Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 (6-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of January 2021

Commission File Number 000-12713

NEC Corporation

(Translation of registrant’s name into English)

7-1, Shiba 5-chome

Minato-ku, Tokyo 108-8001

Japan

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date:		January 29, 2021

NEC Corporation

By:		/s/ Tetsuo Mukunoki
Name:		Tetsuo Mukunoki
Title:		General Manager, Legal Division

Condensed Interim Consolidated Financial Statements

for the Nine-Month Period Ended December 31, 2020

Table of Contents


1 Overview of Business Results

(1) Overview of Operating Results			1

(2) Overview of Cash Flows			3

2 Condensed Interim Consolidated Financial Statements

(1) Condensed Interim Consolidated Statements of Financial Position			4

(2) Condensed Interim Consolidated Statements of Profit or Loss and Comprehensive Income			6

(3) Condensed Interim Consolidated Statements of Changes in Equity			10

(4) Condensed Interim Consolidated Statements of Cash Flows			11

1.	Overview of Business Results

NEC has revised its operating segments from the fiscal year ending March 31, 2021. Figures for the corresponding period of the previous fiscal year have been restated to conform to the new segments.

“Adjusted operating profit (loss)” is an indicator for measuring underlying profitability in order to clarify the contribution of acquired companies to the NEC Group’s overall earnings. It is measured by deducting amortization of intangible assets recognized as a result of M&A and expenses for acquisition of companies (financial advisory fees and other fees) from operating profit (loss). Also, “Adjusted net profit (loss) attributable to owners of the parent” is an indicator for measuring underlying profitability attributable to owners of the parent. It is measured by deducting adjustment items of operating profit (loss) and corresponding amounts of tax and non-controlling interests from net profit (loss) attributable to owners of the parent.

(1) Overview of Operating Results

The world economy and the Japanese economy during the nine-month period ended December 31, 2020 both deteriorated significantly during the first quarter of the fiscal year ending March 31, 2021, due to the effects of restrictions on personal movement and suspension of sales and production activities due to the global pandemic of new coronavirus (“COVID-19”). Although the economy picked up slightly after the second quarter of the fiscal year ending March 31, 2021, the economy remained slow.

Under this business environment, the NEC Group recorded consolidated revenue of 2,044.4 billion JPY for the nine-month period ended December 31, 2020, a decrease of 131.2 billion JPY (-6.0%) year-on-year. This decrease was mainly due to decreased revenue in the Enterprise business, the Public Solutions business and the Global business, despite increased revenue in the Network Services business.

Regarding profitability, operating profit improved by 4.5 billion JPY year-on-year, to an operating profit of 82.4 billion JPY, mainly due to improvement in selling, general and administrative expenses from expenditure efficiency, in addition to improvement in other operating income from gain on sales of land and gain on sales of subsidiaries, despite decreased revenue. Adjusted operating profit improved by 6.4 billion JPY year-on-year, to an adjusted operating profit of 97.0 billion JPY.

Profit before income taxes was a profit of 85.8 billion JPY, a year-on-year improvement of 6.9 billion JPY, mainly due to improved operating profit.

Net profit attributable to owners of the parent was a profit of 54.5 billion JPY, an improvement of 5.3 billion JPY year-on-year. This was primarily due to improved profit before income taxes. Adjusted net profit attributable to owners of the parent improved by 6.8 billion JPY year-on-year, to an adjusted net profit attributable to owners of the parent of 63.7 billion JPY.

Segment results are as follows, and revenue by segment is revenue from external customers.

Public Solutions Business

In the Public Solutions business, revenue was 274.2 billion JPY, a decrease of 41.8 billion JPY (-13.2%) year-on-year, mainly due to decreased sales in sectors that include healthcare and regional industries, as well as reduced renewal demand for business PCs.

Adjusted operating profit (loss) worsened by 6.5 billion JPY year-on-year, to an adjusted operating profit of 11.4 billion JPY, mainly due to decreased sales.

Public Infrastructure Business

In the Public Infrastructure business, revenue was 460.5 billion JPY, a decrease of 4.7 billion JPY (-1.0%) year-on-year, mainly due to decreased sales at consolidated subsidiaries, despite increased sales in the government sector mainly from PCs for educational institutions on the back of the Japanese government’s GIGA school initiative.

Adjusted operating profit (loss) worsened by 7.1 billion JPY year-on-year, to an adjusted operating profit of 35.3 billion JPY, due to decreased profit at consolidated subsidiaries, despite increased profit in the government sector due to increased sales.

Enterprise Business

In the Enterprise business, revenue was 354.4 billion JPY, a decrease of 54.7 billion JPY (-13.4%) year-on-year, mainly due to reduced IT investments in the manufacturing, retail and service sectors, in addition to decreased sales of large-scale projects as compared with the corresponding period of the previous year and reduced renewal demand for business PCs.

Adjusted operating profit (loss) worsened by 10.1 billion JPY year-on-year, to an adjusted operating profit of 26.2 billion JPY, mainly due to decreased sales.

Network Services Business

In the Network Services business, revenue was 365.8 billion JPY, an increase of 43.1 billion JPY (+13.4%) year-on-year, mainly due to an increase in sales in the mobile network domain and fixed network domain on the back of 5G adoption by telecom operators.

Adjusted operating profit (loss) improved by 6.1 billion JPY year-on-year, to an adjusted operating profit of 19.9 billion JPY, mainly due to increased sales.

Global Business

In the Global business, revenue was 325.2 billion JPY, a decrease of 41.1 billion JPY (-11.2%) year-on-year, mainly due to decreased sales in the display and the de-consolidation of subsidiaries in the display and decreased sales in wireless backhaul area, in addition to the termination of part of KMD’s business, which was expected from the time of its acquisition, despite increased sales of submarine systems.

Adjusted operating profit (loss) improved by 6.5 billion JPY year-on-year, to an adjusted operating profit of 8.1 billion JPY, mainly due to gain on the sale of shares of subsidiaries, in addition to improved profitability in the business for service providers and increased sales of submarine systems.

Others

In the Others, revenue was 264.4 billion JPY, a decrease of 32.0 billion JPY (-10.8%) year-on-year.

Adjusted operating profit (loss) worsened by 13.5 billion JPY year-on-year, to an adjusted operating profit of 9.6 billion JPY.

Total assets were 3,343.9 billion JPY as of December 31, 2020, an increase of 220.6 billion JPY as compared with the end of the previous fiscal year. Current assets as of December 31, 2020 decreased by 67.1 billion JPY compared with the end of the previous fiscal year to 1,631.8 billion JPY, mainly due to the collection of trade and other receivables, despite increased inventories. Non-current assets as of December 31, 2020 increased by 287.7 billion JPY compared with the end of the previous fiscal year to 1,712.1 billion JPY. This was mainly due to an increase in goodwill resulting from the acquisition of Avaloq Group and an increase in other financial assets resulting from the rising market value of equity securities.

Total liabilities as of December 31, 2020 increased by 79.5 billion JPY compared with the end of the previous fiscal year to 2,088.2 billion JPY. This was mainly due to an increase in interest-bearing debt from issuance of commercial paper and long-term borrowings, despite a decrease in trade and other payables from the payment of materials cost. The balance of interest-bearing debt amounted to 833.6 billion JPY, an increase of 158.2 billion JPY as compared with the end of the previous fiscal year. The debt-equity ratio as of December 31, 2020 was 0.79 (a worsening of 0.05 points as compared with the end of the previous fiscal year). The balance of net interest-bearing debt as of December 31, 2020, calculated by offsetting the balance of interest-bearing debt with the balance of cash and cash equivalents, amounted to 465.9 billion JPY, an increase of 149.7 billion JPY as compared with the end of the previous fiscal year. The net debt-equity ratio as of December 31, 2020 was 0.44 (a worsening of 0.09 points as compared with the end of the previous fiscal year).

Total equity was 1,255.7 billion JPY as of December 31, 2020, an increase of 141.1 billion JPY as compared with the end of the previous fiscal year, mainly due to the execution of issuance of new shares by way of third-party allotment to Nippon Telegraph and Telephone Corporation (“NTT Corporation”), the increase in other components of equity resulting from the rising market value of equity securities, and the recognition of net profit for the nine-month period ended December 31, 2020, despite payment of dividends.

As a result, total equity attributable to owners of the parent (total equity less non-controlling interests) as of December 31, 2020 was 1,049.4 billion JPY, and the ratio of equity attributable to owners of the parent was 31.4% (an improvement of 2.2 points as compared with the end of the previous fiscal year).

(2) Overview of Cash Flows

Net cash inflows from operating activities for the nine-month period ended December 31, 2020 were 86.6 billion JPY, a year-on-year worsening of 25.6 billion JPY, mainly due to an increase in the amount of reclassification to cash flows from investing activities such as gain on sales of land, despite improved profit before income taxes and working capital.

Net cash outflows from investing activities for the nine-month period ended December 31, 2020 were 194.8 billion JPY, an increase of 131.8 billion JPY year-on-year, mainly due to the purchase of shares of newly consolidated subsidiaries resulting from the acquisition of Avaloq Group, despite an increase in proceeds from sales of property, plant and equipment.

As a result, free cash flows (the sum of cash flows from operating activities and investing activities) for the nine-month period ended December 31, 2020 totaled cash outflows of 108.2 billion JPY, a year-on-year worsening of 157.4 billion JPY.

Net cash flows from financing activities for the nine-month period ended December 31, 2020 totaled cash inflows of 112.7 billion JPY, mainly due to issuance of commercial paper, proceeds from issuance of common shares and proceeds from issuance of bonds, despite redemption of bonds, repayments of lease liabilities and dividends paid.

As a result, cash and cash equivalents as of December 31, 2020 amounted to 367.7 billion JPY, an increase of 8.5 billion JPY as compared with the end of the previous fiscal year.

2.	Condensed Interim Consolidated Financial Statements for the Nine-Month Period Ended December 31, 2020

(1) Condensed Interim Consolidated Statements of Financial Position as of March 31 and December 31, 2020


	JPY (millions)
	Notes		March 31, 2020		December 31, 2020
Assets
Current assets
Cash and cash equivalents		12		359,252		367,709
Trade and other receivables		12		737,484		526,618
Contract assets				247,625		348,149
Inventories				199,326		251,000
Other financial assets		12		5,584		6,240
Other current assets				108,436		132,102

Subtotal				1,657,707		1,631,818
Assets held for sale		6		41,210		—

Total current assets				1,698,917		1,631,818
Non-current assets
Property, plant and equipment, net				558,077		553,958
Goodwill				182,334		435,846
Intangible assets, net				199,093		206,548
Investments accounted for using the equity method				74,092		71,423
Other financial assets		12		219,326		265,649
Deferred tax assets				165,183		138,114
Other non-current assets				26,232		40,517

Total non-current assets				1,424,337		1,712,055

Total assets				3,123,254		3,343,873


	JPY (millions)
	Notes		March 31, 2020			December 31, 2020
Liabilities and equity
Liabilities
Current liabilities
Trade and other payables		12		460,881			406,619
Contract liabilities				195,152			228,526
Bonds and borrowings		12		154,992			176,898
Accruals		12		191,440			164,986
Lease liabilities				47,085			48,844
Other financial liabilities		12		14,995			15,329
Accrued income taxes				12,624			9,821
Provisions				59,412			48,554
Other current liabilities				55,153			57,350

Subtotal				1,191,734			1,156,927

Liabilities directly associated with assets held for sale		6		30,133			—

Total current liabilities				1,221,867			1,156,927
Non-current liabilities
Bonds and borrowings		12		364,828			492,501
Lease liabilities				108,514			115,374
Other financial liabilities		12		42,402			34,303
Net defined benefit liabilities				224,469			238,763
Provisions				12,369			19,058
Other non-current liabilities				34,282			31,288

Total non-current liabilities				786,864			931,287

Total liabilities				2,008,731			2,088,214
Equity
Share capital				397,199			427,831
Share premium				139,735			170,104
Retained earnings				436,361			469,590
Treasury shares				(4,157	)		(1,562	)
Other components of equity		7		(58,464	)		(16,515	)

Total equity attributable to owners of the parent				910,674			1,049,448
Non-controlling interests				203,849			206,211

Total equity				1,114,523			1,255,659

Total liabilities and equity				3,123,254			3,343,873

See accompanying notes to condensed interim consolidated financial statements.

(2) Condensed Interim Consolidated Statements of Profit or Loss and Comprehensive Income for the Nine-Month Period Ended December 31, 2019 and 2020

Condensed Interim Consolidated Statements of Profit or Loss for the Nine-Month Period Ended December 31, 2019 and 2020


	JPY (millions)
	Notes	2019			2020
Revenue	9		2,175,614			2,044,436
Cost of sales			1,555,165			1,473,264

Gross profit			620,449			571,172
Selling, general and administrative expenses			541,009			520,912
Other operating income (expenses)			(1,534	)		32,115

Operating profit			77,906			82,375
Finance income	10		6,323			7,777
Finance costs	10		10,468			7,300
Share of profit of entities accounted for using the equity method			5,073			2,921

Profit before income taxes			78,834			85,773
Income taxes			23,435			25,215

Net profit			55,399			60,558

Net profit attributable to:
Owners of the parent			49,196			54,536
Non-controlling interests			6,203			6,022

Total			55,399			60,558

Earnings per share attributable to owners of the parent:
Basic earnings per share (JPY)	11		189.46			204.02
Diluted earnings per share (JPY)	11		189.46			204.02

See accompanying notes to condensed interim consolidated financial statements.

Condensed Interim Consolidated Statements of Comprehensive Income for the Nine-Month Period Ended December 31, 2019 and 2020


	JPY (millions)
	Notes	2019			2020
Net profit			55,399			60,558
Other comprehensive income, net of tax
Items that will not be reclassified to profit or loss
Equity instruments designated as measured at fair value through other comprehensive income			1,884			32,284
Remeasurements of defined benefit plans			—			(2,122	)
Share of other comprehensive income of entities accounted for using the equity method			43			90

Total items that will not be reclassified to profit or loss			1,927			30,252
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations			(3,399	)		12,080
Cash flow hedges			70			1,340
Share of other comprehensive income of entities accounted for using the equity method			75			297

Total items that may be reclassified subsequently to profit or loss			(3,254	)		13,717

Total other comprehensive income, net of tax			(1,327	)		43,969

Total comprehensive income			54,072			104,527

Total comprehensive income attributable to:
Owners of the parent			49,052			96,485
Non-controlling interests			5,020			8,042

Total			54,072			104,527

Condensed Interim Consolidated Statements of Profit or Loss for the Three-Month Period Ended December 31, 2019 and 2020


	JPY (millions)
	Notes	2019			2020
Revenue			726,621			729,406
Cost of sales			512,897			512,950

Gross profit			213,724			216,456
Selling, general and administrative expenses			181,470			174,660
Other operating income (expenses)			(1,204	)		20,606

Operating profit			31,050			62,402
Finance income			2,962			4,832
Finance costs			2,759			2,230
Share of profit of entities accounted for using the equity method			1,466			1,406

Profit before income taxes			32,719			66,410
Income taxes			10,140			19,166

Net profit			22,579			47,244

Net profit attributable to:
Owners of the parent			20,034			43,528
Non-controlling interests			2,545			3,716

Total			22,579			47,244

Earnings per share attributable to owners of the parent:
Basic earnings per share (JPY)	11		77.18			159.74
Diluted earnings per share (JPY)	11		77.17			159.74

See accompanying notes to condensed interim consolidated financial statements.

Condensed Interim Consolidated Statements of Comprehensive Income for the Three-Month Period Ended December 31, 2019 and 2020


	JPY (millions)
	Notes	2019		2020
Net profit			22,579		47,244
Other comprehensive income, net of tax
Items that will not be reclassified to profit or loss
Equity instruments designated as measured at fair value through other comprehensive income			7,354		16,029
Remeasurements of defined benefit plans			—		—
Share of other comprehensive income of entities accounted for using the equity method			37		(96	)

Total items that will not be reclassified to profit or loss			7,391		15,933
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations			12,867		7,096
Cash flow hedges			89		923
Share of other comprehensive income of entities accounted for using the equity method			235		258

Total items that may be reclassified subsequently to profit or loss			13,191		8,277

Total other comprehensive income, net of tax			20,582		24,210

Total comprehensive income			43,161		71,454

Total comprehensive income attributable to:
Owners of the parent			38,920		67,183
Non-controlling interests			4,241		4,271

Total			43,161		71,454

(3) Condensed Interim Consolidated Statements of Changes in Equity for the Nine-Month Period Ended December 31, 2019 and 2020


	JPY (millions)
			Equity attributable to owners of the parent																	Non- controlling interests			Total equity
	Notes		Share capital		Share premium			Retained earnings			Treasury shares			Other components of equity			Total			Non- controlling interests			Total equity
As of April 1, 2019				397,199		138,824			354,582			(3,547	)		(28,119	)		858,939			200,742			1,059,681

Net profit				—		—			49,196			—			—			49,196			6,203			55,399
Other comprehensive income				—		—			—			—			(144	)		(144	)		(1,183	)		(1,327	)

Comprehensive income				—		—			49,196			—			(144	)		49,052			5,020			54,072
Purchase of treasury shares				—		—			—			(663	)		—			(663	)		—			(663	)
Disposal of treasury shares				—		(0	)		—			63			—			63			—			63
Cash dividends		8		—		—			(18,188	)		—			—			(18,188	)		(4,941	)		(23,129	)
Put option, written over shares held by a non-controlling interest shareholder				—		630			—			—			—			630			—			630
Changes in interests in subsidiaries				—		(25	)		—			—			—			(25	)		355			330

Total transactions with owners				—		605			(18,188	)		(600	)		—			(18,183	)		(4,586	)		(22,769	)

As of December 31, 2019				397,199		139,429			385,590			(4,148	)		(28,263	)		889,807			201,176			1,090,983


	JPY (millions)
			Equity attributable to owners of the parent																	Non- controlling interests			Total equity
	Notes		Share capital		Share premium			Retained earnings			Treasury shares			Other components of equity			Total			Non- controlling interests			Total equity
As of April 1, 2020				397,199		139,735			436,361			(4,157	)		(58,464	)		910,674			203,849			1,114,523

Net profit				—		—			54,536			—			—			54,536			6,022			60,558
Other comprehensive income				—		—			—			—			41,949			41,949			2,020			43,969

Comprehensive income				—		—			54,536			—			41,949			96,485			8,042			104,527
Issuance of new shares				30,632		30,374			—			—			—			61,006			—			61,006
Purchase of treasury shares				—		—			—			(623	)		—			(623	)		—			(623	)
Disposal of treasury shares				—		20			—			3,218			—			3,238			—			3,238
Cash dividends		8		—		—			(21,307	)		—			—			(21,307	)		(5,399	)		(26,706	)
Changes in interests in subsidiaries				—		(25	)		—			—			—			(25	)		(281	)		(306	)

Total transactions with owners				30,632		30,369			(21,307	)		2,595			—			42,289			(5,680	)		36,609

As of December 31, 2020				427,831		170,104			469,590			(1,562	)		(16,515	)		1,049,448			206,211			1,255,659

See accompanying notes to condensed interim consolidated financial statements.

(4) Condensed Interim Consolidated Statements of Cash Flows for the Nine-Month Period Ended December 31, 2019 and 2020


	JPY (millions)
	Notes	2019			2020
Cash flows from operating activities
Profit before income taxes			78,834			85,773
Depreciation and amortization			124,403			121,731
Impairment loss			3,674			337
(Decrease) in provisions			(11,821	)		(14,304	)
Finance income	10		(6,323	)		(7,777	)
Finance costs	10		10,468			7,300
Share of profit of entities accounted for using the equity method			(5,073	)		(2,921	)
Decrease in trade and other receivables			190,324			222,505
(Increase) in inventories			(78,545	)		(47,680	)
(Decrease) in trade and other payables			(26,116	)		(48,697	)
Other, net			(151,924	)		(211,611	)

Subtotal			127,901			104,656
Interest and dividends received			6,123			4,695
Interest paid			(6,912	)		(6,136	)
Income taxes paid			(14,934	)		(16,605	)

Net cash provided by operating activities			112,178			86,610
Cash flows from investing activities
Purchases of property, plant and equipment			(55,232	)		(44,391	)
Proceeds from sales of property, plant and equipment			4,376			40,890
Acquisitions of intangible assets			(11,266	)		(7,012	)
Purchase of equity instruments designated as measured at fair value through other comprehensive income			(1,538	)		(2,614	)
Proceeds from sales of equity instruments designated as measured at fair value through other comprehensive income			10,494			5,891
Purchase of shares of newly consolidated subsidiaries			(6,371	)		(202,588	)
Increase in cash flows resulting in change in scope of consolidation, net of consideration transferred			52			—
Proceeds from sales of subsidiaries			—			8,444
Disbursements for sales of shares of subsidiaries			(68	)		(2,703	)
Purchases of investments in associates or joint ventures			(376	)		(210	)
Proceeds from sales of investments in associates or joint ventures			2,098			8,177
Other, net			(5,134	)		1,319

Net cash used in investing activities			(62,965	)		(194,797	)


	JPY (millions)
	Notes	2019			2020
Cash flows from financing activities
(Decrease) increase in short-term borrowings, net			(5,427	)		83,990
Proceeds from long-term borrowings			35,844			97,100
Repayments of long-term borrowings			(41,781	)		(42,066	)
Proceeds from issuance of bonds			—			35,000
Redemption of bonds			—			(55,000	)
Repayments of lease liabilities			(40,374	)		(42,541	)
Proceeds from issuance of new shares			—			60,893
Dividends paid	8		(18,124	)		(21,209	)
Dividends paid to non-controlling interests			(4,936	)		(5,388	)
Proceeds from disposal of treasury shares			63			3,238
Other, net			(39	)		(1,272	)

Net cash (used in) provided by financing activities			(74,774	)		112,745

Effect of exchange rate changes on cash and cash equivalents			(1,365	)		(262	)

Net (decrease) increase in cash and cash equivalents			(26,926	)		4,296

Cash and cash equivalents, at the beginning of the period			278,314			359,252

Increase in cash and cash equivalents resulting from transfer to assets held for sale	6		1,710			4,161

Cash and cash equivalents, at the end of the period			253,098			367,709

See accompanying notes to condensed interim consolidated financial statements.

Notes to Condensed Interim Consolidated Financial Statements

1.	Reporting Entity

NEC Corporation (the “Company”) is a public company incorporated in Japan. The NEC Group has five segments: Public Solutions business, Public Infrastructure business, Enterprise business, Network Services business, and Global business, all of which are operating segments. For further information regarding these businesses, see Note 5. “Segment Information.”

2.	Basis of Preparation

(1) Compliance with International Financial Reporting Standards

The Company’s condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The term “IFRS” also includes International Accounting Standards (“IAS”) and the related interpretations of the Standard Interpretations Committee (“SIC”) and IFRS Interpretations Committee (“IFRIC”). The Company’s condensed interim consolidated financial statements have been prepared in accordance with IAS 34.

(2) Approval of Financial Statements

The condensed interim consolidated financial statements were approved by Takashi Niino, Representative Director, President and CEO, and Takayuki Morita, Representative Director, Senior Executive Vice President and CFO, on January 29, 2021.

(3) Basis of Measurement

The condensed interim consolidated financial statements have been prepared on historical cost, except for the following important items.

•

Derivatives are measured at fair value.

•

Equity instruments measured at fair value through profit or loss and equity instruments designated as measured at fair value through other comprehensive income

•

Defined benefit asset or liability are recognized using the present value of defined benefit obligations, less the fair value of plan assets.

(4) Functional and Presentation Currency

The condensed interim consolidated financial statements are presented in Japanese yen (“JPY”), which is the functional currency of the Company. All financial information presented in JPY has been rounded to the nearest million JPY, except when otherwise indicated.

3.	Significant Accounting Policies

Significant accounting policies adopted for the nine-month period ended December 31, 2020 are consistent with those applied for the previous fiscal year ended March 31, 2020. Income taxes for the nine-month period ended December 31, 2020 are calculated using reasonably estimated annual effective tax rate.

4.	Use of Accounting Estimates and Judgments

The preparation of condensed interim consolidated financial statements in accordance with IFRS requires management to make certain judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions may differ from the actual results.

These estimates and underlying assumptions are reviewed by management on a continuous basis. Changes in these accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

The judgments, estimates and assumptions including the impact of the COVID-19 pandemic made by management in the process of applying the accounting policies that have a material impact in the condensed interim consolidated financial statements for the nine-month period ended December 31, 2020 are principally consistent with those applied for the previous fiscal year ended March 31, 2020.

5.	Segment Information

(1) General information about reportable segments

The reportable segments of the NEC Group are determined from operating segments that are identified in terms of similarity of products, services and markets based on business, and are the businesses for which the NEC Group is able to obtain respective financial information separately, and the businesses are investigated periodically in order for the Board of Directors to conduct periodic investigation to determine distribution of management resources and evaluate their business results. The NEC Group has five reportable segments, which are Public Solutions, Public Infrastructure, Enterprise, Network Services, and Global businesses.

Descriptions of each reportable segment are as follows:

Public Solutions business mainly provides Systems Integration (Systems Implementation, Consulting), Maintenance and Support, Outsourcing / Cloud Services, and System Equipment, for Public, Healthcare, and Regional industries.

Public Infrastructure business mainly provides Systems Integration (Systems Implementation, Consulting), Maintenance and Support, Outsourcing / Cloud Services, and System Equipment, for Government, and Media industry.

Enterprise business mainly provides Systems Integration (Systems Implementation, Consulting), Maintenance and Support, Outsourcing / Cloud Services, and System Equipment, for Manufacturing, Retail, Services and Finance industries.

Network Services business mainly provides Network Infrastructure (Core Network, Mobile Phone Base Stations, Optical Transmission Systems, Routers / Switches) and Systems Integration (Systems Implementation, Consulting), and Services & Management (OSS/BSS, Service Solutions) for telecom market in Japan.

Global business mainly provides Safer Cities (Public Safety, Digital Government), Software Services for Service Providers (OSS/BSS), Network Infrastructure (Submarine Systems, Wireless Backhaul), System Devices (Displays, Projectors), and Energy Storage System.

Notes:

OSS: Operation Support System, BSS: Business Support System

(2) Basis of measurement for reportable segment revenue and segment profit or loss

Segment profit (loss) is measured by deducting amortization of intangible assets recognized as a result of M&A and expenses for acquisition of companies (financial advisory fees and other fees) from operating profit (loss).

Intersegment revenues are made at amount that approximates arm’s-length prices.

(3) Segment information on revenue, profit or loss by reportable segment

Segment information on revenue, profit or loss by reportable segment for the nine-month period ended December 31, 2019 and 2020, are as follows:

Nine-month period ended December 31, 2019


	JPY (millions)
	Reportable segments
	Public Solutions		Public Infrastructure		Enterprise		Network Services		Global		Total		Others		Reconciling items			Consolidated total
Revenue:
External customers		315,977		465,187		409,080		322,725		366,240		1,879,209		296,405		—			2,175,614
Intersegment		10,851		3,303		33,287		6,927		388		54,756		9,464		(64,220	)		—

Total		326,828		468,490		442,367		329,652		366,628		1,933,965		305,869		(64,220	)		2,175,614

Segment profit (loss)		17,936		42,383		36,253		13,791		1,570		111,933		23,057		(44,342	)		90,648

Amortization of acquisition-related intangible assets																			(12,493	)
M&A related expenses																			(249	)

Operating profit																			77,906

Finance income																			6,323
Finance costs																			(10,468	)
Share of profit of entities accounted for using the equity method																			5,073

Profit before income taxes																			78,834

Nine-month period ended December 31, 2020
	JPY (millions)
	Reportable segments
	Public Solutions		Public Infrastructure		Enterprise		Network Services		Global		Total		Others		Reconciling items			Consolidated total
Revenue:
External customers		274,168		460,486		354,424		365,814		325,168		1,780,060		264,376		—			2,044,436
Intersegment		8,750		2,600		29,053		6,250		496		47,149		5,196		(52,345	)		—

Total		282,918		463,086		383,477		372,064		325,664		1,827,209		269,572		(52,345	)		2,044,436

Segment profit (loss)		11,433		35,314		26,175		19,919		8,071		100,912		9,565		(13,468	)		97,009

Amortization of acquisition-related intangible assets																			(13,744	)
M&A related expenses																			(890	)

Operating profit																			82,375

Finance income																			7,777
Finance costs																			(7,300	)
Share of profit of entities accounted for using the equity method																			2,921

Profit before income taxes																			85,773

Notes:

“Others” mainly includes businesses such as business consulting and package solution services for the nine-month period ended December 31, 2019 and 2020.

“Reconciling items” in segment profit (loss) includes amounts not allocated to each reportable segment that consist principally of corporate expenses of 40,471 million JPY and 14,108 million JPY for the nine-month period ended December 31, 2019 and 2020, respectively. Corporate expenses are mainly general and administrative expenses and research and development expenses incurred at the headquarters of NEC. Also, these reconcilling items include the gain on sales of the land of Sagamihara Plant recorded during this third-quarter.

(4) Information about revising reportable segments

From the first quarter of the fiscal year ending March 31, 2021, the NEC Group’s descriptions of the reportable segments have been revised based on a new performance management system and a new organization structure effective as of April 1, 2020.

Under the former organization structure, among the products and services provided by each business unit to customers, products and services managed by other business units were recorded as revenue in the segment to which the business unit managing the products and services belonged. However, sales revenue of products and services are now recorded in the business unit providing products and services to customers.

Along with this, the “System Platform” segment is no longer an operating segment, and, excluding revenue recorded in other operating segments, revenue previously recorded in the “System Platform” segment, is now included in “Others”.

The NEC Group also made segment changes due to organizational reforms and changes in the management system of subsidiaries that have been implemented to accelerate business development related to digital transformation (DX) and strengthen business execution capabilities by integrating businesses with compatibility.

In connection with this revision, segment information for the nine-month period ended December 31, 2019 has been reclassified to conform to the presentation of the revised segments for the fiscal year ending March 31, 2021.

(5) Geographical information

Revenues from contract with customers by country or region for the nine-month period ended December 31, 2019 and 2020, are as follows:


	JPY (millions)
	2019		2020
Japan		1,618,842		1,534,134
North America and Latin America		124,059		95,503
Europe, Middle East, and Africa		169,788		158,586
China, East Asia, and Asia Pacific		262,925		256,213

Total		2,175,614		2,044,436

6.	Assets Held for Sale

Major components of assets held for sale and liabilities directly associated with assets held for sale as of March 31, 2020 are as follows:


	JPY (millions)
	March 31, 2020		December 31, 2020
Cash and cash equivalents		4,161		—
Trade and other receivables		12,349		—
Inventories		16,496		—
Other assets		8,204		—

Assets held for sale		41,210		—


	JPY (millions)
	March 31, 2020		December 31, 2020
Trade and other payables		11,786		—
Other liabilities		18,347		—

Liabilities directly associated with assets held for sale		30,133		—

Fiscal year ended March 31, 2020

The assets held for sale as of March 31, 2020, consisted of groups of assets and liabilities relating to two subsidiaries, NEC Display Solutions, Ltd. (“NDS”) and Showa Optronics Co., Ltd (“Showa Optronics”). NDS belonged to the “Global” segment, and the sale of its 66% share was scheduled to close by the end of 2020.

In addition, the assets and liabilities of Nippon Avionics Co., Ltd. (“Nippon Avionics”) were classified as a disposal group held for sale during the fiscal year ended March 31, 2020. As the Company completed the transfer of all of the common shares of Nippon Avionics through a cash tender offer on January 31, 2020, Nippon Avionics has been excluded from the scope of consolidation of the NEC Group.

Nine-month period ended December 31, 2020

There are no assets held for sale as of December 31, 2020.

Although NDS used to belong to the “Global” segment and was classified as an asset held for sale as of the end of the fiscal year ended March 31, 2020, it is no longer a subsidiary of the Company due to the completion of the transfer of its 66% share on November 1, 2020. Along with this transfer of stock, NDS changed its company name to Sharp NEC Display Solutions, Ltd., and became an associate of the Company. As the Company completed the transfer of all of the shares of Showa Optronics on June 1, 2020, Showa Optronics has been excluded from the scope of consolidation of the NEC Group. The assets and liabilities of NEC Financial Services, LLC (“NECFS”) and SINCERE Corporation (“SINCERE”) were classified as a disposal group held for sale during the nine-month period ended December 31, 2020. NECFS used to belong to the “Global” segment, but the Company has completed the sale of its all shares to NEC Capital Solutions Limited, which is an associate of the Company, on November 30, 2020. Thus, NECFS is no longer a subsidiary of the Company, and became a subsidiary of associate of the Company. Additionally, the Company completed the sale of 36.3% share of SINCERE on October 30, 2020, and SINCERE is no longer an associate of the Company.

7.	Equity

(1) Increase in equity due to issuance of new shares and disposal of treasury shares by way of third-party allotment

The board of directors of the Company passed a resolution as of June 25, 2020, to issue 12,376,600 new shares and dispose of 647,000 treasury shares (a total of 13,023,600 shares) at a price of 4,950 JPY per share, or 64,467 million JPY in total, to NTT Corporation by way of third-party allotment. The board of directors also passed a resolution as of the same date, to execute a capital and business alliance agreement with NTT Corporation, and executed the agreement on the same date. The payment for the shares has completed on July 10, 2020.

(2) Breakdown of other components of equity

A breakdown of other components of equity as of March 31 and December 31, 2020, is as follows:


	JPY (millions)
	March 31, 2020			December 31, 2020
Remeasurements of defined benefit plans		(35,326	)		(37,448	)
Exchange differences on translating foreign operations		(32,415	)		(21,970	)
Cash flow hedges		(609	)		713
Equity instruments designated as measured at fair value through other comprehensive income		9,886			42,190

Total		(58,464	)		(16,515	)

8.	Dividends

(1) Dividends paid

Nine-month period ended December 31, 2019


Resolution		Board of directors on April 26, 2019
Type of shares		Ordinary shares
Total dividends JPY (millions)		10,393
Source of dividends		Retained earnings
Dividends per share (JPY)		40
Record date		March 31, 2019
Effective date		June 3, 2019


Resolution		Board of directors on October 29, 2019
Type of shares		Ordinary shares
Total dividends JPY (millions)		7,795
Source of dividends		Retained earnings
Dividends per share (JPY)		30
Record date		September 30, 2019
Effective date		December 2, 2019

Nine-month period ended December 31, 2020


Resolution		Board of directors on May 12, 2020
Type of shares		Ordinary shares
Total dividends JPY (millions)		10,393
Source of dividends		Retained earnings
Dividends per share (JPY)		40
Record date		March 31, 2020
Effective date		June 1, 2020


Resolution		Board of directors on October 29, 2020
Type of shares		Ordinary shares
Total dividends JPY (millions)		10,914
Source of dividends		Retained earnings
Dividends per share (JPY)		40
Record date		September 30, 2020
Effective date		December 1, 2020

9.	Revenue

Disaggregation of revenue

The NEC Group has five reportable segments: Public Solutions, Public Infrastructure, Enterprise, Network Services, and Global businesses.

The revenue disaggregated by type of good or service and the reconciliation of the disaggregated revenue with the five reportable segments for the nine-month period ended December 31, 2019 and 2020, are as follows:

Nine-month period ended December 31, 2019


	JPY (millions)
	Reportable segments												Others		Consolidated Total
	Public Solutions		Public Infrastructure		Enterprise		Network Services		Global		Total		Others		Consolidated Total
Contracts for hardware and packaged software deployments		121,726		200,075		105,977		95,967		123,004		646,749		139,991		786,740
Contracts for services to customers (including maintenance and outsourcing)		103,519		72,787		168,331		131,013		146,272		621,922		91,320		713,242
Contracts for system integrations and equipment constructions		90,732		192,325		134,772		95,745		96,964		610,538		65,094		675,632

Total		315,977		465,187		409,080		322,725		366,240		1,879,209		296,405		2,175,614

Nine-month period ended December 31, 2020
	JPY (millions)
	Reportable segments												Others		Consolidated Total
	Public Solutions		Public Infrastructure		Enterprise		Network Services		Global		Total		Others		Consolidated Total
Contracts for hardware and packaged software deployments		83,055		210,987		80,885		105,023		83,903		563,853		113,071		676,924
Contracts for services to customers (including maintenance and outsourcing)		103,036		80,465		163,185		152,520		126,448		625,654		89,539		715,193
Contracts for system integrations and equipment constructions		88,077		169,034		110,354		108,271		114,817		590,553		61,766		652,319

Total		274,168		460,486		354,424		365,814		325,168		1,780,060		264,376		2,044,436

The above disaggregated revenue information for the nine-month period ended December 31, 2020 has been restated to conform to the current segment composition reflecting a new performance management system and a new organization structure effective as of April 1, 2020.

10.

Finance Income and Finance Costs

Components of finance income and finance costs for the nine-month period ended December 31, 2019 and 2020, are as follows:


	JPY (millions)
	2019		2020
Finance income
Interest income		1,126		785
Dividend income		4,332		3,363
Gain on sales of associates		135		3,122
Foreign exchange gains, net		—		185
Other		730		322

Total		6,323		7,777

Finance costs
Interest expenses		7,206		6,170
Foreign exchange losses, net		1,487		—
Other		1,775		1,130

Total		10,468		7,300

Notes:

“Gain on sales of associates” in the nine-month period ended December 31, 2020 is mainly from the sale of shares of SINCERE.

Interest income arises from financial assets measured at amortized cost. Dividend income arises from equity instruments designated as measured at fair value through other comprehensive income. In addition, interest expenses arise from financial liabilities measured at amortized cost and lease liabilities.

11.

Earnings Per Share

The calculation of basic earnings per share (“EPS”) and diluted EPS has been based on the following net profit attributable to ordinary shareholders of the parent company for the nine-month period ended December 31, 2019 and 2020:

Nine-month period ended December 31, 2019 and 2020


	JPY (millions)
	2019		2020
Net profit attributable to owners of the parent		49,196		54,536
Net profit attributable to ordinary shareholders of the parent to calculate basic EPS		49,196		54,536
Net profit attributable to ordinary shareholders of the parent after adjustment for the effects of dilutive potential ordinary shares		49,196		54,536
Weighted-average number of ordinary shares to calculate basic EPS (in thousands of shares)		259,661		267,307

Weighted-average number of ordinary shares (diluted) (in thousands of shares)		259,661		267,307
Basic EPS (JPY)		189.46		204.02
Diluted EPS (JPY)		189.46		204.02

Net Profit attributable to ordinary shareholders of the parent after adjustment for the effects of dilutive potential ordinary shares includes the effect of share options issued by Japan Aviation Electronics Industry, Limited, a subsidiary of the Company.

The calculation of basic EPS and diluted EPS has been based on the following net profit attributable to ordinary shareholders of the parent company for the parent period ended December 31, 2019 and 2020:

Three-month period ended December 31, 2019 and 2020


	JPY (millions)
	2019		2020
Net profit attributable to owners of the parent		20,034		43,528
Net profit attributable to ordinary shareholders of the parent to calculate basic EPS		20,034		43,528
Net profit attributable to ordinary shareholders of the parent after adjustment for the effects of dilutive potential ordinary shares		20,034		43,528
Weighted-average number of ordinary shares to calculate basic EPS (in thousands of shares)		259,591		272,495

Weighted-average number of ordinary shares (diluted) (in thousands of shares)		259,591		272,495
Basic EPS (JPY)		77.18		159.74
Diluted EPS (JPY)		77.17		159.74

Net profit attributable to ordinary shareholders of the parent after adjustment for the effects of dilutive potential ordinary shares includes the effect of share options issued by Japan Aviation Electronics Industry, Limited, a subsidiary of the Company.

12.

Financial Instruments

Fair value measurement of financial instruments

The carrying amounts and fair values of financial assets and liabilities as of March 31 and December 31, 2020, are as follows:


	JPY (millions)
	March 31, 2020				December 31, 2020
	Carrying amount		Fair value		Carrying amount		Fair value
Financial liabilities measured at amortized cost:
Bonds		199,596		200,425		179,546		180,361
Long-term borrowings		220,219		220,879		312,955		313,564

The financial instruments whose fair value is determined to be close or equal to the carrying amount are excluded from the chart above. The financial instruments regularly measured at fair value, but equal to the carrying amount are also excluded from the chart above.

Basis of the fair value measurement for financial instruments

Cash and cash equivalents, trade and other receivables, trade and other payables, and accruals: The fair value is determined as equal or close to the carrying amount since they are to be settled in a short term.

The fair value of loans is measured by discounting estimated future cash flows to the present value based on an interest rate that takes into account the remaining period to the maturity date and credit risk.

Among equity instruments designated as measured at fair value through other comprehensive income, and equity instruments measured at fair value through profit or loss, the fair value of listed equity instruments is determined using a quoted market price at an exchange. The fair value of equity securities with no active market is measured mainly by using the comparable company valuation method or other appropriate valuation methods. Price book-value ratio (PBR) of a comparable company is used as a significant unobservable input in the fair value measurement of the equity securities with no active market. The fair value increases (decreases) as the PBR of a comparable company rises (declines).

Among the fair values of derivative assets and liabilities, forward exchange contracts are determined using quoted forward exchange rates at the end of the fiscal year, while interest rate swaps are calculated as the present value of the estimated future cash flows based on the interest rate at the end of the reporting period.

The fair values of short-term borrowings and long-term borrowings (current portion) are determined as the carrying amount, as the carrying amount is a reasonable estimate of fair value due to the relatively short period of maturity of these instruments. The fair value of long-term borrowings (excluding the current portion) is calculated as the present value of the estimated future cash flows, based on the expected interest rate at which a similar new borrowing was made.

The fair value of bonds is determined based on the quoted market price in a non-active market.

Fair value hierarchy

Hierarchy and classification used for the fair value measurement for financial assets and liabilities measured at fair value are as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities

Level 2: Inputs other than quoted prices classified into Level 1 that are observable for the financial asset or liability, either directly or indirectly

Level 3: Unobservable inputs that are not based on observable market data

The NEC Group recognizes transfers between levels of the fair value hierarchy when a triggering event of the change has occurred.

Financial assets classified into Level 3 mainly consist of unquoted equity instruments. The fair value of significant unquoted equity instruments is measured by using the comparable company valuation method or other appropriate valuation methods. For the financial assets classified into Level 3, changes of unobservable inputs to reasonably possible alternative assumptions are not expected to cause significant changes in the fair value of those financial assets. Further, fair value measurements of financial assets and liabilities classified into Level 3 are reviewed and approved by the responsible personnel based on relating internal regulations.

Financial assets and liabilities measured at fair value on a recurring basis by fair value category as of March 31 and December 31, 2020, are as follows:


	JPY (millions)
As of March 31, 2020	Level 1		Level 2		Level 3		Total
Financial assets measured at fair value through profit or loss		—		1,578		10,531		12,109
Equity instruments designated as measured at fair value through other comprehensive income		94,273		—		72,952		167,225
Financial liabilities measured at fair value through profit or loss		—		1,058		—		1,058

	JPY (millions)
As of December 31, 2020	Level 1		Level 2		Level 3		Total
Financial assets measured at fair value through profit or loss		—		2,139		10,367		12,506
Equity instruments designated as measured at fair value through other comprehensive income		139,662		—		74,430		214,092
Financial liabilities measured at fair value through profit or loss		—		482		—		482

There were no significant financial assets or liabilities that were transferred between levels during the nine-month period ended December 31, 2019 and 2020, and there were no significant changes in Level 3 assets measured at fair value on a recurring basis for the nine-month period ended December 31, 2019 and 2020.

13.

Business Combination

Nine-month period ended December 31, 2019

There was no significant business combination.

Nine-month period ended December 31, 2020

Business combination of a subsidiary

The Company has acquired all of the shares of WP/AV CH Holdings I B.V. (“WP/AV CH Holdings I”), which owns 100% share of Avaloq Group AG (“Avaloq Group”), a Swiss financial software company, from Avaloq Group’s shareholding association, and a shareholder of WP/AV CH Holdings I that is indirectly wholly owned by funds managed by Warburg Pincus LLC, and Avaloq Group became a consolidated subsidiary of the Company. Through this acquisition, the NEC Group expects to acquire the knowledge of software and domain in the digital finance field, to globally promote business participation in such field, and to strengthen businesses in the digital government field. A summary of this transaction is as follows:

(1) Summary of the business combination

(i)

Name of the acquired company and its type of business

Name: WP/AV CH Holdings I

Type of Business: Software for financial institutions

(ii)

Main reason for the business combination

To expand businesses and improve profitability, mainly in the digital government and digital finance areas, by globally developing SaaS business models that utilize software and technologies from throughout the NEC Group including the acquired company, Avaloq Group.

(iii)

Date of the business combination: December 22, 2020

(iv)

Ratio of voting rights acquired on the acquisition date: 100.00%

(2) Consideration for the acquisition


	JPY (millions)
	As of December 31, 2020
Cash and cash equivalents		216,886

Total		216,886

(3) Acquisition-related costs

The Company incurred outsourcing service expenses and other expenses as the acquisition-related costs for the business combination of 826 million JPY related to the share acquisition. These costs were included in “Selling, general and administrative expenses” in the consolidated statement of profit or loss for the nine-month period ended December 31, 2020.

(4) Fair value of assets acquired and liabilities assumed at the acquisition date


	JPY (millions)
	As of December 31, 2020
Current Assets
Cash and cash equivalents		15,444
Trade and other receivables		13,504
Others		1,104
Non-current Assets
Property, plant and equipment, net		10,743
Intangible assets, net		10,861
Others		20,788

Total assets		72,444


	JPY (millions)
	As of December 31, 2020
Current Liabilities
Trade and other payables		2,871
Contract Liabilities		27,263
Others		13,414
Non-current Liabilities
Financial liabilities		47,712
Others		4,489

Total Liabilities		95,749

Equity		(23,305	)

Some of the amounts above are provisional fair value calculated based on reasonable information available as of December 31, 2020, because the allocation of the acquisition costs has not been completed.

(5) Goodwill arising on acquisition


	JPY (millions)
	As of December 31, 2020
Consideration for the acquisition		216,886
Non-controlling interests		149
Fair value of identifiable net liabilities acquired by the NEC Group		23,305

Goodwill arising on acquisition		240,340

Non-controlling interests are measured by the percentage of interests owned by non-controlling shareholders to the fair value of identifiable net assets of the acquired company group. Goodwill mainly reflects excess earnings power and synergies with existing businesses. Entire goodwill is not expected to be deductible for tax purposes.

(6) Impact on the NEC Group’s performance

(i)

Revenue and net loss of the acquired company that was incurred after the acquisition date recorded in the consolidated statement of profit or loss for nine-month period ended December 31, 2020 were immaterial.

(ii)

Has the acquisition occurred as of the beginning of the nine-month period ended December 31, 2020, the NEC Group’s revenue and net profit in the consolidated statement of profit or loss for the nine-month period ended December 31, 2020 would have been 2,093,277 million JPY and 62,607 million JPY, respectively (information outside the scope of the auditor’s quarterly review).

14.

Subsequent Events

There are no significant subsequent events.

NEC (PK) (USOTC:NIPNF)
Historical Stock Chart
From Jan 2025 to Feb 2025