Profit structure reform status under the Mid-term Management Plan 2020
Tokyo, November 29, 2018 - Aiming to implement continued investments in order to get back on the track to growth under the Mid-term Management Plan 2020, NEC Corporation (NEC; TSE: 6701) is introducing significant reforms to its profit structure.
As part of these efforts, NEC is announcing the results of human resource measures, including a career transition support measure that promotes voluntary retirement within the NEC Group, and the transfer of its lighting business. These measures will allow NEC to streamline its workforce by approximately 3,000 personnel, and are expected to improve earnings by approximately 24.0 billion yen on an annualized basis.
1．Human resource measure results
(1) Career transition support measure
- (1) Eligible employees:Employees of NEC and Group companies belonging to back-office departments and particular departments under the hardware business segment who are 45 years old or older and have worked for the company for at least five years
- (2) Target number of applicants:Unspecified
- (3) Application period:October 29 to November 9, 2018
- (4) Retirement date:December 28, 2018
- (5) Support to be provided:In addition to the regular retirement allowance, an additional "career transition support allowance" will also be provided, along with access to reemployment support services through a reemployment support agency
- *Different conditions apply for some Group companies
- *International subsidiaries and some Group companies are excluded from this measure
Number of applicants: 2,170
The cost of implementing this measure will be approximately 20.0 billion yen, recorded as business structure improvement expenses for the third quarter of the fiscal year ending March 2019 (nine months ending December 2018). This cost has already been taken into account for the consolidated financial forecast for the fiscal year ending March 2019.
(2) Other measures
In addition to the "career transition support measure," NEC plans to further reduce its workforce by approximately 400 personnel by the end of March 2019 through temporary and permanent transfers to companies outside the NEC Group, including subcontractors and client companies.
2．Transfer of lighting business
NEC has also decided to transfer all businesses of NEC Lighting, Ltd., which handles NEC's lighting business, through a company split to a newly formed company under the investment fund that receives advice from Nippon Mirai Capital Co., Ltd. The transfer is scheduled to take place on April 1, 2019. As a result of the transfer, NEC will receive 5% of the shares of the new company.
Beginning with the mass production of fluorescent lamps in 1952, for more than 60 years, NEC has provided a safe, secure, and comfortable living environment to its customers through lighting. Following the rapid shift in demand to LED lighting, which has a simpler manufacturing process compared to fluorescent lights, competition in the lighting market has continued to further intensify. In recent years, NEC has been focusing on Solutions for Society designed to bring about the sophistication of social infrastructure through ICT. In this connection, the company has come to the decision to aim for medium- to long-term business growth by carrying out reforms in profit structure through flexible business management in regard to NEC's lighting business under Nippon Mirai Capital Co., Ltd., a management company for domestic and independent investment funds, which possesses extensive experience in the formulation of growth strategies for companies being invested in and the provision of support for their execution, as well as support for the creation of organizational structure for the subsidiaries of large companies that are becoming independent.
Along with continuing to pursue reforms in its profit structure, NEC will accelerate initiatives aimed at achieving growth, such as the expansion of its global business centering on safety business as the engine for growth, the shift to a service-oriented business model in its domestic business within Japan, and the creation of business infrastructure for enhancing its execution capabilities.
Reference: Overview of NEC Lighting, Ltd.
Business domain: Development, manufacture, and sale of lamp products, lighting apparatus, and related products
Date of establishment: January 18, 2000
Capital: 1,000 million yen (NEC Corporation 100%)
Annual sales: 17,200 million yen (March 2018)
Number of employees: 403 (as of March 2018)
About NEC Corporation
NEC Corporation is a leader in the integration of IT and network technologies that benefit businesses and people around the world. The NEC Group globally provides "Solutions for Society" that promote the safety, security efficiency and fairness of society. Under the company's corporate message of "Orchestrating a brighter world," NEC aims to help solve a wide range of challenging issues and to create new social value for the changing world of tomorrow. For more information, visit NEC at https://www.nec.com.
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