Itochu Corp
TSE:8001
Itochu Corp
Itochu Corp, steeped in a rich history that traces back to 1858, has evolved from its humble beginnings as a textile trading company in Osaka into a titan of global commerce. This Japanese conglomerate is characterized by its shrewd diversification strategies, transforming over decades into a multifaceted powerhouse with its fingers in numerous pies. Today, Itochu’s influence can be found across various industries, including textiles, machinery, metals, energy, chemicals, food, and real estate. As one watches Itochu navigate the complexities of international trade, the corporation’s ability to adapt and expand is on full display, utilizing a mix of traditional trading prowess and innovative investments to fuel its growth.
As with any formidable trading entity, the key to Itochu’s success lies in its ability to orchestrate and leverage an intricate network of business relationships worldwide. The company executes a brilliant balancing act by maintaining a diverse portfolio that mitigates risk while maximizing opportunities for synergy. For instance, in the food sector, Itochu not only distributes beverages and frozen foods but also heavily invests in agricultural businesses, ensuring a stable supply chain from production to retail. Meanwhile, in energy, the corporation continues to adapt to the shifting paradigm towards sustainability. Its robust operations allow it to profit not merely from the movement of goods and commodities but also from value-added services, licensing agreements, and shrewd joint ventures. Through a meticulous blend of traditional trading tactics and forward-thinking innovations, Itochu Corp consistently positions itself as a vanguard in the global market theater, harnessing its historical foundation with modern-day market dynamics.
Earnings Calls
In Q3 of fiscal 2024, Fujitsu reported a modest revenue decline of 0.8%, totaling JPY 2.621 trillion. Service Solutions thrived, with revenue rising 2.7% to JPY 1.563 trillion, driven by digital transformation demand in Japan which saw a 6% increase year-on-year. Adjusted operating profit surged to JPY 161.5 billion, up JPY 45.2 billion, marking a 10.3% profit margin. For fiscal 2024, revenue is projected at JPY 3.47 trillion and operating profit at JPY 290 billion. Additionally, Uvance, a key growth driver, aims for JPY 450 billion in revenue, reflecting a 22% increase from last year.
Management
Keita Ishii is a prominent executive at Itochu Corporation, a leading Japanese trading company. He has been with the company for a significant portion of his career, contributing to its growth and diverse business ventures. Over the years, Ishii has held various positions within Itochu, showcasing his expertise in international trade, business strategy, and management. Throughout his tenure, Ishii has been involved in expanding Itochu's operations both domestically and internationally, demonstrating keen insights into market dynamics and opportunities. His leadership style is known to emphasize innovation, collaboration, and sustainable practices, aligning with the company's broader strategic goals. Keita Ishii has played a crucial role in driving Itochu’s initiatives across various sectors such as energy, textiles, food, and technology. His work reflects a commitment to enhancing the company's competitive edge and adapting to the evolving global trade environment. Through his efforts, Ishii continues to contribute to Itochu's standing as one of Japan's most influential sogo shosha (general trading companies).
Shuichiro Yamaura is a prominent executive at Itochu Corporation, a major Japanese trading company. He has built a significant career within Itochu, known for its diverse operations in textiles, machinery, information technology, and other sectors. Yamaura has held various leadership positions within the company, contributing to its strategic development and business expansions. His expertise is often reflected in the company's innovative approaches and global operational strategies. Yamaura is recognized for his role in strengthening Itochu's market presence and adapting the company's business model to evolving market conditions. His leadership is marked by a focus on sustainable growth and international collaboration.
Tomoyuki Takada is a prominent executive at Itochu Corporation, one of Japan's leading trading companies, known for its diversified business operations worldwide. Over the years, Takada has held various significant roles within the company, demonstrating expertise in corporate planning, strategic development, and international business operations. His leadership skills have contributed to Itochu's growth and adaptation in a rapidly changing global market. As a key figure in the management team, he has been involved in various initiatives to enhance Itochu's competitive edge, focusing on sustainability, innovation, and global expansion. His experience and strategic vision continue to be instrumental in driving the company towards achieving its long-term objectives.
Kazunori Harada serves as an executive at Itochu Corporation, a leading Japanese trading company with a global presence. With a career at Itochu that spans several years, Harada has held various key positions within the company, focusing on areas such as strategic planning, business development, and international trade. His leadership style emphasizes innovation, operational efficiency, and sustainable growth, reflecting Itochu's commitment to expanding its global reach while maintaining strong ethical and social responsibility standards. Harada has played a significant role in enhancing Itochu's business operations and fostering partnerships across different sectors worldwide. His contributions have been instrumental in advancing the company's core initiatives and successfully navigating the complexities of the global market.
Mitsuru Claire Ike is a prominent executive at Itochu Corporation, one of Japan's largest trading companies. She has carved a notable career within the corporate landscape, demonstrating leadership and expertise, particularly in legal and corporate affairs. At Itochu, she has managed various responsibilities that enhance the firm's governance and global operations. Known for her strategic acumen and understanding of international markets, Mitsuru Claire Ike plays a vital role in steering Itochu's corporate affairs to meet the dynamic demands of the global trading environment. Her work focuses on compliance, corporate governance, and building sustainable corporate strategies, contributing significantly to Itochu's reputation and operational efficiency on the global stage.
Toshiyuki Kakimi is an executive at Itochu Corporation, a leading Japanese trading company. Over his career at Itochu, Kakimi has held various key positions that have contributed to the company's growth and strategic initiatives. He has been involved in business development, resource management, and strategic planning across different sectors. Notably, Kakimi has played a significant role in Itochu’s textile and apparel divisions, leveraging his expertise to enhance operational efficiencies and market reach. His leadership style is characterized by a focus on innovation and sustainability, aligning with Itochu's broader corporate goals. Kakimi's career reflects a deep understanding of global markets, and he is recognized for his ability to drive cross-border collaborations and partnerships. His contributions are not only limited to business operations, but he also actively participates in community outreach and corporate social responsibility initiatives, reinforcing Itochu's commitment to ethical business practices. Overall, Toshiyuki Kakimi is a prominent figure within Itochu Corporation, recognized for his strategic insight and leadership in navigating the challenges of the global trading landscape.
Hideo Nakanishi is a notable executive at Itochu Corporation, a major Japanese trading company. He has held various key positions within the company, contributing to its strategic growth and operational success. Mr. Nakanishi is recognized for his expertise in business development and management, particularly in sectors such as textiles and apparel, which are significant areas of focus for Itochu. Throughout his tenure, he has been instrumental in overseeing and enhancing the company's supply chain operations and expanding its global reach. Known for his leadership skills and strategic vision, Nakanishi has played a pivotal role in fostering partnerships and driving sustainable business practices within the organization. His contributions are highly regarded within Itochu, making him a prominent figure in the company's leadership team.
Hiroyuki Tsubai is an esteemed executive at Itochu Corporation, a prominent Japanese trading company with diversified operations across various sectors, including textiles, machinery, chemicals, food, and more. Tsubai has made significant contributions to the company's global strategies and business expansions. Known for his leadership skills and extensive experience in the trading industry, he has played a pivotal role in enhancing Itochu's competitiveness and fostering sustainable growth initiatives. His strategic vision has been instrumental in driving the company towards innovative solutions and strengthening its position in global markets.
Masatoshi Maki is an executive at Itochu Corporation, a prominent Japanese trading company. As of recent information, he serves as the Chief Financial Officer (CFO) of the corporation. In his role, Maki is responsible for overseeing the financial strategy and operations of Itochu, playing a key part in driving the company's financial performance and strategic growth initiatives. Itochu Corporation, one of the leading sogo shosha (general trading companies) in Japan, is involved in a diverse range of businesses, including textiles, machinery, metals, minerals, energy, chemicals, and ICT. As CFO, Maki is instrumental in managing and optimizing Itochu's financial resources across these varied sectors. Throughout his career at Itochu, Maki has likely been involved in various aspects of corporate finance, investment strategy, and financial planning, contributing to the company's robust business model and adaptability in a dynamic global market. His leadership and expertise in finance are critical to maintaining Itochu's financial health and supporting its long-term strategic objectives.
Mr. Chiharu Higuchi is a notable executive in the corporate world, particularly known for his association with Itochu Corporation, one of Japan's leading trading companies. He has played a significant role in shaping the strategic direction and operational efficiency of the company. With a career that spans several decades within Itochu, Mr. Higuchi has accumulated extensive experience in various sectors and has been instrumental in fostering international business relationships. Throughout his tenure, he has been involved in various leadership roles, contributing to the company's global expansion and its diversification into sectors such as textiles, machinery, and food. His leadership skills, strategic vision, and understanding of international trade dynamics have been pivotal in the company’s continuous growth and adaptation to changing market conditions. Mr. Higuchi’s efforts have not only strengthened Itochu's foothold in the global market but also enhanced its corporate social responsibility initiatives, aligning business strategies with sustainable practices. His leadership exemplifies a blend of traditional business acumen and modern innovation, making significant impacts on the corporation's success and reputation.
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Thank you very much. I will give you the outline of the consolidated financial results for the third quarter 2024. I will explain based upon the material. First of all, please turn to Page 3. I will start by presenting our financial highlights for the first 9 months of the fiscal 2024.
Most important segment is Service Solutions, which continued to record progress, and higher revenue and operating profit. For the first half, revenue was JPY 1,563.1 billion, an increase of 2.7 billion (sic) [ 2.7% ]. In Japan, demand continued to be strong for digital transformation and modernization. Revenue in Japan rose 6% year-on-year.
Outside of Japan, because of the carve-out of the low profitability business, revenue declined by 5%. Excluding this, revenue was essentially unchanged from the previous year. Adjusted operating profit for Service Solutions was JPY 161.5 billion, increase of JPY 45.2 billion compared to the first 9 months of 2023.
The trend in the most recent third quarter showed similar progress. In addition to the impact of higher revenue, there has been progress in profitability. The adjusted operating profit margin improved to 10.3%, up 2.7 percentage points. And the total consolidated revenue was JPY 2 trillion or JPY 2,621.4 billion, a decrease of 0.8%. Revenue declined in Hardware Solutions, Ubiquitous Solutions.
Adjusted operating profit, JPY 157.6 billion, up JPY 38.7 billion year-on-year, and the margin was 6.0%, improvement of 1.5 percentage points from the prior year and mainly from the improvement in Service Solutions. Adjusted operating profit for the 9 months of the year hit a record high. Operating profit prior to adjustment was JPY 125.2 billion. There was a rebound from the onetime business restructuring costs recorded last year, resulting in an increase of JPY 78.7 billion for the fiscal year's first 9 months.
Page 4 shows the overview of the financial results for each business segment. I will discuss the results of each segments later, but I will give you the overall view.
Service Solutions, on the growth driver, had higher revenue and strong pace of progress in the profitability. Hardware, the revenue and profit fell, as there was a pullback from last year's large-scale deals.
Ubiquitous Solutions. Revenue declined because of the exit from a low profitability business in Europe. Profit increased, however.
In Device Solutions, the revenue and the profit increased, excluding the impact of the weak yen. However, results were essentially unchanged from the previous year.
Page 5 shows the consolidated PL, adjusted operating profit, adjusted amounts and the profits prior to adjustment.
Page 6, the following slide, show results for each segment. Service Solutions, starting from Page 7. Revenue was JPY 1,563.1 billion, up 2.7% year-on-year. Primarily in Japan, there were continued increases in demand for digital transformation and modernization services, 6% increase in revenue in Japan compared previous year. Global, the Fujitsu Uvance revenue rose 30.1% year-on-year.
Adjusted operating profit was JPY 161.5 billion, up JPY 45.2 billion year-on-year. And adjusted operating profit margin was 10.3%, improvement of 2.7 percentage points. I will explain the components increase in the profit with a waterfall chart on the next page.
This chart shows the factors that caused the increase and decrease in the adjusted operating profit in Service Solutions. Far left, the operating profit, JPY 116.3 billion. And then the starting point for examination changes in the operating profit in the first 9 months of this fiscal year to the right of that.
The first factor is an increase of about JPY 25.4 billion in adjusted operating profit from the impact of higher revenue. Second factor is an increase of JPY 38.8 billion from improved profitability. We continue to make progress in initiatives to improve productivity. And in the international regions, there was a positive impact from the carve-out of low profitability business. Gross margin improved by 2.6 percentage points from the previous year.
The third factor is a decline of JPY 19 billion from the higher expenses, including investment in the growth business. In accordance with the plans, we are implementing investment in the business, such as the development of Uvance offerings, meeting the increasing demand for the modernization business and others. And adding this up, adjusted operating profit for Service Solutions in the first 9 months of the year was JPY 161.5 billion.
Page 9, I will provide supplemental information in each of the factors in the previous chart. First, the status of orders. This is in Japan. Compared to the previous year, in the third quarter, Japan rose 9% and rose by 2% for the first 9 months. Last year, we won large-scale multiyear contracts, and we had an extremely high level of orders throughout the year. Nevertheless, we were still able to exceed the previous year's level this year.
Column at the far right shows the, for reference, compound annual growth rate for the cumulative first 9 months of the year, with fiscal 2022 as a starting point. Orders in Japan have grown at an average rate of 9%. I will comment on each segment.
First of all, Private Enterprise Business segment. And the orders were up 5%, and there were continued growth in the projects related to digital transformation and sustainability transformation and modernization and mission-critical systems. There is an increasing demand across the industries. Orders were up 6% in international business.
We were able to win multiple large-scale deals to upgrade mission-critical systems for financial institutions. And using fiscal 2022 as the starting point, the annualized average growth was 15%.
In the Public & Healthcare segment, orders fell 5%. In the third quarter, we won deals for mission-critical systems, and orders were up sharply by 11% compared to year-on-year when there was a high level of orders. On the other hand, there was a pullback from the first half of last year when we received orders for large-scale multiyear deals. And the average annual growth rate in orders since fiscal '22 has been 6%.
In Mission Critical and Other segment, orders were up 10% from the previous year. We received multiple large-scale deals such as cloud-related projects. The average annual growth rate in orders since '22 has been 19%, which has been very high.
We foresee there will be multiple large-scale deals in the fourth quarter, mainly in the field of national security. While there are variations in the figures by market segments among the quarters, but the overall major trend of expansion in demand has continued, and we are -- we will continue win new projects.
Looking at our pipeline of expected orders, we are expecting to see a similar expansion in demand in the fourth quarter. While converting our backlog of our orders to date into sales, we believe that we can continue to increase revenues in the fourth quarter and then fiscal '25 as well.
Page 10 shows the orders in regions in the international regions. Orders for Europe and Americas region declined compared to last year. This represented pullback from last year's large-scale deals, but we anticipate there will be large deals in the fourth quarter, and we are going to win them. Orders for the Asia Pacific region were up 45% from the previous year. In Oceania, we were able to win multiple new deals and renewals in the public sector.
Page 11 shows the progress of Fujitsu Uvance, which are positioning -- positioned as the most vital area for our business. Orders received amounted to JPY 348.5 billion, increase of 32% year-on-year. And the revenue is shown below.
The bar graph, deep blue portion, depicts revenue from the vertical areas. And the light blue are revenues from 3 horizontal areas, which are technology platforms that support the aforementioned cross-industry areas. Overall, revenue in the first 9 months was JPY 321.7 billion, up 30%, and vertical areas grew by 78%.
And the share of revenue from Fujitsu Uvance in Service Solutions increased from 16% from the previous year to 21%. For Uvance, orders and the revenue are performing well and progressing at a strong pace towards our target.
On the right-hand side of the graph, there is a revenue target for fiscal '24 and '25. Revenue target for fiscal '24 is JPY 450 billion, increase of about JPY 100 billion from the previous year, growth of 22%. Growth in the first 9 months was 30%, slightly above our plan.
We are seeking to achieve our target for Uvance's revenue of JPY 700 billion in fiscal 2025. The final fiscal year of the mid-term management plan, in which we seek to have Uvance, represent 30% of the total revenue in Service Solutions. In that sense, we are still in the launch phase. We need to drive it even higher level of performance.
Page 12 shows the status of the modernization business. Revenue for the first 9 months of the year was JPY 139.4 billion, up 74% year-on-year. The full year revenue target shown on the right-hand side is JPY 200 billion, an increase of 69% from the previous year. Therefore, for the first 9 months of the year, modernization business has also progressed slightly above the plan. Excluded from this figure are revenues that would overlap with Fujitsu Uvance and hardware revenue from modernization business.
We will improve profitability through such initiatives as knowledge aggregation and automation to implement a thorough modernization of IT assets of our customers, and while expanding our digital transformation and sustainable transformation business.
Page 13 provides supplemental information about the status of our efforts to improve profitability and the status of our growth investment. Increase in profit resulting from profitability improvement in the first 9 months was JPY 38.8 billion. Gross margin was 35.9%, improvement of 2.6 percentage points year-on-year. As shown on the graph, profitability is continuing to improve at steady pace year after year.
We are steadily continuing to improve productivity in services through such measures as the standardization, automation and bringing work in-house and expanding the use of offshore operations. And in addition, improvements monitoring profitability has also contributed to the improvement of profitability.
Of course, customers have recognized the value we deliver. And another positive point has been that we made progress on setting appropriate pricing, and we can also see this in the international regions. On the right side, the expansion in the gross investment was JPY 19 billion, representing a negative impact on the operating profit.
In addition to developing offering for the Fujitsu Uvance and knowledge aggregation to handle the expansion in modernization business, we have continued to proactively and systemically direct investment towards the business growth, such as investment in developing and hiring employees with special skills. The pillars of growth in Service Solutions are Uvance, modernization and consulting, and we are moving ahead with investment to support the acceleration in expanding these growth business.
Page 14 shows the status of each segment in Service Solutions. First of all, Global Solutions. Revenue was JPY 367 billion, up 10.7% year-on-year. On the adjusted basis, subsegment posted an operating loss of JPY 4.8 billion. Although the subsegment secured the profit looking only at the third quarter, in terms of cumulative total for the first 9 months, it is still in the red.
Revenue increased by double digit, primarily by Uvance who did -- meanwhile, we are also accelerating and developing offerings, primarily in the Uvance vertical areas and strengthening the investment in delivery standardization, such as modernization knowledge center. The planned upfront investment for the start-up of the business, so we do not view this as a particularly negative factor.
We will carefully assess each of our investment in each -- these areas, including expansion of the sale of each of these offerings. We believe that, in the fourth quarter, we will be able to increase the subsegment's profitability through a further increase in revenue and become profitable on a full year basis.
Next, regions in Japan. Revenue was JPY 905.2 billion, up 2.1% year-on-year. Adjusted operating profit, JPY 153.9 billion, up JPY 31 billion from the previous year. Expansion of demand in digital transformation business and modernization business, such as the upgrades to mission-critical system led to increase in revenue, mainly in mobility and finance sector.
In addition to the impact of higher revenue, we will continue to make the fine progress on improving profitability. The adjusted profit margin had a significant 3.1 percentage point improvement year-on-year so 17%, while growth -- profit growth was steady. Skewing revenue towards the first quarter remains the main issue.
Although we have many expected orders in the pipeline for the fourth quarter revenue, having a large concentration of orders in the fourth quarter could lead to issues and concerns. And our first priority is to ensure orders for the first -- fourth quarter are converted into actual sales. At the same time, we will also work to make progress on expanding on a recurring basis.
International region. Revenue was JPY 421.8 billion, down 5.3% from the previous year. Adjusted operating profit, JPY 12.4 billion, up JPY 15.6 billion year-on-year. Revenue was down due to the impact of the carve-out of low profitability German private cloud business. But aside from the impact of this, revenue was at the same level as the previous year. In terms of the profitability, transformation of our business portfolio has a significant positive impact. While improvement in profitability and the level of profitability is still low, we are seeing the results of the improvement.
Page 15 shows the progress of our profit plan. The third -- 3 figures on the left-hand side shows the cumulative adjusted operating profit by quarter. Light color shows the figure for fiscal '23 and the dark blue shows 2024. So each fiscal year, there has been -- not been any significant changes to each of these quarters. And as a result, adjusted operating profit for the first 9 months was JPY 161.5 billion. Progress rate and the rate towards the annual target is at 58%, up 9 percentage point year-on-year.
Right-hand side is the actual results for fiscal '23 and '24. So the -- we must record roughly JPY 120 billion in adjusted operating profit in the fourth quarter to achieve this target. While situation remains impossible to predict, we will work towards achieving the scale of profit shown here.
Page 16, I will talk about the other segments besides Service Solutions. First of all, Hardware Solutions' revenue was JPY 712.8 billion, down 4.7% year-on-year. And the adjusted operating profit, JPY 14.1 billion, a deterioration of JPY 23 billion.
In System Products business, in addition to pullback from the large-scale business deals in the public sector last year, the -- and the weak yen led to the higher component costs and resulted in decline in operating profit and revenue.
Network Products demand in both in and out of Japan this year has been about the same level. We are continuing to invest in the product development as we prepare for the next growth cycle, but the business still remains difficult.
Next is the Ubiquitous Solutions. Revenue was JPY 181.4 billion, down 8.2% from the previous year. Adjusted operating profit, JPY 20.3 billion, increase of JPY 3.6 billion year-on-year. Decline in revenue was mainly the result of the exiting of the business in Europe.
In the segment's continuing business in Japan, there was an increase in revenue due to demand related to preparing for the end of support for Windows 10 in October 2025. In terms of profitability, exiting the business in Europe business has streamed losses, or in other words, having the positive effect and the improved profitability to the point that it exceeded the negative impact of a weak yen.
Page 17, Device Solutions. Revenue was JPY 217.5 billion, up 2.4% from the previous year. Adjusted operating profit was JPY 20.5 billion, an increase of JPY 7.8 billion from the previous year. In exported products from Device Solutions, foreign exchange movements had a positive impact on both revenue and profit, and the impact of this contributed to higher revenue and profit, but the recovery of demand has actually been slower than we planned. And looking at business performance, excluding exchange rate movements, revenue fell slightly, and both revenue and operating income fell below our target levels.
Below that is Intersegment Eliminations and Corporate. There was an operating loss of JPY 58.9 billion, with a decrease in expenses of JPY 5.1 billion compared to the previous year. We are continuing to advance group-wide business growth investments. Last year's temporary accumulation of inventory assets for transactions within the Fujitsu Group was eliminated, resulting in an improvement in unrealized gains, which was another positive factor.
Incidentally, for business growth investments that are managed group-wide, items related to cutting-edge research on AI and quantum computing as well as enhancing the management foundation of Fujitsu as a whole are areas that contribute to medium to long-term growth.
We have been advancing the OneFujitsu program, the global group-based ERP deployment project, as an investment to strengthen our management foundation. We started this program in 2020 and launched it in our services business in Japan in the third quarter. Currently, approximately 70,000 people have started using the program.
In addition to accelerating our digital transformation DX and advancing data-driven management, we will use Fujitsu's internal implementation of OneFujitsu, such as its actual formulation and usage condition, as a useful reference for us deploying it in our customer business as well.
Page 18. This concludes my overview of the status of adjusted operating profit that represents our core business. I will now briefly explain the onetime profit or loss adjustment items, including review of our portfolio to improve corporate value as well as our operating profit prior to adjustments, including these factors.
From the left, the table of -- tables from the first 9 months shows the actual results and comparisons with the previous fiscal year for adjusted operating profit, adjusted items and operating profit prior to adjustment. In the middle, in dark green, in the first 9 months of fiscal year 2024, an adjusted item reduced operating income by JPY 32.3 billion.
The main reasons for this were the approximately JPY 20 billion in expansion of expenses for the Self Produce Support program system, approximately JPY 4 billion in M&A-related expenses and approximately JPY 4 billion in business restructuring expenses. Last year, we recorded a onetime loss of approximately JPY 70 billion, mainly from business portfolio transformations and structural reforms in Europe as adjustment items.
As a result, in the box, in the far right, looking at comparisons with the previous year, adjusted operating profit was up JPY 38.7 billion. With adjusted items boosting operating profit JPY 39.9 billion from a decrease in costs and operating profit prior to adjustments, the sum of these 2 figures was JPY 78.7 billion.
Page 19, I will now review the status of our cash flows and balance sheet. Page 20, cash flows. Excluding onetime cash inflows or outflows, the core free cash flow was JPY 42.4 billion, an increase in inflows of JPY 32.6 billion year-on-year. Accounts receivable and inventory assets increased, mainly due to services in Japan, for which there has been a trend in higher revenue. We expect there to be cash inflows for -- from these areas in the fourth quarter as inventories are reduced and account receivables are collected.
Towards the bottom of the table, free cash flow, including onetime cash flows, was negative JPY 23.1 billion due to such factors as pullback from onetime cash flows in the cash inflows in the previous year, including from the sale of shares in Social Next. It is an increase in outflows of JPY 92.6 billion year-on-year.
Buybacks of Fujitsu's own shares are included in cash flows from financing activities. Through the third quarter, Fujitsu has executed JPY 111.7 billion in buybacks toward our annual target of JPY 180 billion. We are progressing as planned.
Page 21, the status of assets, liabilities and equity. I will omit explanation. Although this is not on the slide, this concludes my explanation of the 9 -- financial results for the first 9 months. Although it is not on this slide, I will now briefly comment on the progress that we have made with our targets.
Although the status of financial results of each segment during these 9 months varies, overall, we are mostly progressing as planned for our internal target. Performance and Service Solutions was slightly better than our target, with improvement in profitability.
Ubiquitous Solutions also performed better than our target against the backdrop of demand for placing Windows 10 due to end of support for it. On the other hand, Hardware Solutions, the weak yen and other factors have a slight negative impact on results. Moreover, particularly in network products, the status of orders and our pipeline of expected orders has been less than anticipated in our plans.
In addition, Device Solutions, recovering demand has been slower than anticipated, therefore, not meeting targets for both revenue and operating profit. And overall, consolidated basis, our rate of progress towards our profit target is improving more than before, and we will continue to work hard to achieve our targets.
Page 22, I will explain about the progress in our portfolio transformation. As a part of portfolio transformation, we've been working on carving out noncore business. I will explain about this progress.
First, Shinko Electric. As you may know, Fujitsu signed an agreement to sell its shares in Shinko Electric in December 2023. After this, the necessary procedures for domestic and foreign competition laws were completed in December 2024 and a tender offer bid is scheduled to take place in mid-February 2025. Following the tender offer bid, sales of shares, including share consolidation, is scheduled to take place in fiscal year 2025.
Secondly, Fujitsu Optical Components Limited. In December 2024, Fujitsu signed an agreement to sell its shares in Fujitsu Optical Components to Furukawa Electric. We expect to execute the sale of shares on April 1, 2025.
Number three, Fujitsu General. As we recently announced, Fujitsu signed an agreement to sell its shares in the company to Paloma Rheem Holdings in January 2025. We expect to execute sale of shares in fiscal 2025.
In line with the progress of these portfolio changes, this cash flow generation of JPY 1.3 trillion over 3 years of the medium-term management plan is in sight. Device Solutions will be reclassified as discontinued operation at the end of fiscal year 2024.
Page 25 shows what changes will occur if Device Solutions is classified as discontinued business operation. The left side shows the base case without any discontinued operation. The right side shows the changes if Device Solutions is classified as discontinued operation.
It shows adjusted operating profit from continuing operations, excluding Device Solutions. Both sides show actual results for fiscal '22 and '23, the previously announced forecast for fiscal '24 and figures for our medium-term plan for fiscal 2025.
Fiscal 2024, the base case on the left side has revenue of JPY 3,760 billion. Adjusted operating profit of JPY 330 billion. If Device Solutions is classified as discontinued operation, JPY 335 billion in revenue and JPY 40 billion adjusted operating profit, that would be subtracted from these figures, leaving JPY 3.425 trillion in revenue and JPY 290 billion adjusted operating profit, as shown in the right-hand side box.
Today's explanation is our third quarter financial results with accordance with our base case. But for the fourth quarter and beyond, our expectations will be based from continuing operations. As I just mentioned, past figures will also be restated.
Regarding the figures we have presented for our third quarter financial results, if there is a restatement to just reflect continued operations, as I just explained, we have attached some supplementary materials for your reference.
Starting from Page 26, we have the earnings forecast for fiscal 2024. The explanation here is in accordance with the continuing operations basis, as I just mentioned. The financial forecast for fiscal 2024 projects revenue of JPY 3.47 billion, JPY 45 billion increase from the previous forecast and adjusted operating profit of JPY 290 billion, which is unchanged from the previous forecast.
On the next page, I will explain the composition of these figures by segment. Page 28, Service Solutions. There are no changes from the previous forecast. Next is Hardware Solutions. Revenue is projected to be JPY 1.5 trillion, up JPY 20 billion from the previous forecast. Adjusted operating profit is projected to be JPY 62 billion, representing a downward revision of JPY 8 billion from the previous forecast.
In Systems Products, while we predict that revenues will exceed our target, the weak yen has also increased procurement costs. So the benefit to profit on a net basis is limited. For network products, in addition to a very slow recovery in demand and profitability is expected to deteriorate because of changes to the product mix. And these factors are expected to result in lower revenue and lower profit compared to the previous forecast.
Ubiquitous Solutions. Revenue is projected to be JPY 245 billion, up JPY 25 billion from the previous forecast. Adjusted operating profit is projected to be JPY 28 billion, representing an upward revision of JPY 8 billion to the previous forecast.
The start of replacement demand because of the end of support for Windows 10 has been earlier than anticipated, so we made upward revisions to revenue and profit compared to previous forecast.
Page 29 breaks out the actual results for the first 9 months and our forecast for the fourth quarter. The rate of progress in profit in the actual adjusted operating profit for the first 9 months was 47.3%, exceeding the level of the previous year by 7 percentage points, and we expect the level of profit in the fourth quarter to slightly below actual results in last year's fourth quarter.
Based on the pipeline of expected orders, level of existing order backlog and the progress in improving probability, we think we are on course to meet our targets, but the lopsided trend in the weight of fourth quarter profits still remains. So we will continue to work toward each of our goals without letting up.
Page 30 shows adjusted items for operating profit and our forecast for results prior to adjustments. Aside from the upward revision to revenue, which I just mentioned, there are no other changes from the previous forecast.
Page 31. There are no changes from the previous forecast to core free cash flow or free cash flow. As I have explained, in the third quarter overall, there were no major deviations from the performance trends of the first half.
In our main focus area of Service Solutions, with the expansion of Fujitsu Uvance and our modernization business, we are making steady advances on initiatives to promote business growth and improve profitability. In addition, we were also able to report steps in our progress to carve out noncore business.
Although we are always exposed to a variety of potential changes in our business environment, we will continue to ensure that we do not delay in responding to these changes. To do so, what we think is most decisive is to continue to effectively execute our business portfolio transformation and our human resources portfolio transformation without interruption.
We will continue to work hard to achieve the medium-term management plan and beyond that, a sustainable improvement to our corporate value. This concludes my presentation.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]