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Please turn the page of the presentation materials in front of you. I want to direct your attention to the top half of the page, Slide 3. This is an overview of our consolidated financial results for the third quarter of fiscal 2019. I will break my explanation of our results into 3 categories. Our results, excluding restructuring and special items; the impact of business restructuring; and one-off special items.
Please look at the bolded portion. At the top are our results, excluding restructuring and special items. Revenue for the period was JPY 923.2 billion, an increase of JPY 21 billion from the previous year or 2.3%, excluding the impact of foreign exchange movements. As with the first half of the year, our business in Japan achieved growth, primarily in Services and Ubiquitous Solutions.
We recorded an operating profit of JPY 50.2 billion. Operating profit increased JPY 34.1 billion over the previous year due to both the effects of higher revenue from our businesses in Japan and the continued improvements in profitability. I will give a breakdown of the changes to our operating profit with a waterfall chart a little later.
Next is the impact of business restructuring. The negative impact of no longer including certain revenue from our consolidated results was JPY 61.5 billion. This is due not only to the impact of the restructuring of the semiconductor sales company and the electronic components manufacturing company conducted in the fourth quarter of the previous year, but also to no longer including results from the Mie Semiconductor plant from the consolidated results starting from this third quarter. Third, we have one-off special items. The overall impact of special items in the third quarter was more or less flat as there were both positive and negative items. The positive items are the profits related to the sale of the businesses totaling JPY 7.3 billion. This consisted of 2 factors.
First, as part of the sale of the PC business, an earn-out clause was included in the agreement. In this third quarter, the execution of this clause became finalized, so we recorded a onetime gain of JPY 5.1 billion. Second, there was a onetime gain of JPY 2.2 billion related to the sale of the Mie plant. The negative items are business model transformation expenses totaling JPY 7.1 billion.
There were 2 main factors here as well. First, expenses related to structural transformation outside Japan totaling JPY 5.5 billion. I will give further details on the segment-by-segment breakdown. Second, restructuring expenses for our electronic components business totaling JPY 1.6 billion.
Last year, we recorded onetime expenses of JPY 45.8 billion, primarily related to business model transformation in Europe. As those expenses have not recurred in this fiscal year in terms of special items, operating profit has improved by JPY 46 billion over the previous year. At the very bottom is our consolidated total operating profit of JPY 50.4 billion. In addition to increases in operating profit, excluding special items, the reduction in expenses related to special items compared to the previous year means this is an increase of JPY 79.1 billion over the previous year. Please turn to the top of the next page, Slide 5. My previous explanation was broken into 3 parts but this page shows the usual consolidated total for profit and loss. I would like to give a further explanation of everything showing below operating profit. In the upper table, right in the middle, we show financial income of JPY 3.3 billion, more or less in line with the previous year. At the very bottom, our profit for the period was JPY 36.2 billion.
Next, please turn the page to Slide 7. This is a summary of consolidated results for the first 9 months. First, please look at our results, excluding restructuring and special items. Revenue was JPY 2.752 trillion. Excluding the negative impact of foreign exchange movements, this was an increase of JPY 141.5 billion over the previous year, a rise of 5.3%. We achieved significant growth in PCs and services in Japan.
Operating profit was JPY 124.3 billion, an increase of JPY 114.9 billion from the previous year. Operating profit increased significantly, due not only to the effects of higher revenue from business in Japan, but also to continued improvements in profitability and to the efficiency of operating expenses.
Second, business restructuring. The negative impact on revenue of no longer including certain businesses from the consolidated totals, especially the restructuring of the device business, was a decline of JPY 161.2 billion.
Third are the one-off special items. The total impact of special items across the first 9 months was a decline of JPY 2.8 billion.
Profits related to the sale of businesses amounted to JPY 7.3 billion. This is what I touched on in my explanation of the third quarter earlier.
Business model transformation expenses amounted to JPY 10.1 billion. This consists of 2 main parts. First, JPY 7.6 billion in expenses related to the restructuring of an electronics component plant in Japan. Second, JPY 2.5 billion in expenses related to business outside Japan.
Last year, in terms of special items, we had significant onetime gains in the first half due to factors such as a change in the retirement benefit system. So despite business model transformation expenses in the third quarter, primarily in Europe, the consolidated total impact of special items for the first 9 months of the previous year was an increase of JPY 54.8 billion. The impact of special items this fiscal year, therefore, represents a fall of JPY 57.6 billion relative to the previous year, primarily due to this difference.
At the very bottom of the table is our consolidated total operating profit of JPY 121.4 billion, due to significant increases in our operating profit, excluding special items and restructuring. We were able to make up the difference in the impact of special item gains compared with the previous year, resulting in an increase in operating profit of JPY 54.9 billion.
Next, please turn the page to Slide 9. As with the third quarter results, this page shows the usual consolidated totals for profit and loss. I would like to give a further explanation of everything showing below operating profit. In the upper table, right in the middle, we show financial income of JPY 13.1 billion, a fall of JPY 11.6 billion from the previous year. This reflects the onetime profits relating to the sale of the PC business recorded in the previous year that did not recur this year. At the very bottom, our profit for the period was JPY 99.9 billion.
Next, please turn the page to Slide 11. This is a breakdown of the factors behind the changes in operating profit from the previous year for the third quarter. On the far left, we show our results for the third quarter of fiscal 2018, an operating loss of JPY 28.7 billion. From here, if we exclude the JPY 44.8 billion in losses due to special items and restructuring in the previous year, we have an operating profit for the third quarter of the previous year of JPY 16 billion. This is our starting point, and subsequent arrows will reflect increases and decreases in operating profit in this third quarter compared to the previous year.
The first upward-facing arrow shows an increase of JPY 5.6 billion. This is the increase in profit due to the JPY 21 billion increase in revenue. Strong sales in Japan have continued from the fourth quarter of the previous year, resulting in an increase in revenue in this third quarter as well. The second upward-facing arrow shows an increase of JPY 15.8 billion. This is the increase in profit due to profitability improvements.
In services, we have not only continued to improve development efficiency in Solutions SI, we have also continued to improve the efficiency of maintenance and operational support for infrastructure services in Japan.
In system products and Ubiquitous Solutions, profitability improvements have continued, primarily due to lower costs from lower prices of key components.
The third upward-facing arrow shows an increase of JPY 12.6 billion. This reflects not only the impact of limiting fixed expenses, due to the resource shift, but also continued efficiency improvements in operating expenses, including a downsizing of our indirect or administrative operations and changes to upfront investments.
Combining the 3 arrows, the total improvement in operating profit, excluding restructuring and special items, was an increase of JPY 34.1 billion. This reflects a total improvement in Technology Solutions, our core segment and other elimination and corporate of about JPY 26 billion. While in Ubiquitous Solutions, we saw an improvement of about JPY 8 billion.
The final arrow represents the impact of special items in the third quarter. As mentioned earlier, when you add together the positive and negative special factors, the total effect is fairly insignificant. Adding that altogether, the total operating profit for the period is JPY 50.4 billion. I would like to give a further explanation of the higher revenue when restructuring and special items are excluded. So please turn to the bottom of the page, Slide 12.
Continuing from the first half, revenue in Japan grew, primarily in Services and Ubiquitous Solutions. Revenue in Japan was JPY 37.7 billion, an increase of 7% from the previous year. Below is a breakdown of that revenue. Revenue from Technology Solutions in Japan grew by 4% year-on-year. Services saw revenue growth, primarily in Solutions SI, while System Platforms also grew. Revenue from Ubiquitous Solutions increased 9% over the previous year. While rush demand due to the consumption tax increases over, revenue continued to grow in the third quarter due to strong demand, including demand resulting from the end of the support period for Window 7.
Please turn to the top of the next page, Slide 13. I would like to give some further information on the status of incoming orders in Japan. For Fujitsu Limited, on an unconsolidated basis, incoming orders in the third quarter were in line with the previous year. Since the first quarter of fiscal 2018, orders in each quarter had exceeded those of the previous year. This third quarter is on par with the previous year, but we saw a higher rate of growth in the third quarter of last year. So in absolute terms, we have been able to maintain the high level of orders.
For the first 9 months, we have seen a high level of growth at 108%. There has been no change in the desire of our customers to invest in systems aimed at transforming business processes and creating new businesses, so we expect to be able to maintain a high level going forward. Next, I would like to comment on the effects of the business model transformation carried out last year.
Please look at the bottom of the page, Slide 14. First, the impact of the reduction of fixed expenses relating to the resource shift was JPY 5 billion in the third quarter. The breakdown by segment is shown in the table. The impact of measures such as the restructuring of plants in Japan was JPY 0.7 billion. Total impact of business model transformation in the third quarter was JPY 5.7 billion. The cumulative impact for the first 9 months was JPY 16.7 billion. We expect that the effect for the year will amount to JPY 22.1 billion.
As for the business model transformation in Europe, our various programs are proceeding on schedule. We are working to complete all programs, including exiting from unprofitable countries and the closure of the factory in Augsburg in the first half of fiscal 2020. And we plan to see the impact of the transformation starting in the second half of 2020. Next, we will move on to the segment-by-segment explanation, mainly in comparison to last year's results.
Please turn the page, Slide 16. This shows revenue and operating profit for each segment. This is Technology Solutions. Revenue was JPY 757.3 billion, a decrease of 0.9% over the previous year. Operating profit, JPY 56 billion, up JPY 37 billion from last year. I'll explain the details in my discussion of the subsegments.
Next, please turn to the top of the next page, Slide 17, the breakdown of the subsegments. First, Services. Revenue was JPY 656.6 billion, a decline of 0.7% from the prior year. Excluding the impact of foreign exchange movements, revenue increased by 0.6%. To break that down further, revenue from Solutions SI was JPY 286.7 billion, an increase of 6.7% over last year.
In addition to ongoing growth in the revenue from customers in the manufacturing sector and the retail and logistics centers, we have also seen growth in the public sector, primarily local government and health care. So this third quarter, yet again, was our highest revenue ever.
Revenue from Infrastructure Services was JPY 369.8 billion, down 5.7% from the previous year. While revenue in Japan remained strong, particularly in monthly fee services, such as outsourcing, overall revenue fell slightly relative to the previous year because of a major business deal relating to infrastructure construction in the previous year.
Outside of Japan, revenue fell due to continued weak sales in the U.S. and Europe as well as the continued foreign exchange impact of the strong yen against the euro and the pound. Operating profit was JPY 45.4 billion, up JPY 7.9 billion from the prior year. Excluding restructuring and special items, operating profit increased by JPY 12.3 billion over the previous year. This increase was primarily in Services in Japan. Outside of Japan, operating profit was more or less in line with the previous year.
In Japan, operating profit rose significantly due to the effects of higher revenue from Solutions SI as well as improved profitability. In addition to an improvement in the utilization rate of system engineers, due to the increase in revenue in Solutions SI, efficiency also continued to improve due to the automation of development.
Infrastructure Services also achieved ongoing improvements, including the reduction in maintenance component costs and the standardization of operations support tasks.
Business model transformation expenses for the third quarter were JPY 5.5 billion, up JPY 4.3 billion from the previous year. We are conducting write-downs of assets for our businesses outside Japan, including inventories.
Next, please look at the bottom of the page, Slide 18, System Platforms. Revenue was JPY 100.7 billion, down 2.3% from the prior year. To break that down further, revenue from system products was JPY 58.5 billion, up 2% from the previous year. There was an increase in mainframe-related projects.
Revenue from Network Products was JPY 42.1 billion, down 7.7% from the previous year. 5G base stations for preservice were delivered in the second quarter, and delivery of commercial units will begin in the fourth quarter. So looking at the segment on a quarterly basis, this third quarter will be the low point. There has been no change to our overall plans and the delivery of commercial units in the fourth quarter is the starting point that will lead to an expansion into full-scale 5G projects.
Operating profit was JPY 10.5 billion, an improvement of JPY 29 billion from the previous year. Excluding the previous year's business model transformation expenses as well as this year's restructuring and special items, operating profit increased by JPY 5.8 billion.
There are 2 main factors. The first is improvements in the profitability of System Products. This improvement is due not only to improvements in our product mix, such as an increase in mainframes, but also to cost reductions as a result of lower prices on key components. The second is continued efficiency improvements in operating expenses.
Next, please turn to the top of the next page, Slide 19, Ubiquitous Solutions. Revenue was JPY 133.2 billion, up 8.2% from the previous year. Although we expected sales revenue for PCs to be weak in the third quarter because we expected purchases to be concentrated in the first half prior to the introduction of the higher consumption tax, there was a continuation of demand for replacement PCs in response to the end of the support period for Windows 7, so revenue in the third quarter also increased from the previous year.
The segment reported an operating profit of JPY 8 billion, representing an improvement of JPY 26.6 billion from the prior year. Excluding the impact of business model transformation expenses recorded last year and other special items, operating profit increased by JPY 8 billion.
In addition to the effect of higher revenue, operating profit increased due to improved profitability, thanks to lower prices on key components such as memory. Because of lower prices with key components, we expected that we would have to lower unit sales prices on PCs, starting in the third quarter. But replacement demand for PCs was strong, and we were able to maintain the same pricing levels as last year.
At the bottom of the page, Slide 20, Device Solutions. Revenue was JPY 74.5 billion. This is a significant decline from the previous year due to the impact of business restructuring. In addition to the impact of the restructuring that occurred in last year's fourth quarter, revenue declined by JPY 61.5 billion because starting this third quarter, results from the Mie plant are no longer consolidated. Excluding that, revenue increased 4.1% from the previous year.
The segment's operating profit was JPY 0.5 billion, a decline of JPY 2 billion from the previous year. The impact on operating profit from the restructuring expenses for the Electronic Components business and the no longer consolidated results, due to business restructuring, was the decrease in operating profit by JPY 1 billion each, for a total of JPY 2 billion. Excluding restructuring and special items, operating profit was essentially unchanged from the previous year.
Please turn to the top of the next page to Slide 21, Other/Elimination and Corporate. In this segment, we record upfront investments that are shared company-wide and shared company-wide expenses that cannot be allocated to the other segments. Excluding restructuring and special items, the results for the third quarter, as shown at the top, were an operating loss of JPY 21.6 billion, which represented an improvement of JPY 7.8 billion from the previous year.
In addition to the effect of lower fixed costs due to the resource shift, we made progress in reducing indirect overhead costs. In addition, while pursuing selection and concentration in upfront investments, there were also projects that shifted out of the investment phase into the revenue-generating phase, leading to a large overall improvement.
Below that, you can see special items. In this fiscal year, we recorded a one-time gain on the sale of businesses. In the third quarter of last year, it was mainly expenses relating to the revision to the retirement benefit plan. At the bottom of the total figures, there was an improvement of JPY 17.4 billion from last year.
At the bottom of the page is Slide 22, cash flows. Cumulative cash flows from the first 9 months from operating activities were JPY 216.7 billion. This represents a net increase in inflows of JPY 200.4 billion from the previous year. The revenue level in the fourth quarter of the previous year was extremely high. And in addition to the collections of those accounts receivable, the revenue level in the first 9 months was also high, resulting in an increase in cash inflows from the previous year.
As a result of change in lease accounting, cash flows from operating activities increased by approximately JPY 43 billion. Cash flows from investing activities were a net outflow of JPY 44.5 billion. Last year, cash inflows from the majority sale of the PC business and an affiliate company in China as well as the sales across shareholdings were approximately JPY 120 billion. This year, cash inflows from the sale of the Mie plant and cross shareholdings were approximately JPY 60 billion. These factors account for the fluctuations from the previous year. Excluding these factors, investment was about the same level as the previous year. Free cash flow was JPY 172.2 billion.
Please turn to the top of the next page to Slide 23, Assets, Liabilities and Equity. At the end of the third quarter of fiscal 2019, total equity was JPY 1.316 trillion, an increase of JPY 62.3 billion from the end of the last fiscal year. The increase in net income and dividend payments were the main factors for the change. Equity attributable to owners of the parent ratio, shareholders' equity ratio was 38.8%.
Before we get to the financial forecast, I would like to comment on our progress in relation to our internal projections, although there is no slide for this. For the consolidated total operating profit compared to the internal projections publicly stated last time, we exceeded our projections in the third quarter by JPY 20 billion.
Broken out by segment, Technology Solutions and Other/Elimination and Corporate, combined, exceeded our projections by JPY 10 billion. Ubiquitous Solutions also exceeded our projections by JPY 10 billion. In addition to higher-than-anticipated demand in our businesses in Japan, we made more progress than expected in improving our profitability.
At the bottom of the page is Slide 24. This is the full year financial forecast for fiscal 2019. This time, we have changed our full year financial forecast. The new revenue forecast is JPY 3.850 trillion, an upward revision of JPY 50 billion. The new operating profit forecast is JPY 200 billion, an increase of JPY 40 billion. The new forecast for profit for the year is JPY 160 billion, an increase of JPY 35 billion. Each has been adjusted upward.
I would like to add to my explanation for the upward revision in operating income. Please turn to the top of the next page to Slide 25. Please look at the figures broken out by each segment. Please look at operating profit toward the bottom of the table, at the column comparing our projections from last October.
First, we have reshuffled the segments in which the JPY 7 billion in business model transformation expenses for the third quarter were recorded. There was a reduction of JPY 5 billion for the services subsegment of Technology Solutions. There was a reduction of JPY 2 billion for Device Solutions. Offsetting these reductions, there was an increase of JPY 7 billion for other elimination and corporate.
Next is operating profit, excluding restructuring and other special items. Technology Solutions and Ubiquitous Solutions each have been increased by JPY 15 billion. Other/Elimination and Corporate has been increased by JPY 10 billion. The total upward revision is JPY 40 billion, all from our businesses in Japan. For each of the segments, I would like to comment on the reasons for any increases or decreases.
Please turn to the top of the next page to Slide 27. We will first look at Services and Technology Solutions. We have increased our revenue projections by JPY 10 billion. The breakdown is as follows: revenue for Solutions SI has been raised by JPY 25 billion.
Orders and revenue continue to be strong, so we have upwardly revised our full year revenue figure. Revenue from infrastructure services has been lowered by JPY 15 billion. For services outside Japan, the yen was stronger than we anticipated for foreign exchange levels in the third quarter, and that impact is the main reason for the revision. We have increased our projection for operating profit by JPY 5 billion.
Excluding restructuring and other special items, operating profit has been raised by JPY 10 billion. This increase is from our services business in Japan. In addition to the impact of raising our revenue projection for Solution SI, we also factored in profitability improvements in Solutions SI as well as in infrastructure services.
Next, please look at the bottom of the page, Slide 28. This is System Platforms. The forecast for operating profit from system products has been upwardly revised by JPY 5 billion. We factored in the impact of lower costs for key components and also a positive change in the product mix. At the time of our last forecast, we assume that the reduction in prices for key components would come to an end in the third quarter and then would gradually rise.
In the third quarter, prices for key components fell again and we also revised our assumptions about the timing of when prices would start to rise, pushing it back a bit. The forecast for both revenue and operating profit for Network Products is unchanged from our previous forecast.
Please turn to the top of the next page to Slide 29, Ubiquitous Solutions. The forecast for revenue has been adjusted upward by JPY 40 billion. As market demand was strong, we reviewed our revenue for the full year. At the time of our last forecast, we assumed that revenue momentum would level off in the third quarter and significantly decline in the fourth quarter. Demand has been stronger than anticipated, and our revenue in the third quarter significantly exceeded the level in the previous year.
For the fourth quarter, we factored in a revision to the extent we expect revenue to decline. Our forecast for operating profit has been raised by JPY 15 billion. The main reason is the increase in unit sales in the third quarter. In addition, it also reflects better profitability because of being able to maintain unit sales pricing.
Please turn to the top of the next page, Slide 31, the full year forecast for Other/Elimination and Corporate. Operating profit has been upwardly revised by JPY 17 billion, excluding restructuring and other special items, and has been upwardly revised by JPY 10 billion. We factored in lower upfront investments and further progress in generating efficiencies in administrative work and other indirect units.
At the bottom of the page is Slide 32, Cash Flow Forecast. Our new forecast for free cash flow is JPY 150 billion, an increase of JPY 50 billion from the previous forecast. In addition to our expectation of higher profits, the output adjustment reflects the fact that revenue in the first 9 months of fiscal 2019 was much higher than in the previous year.
Lastly, please turn to the top of the next page to Slide 33. I want to add 2 points about shareholder returns. The first point is our planned dividends for fiscal 2019. For fiscal 2019, there was an interim dividend of JPY 80. And we plan to pay a year-end dividend of JPY 100 for a total of JPY 180. This represents an increase of JPY 20 over our previous dividend forecast and JPY 30 higher on an annual basis than what we paid last year.
Based on our basic policy of paying a stable dividend, and in accordance with improvements in our financial performance, we will increase our dividends.
For the second point, please turn to the bottom of the page to Slide 34. This is about share buybacks. In light of increases in our cash flow and other improvements to our immediate financial condition, we want to make comprehensive judgments that take into consideration improvements in capital efficiency, among other issues, and we will execute JPY 50 billion in share buybacks.
We have set the timing for executing these buybacks at 1 year and plan to take an agile approach, taking into consideration such factors as trends in the market and our stock price. Those are the 2 points relating to changes in shareholder returns. These changes were made against the backdrop of improvements in our financial performance this fiscal year, but we are currently rethinking the direction of our capital allocation over a slightly medium-term horizon.
There is no major change to our thinking about capital allocation, which is to prioritize growth investments, shareholder returns and maintaining a solid financial foundation to support our business. But we plan to provide you with further information at the end of the fiscal year, including about issues relating to the scale of these priorities.
In addition to the growth of our business, improvements in its profitability and the strengthening of our ability to generate cash, we want to work on improvements to capital efficiency as another key performance indicator.
This concludes my presentation today.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]