, reflecting increased sales togovernment offices
 Sales remained at high levels as the migration to digitalFF systems progressed toward the May 2016 deadline.
 Orders increased for overseas infrastructure
works (+¥2.5 bil.) and space-related projects (+1.5),
although those for FF&DP systems decreased (-11).

52.3

Service<Orders>

56.8<Sales>23

1H 15/3

Orders(Bil.¥)

SI/Construction

FF&DP system business(Bil.¥)

121212

1H 16/3

1H 15/3

1H 16/3Sales

51.0 -10%

41.8

46.4

10.6

10.4

10.2

1H
14/3

1H
15/3

1H
16/3

40.8 -12%

-2%

38.4

39.4 +3%30.0

31.4 +4%

8.2

8.4

8.0

1H
14/3

1H
15/3

1H
16/3

31.4
23.2

-4%

FF: fire fighting, DP: disaster prevention
7© NEC Networks & System Integration Corporation 2015

1H FY2016/3 Operating Income by Segment(Bil.¥)

4.2（3.6%）

Others0.3

1.8Social Infra. (5.8%)
Carrier
2.9
Networks (7.2%)
Enterprises 2.9
Networks (7.0%)

Elimination

-3.8

1H
14/3
8

4.5（3.4%）

0.1

2.5(6.6%)

2.9(7.1%)

3.0

3.5（2.8%）

0.2

2.6(6.6%)

1.4(4.0%)

3.4(6.3%)(6.7%)

-4.1

-4.1

1H
15/3

1H
16/3

© NEC Networks & System Integration Corporation 2015

▌Operating income declined due to a fallin sales of the Carrier Networks
business, although the Enterprises
Networks & Social Infrastructurebusinesses posted higher income.

Social Infrastructure
・Income rose on increased sales.

Carrier Networks

・Income declined on decreased sales
and the delay in cost cutting
to adapt to rapid changes in thebusiness environment.

Enterprises Networks
・Income rose on increased sales
and streamlined SG&A.

1H FY2016/3 Balance Sheet (End of September, 2015)▌Owner’s equity ratio improved 3.8% mainly because of a reduction in total
assets through the collection of accounts receivables and payment ofaccounts payables.
End of 15/3
39.0
113.9
10.1
8.1

Noncurrent Assets

171.1
30.9

End of 15/9
52.3
82.8
11.7
10.0

156.7
31.1

-14.3
0.2

Assets

202.0

187.8

-14.2

48.7
6.2
53.0

36.1
8.0
49.0

-12.6
1.8
-4.0

Cash and cash equivalents
Notes & accounts receivable
Inventories
OthersCurrent AssetsNotes and accounts payable
Loans
OthersLiabilities
Shareholders' equity
Accumulated othercomprehensive income
Non-controlling interests

13.3
-31.2
1.5
2.0

107.8

93.0

-14.7

-1.9

-1.7

0.2

1.6

1.6

0.0

94.4

94.8

0.3

Liabilities & Net Assets

94.2
202.0

94.8
187.8

0.6
-14.2

Owner's Equity Ratio

45.8%

49.6%

+3.8ptNet Assets

9Diff.

© NEC Networks & System Integration Corporation 2015(Bil.¥)1H FY2016/3 Cash Flows▌Improved FCF by recouping cashfrom large projects at the end of last fiscal year
20.3(Bil.¥)

2.0

14.6
-4.3

-5.5

4.1

13.5
3.2

4.4

FCF-5.9-9.2

504030

38.8

20100

25.7
1H

19.3
2H

FY11/3

1H

33.5

36.6

2H

1H

FY12/326.2
2H

FY13/3

37.0

38.0

1H2H

FY14/3

45.7

1H

32.8

2H

FY15/3

44.3

Net *Cash

1H
FY16/3※Net Cash = Cash & cash equivalent – interest bearing debt
10

© NEC Networks & System Integration Corporation 2015

II. Forecasts for FY2016/3

2H FY2016/3 Business Environments▌Market conditions for telecom carriers will be severe,
but those for the Enterprises Networks and Social
Infrastructure businesses will remain solid.
 Enterprises Networks

・ICT investments by companies, centered on those in the retail,service and manufacturing sectors, will remain firm.
・Demand for the renewal of voice network systems is a positivefactor.

 Carrier Networks

・Telecom carriers are likely to continue curbing their investments.
・Areas of new services such as IoT/M2M are promising.

 Social Infrastructure

・ICT investments will remain firm to address objectives such as

safety & security and the improvement of transportation
infrastructures.
・Overseas infrastructure investment markets, centered on Asia, willbe brisk.

12© NEC Networks & System Integration Corporation 2015

2H FY2016/3 Basic Policy▌Actions to deal with changing market environments
 Further efforts to focus on Enterprises Networks and Social
Infrastructure businesses that continue to perform well.
 Improvement of profitability of Carrier Networks business.
・Further cost reductions.
・Streamlining of the structure of support and maintenancebusinesses.

▌Initiatives for future growth Services business, global business, etc.
 Creation of new businesses
・IoT/MVNO, SDN, etc.

13

© NEC Networks & System Integration Corporation 2015

FY2016/3 Forecasts▌No change from the initial forecasts, albeit withvariations in individual business areas.
FY15/3

FY16/3Forecasts

ChangeOrders Receipts

299.1

3000%Net Sales

292.2

295+1%

Operating Income

16.2

16.5

0.3

(to Sales)(5.5%)(5.6%)+0.1pt

7.8

9.5

1.7

(2.7%)(3.2%)+0.5ptNet Income *(to Sales)(Bil.¥)*Profit attributable to owners of parent(Forecasts as at October 29, 2015)14© NEC Networks & System Integration Corporation 2015

FY2016/3 Forecasts by Segment (Sales & Operating Income)(Forecasts as at October 29, 2015)▌Revised segment forecasts considering environmentchange and progress in 1H
Operating income

Sales(to sales)

YoY

OthersSocialInfra.

Carrier
Networks

Enterprises
Networks

292.2

295

6.4

696.8

95

86.2

102.8
FY15/3

1582112FY16/3(Apr.28 forecast)

16.2

16.5

16.5 +0.3

Social9.5
Infra. (9.9%)(10.0%)

9.5+0.8 10.3 +0.8

295 +1%(5.5%)

6+4-6+299

76+2%

-12%

114 +11%
FY16/3(Revised forecast)© NEC Networks & System Integration Corporation 2015

YoY

Carrier
Networks

6.9(8.0%)(5.6%)(5.6%)(10.4%)

6.9-2.0

4.9-2.0

8.3(8.4%)(6.4%)

Enterprises
7.5
Networks (7.3%)(7.4%)+0.7 9.0+1.5

Others/Elimination-8.2 +0.5 -7.7+0.1-7.8
FY15/3

FY16/3(Apr.28 forecast)(7.9%)

FY16/3(Revised forecast)Dividend Plan
(Forecast as at October 29, 2015)▌Payment of interim dividend of ¥35 as plannedat the beginning of the fiscal yearNo change in year-end dividend planned
60

Planning increase forthe 9th year in a row

1477

FY07/31645252628

13142022101114101111131408/3

09/3

10/3

11/3

12/3

© NEC Networks & System Integration Corporation 2015306432

Dividend pershare (¥)

7035

Yearend

26

19
13/3

30

32

35

14/3

15/3

16/3
(Forecast)InterimCautionary Statement
Forecasts and targets of results mentioned in this document are future estimates andare thus inclusive of risks and uncertain factors since they are not based on definite facts.
Please be aware that a variety of factors could cause actual results to differ significantly
from those projected. The major factors affecting actual results include the economic
climate and social trends surrounding the business of this Company’s group, consumer
trends vis-a-vis systems and services provided by this Company’s group, as well aspressure to lower prices and ability to cope with the market in response to intensifiedcompetition.
Factors affecting results are not limited to the ones mentioned above.

The Group implemented the realignment of domestic subsidiaries to facilitate theefficient management of group companies, such as the integration (absorption-typemerger) of Toyo Networks & System Integration Co., Ltd by NEC Magnus Communications,Ltd. As a result, changes were made to the consolidated financial results from the firstquarter under review, such as the inclusion of Toyo Networks & System Integration Co.,
Ltd, which had been included in the “others” segment previously, in the “Carrier Networks”
segment, which includes NEC Magnus Communications, Ltd.
Segment information for the fiscal years ended March 2014 and 2015 has been changed
to reflect the change in the content of business segments.

17© NEC Networks & System Integration Corporation 2015

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19© NEC Networks & System Integration Corporation 2015