FY2015 Earnings 2015 Full-Year Results Ended March 31, 2016 April 27, 2016 OMRON Corporation Summary FY2015 ・Attained estimated OP. ・Rebuilt the earnings structures of Backlights and PV Inverters Businesses in second half of FY2015. ・Strengthened business foundation of IAB for future growth. FY2016 ・Rebuild the earnings structure and create an engine for self-driven growth. ・Accelerate business growth of IAB and HCB. ・Simultaneously, attain GP margin improvement. Mid-and Long-Term Growth Strategy for IAB ・Provide new value through innovative-Automation. 1 Contents 1. FY2015 Results P. 3 2. FY2016 Plans P. 11 3. Mid-and Long-Term Growth Strategy for IAB P. 22 References P. 29 2 FY2015 Results 3 FY2015 Results FY2016 Plans IAB Strategies References FY2015 Results Attained estimated OP (¥bn) (1) FY2015 Jan. Fcst* (2) FY2015 Actual Net Sales 835.0 833.6 -0.2% 847.3 -1.6% Gross Profit 323.5 320.8 -0.8% 332.6 -3.5% (38.7%) (38.5%) (%) Operating Income (%) Net Income Attributable to Shareholders 62.0 (7.4%) 47.5 62.3 (2)/(1) (-0.2%pt) +0.5% (7.5%) (+0.1%pt) 47.3 -0.4% (3) FY2014 Actual (39.3%) 86.6 (10.2%) 62.2 (2)/(3) (-0.8%pt) -28.1% (-2.7%pt) -23.9% 1USD (JPY) 120.5 120.2 -0.3 110.0 +10.2 1EUR (JPY) 132.0 132.2 +0.2 138.7 -6.5 *Announced on January 28, 2016. 4 FY2015 Results FY2016 Plans IAB Strategies References Sales by Business Segment Sales up by 4% excl. the businesses sensitive to external environment *1. (¥bn) (1) 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 Jan Fcst*2 (2) FY2015 Actual 338.0 336.0 -0.6% 331.8 +1.2% 104.0 103.7 -0.3% 103.9 -0.3% 140.0 140.0 ±0% 137.9 +1.5% 77.5 77.5 ±0% 80.4 -3.6% 107.0 108.1 +1.0% 100.6 +7.5% 64.0 63.0 -1.5% 87.4 -27.9% 4.5 5.3 +18.0% 5.3 +2.6% 835.0 833.6 -0.2% 847.3 -1.6% *1 Backlights (Other), PV Inverters (Other & SSB), Oil & Gas (IAB) *2 Announced on January 28, 2016. (2)/(1) (3) FY2014 Actual (2)/(3) 5 FY2015 Results FY2016 Plans IAB Strategies References Operating Income by Business Segment Rebuilt the earnings structures of Backlights and PV Inverters Businesses (¥bn / % of net sales) (1) FY2015 Jan Fcst* IAB Industrial Automation (2) FY2015 Actual 50.0 47.9 (14.8%) (14.3%) 8.0 8.5 (7.7%) (8.2%) 7.5 7.3 (5.4%) (5.2%) 3.2 3.2 (4.1%) (4.1%) 7.0 7.3 Healthcare (6.5%) (6.7%) Other -4.5 -4.1 EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Businesses under the Direct Control of HQ Eliminations & Corporate Total (-) (-) -9.2 62.0 -7.8 62.3 (7.4%) (7.5%) (3) FY2014 Actual (2)-(1) -2.1 (-0.5%pt) +0.5 (+0.5%pt) -0.2 (-0.1%pt) ±0 (±0%pt) +0.3 (+0.2%pt) +0.4 (-) +1.4 +0.3 (+0.1%pt) 54.6 (16.5%) 10.2 (9.8%) 9.2 (6.7%) 5.0 (6.2%) 6.5 (6.5%) 8.4 (9.6%) -7.3 86.6 (10.2%) (2)-(3) -6.7 (-2.2%pt) -1.7 (-1.6%pt) -1.9 (-1.4%pt) -1.8 (-2.1%pt) +0.8 (+0.3%pt) -12.5 (-) -0.5 -24.3 (-2.7%pt) *Announced on January 28, 2016. 6 FY2015 Results FY2016 Plans IAB Strategies References Operating Income Analysis, Y/Y SG&A up due to M&A. R&D up intended for growth. 86.6 Forex, raw material impacts -2.4 Added value down -12.5 Fixed manufacturing costs down +1.0 SG&A up -5.8 R&D up -4.6 Gross profit 62.3 (¥bn) -11.5 (excl. forex & raw material impacts) FY2014 Actual FY2015 Actual 7 FY2015 Results FY2016 Plans IAB Strategies References Consolidated B/S (¥bn) (1) Mar. 31, 2015 (2) Mar. 31, 2016 (2)-(1) Current assets 434.1 389.6 -44.5 Property, plant & equipment 151.5 146.6 -4.9 Investments and other assets 125.5 147.2 +21.7 Total Assets 711.0 683.3 -27.7 Current liabilities 176.8 162.7 -14.1 42.2 73.6 +31.5 Total Liabilities 218.9 236.3 +17.4 Shareholders' equity 489.8 444.7 -45.1 2.3 2.3 ±0 Total Net Assets 492.1 447.0 -45.1 Total Liabilities and Shareholders' Equity 711.0 683.3 -27.7 Shareholders' equity to total assets 68.9% 65.1% Long-term liabilities Noncontrolling interests -3.8%pt 8 FY2015 Results FY2016 Plans IAB Strategies References Consolidated Cash Flows Secured positive FCF although investing activities increased due to M&A (¥bn) (1) FY2014 Actual (2) FY2015 Actual (2)-(1) Operating activities (Operating CF) 77.1 84.2 +7.2 Investing activities (Investing CF) -39.5 -67.1 -27.6 37.5 17.1 -20.4 -29.3 -31.6 -2.2 102.6 82.9 -19.7 Capital expenditures 38.1 36.9 -1.3 Depreciation and amortization 28.3 31.5 +3.1 Free cash flow (FCF) Financing activities (Financing CF) Cash and cash equivalents at end of the period 9 FY2015 Results FY2016 Plans IAB Strategies References Management Targets Achieved ROIC of 9.7% and ROE of 10.1% FY2014 Actual Net Sales (\bn) FY2015 Actual Y/Y 847.3 833.6 -1.6% GP Margin 39.3% 38.5% -0.8% OP Margin 10.2% 7.5% -2.7%pt ROIC 13.4% 9.7% -3.7%pt ROE 13.5% 10.1% -3.4%pt 283.9 219.0 -64.9 1USD（JPY） 110.0 120.2 +10.2 1EUR（JPY） 138.7 132.2 -6.5 EPS (\) 10 FY2016 Plans 11 FY2015 Results FY2016 Plans IAB Strategies References FY2016 Business Environment by Region Though the global economy is expected to recover gradually, the external environment will remain severe due to China‘s economic slowdown and strong yen. Japan • Capex in auto industry will recover gradually, especially in the leading companies. • However, there are potential downside risks that corporate performances deteriorate due to strong yen. Overseas • Americas: Private consumption and capex in the U.S. will go solid, but deceleration of oil-related investment will continue due to the decline in oil prices. • Europe: Economy of Europe as a whole will remain flat. Russia and East Europe bottomed out in some areas, but will remain sluggish. • China: Economic growth will slow down as a result of structural reforms and overcapacity, but infrastructure investment will remain strong. House sales, private consumption, etc. will be firm. • Southeast Asia: Regional economy will remain flat. Though public investment and economy stimulus packages will support Thailand and Indonesia’s economies, recovery of exports has been delayed. 12 FY2015 Results FY2016 Plans IAB Strategies References FY2016 Policy Rebuild the earnings structure and create an engine for self-driven growth Accelerate Business Growth Reform Business Structure ・IAB (Industrial Automation) ・HCB (Healthcare) ・Backlights ・PV Inverters 13 FY2015 Results FY2016 Plans IAB Strategies References FY2016 Business Environment by Segment IAB Japan: Auto's capex for North America will expand. Semiconductors will remain flat. Overseas: Chinese economy will remain uncertain. Southeast Asia will remain weak due to Industrial Automation currency depreciation. Auto in Americas will go solid, while oil & gas will remain weak. EMC Home electronics: Will remain weak although air conditioners production adjustment in China is Electronic & Mechanical close to the end. Components Auto: China, North America and Europe will remain firm. AEC Automotive Electronic Components Japan: The influence of last year's tax increase in Kei car is coming to an end, but the prospects are uncertain in the aftermath of the Kumamoto Earthquake. Overseas: Americas will remain solid. China will also remain firm owing to tax cuts, though the economic growth slows down. SSB Transportation: Will slow down as the replacement cycle is coming to an end. Social Systems, Environmental Solutions: The market for PV power generation will remain weak. The market for Solutions & Service rational use of energy is expanding. HCB Japan: Will remain solid due to the increase in lifestyle diseases and rising health concerns. Overseas: Demand will expand as health awareness is growing in emerging markets, e.g. Healthcare Southeast Asia. Other Environmental Solutions: Demand for PV inverters will remain weak, while demand for power Businesses under the storage system will expand. Direct Control of HQ Backlight: China's smartphone market's growth will slow down. 14 FY2015 Results FY2016 Plans IAB Strategies References FY2016 Plans Improve GP margin; attain profit growth (¥bn) FY2015 Actual FY2016 Plan Y/Y Y/Y (excl. forex impacts*) Net Sales 833.6 820.0 -1.6% +4% Gross Profit 320.8 322.0 +0.4% +7% (39.3%) (+0.8%pt) (+1.1%pt) (%) Operating Income (%) Net Income Attributable to Shareholders (38.5%) 62.3 (7.5%) 47.3 63.0 +1.1% +23% (7.7%) (+0.2%pt) (+1.2%pt) 47.5 +0.4% 1USD（JPY） 120.2 110.0 -10.2 1EUR（JPY） 132.2 125.0 -7.2 +19% *Calculated on the basis of the exchange rate of FY2016 plan. 15 FY2015 Results FY2016 Plans IAB Strategies References Sales Forecast by Business Segment Other businesses are recovering. (¥bn) 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 FY2015 Actual FY2016 Plan 336.0 336.0 ±0% +5% 103.7 100.0 -3.6% +3% 140.0 130.0 -7.1% +1% 77.5 70.0 -9.7% -10% 108.1 108.0 ±0% +7% 63.0 71.0 +12.6% +17% 5.3 5.0 -5.7% -6% 833.6 820.0 -1.6% +4% Y/Y Y/Y (excl. forex impacts) 16 FY2015 Results FY2016 Plans IAB Strategies References Operating Income Forecast by Business Segment Other businesses are turning to a surplus. (¥bn / % of net sales) IAB Industrial Automation EMC Electronic & Mechanical Components (1) FY2015 (2) FY2016 Actual Plan 47.9 46.5 (14.3%) (13.8%) 8.5 10.0 (8.2%) (10.0%) 7.3 6.5 (5.2%) (5.0%) 3.2 4.0 (4.1%) (5.7%) 7.3 8.0 Healthcare (6.7%) (7.4%) Other -4.1 1.5 AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Businesses under the Direct Control of HQ Eliminations & Corporate Total (-) (2.1%) (2)-(1) (2)/(1) -1.4 (-0.4%pt) +1.5 (+1.8%pt) -0.8 (-0.2%pt) +0.8 (+1.6%pt) +0.7 (+0.7%pt) +5.6 (-) -7.8 -13.5 -5.7 62.3 63.0 +0.7 (7.5%) (7.7%) (+0.2%pt) (2)/(1) (excl. forex impacts) -3.0% +11% +17.7% +53% -11.5% +16% +25.1% +25% +9.8% +19% - - - - +1.1% +23% 17 FY2015 Results FY2016 Plans IAB Strategies References Operating Income Analysis, Y/Y Attain profit growth by increasing added value Added Value up Fixed manufacturing costs up SG&A up -3.4 62.3 -3.3 Forex, Raw material impacts -11.0 R&D up -3.6 63.0 (¥bn) +25.0 Extraordinary factors* -3.0 Gross profit +21.6 (excl. forex & raw material impacts) FY2015 Actual *Termination and retirement benefits Size-based business tax -2.0 -1.0 FY2016 Plan 18 FY2015 Results FY2016 Plans IAB Strategies References R&D, Capex R&D up intended for future growth. Capex down, but continue to invest an amount exceeding the depreciation. R&D (¥bn) Capex 52.8 47.9 43.5 42.1 28.3 2011 R&D Capex 47.9 38.1 55.0 36.9 36.0 33.7 28.3 2012 2013 2014 2015 2016 (Plan) IAB↑, HCB↑, core technology↑ IAB↑, IT investment↑, Backlights↓ 19 FY2015 Results FY2016 Plans IAB Strategies References Management Targets Raise GP margin to 39.3%, aim at deliver ROIC and ROE of more than 10% FY2015 Actual Net Sales (\bn) FY2016 Plan 833.6 820.0 GP Margin 38.5% 39.3% OP Margin 7.5% 7.7% ROIC 9.7% 10% 10.1% 10% 219.0 222.2 1USD（JPY） 120.2 110.0 1EUR（JPY） 132.2 125.0 ROE EPS (\) 20 FY2015 Results FY2016 Plans IAB Strategies References Dividend Per Share Commit a dividend payout ratio of 30% in FY2016; full-year dividend forecast is 68 yen. FY2015 FY2016 Fcst Full-Year Dividend ¥68 ¥68 Payout Ratio 31.1% 30.6% *FY2016 interim and year-end dividends are not decided yet. *If net income is increased or decreased, the full-year dividend will slide up or slide down accordingly. 21 Mid-and Long-Term Growth Strategy for IAB 22 FY2015 Results FY2016 Plans IAB Strategies References Generation of Omron’s Unique Automation Generate unique automation by integrated robotics and machine control Robotics Machine Control 23 FY2015 Results FY2016 Plans IAB Strategies References New Stage of Manufacturing Driven by innovative-Automation Develop innovation in manufacturing through three “i”s コンセプト Concept Direction innovative-Automation i-Automation オムロンユニークなInnovationによるモノづくりの革新 Bring innovation to manufacturing by OMRON Evolution in control integrated Intelligence developed intelligent through ICT New harmonization between humans and machines interactive 24 FY2015 Results FY2016 Plans IAB Strategies References integrated -Evolution in Control- Our Vision Realize craftsman-quality works by innovative automation Ultra high-precision Ultra high-precision Ultra high-speed processing assembly conveyance 25 FY2015 Results FY2016 Plans IAB Strategies References integrated -Evolution in Control- Why Omron? Realize innovative automation by seamless tuning of ILOR+S Application Package Robot Input Logic Output One Controller Safety 26 FY2015 Results FY2016 Plans IAB Strategies References integrated -Evolution in Control- For Value Generation Launched 49 robots connected with One Controller (NJ series) around the world simultaneously Parallel SCARA 6-axis Controller(NJ)＋Application Package 27 28 References 29 FY2015 Results FY2016 Plans IAB Strategies References Preconditions: Exchange Rates & Raw Material Costs Decided FY2016 preconditions taking most recent market trend into account FY2016 preconditions Exchange rates Raw material costs • 1 USD = ¥110 • Silver = ¥61,000/kg • 1 EUR = ¥125 • Copper = ¥650/kg ¥1 fluctuation impact (full-year, approx.) Price change impact (full-year, approx.) Sales OP USD ¥3.5bn ¥0.3bn Silver EUR ¥0.9bn ¥0.5bn Copper Price change OP ¥1,000/kg ¥70mn ¥10/kg ¥40mn *If the emerging-market currencies do not link with USD and EUR as expected, the sensitivity of OP will be affected. 30 FY2015 Results FY2016 Plans IAB Strategies 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 31 FY2015 Results FY2016 Plans IAB Strategies References ROIC Definition ＜Consol. B/S＞ Net income ROIC = attributable to shareholders Invested capital Invested capital* = Net assets + Interest-bearing debt *The average of previous fiscal year-end result and quarterly results (or forecasts) of current fiscal year. Capital cost forecast at 6% For FY2014-2016 32 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 risks 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. Analysis of Results of Operations and Financial Condition, (1) Analysis of Results of Operations, 2) Outlook for the Year Ending March 31, 2017" in "Summary of Consolidated Financial Results for the Year Ended March 31, 2016 (U.S. GAAP)." 3. The presentation slides are based on "Summary of Consolidated Financial Results for the Year Ended March 31, 2016 (U.S. GAAP)." 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". 33