Q2 2014 Earnings Financial Results for the Second Quarter Ended September 30, 2014 October 28, 2014 OMRON Corporation Summary • H1 saw high OP with large sales increase and higher profitability. Gross profit margin up 1.4%pt, with 10%-plus OP margin. • Makes upward revision to full-year forecast. Expects sales to go up in all business segments, led by constantly strong IAB. • Annual dividends forecasted at ¥71, up ¥18 y/y. Omron will carry out acquisition and disposal of own shares, and treasury stock cancellation. 1 Contents 1. H1 Results P. 3 2. Full-Year Forecast P. 11 3. Shareholder Return P. 18 4. NS Acquisition, Brazil P. 21 References P. 29 2 H1 Results 3 H1 Results Full-Year Forecast Shareholder Return NS Acquisition H1 Results Large sales increase to post high OP. （Billions of yen） FY2014 H1 Forecast FY2014 H1 Actual vs. Forecast FY2013 H1 Actual Y/Y Net Sales 400.0 404.5 +1.1% 359.7 +12.4% Gross Profit 158.0 160.6 +1.6% 137.8 +16.5% (39.5%) (39.7%) (+0.2%pt) (38.3%) (+1.4%pt) 39.0 43.0 +10.3% 30.8 +39.7% (9.8%) (10.6%) (+0.9%pt) (8.6%) (+2.0%pt) NIBT 40.0 45.0 +12.5% 30.0 +49.8% Net Income 29.0 33.7 +16.2% 21.2 +59.1% 1USD（JPY） 101.2 103.4 +2.2 98.2 +5.2 1EUR（JPY） 137.8 139.0 +1.2 128.9 +10.1 (%) Operating Income (%) attributable to shareholders 4 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Sales by Segment IAB and “Other” were major drivers. （Billions of yen） IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Eliminations & Corporate Total FY2014 H1 Forecast FY2014 H1 Actual vs. Forecast FY2013 H1 Actual 156.5 161.2 +3.0% 138.0 +16.8% 51.5 50.1 -2.7% 48.8 +2.7% 65.0 65.6 +0.9% 59.5 +10.3% 31.0 30.9 -0.4% 29.1 +6.0% 46.0 45.5 -1.2% 42.8 +6.1% 47.5 48.6 +2.3% 38.5 +26.4% 2.5 2.6 +4.3% 3.0 -13.3% 400 404.5 +1.1% 359.7 +12.4% Y/Y 5 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Operating Income Analysis, Y/Y Sales up, added value (%) up, to boost operating income. Sales up Added value (%) up -3.4 +19.4 Fixed manufacturing costs up SG&A up -7.0 （Billions of yen） Ｒ&Ｄ up -1.3 43.0 Forex, Raw material costs 30.8 +4.5 Gross profit up 16.0 （excl. forex & raw material impacts） Operating income up 12.2 H1 2013 Actual H1 2014 Actual 6 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Operating Income Analysis, vs. July Forecast OP up, due to higher added value led by sales increase, and cost-spending carryover. （Billions of yen） SG&A down Fixed manufacturing Sales up costs up Added value up Ｒ&Ｄ down 43.0 +0.5 +1.4 -0.1 Forex, Raw material costs 39.0 +1.4 +0.8 Gross profit up 1.3 （excl. forex & raw material impacts） Operating income up 4.0 H1 2014 Forecast H1 2014 Actual 7 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Operating Income by Segment IAB and “Other” were major drivers. （Billions of yen） FY2014 H1 Forecast IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Eliminations & Corporate Total FY2014 H1 Actual vs. Forecast FY2013 H1 Actual Y/Y 23.6 26.7 +3.1 17.8 +8.9 (15.1%) (16.6%) (+1.5%pt) (12.9%) (+3.6%pt) 4.4 4.0 -0.4 3.9 +0.1 (8.5%) (7.9%) (-0.6%pt) (8.1%) (-0.1%pt) 4.4 4.1 -0.3 4.3 -0.2 (6.8%) (6.3%) (-0.5%pt) (7.3%) (-1.0%pt) -1.2 -1.0 +0.2 -1.8 +0.8 (-) (-) (-) (-) (-) 3.6 3.9 +0.3 4.4 -0.5 (7.8%) (8.7%) (+0.9%pt) (10.3%) (-1.6%pt) 7.0 7.9 +0.9 5.8 +2.1 (14.7%) (16.2%) (+1.5%pt) (15.0%) (+1.2%pt) -2.8 -2.6 +0.2 -3.6 +1.0 39.0 43.0 +4.0 30.8 +12.2 (9.8%) (10.6%) (+0.9%pt) (8.6%) (+2.0%pt) 8 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Consolidated B/S （Billions of yen） Mar. 31, 2014 Sept. 30, 2014 Current assets 396.5 423.9 +27.4 Property, plant & equipment 135.6 140.8 +5.3 Investments and other assets 122.6 110.5 -12.1 Total Assets 654.7 675.3 +20.5 Current liabilities 162.7 165.1 +2.4 59.2 42.4 -16.9 Total Liabilities 221.9 207.5 -14.5 Shareholders' equity 430.5 465.2 +34.7 2.3 2.6 +0.3 Total Net Assets 432.8 467.8 +35.0 Total Liabilities and Shareholders' Equity 654.7 675.3 +20.5 65.8% 68.9% +3.1%pt Long-term liabilities Noncontrolling interests Shareholders' equity to total assets vs. Mar. 31, 2014 9 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Consolidated Cash Flows Without ¥13.2bn pension fund contribution, FCF up Y/Y. （Billions of yen） FY2013 H1 FY2014 H1 FY2014 H1 Y/Y (ex. Pension fund) (ex. Pension fund) Operating activities 33.8 29.5 42.7 +8.9 Investing activities -12.9 -9.9 -9.9 +3.1 20.8 19.6 32.8 +12.0 -10.8 -6.7 -6.7 +4.1 66.9 105.4 118.6 +51.6 Capital expenditures 13.6 15.0 15.0 +1.5 Depreciation and amortization 11.9 13.2 13.2 +1.3 Free cash flow (FCF) Financing activities Cash and cash equivalents at end of the period 10 Full-Year Forecast 11 H1 Results Full-Year Forecast Shareholder Return NS Acquisition H2 Business Environment by Area (vs. H1) Overall, expecting the H2 climate to be the same as H1. Japan will continue to be on a recovery trend overall, with automotive capital investment going solid. Overseas • Americas: US will go solid thanks to increasing consumer spending and capital investment. Brazil will still feel bitter sentiment. • Europe: Flat overall. Russia will remain uncertain. • China: Active investments in some industries (e.g. smartphones) will cool down. Others flat overall. • Asia: Thailand and Indonesia will still remain unclear. But India and some other countries will see some pickup signs. 12 H1 Results Full-Year Forecast Shareholder Return NS Acquisition H2 Business Environment by Business Segment (vs. H1) IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Japan: Same as H1 overall, thanks to automotive-related demand staying brisk. Overseas: China's smart-phone related-demand will cool down. Americas favorable especially N.America. Europe and Asia will stay flat. Japan: Home electronics and automotives will be the same as H1 overall. Overseas: Healthy in Americas. Flat in other areas. Japan: Mini-vehicles will drop partly, but unchanged overall. Overseas: N. America will be solid. Asia and China will be the same level as H1. Demand for train system will go solid, enjoying customers' sound performance. Growth of Environmental Solutions will slow down due to the market change. Japan: Demand will steadily go back-on-track trend. Overseas: Healthy overall, while Russia still weak. In Backlight, smart-phone related orders will stay favorable. Environmental Solutions will slow down due to the market change. 13 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Full-Year Forecast Omron makes upward revision, targeting to record highestever profits two years in a row. （Billions of yen） (1) FY2014 Initial Fcst (2) FY2014 Oct. Fcst (2)/(1) FY2013 Actual Y/Y Net Sales 800.0 835.0 +4.4% 773.0 +8.0% Gross Profit 317.0 331.0 +4.4% 297.2 +11.4% (39.6%) (39.6%) (±0.0%pt) (38.5%) (+1.2%pt) 74.0 84.0 +13.5% 68.1 +23.4% (9.3%) (10.1%) (+0.8%pt) (8.8%) (+1.3%pt) 71.0 84.5 +19.0% 62.0 +36.3% 51.0 62.5 +22.5% 46.2 +35.3% 1USD（JPY） 100.0 101.9 +1.9 100.1 +1.8 1EUR（JPY） 135.0 137.1 +2.1 134.0 +3.1 (%) Operating Income (%) NIBT Net Income attributable to shareholders 14 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Full-Year Sales Forecast by Segment Sales up in all, especially looking IAB to stay strong. （Billions of yen） IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Eliminations & Corporate Total (1) FY2014 Initial Fcst (2) FY2014 Oct. Fcst (2)/(1) FY2013 Actual Y//Y 300.0 321.0 +7.0% 291.7 +10.0% 101.0 101.5 +0.5% 97.7 +3.9% 128.5 131.5 +2.3% 126.6 +3.9% 85.5 84.5 -1.2% 82.7 +2.2% 98.5 100.0 +1.5% 89.3 +12.0% 83.0 91.5 +10.2% 78.9 +15.9% 3.5 5.0 +42.9% 6.1 -16.5% 835.0 +4.4% 773.0 +8.0% 800.0 15 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Full-Year Operating Income Forecast by Segment Eyeing big OP increase with solid IAB. （Billions of yen） (1) FY2014 Initial Fcst IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Eliminations & Corporate Total (2) FY2014 Oct. Fcst (2)-(1) FY2013 Actual Y//Y 40.0 50.0 +10.0 38.8 +11.2 (13.3%) (15.6%) (+2.2%pt) (13.3%) (+2.3%pt) 9.2 9.2 ±0.0 8.7 +0.5 (9.1%) (9.1%) (±0.0%pt) (8.9%) (+0.2%pt) 9.2 8.9 -0.3 9.1 -0.2 (7.2%) (6.8%) (-0.4%pt) (7.2%) (-0.4%pt) 6.5 6.2 -0.3 5.6 +0.6 (7.6%) (7.3%) (-0.3%pt) (6.7%) (+0.6%pt) 8.0 7.2 -0.8 7.5 -0.3 (8.1%) (7.2%) (-0.9%pt) (8.5%) (-1.3%pt) 9.5 10.5 +1.0 8.7 +1.8 (11.4%) (11.5%) (+0.1%pt) (11.0%) (+0.5%pt) -8.4 -8.0 +0.4 -10.3 +2.3 74.0 84.0 +10.0 68.1 +15.9 (9.3%) (10.1%) (8.8%) (+1.3%pt) (+0.8%pt) (8.8%) 16 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Management Indices Looking to achieve all targets. ROIC and EPS steadily better. (1) FY2014 Initial Fcst Gross Profit Margin Operating Profit Margin (2) FY2014 Oct. Fcst (2)-(1) FY2013 Actual Y/Y 39.6% 39.6% ±0.0%pt 38.5% +1.2%pt 9.3% 10.1% +0.8%pt 8.8% +1.3%pt ROIC approx. 12% >13% - 11.3% - ROE approx. 12% >13% - 11.6% - \231.7 \285.5* up \53.8 \209.8 up \75.7 EPS *FY2014 EPS forecast includes planned share buyback this fiscal year. 17 Shareholder Return 18 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Per-Share Dividend Forecast Planning to increase annual dividend to ¥71, up ¥18. Interim decided at ¥31. Up ¥18 Full-year, forecast [Interim below in brackets] 71 [31] 53 [25] FY2013 Actual FY2014 Forecast *Interim dividend decided. 19 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Share Buyback, Own Share (Treasury Stock) Cancellation Omron is to buy back 3mil or ¥15bn shares, and cancel 9.9mil treasury stock. Share Buyback Treasury Stock Cancellation 3mil or ¥15bn 9.9mil Treasury Stock, 7.04mil 0.14mil Sept. 30, 2014 Oct. 29 – Dec. 5 Dec. 25 Dec. 25 (after cancellation) * Share buyback ends when the amount reaches 3mil shares or ¥15bn. Dec. 25 cancellation = the above buyback + currently owned 6.9mil shares. 20 NS Acquisition, Brazil 21 H1 Results Full-Year Forecast Shareholder Return NS Acquisition EARTH-1 STAGE Strategy Omron acquired NS company to accelerate EARTH-1 STAGE strategy of “Super-global Growth”. Maximization of IA Business Super-global Growth Strategy New Business Strategy for the Optimization Society 22 H1 Results Full-Year Forecast Shareholder Return NS Acquisition About NS Company Top Nebulizer Company in Brazil with 40-plus-year history • Company Name NS Indústria de Aparelhos Médicos Ltda. • Establishment November 27, 1969 • Business Manufacture and sales of nebulizers (Domestic top share of 40%) • FY13 Consol. BRL 97.5million (¥4.5bn)* *1BRL = 45.8 JPY Sales • Number of employees 480 Nebulizers are … Therapeutic devises that vaporize liquid medicine so patients can inhale. Used for the treatment of asthma, and COPD, chronic obstructive pulmonary disease. 23 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Why Acquired, 1/3: To Win Global Top Share With NS, Omron can expand its business in the largest nebulizer market, then win global #1 market share. Before Acquisition, 2014 After Acquisition 1 Corp. A 1 Omron + NS 2 Omron 2 Corp. A 3 Corp. B 3 Corp. B 4 Corp. C 4 Corp. C 5 NS : : *Omron’s Research 24 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Why Acquired, 2/3: To Win Sales & Service Network Omron can utilize NS’s wide sales & service network of healthcare products in Brazil all at once. NS Sales & Service Representatives + The number of pharmacies, medical device dealers, home electronics retailers Coverage of the Brazil market* approx. approx. 15,000 50,000 25% 85% Sales reps Service reps *Omron’s research, estimating the number of pharmacies, medical device dealers, and home electronics retailers in Brazil at approx. 60,000 in total. *as of FY2013 25 H1 Results Full-Year Forecast Shareholder Return NS Acquisition Why Acquired, 3/3: To Get Local Manufacture & R&D Sites With manufacture and R&D sites in Latin America, Omron is ready to grow faster in the region. • Swift production approvals & licenses (originally time-consuming) • Manufacture and R&D possible in Brazil Expansion in Latin America 26 Omron Nominated for TSE Award Omron selected as one of the four finalists of Tokyo Stock Exchange "Corporate Value Improvement Award" in 2014 TSE website: http://www.tse.or.jp/english/listing/award/corporate_value.html 27 28 References 29 Conditions: Exchange Rates & Raw Material Costs No change to the initially set conditions. Q3-Q4 Conditions Exchange rates • 1 USD = ¥100 • 1 EUR = ¥135 Raw material costs • Silver = ¥72,000/kg • Copper = ¥760/kg ¥1 fluctuation impact (full-year, approx.) Price change impact (full-year, approx.) Sales OP USD ¥3.1bn ¥0.4bn Silver EUR ¥0.8bn ¥0.4bn Copper Price change OP ¥1,000/kg ¥0.1bn ¥10/kg ¥0.1bn 30 ROIC Definition ＜Consol. B/S＞ Net income ROIC = attributable to shareholders Invested capital Invested capital* = Net assets + Interest-bearing debt *FY13 year-end & FY14 Q2-end average. Capital cost forecast at 6% for EARTH-1 STAGE (FY14-16) 31 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 current time, as well as certain assumptions judged by the Company to be reasonable. Various factors could cause actual results to differ materially from these projections. Major factors influencing Omron's actual results include, but are not limited to, (i) economic conditions affecting the Company's businesses in Japan and overseas (ii) demand trends for the Company's products and services (iii) the ability of the Company to develop new technologies and products (iv) major changes in the fundraising environment (v) tie-ups or cooperative relationships with other companies (vi) movements in currency exchange rates and stock markets, and (vii) accidents and natural disasters. 3. The presentation slides are based on “Summary of Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2015”. Figures rounded to the nearest JPY million and percentage to one decimal place. Contact: Investor Relations Department ＜ＩＲに関するお問い合わせ＞ Investor Relations Headquarters Omron Corporation オムロン株式会社 Phone: +81-(0)3-6718-3421 経営ＩＲ室 経営ＩＲ部 Email: [email protected] ： www.omron.com 03-6718-3421 電話 Website: Ｅ-ｍａｉｌ ： [email protected] *To subscribe to Omron IR email newsletters: ＨＰアドレス www.omron.co.jp Send us： an email titled "subscribe". 32