Q3 2015 Earnings Financial Results for the Third Quarter Ended December 31, 2015 January 28, 2016 OMRON Corporation Summary FY15 Q1-Q3 Results • Sales remained flat while operating income decreased, Y/Y. • The worse-than-expected business environment had a negative impact on performance. FY15 Full-Year Forecast • The full-year forecast is revised down as the business environment in Q4 is worse than expected in Q2. Shareholder Return • 30% dividend payout ratio is applied; full-year dividend forecast is lowered to ¥68. • All of the 3.44 million shares of treasury stock (equivalent to ¥15bn) acquired in Q3 have been cancelled. 1 Contents 1. FY15 Q1-Q3 Results P. 3 2. FY15 Full-Year Forecast P. 10 3. Shareholder Return P. 20 References P. 25 2 FY15 Q1-Q3 Results 3 Q1-Q3 Results Full-Year Forecast Shareholder Return References Q1-Q3 Results Sales flat, OP down. (¥bn) FY14 Q1-Q3 FY15 Q1-Q3 Y/Y Net Sales 614.3 614.0 ±0% Gross Profit 243.9 237.4 -2.7% (39.7%) (38.7%) (-1.0%pt) 63.0 44.2 -29.9% (10.3%) (7.2%) (-3.1%pt) 65.5 44.7 -31.8% 49.3 33.9 -31.3% 1USD（JPY） 107.2 121.5 +14.3 1EUR（JPY） 140.5 133.5 -7.0 (%) Operating Income (%) NIBT Net Income Attributable to Shareholders 4 Q1-Q3 Results Full-Year Forecast Shareholder Return References Sales by Business Segment • IAB, EMC, AEC, and HCB posted sales growth. • SSB and Other down due to drop in PV inverters and backlights. (¥bn) FY14 Q1-Q3 IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Businesses under the Direct Control of HQ Eliminations & Corporate Total FY15 Q1-Q3 Y/Y 244.6 251.6 +2.9% 75.6 78.7 +4.1% 100.9 104.0 +3.0% 48.0 44.9 -6.5% 73.5 81.0 +10.3% 67.8 50.1 -26.1% 3.9 3.7 -4.4% 614.3 614.0 ±0% 5 Q1-Q3 Results Full-Year Forecast Shareholder Return References Operating Income by Business Segment • HCB up. • The other segments down mainly due to increase in growth investments. (¥bn / % of net sales) FY14 Q1-Q3 IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Businesses under the Direct Control of HQ Eliminations & Corporate Total FY15 Q1-Q3 Y/Y Main Reasons 40.3 36.8 -3.5 (16.5%) (14.6%) (-1.9%pt) 7.0 6.6 -0.5 (9.3%) (8.3%) (-0.9%pt) 7.1 5.2 -1.8 (7.0%) (5.0%) (-1.9%pt) -1.0 -2.7 -1.7 (-) (-) (-) 5.8 6.3 +0.5 (8.0%) (7.8%) (-0.1%pt) 8.4 -1.9 -10.3 (12.3%) (-) (-) -4.6 -6.1 -1.6 63.0 44.2 -18.8 (10.3%) (7.2%) (-3.1%pt) PMI costs, increase in R&D Investment to increase productivity Increase in R&D Sales decline Sales decline IT investment 6 Q1-Q3 Results Full-Year Forecast Shareholder Return References Operating Income Analysis, Y/Y • Added value down due to drop in PV inverters and backlights sales. • SG&A and R&D up intended for growth. 63.0 Forex, Raw material impacts ±0 Added value down -11.5 Fixed manufacturing costs down +0.8 SG&A up -5.1 R&D up -3.0 Gross profit 44.2 （¥bn） -10.7 （excl. forex & raw material impacts） Operating income Q1-Q3 2014 Actual -18.8 Q1-Q3 2015 Actual 7 Q1-Q3 Results Full-Year Forecast Shareholder Return References Consolidated B/S Current assets down, investments and other assets up. (¥bn) Mar. 31, 2015 Dec. 31, 2015 vs. March Current assets 434.1 378.4 -55.7 Property, plant & equipment 151.5 151.0 -0.5 Investments and other assets 125.5 154.3 +28.8 Total Assets 711.0 683.6 -27.4 Current liabilities 176.8 146.0 -30.8 42.2 43.6 +1.4 Total Liabilities 218.9 189.6 -29.3 Shareholders' equity 489.8 491.6 +1.8 2.3 2.5 +0.1 Total Net Assets 492.1 494.0 +1.9 Total Liabilities and Shareholders' Equity 711.0 683.6 -27.4 68.9% 71.9% +3.0%pt Long-term liabilities Noncontrolling interests Shareholders' equity to total assets 8 Q1-Q3 Results Full-Year Forecast Shareholder Return References Consolidated Cash Flows Negative FCF due to increase in investing activities including M&A. (¥bn) FY14 FY15 Q1-Q3 Q1-Q3 Y/Y Operating activities (Operating CF) 42.6 47.6 +5.0 Investing activities (Investing CF) -27.9 -58.1 -30.2 14.8 -10.4 -25.2 -28.9 -31.6 -2.7 83.1 58.6 -24.5 Capital expenditures 25.7 26.3 +0.6 Depreciation and amortization 20.5 23.2 +2.7 Free cash flow (FCF) Financing activities (Financing CF) Cash and cash equivalents at end of the period 9 FY15 Full-Year Forecast 10 Q1-Q3 Results Full-Year Forecast Shareholder Return References H2 Business Environment by Business Segments (vs. Q2 Estimates) Compared with the Q2 estimates, business environment for IAB and EMC gets worse. Q2 Estimastes Q3 Q4 Q3 Estimates Q3 Q4 IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Businesses under the Direct Control of HQ 11 Q1-Q3 Results Full-Year Forecast Shareholder Return References Q4 Business Environment by Business Segment (vs. Q2 Estimates) Japan: Semiconductors will remain weak. Auto will recover as the delayed capex to be incurred. IAB Overseas: China will remain weak. Southeast Asia will slow down due to China’s impact and Industrial Automation currency depreciation. Auto in Americas will go solid, while oil & gas will get slower. Europe will recover slowly. EMC Home electronics: Will slow down as production adjustment in China, e.g. air conditioners. Electronic & Mechanical Auto: China will recover due to tax cuts. Americas solid, whereas Japan will remain weak. Components AEC Japan: Will remain weak, but export to North America will go solid due to Yen's depreciation and Automotive Electronic oil price decline. Components Overseas: China will recover temporarily due to tax cuts. Americas will remain solid. SSB Transportation: Demand in general will remain strong, although some customers show a Social Systems, tendency of weak investment. Solutions & Service Environmental Solutions: The market for small-sized biz-use will remain weak. Japan: Home-use will slow down due to mild winter. Professional-use will decline due to subdued HCB capex. Healthcare Overseas: Retailers sales in China will remain weak but Internet sales will stay solid. Brazil will remain weak. Other Environmental Solutions: Both residential-/small-sized biz-use will remain low. Businesses under the Backlight: China's smartphone market will remain weak. Direct Control of HQ 12 Q1-Q3 Results Full-Year Forecast Shareholder Return References Full-Year Forecast Revised down by incorporating business environment deterioration. (¥bn) (1) FY2015 (2) FY2015 Oct. Fcst Jan. Fcst (2)/(1) (3) FY2014 Actual (2)/(3) Net Sales 860.0 835.0 -2.9% 847.3 -1.4% Gross Profit 338.0 323.5 -4.3% 332.6 -2.7% (39.3%) (38.7%) (-0.6%pt) (39.3%) (-0.5%pt) 70.0 62.0 -11.4% 86.6 -28.4% (8.1%) (7.4%) (-0.7%pt) (10.2%) (-2.8%pt) NIBT 71.0 65.5 -7.7% 87.4 -25.0% Net Income Attributable to Shareholders 53.5 47.5 -11.2% 62.2 -23.6% 1USD（JPY) 120.8 120.5 -0.3 110.0 +10.5 1EUR（JPY) 134.6 132.0 -2.6 138.7 -6.7 (%) Operating Income (%) *Q4 forex assumption: 1USD = ¥117, 1EUR = ¥127 13 Q1-Q3 Results Full-Year Forecast Shareholder Return References Full-Year Sales Forecast by Business Segment Sales up in IAB, EMC, AEC and HCB. (¥bn) (1) FY2015 (2) FY2015 IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Businesses under the Direct Control of HQ Eliminations & Corporate Total (2)/(1) (3) FY2014 (2)/(3) Oct. Fcst Jan. Fcst 350.0 338.0 -3.4% 331.8 +1.9% 108.0 104.0 -3.7% 103.9 +0.1% 138.0 140.0 +1.4% 137.9 +1.5% 80.0 77.5 -3.1% 80.4 -3.6% 111.0 107.0 -3.6% 100.6 +6.3% 68.0 64.0 -5.9% 87.4 -26.8% 5.0 4.5 -10.0% 5.3 -13.1% 860.0 835.0 -2.9% 847.3 -1.4% Actual 14 Q1-Q3 Results Full-Year Forecast Shareholder Return References Full-Year Operating Income Forecast by Business Segment Profits down by continuously making eclectic investments for growth. (¥bn / % of net sales) (1) FY2015 (2) FY2015 IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Businesses under the Direct Control of HQ Eliminations & Corporate Total (2)/(1) (3) FY2014 Actual (2)/(3) Oct. Fcst Jan. Fcst 55.0 50.0 -5.0 54.6 -4.6 (15.7%) (14.8%) (-0.9%pt) (16.5%) (-1.7%pt) 10.5 8.0 -2.5 10.2 -2.2 (9.7%) (7.7%) (-2.0%pt) (9.8%) (-2.1%pt) 7.5 7.5 ±0 9.2 -1.7 (5.4%) (5.4%) (-0.1%pt) (6.7%) (-1.3%pt) 3.5 3.2 -0.3 5.0 -1.8 (4.4%) (4.1%) (-0.2%pt) (6.2%) (-2.1%pt) 7.0 7.0 ±0 6.5 +0.5 (6.3%) (6.5%) (+0.2%pt) (6.5%) (+0.1%pt) -3.5 -4.5 -1.0 8.4 -12.9 (-) (-) (-) (9.6%) (-) -10.0 -9.2 +0.8 -7.3 -1.9 70.0 62.0 -8.0 86.6 -24.6 (8.1%) (7.4%) (-0.7%pt) (10.2%) (-2.8%pt) 15 Q1-Q3 Results Full-Year Forecast Shareholder Return References Initiatives for Future Growth Implement the initiatives for future growth from two perspectives. ■Business Growth IAB Industrial Automation HCB Healthcare Acquisitions of Delta Tau and Adept To contribute to Industry 4.0 with broad product lines Acquisition of NS, development of ultra-compact wrist-type blood pressure monitor To help realize healthy and comfortable lives for people around the world ■Problem-solving Backlights PV Inverters Business restructuring To convert to a profit-generating structure 16 Q1-Q3 Results Full-Year Forecast Shareholder Return References Toward the Realization of Industry 4.0 • Strengthen the product lines and technological capabilities by M&A. • Contribute to the realization of Industry 4.0 by leveraging big data. Omron’s Sensing & Control Technology Information (ILO+S) Technology (Big Data) Robotics Technology (+R) Industry4.0 17 Q1-Q3 Results Full-Year Forecast Shareholder Return References Innovation at Production Sites • Delta Tau Processing Line: machine evolution (high-speed, highprecision and informatization). • Adept Assembly Line: creation of new automation by humanmachine harmony. Information Technology (IoT Models) High-Precision Surface Finish Processing Line From Laborsaving to Human-Machine Harmony Conveyor Line Assembly Line Inspection Line Robotics Technology (+R) Omron’s Sensing & Control Technology (ILO+S) 18 Q1-Q3 Results Full-Year Forecast Shareholder Return References All for Healthcare To help realize healthy and comfortable lives for people around the world. Business Vision Circulatory Business Respiratory Business Zero event of brain and cardiovascular diseases Zero severe childhood asthma Blood pressure monitor Nebulizer 19 Shareholder Return 20 Q1-Q3 Results Full-Year Forecast Shareholder Return References Dividend Per Share Applied 30% dividend payout ratio to the updated net income forecast; full-year dividend forecast is lowered to ¥68. FY2015 Oct. Fcst FY2015 Jan. Fcst Payout Ratio 30.1% 30.9% Full-Year Dividend ¥74 ¥68 Interim ¥34 Year-end ¥34 21 Q1-Q3 Results Full-Year Forecast Shareholder Return References Cancellation of the Treasury Stock All of the 3.44 million shares of treasury stock (equivalent to ¥15bn) acquired in Q3 have been cancelled. ・Number of shares acquired 3.44 million shares (equivalent to ¥15bn) ・Number of shares cancelled 3.44 million shares ・Percentage to total shares outstanding (excl. treasury stock) 1.58% ・Number of issued shares after the cancellation of treasury stock 213.96 million shares 22 Q1-Q3 Results Full-Year Forecast Shareholder Return References Total Return Ratio Over 60% total return ratio for FY15. 80% 60% 62.4% 49.1% 40% 37.7% 27.0% 20% 25.3% 0% FY2011 FY2012 FY2013 FY2014 FY2015 Estimates 23 24 References 25 Q1-Q3 Results Full-Year Forecast Shareholder Return References Conditions: Exchange Rates & Raw Material Costs Revising Q4 conditions taking market fluctuations into account. FY15 Q4 conditions (changes from the Oct 27 conditions) Exchange rates Raw material costs • 1 USD = ¥117 (-¥3) • Silver = ¥63,000/kg (-¥2,000) • 1 EUR = ¥127 (-¥8) • Copper = ¥700/kg (-¥70) ¥1 fluctuation impact (full-year, approx.) Price change impact (full-year, approx.) Sales OP USD ¥3.4bn ¥0.3bn Silver EUR ¥0.8bn ¥0.4bn Copper Price change OP ¥1,000/kg ¥80mn ¥10/kg ¥30mn *FY14 results used to calculate exchange rates & raw material costs fluctuation impacts. 26 Q1-Q3 Results Full-Year Forecast Shareholder Return References ROIC Management: Down-Top ROIC Tree On-site To-Dos Cycle KPI • Sales in focus industries/areas • Sales of new/focus products • Selling price control • Variable costs reduction, value/% • Defect costs % • Per-head production # • Automation % (headcount reduction) • Labor costs–sales % • Inventory turnover months • Slow-moving inv. months • Credits & debts months • Facilities turnover (1/N automation ratio) Drivers GP Margin Added -value % ROS Fixed manuf. costs % ROIC SG&A % R&D % Working capital turnover Fixed assets turnover Invested Capital Turnover 27 Q1-Q3 Results Full-Year Forecast Shareholder Return References ROIC Definition ＜Consol. B/S＞ Net income ROIC = attributable to shareholders Invested capital Invested capital* = Net assets + Interest-bearing debt *The average of FY14 year-end result, FY15 quarterly results and forecasts. Capital cost forecast at 6% for EARTH-1 STAGE (FY14-16) 28 Notes 1. The consolidated statements of Omron Corporation (the Company) are prepared in accordance with U.S. GAAP. 2. Projected results and future developments are based on information available to the Company at the time of writing, as well as certain assumptions judged by the Company to be reasonable. Various risk and uncertain factors could cause actual results to differ materially from these projections. For the preconditions of projections and matters, etc. to be aware of when using the projections, please refer to "1. Qualitative Information on Quarterly Financial Results (3) Description of Information on Outlook, Including Consolidated Performance Forecast" in "Summary of Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2016 (U.S. GAAP)." 3. The presentation slides are based on “Summary of Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 31, 2016”. Figures rounded to the nearest JPY million and percentage to one decimal place. Contact: Investor Relations Department Global Investor Relations & Corporate Communications Headquarters Omron Corporation Phone: +81-(0)3-6718-3421 Email: [email protected] Website: www.omron.com *To subscribe to Omron IR email newsletters: Send us an email titled "subscribe". 29