2020.1Q Financial Results-Key Points
Last updated : August 14, 2020
2020.1Q Financial Results-Key Points
- FY2020 1Q operating revenues and operating income decreased as a result of the impact of COVID-19, among other factors. Operating revenues decreased by 149.0 billion yen (▲5.1%) from the previous year, but operating income only decreased by 7.6 billion yen (▲1.5%) from the previous year due to various cost reduction measures.
- We expect operating revenues to decrease but operating income/profit to increase in FY2020. Although the impact of COVID-19 is expected to cause a decline in operating revenues (▲399.4 billion yen year-on-year), we expect to secure an increase in both operating income and profit year-on-year by curbing capital investment and reducing costs through operational efficiency.
How big was the impact of COVID-19 on the 1Q of FY2020?
Despite an increase in optical fiber lines and telework product sales, the decline of DOCOMO's handset sales revenue in japan/system integration (SI) revenue mainly from overseas had a negative impact on operating revenues of approximately 70 billion yen and on operating profit of approximately 10 billion yen.
As the decrease in profit due to the impact of COVID-19 will become apparent in the future, what steps will NTT take to increase profit in order to achieve the target of FY2020?
As a result of the spread of COVID-19, DOCOMO's handset sales revenue in japan and SI revenue mainly from overseas are expected to decrease toward the second half of the year, and so operating revenues is expected to decrease by 350.0 billion yen (▲180.0 billion yen in Japan and ▲170.0 billion yen overseas) and operating income is expected to decrease by 70.0 billion yen (▲45.0 billion yen in Japan and ▲25.0 billion yen overseas). However, we expect profit to increase year-on-year by covering this with (1) cost reduction of equipment through investment restraint, etc., (2)further operational efficiency improvement by promoting DX and other measures.
Seizing the potential for major changes in the way people work and lifestyles, we have announced to offer “NeWork”, an online workspace, and “Window Talk”, which enables contactless conversations, as the first steps for our new service strategy to create a remote world. Going forward, we will continue to create innovative technologies and products originating in Japan, expand product lineup, and expand sales with the aim of achieving sustainable profit growth from FY2021 onward.
Forecasts for both overseas sales and overseas operating income are expected to decrease from the previous year, but what are the latest efforts to achieve the medium-term financial targets (FY2023: Overseas sales $25B, profit margin 7%)?
Due to the impact of COVID-19, operating revenues of SI business/other businesses are decreasing, and the impact is expected to expand further from 2Q. As a result, overseas sales and overseas operating income for FY2020 are planned to decrease.
NTT Ltd. expects its operating income to improve significantly from the previous year and become profitable, by contributing to cost reduction effects such as personnel expenses through structural reforms, and promoting various sales measures to increase sales.
NTT DATA expects a decrease in operating revenues and operating income for FY2020 due to temporary costs for structural reforms mainly in North America to support digitalization of after-COVID-19 (expansion of digital human resources, reskilling, resource optimization, office/data center integration, etc.), in addition to the sales decrease due to the impact of COVID-19.
What is NTT's shareholder return policy? Given the uncertain outlook due to the impact of COVID-19 and other factors, is there any changes in NTT's shareholder return policy?
The basic policy is to increase dividends on a continuous basis, to buy back shares flexibly, and to improve capital efficiency. We have announced in our FY2019 results that we would pay a dividend of 100 yen per share for FY2020, an increase of 5 yen from the previous year.
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