On May 12, 2023, Toshiba unveiled its financial results, thus bringing to light the performance of eight major players in the electronics manufacturing sector. The released figures revealed a gamut of fortunes, with some companies boasting unprecedented profits and others nursing losses after a six-year spell of profitable operations. The disparity in the performance highlights the diverging trajectories these businesses are on, largely determined by their respective operational sectors. As they anticipate a challenging FY2023, these companies remain cautious regarding their future prospects.
Hitachi’s Earnings Reveal Continued Group Consolidation
In FY2022, Hitachi Ltd. reported sales projected at ¥10,881.1 billion ($77.6 billion), marking a 6.0% year-on-year growth. The adjusted EBITA stood at ¥884.6 billion ($6.31 billion), a year-on-year increase of ¥29.2 billion ($208 million). The net income reported was ¥649.1 billion ($4.63 billion), up ¥65.7 billion ($469 million) year-on-year.
The Digital Systems & Services Division showcased an uptick in both sales and profits, attributed to favourable exchange rates and expansion of the Lumada business. The performance was bolstered significantly by GlobalLogic’s notable surge in sales and maintained profitability. The Green Energy & Mobility Division also recorded increased sales and profits, largely driven by positive exchange rates and the stable performance of the Hitachi Energy & Railway Systems Division. The Connective Industries Division, supported by strong showings from Hitachi High-Tech and the Building Systems BU, saw both sales and profits rise. The Automotive Systems Division grappled with semiconductor shortages and supply chain disruptions but managed to post higher sales and profits thanks to favourable exchange rates and a rebound in automakers’ production volumes. The divestment of Hitachi Construction Machinery and Hitachi Metals shares led to a dip in consolidated sales and profits, although gains were registered from the sale of shares.
For FY2023, Hitachi projects net sales to be at ¥8.8 trillion ($62.8 billion), down 19.1% year-on-year. The company forecasts its adjusted EBITA at ¥835 billion ($5.96 billion), a year-on-year decrease of ¥49.6 billion ($354 million). Net income is expected to come in at ¥500 billion ($3.57 billion), down ¥149.1 billion ($1.06 billion) year-on-year. This lowered outlook, albeit reflective of the sale of a consolidated subsidiary, can be viewed positively in certain respects. However, the company’s shares saw a slight dip following the release of these figures, possibly due to market perception of negativity.
Toshiba Braces for Delisting Possibility
Toshiba Corp. posted FY2022 sales of ¥3,361.7 billion ($23.96 billion), up 0.7% year-on-year. However, the operating profit slid to ¥110.5 billion ($789 million), a decline of ¥48.4 billion ($345 million) year-on-year. Net profit also fell to ¥126.6 billion ($903 million), down by ¥68.1 billion ($486 million) year-on-year.
While the energy system solutions division witnessed increased sales from power generation systems and transmission/transformation/distribution, profits were impacted due to provisions made for product warranty reserves linked to power generation systems. The infrastructure system solutions division saw both sales and profits rise, buoyed by the robust performance of railway and industrial systems offsetting the dip in public infrastructure. The Building Solutions Division faced a slump in sales and profits due to the air conditioning business’s exclusion from consolidation. Retail & Printing Solutions experienced a surge in sales due to exchange rate fluctuations, yet profits fell due to impairment losses on goodwill and other factors. In the Device & Storage Solutions Division, the robust performance of semiconductors was offset by sluggish HDD demand, resulting in lower sales and profits. Meanwhile, the Digital Solutions segment enjoyed increased sales and profits due to heightened demand from government offices.
Looking to FY2023, Toshiba projects sales of ¥3.2 trillion ($22.8 billion), down 4.8% year-on-year, an operating income of ¥110 billion ($785 million), a ¥500 million ($3.57 million) year-on-year decline, and a net income of ¥70 billion ($500 million), down ¥56.6 billion ($404 million) year-on-year. While the Devices & Storage Division is expected to become a significant revenue driver amidst a sluggish semiconductor market, concerns are growing over the fate of the HDD business. The possible move toward delisting is also a growing concern, making Toshiba a company to keep an eye on.
Mitsubishi Electric Sees Growth in Sales and Income
Mitsubishi Electric Corp. posted FY2022 sales of ¥5,003.6 billion ($35.7 billion), marking an 11.8% year-on-year increase. Operating income came in at ¥262.3 billion ($1.87 billion), up ¥10.3 billion ($73.5 million) year-on-year. Net income rose to ¥213.9 billion ($1.53 billion), up ¥10.4 billion ($74.2 million) year-on-year.
The Infrastructure Division saw increased sales in social systems, electric power systems, and defense/space systems, although profits declined due to changes in sales projects and the deterioration of the space systems business’s profitability. The Industry/Mobility Division reported increased sales in both FA systems and automotive equipment. However, profits suffered from rising material and logistics costs in the automobile business and impairment losses on fixed assets. The Life Division posted an increase in both sales and profits, spurred by robust sales in building systems, air conditioning, and home appliances. The business platform division also saw a surge in both sales and profits, driven by robust performance in both information systems/services and electronic devices.
For FY2023, Mitsubishi Electric forecasts sales of ¥5.2 trillion ($37.1 billion), up 3.9% year-on-year, an operating income of ¥330 billion ($2.35 billion), a rise of ¥37.7 billion ($269 million) year-on-year, and a net income of ¥260 billion ($1.85 billion), up ¥46.1 billion ($329 million) year-on-year.
NEC Poised to Meet FY2025 Company Targets
NEC Corporation has reported FY2022 sales at ¥3,313.0 billion ($23.64 billion), an increase of 9.9% year-on-year. The adjusted operating profit was ¥205.5 billion ($1.47 billion), with a slight increase of ¥345 million ($2.46 million) year-on-year. Meanwhile, the adjusted net profit came in at ¥138.6 billion ($988 million), down by ¥28.7 billion ($205 million) year-on-year.
Sales and profits in the social and public sectors saw growth due to robust sales to SMEs and to the public and medical sectors. The social infrastructure sector also noted increased sales and profits, thanks to favourable sales in space and defense. Strong performance in financial, manufacturing and distribution services led to increased sales and profits in the Enterprise Division. The network service division reported a sales increase, attributed to the recording of an intellectual property income of ¥10 billion ($71 million). However, profits decreased due to the recording of strategic expenses. The global division reported increased sales and profits due to the strong performance of the software-related business and the offshore business.
The forecast for FY2023 includes sales of ¥3.38 trillion ($24.1 billion), up 2.0% year-on-year, an adjusted operating income of ¥220 billion ($1.57 billion), up ¥14.5 billion ($103 million) year-on-year, and an adjusted net income of ¥140 billion ($1 billion), up ¥1.4 billion ($10 million) year-on-year. If current trends continue, the company is likely to achieve its FY2025 targets of net sales of ¥3.5 trillion ($25 billion), adjusted operating income of ¥300 billion ($2.14 billion), and adjusted net income of ¥185 billion ($1.32 billion). While the stock price rose significantly post-announcement, NEC should set higher long-term goals. Like Fujitsu, NEC has the potential to play a significant role in Japan’s IT industry.
Fujitsu Posts Record Profits
Fujitsu Ltd. reported record-breaking FY2022 sales of ¥3,713.7 billion ($26.48 billion), up 3.5% year-on-year, operating income of ¥335.6 billion ($2.39 billion), up ¥116.4 billion ($831 million) year-on-year, and net income of ¥215.1 billion ($1.53 billion), up ¥32.4 billion ($231 million) year-on-year.
The Technology Solutions Division reported increased sales and profits due to the strong performance of the DX (Digital Transformation) business and modernization efforts. The system platform division saw strong sales in 5G base stations and business for North America, leading to increased sales and profits. Overseas sales in the division expanded due to the growth of the service business, but profits decreased due to increased M&A-related costs. The Ubiquitous Solutions Division posted lower sales and profits, impacted by sluggish market conditions in Europe. The Device Solutions Division performed well in H1, but sales and profits were largely flat in H2 due to market slumps.
The FY2023 outlook suggests sales of ¥3.86 trillion ($27.52 billion), up 3.9% year-on-year, operating income of ¥340 billion ($2.43 billion), up ¥4.3 billion ($31 million) year-on-year, and net income of ¥218 billion ($1.55 billion), up ¥2.8 billion ($20 million) year-on-year. Fujitsu’s stock price is trending upwards, likely in response to the record-breaking profits.
Panasonic Cautious Amid Intensifying Competition for Automotive Batteries
Panasonic Corp. reported FY2022 sales of ¥8,378.9 billion ($60.1 billion), up 13.4% year-on-year, an operating profit of ¥288.6 billion ($2.07 billion), down ¥68.9 billion ($494 million) year-on-year, and a net profit of ¥265.5 billion ($1.9 billion), up ¥10.2 billion ($73 million) year-on-year.
Sales increased in the Lifestyle Business Division, driven by the steady sales of air conditioners in Europe, electrical materials in Japan and overseas, and showcases in North America. However, profits fell as the division could not offset the slump in Japanese home appliances. The automotive division saw an increase in sales and profits due to the recovery in automobile production. The Connect Division reported an increase in sales as a result of the inclusion of Blue Yonder in its consolidated group. The industry sector reported a decrease in sales and profits due to changes in commercial distribution associated with the transfer of the semiconductor business and soaring raw material prices. The energy division reported an increase in sales due to the increased sales of automotive batteries, but profits decreased due to rising raw material prices and increased fixed costs like development costs.
The forecast for FY2023 includes sales of ¥8.5 trillion ($60.8 billion), up 1.4% year-on-year, an operating income of ¥430 billion ($3.1 billion), up ¥115.9 billion ($832 million) year-on-year, and a net income of ¥350 billion ($2.5 billion), up ¥84.5 billion ($606 million) year-on-year. The company is concerned about the energy division due to the intensifying competition for in-vehicle batteries.
Sharp’s Display Business Key to Earnings Stability
Sharp Corp. posted a deficit for FY2022 with sales of ¥2,548.1 billion ($18.2 billion), up 2.1% year-on-year, an operating loss of ¥25.7 billion ($184 million), down ¥110.4 billion ($791 million) year-on-year, and a net loss of ¥260.8 billion ($1.87 billion), down ¥334.7 billion ($2.4 billion) year-on-year.
The company hopes to stabilize its finances by reducing the deficit in the display division and transforming it into a pillar of earnings.
Sony Achieves Record Sales and Operating Income
Sony Corp. recorded FY2022 sales of ¥11.5398 trillion ($82.6 billion), up 16.3% year-on-year, operating income of ¥1.2082 trillion ($8.65 billion), up ¥5.9 billion ($42 million) year-on-year, and net income of ¥937.1 billion ($6.7 billion), down ¥54.9 billion ($394 million) year-on-year. Both sales and operating income reached record highs.
The forecast for FY2023 anticipates sales of ¥11.5 trillion ($82.4 billion), down ¥39.8 billion ($285 million) year-on-year, operating income of ¥1.17 trillion ($8.39 billion), down ¥38.2 billion ($274 million) year-on-year, and net income of ¥840 billion ($6.02 billion), down ¥97.1 billion ($696 million) year-on-year. Despite a slight expected drop from FY2022’s record highs, Sony’s high earnings ability is positively viewed.
Despite projecting a conservative outlook for fiscal 2023, industry stalwarts Hitachi and Sony grapple with slight pessimism in stock market valuations, although their robust profitability frameworks inspire confidence. On the other hand, NEC and Fujitsu garner favourable market reviews, with the potential to set sights on greater ambitions in the medium to long run. Conversely, the future seems uncertain for Toshiba, facing a delisting conundrum, and Sharp, plagued by a downturn in key earning sectors. The strategy these firms will adopt to navigate these challenges is yet to unfold.