OMRON Investor Meeting FY13 Full-Year Earnings & VG2020 Midterm Strategy (EARTH-1 Stage) April 24, 2014 OMRON Corporation Contents 1/38 1. GLOBE Stage (1) FY13 Full-Year Performance (2) GLOBE Stage Review 2 10 2. EARTH-1 Stage (1) EARTH-1 Stage Plans (2) FY14 Plans 3. References 16 24 33 2/38 GLOBE Stage (1) FY13 Full-Year Performance FY13 Consolidated P/L 3/38 Highest-ever in sales, gross profit, operating income and net income. (Billions of yen) FY2013 FY2013 last forecast vs. Fcst (fcst = 100%) FY2012 Y/Y Net Sales 773.0 750.0 +3.1% 650.5 +18.8% Gross Profit 297.2 292.5 +1.6% 241.5 +23.1% (38.5%) (39.0%) (-0.5%pt) (37.1%) (+1.4%pt) 68.1 65.0 +4.7% 45.3 +50.1% (%) (8.8%) (8.7%) (+0.1%pt) (7.0%) (+1.8%pt) NIBT 62.0 62.0 +0.0% 41.2 +50.4% Net Income attributable to shareholders 46.2 43.0 +7.4% 30.2 +52.9% EPS (JPY) 210 195 +7.4% 13.7 +52.9% 1USD (JPY) 100.1 98.3 +1.8 83.2 +16.9 1EUR (JPY) 134.0 131.6 +2.4 107.6 +26.4 (%) Operating Income Operating Income Analysis, Y/Y 4/38 OP soared y/y due to higher sales and better GP margin. Sales up, GP% up Fixed manufacturing costs up -7.1 Forex, Raw material costs +25.7 (Billions of yen) SG&A up -13.3 R&D up 68.1 -3.1 (incl. strategic investments) 45.3 +20.6 Gross profit up ¥18.6bn (excl. forex & raw materials) Operating income up ¥22.8bn FY2012 Actual FY2013 Actual Operating Income Analysis, vs. Forecast 5/38 Higher-than-forecasted OP due to last-minute purchase before consumption tax hike and favorable forex. Sales up, Product mix +4.1 Fixed manufacturing costs up -2.6 Forex, Raw material costs 65.0 (Billions of yen) SG&A up R&D down -0.2 +0.2 68.1 +1.6 Gross profit up ¥1.5bn (excl. forex & raw materials) Operating income up ¥3.1bn FY2013 Last Forecast FY2013 Actual Consolidated B/S 6/38 Sales up, but inventory well managed. (Billions of yen) Assets Cash and cash equivalents Notes and accounts receivable - trade Inventories (w/o forex impact) Deferred income taxes, other current assets Property, plant and equipment Investments and other assets Liabilities Short-term debt Notes and accounts payable - trade Termination and retirement benefits Other liabilities Net Assets Common stock and retained earnings Accumulated other comprehensive income (loss) Treasury stock Non-controlling interests Total Liabilities and Shareholders’ Equity Shareholders' equity to total assets Mar. 31, 2014 Mar. 31, 2013 654.7 573.6 90.3 172.4 97.7 91.2 36.2 135.6 122.5 55.7 156.9 91.0 30.1 126.8 113.1 221.9 204.9 0.5 85.2 50.7 85.5 5.6 75.6 56.9 66.8 432.8 368.8 462.2 -15.2 -16.5 2.3 427.7 -44.3 -16.4 1.8 654.7 573.6 65.8% 64.0% Consolidated Cash Flows 7/38 FCF jumped y/y due to net income increase. (Billions of yen) FY2013 FY2012 79.0 -31.1 47.9 -16.3 53.1 -28.5 24.6 -18.6 2.9 4.4 Net increase/decrease in cash and cash equivalents 34.5 10.5 Cash and cash equivalents at end of the period 90.3 55.7 33.7 25.1 28.3 22.5 Operating activities Investing activities Free cash flow Financing activities Effect of exchange rate changes on cash and cash equivalents Capital expenditures Depreciation and amortization Sales by Segment 8/38 All business segments posted two-digit y/y increase. (Billions of yen) FY2013 IAB Industrial Automation FY2013 last forecast vs. Fcst FY2012 Y/Y 291.7 283.0 +3.1% 263.0 +10.9% 97.7 98.0 -0.3% 84.1 +16.2% 126.6 121.0 +4.6% 97.6 +29.7% 82.7 83.0 -0.4% 68.8 +20.3% 89.3 88.0 +1.4% 71.5 +24.8% 78.9 72.0 +9.7% 59.2 +33.3% 6.1 5.0 +22.0% 6.3 -3.2% 773.0 750.0 +3.1% 650.5 +18.8% EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Eliminations & Corporate Total Operating Income by Segment 9/38 All business segments posted large y/y increase. (Billions of yen) FY2013 FY2013 last forecast vs. Fcst FY2012 Y/Y IAB 38.8 37.0 +4.7% 31.3 +23.6% Industrial Automation (13.3%) (13.1%) (+0.2%pt) (11.9%) (+1.4%pt) 8.7 8.5 +1.8% 4.4 +98.9% (8.9%) (8.7%) (+0.2%pt) (5.2%) (+3.7%pt) 9.1 8.5 +6.9% 5.0 +81.4% (7.2.%) (7.0%) (+0.2%pt) (5.1%) (+2.1%pt) 5.6 5.5 +0.9% 2.9 +90.5% (6.7%) (6.6%) (+0.1%pt) (4.2%) (+2.5%pt) 7.5 7.5 +0.6% 4.4 +71.2% (8.5%) (8.5%) (+0.0%pt) (6.2%) (+2.3%pt) 8.7 7.0 +23.9% 2.5 +243.5% (11.0%) (9.7%) (+1.3%pt) (4.3%) (+6.7%pt) -10.3 68.1 -9.0 65.0 +4.7% -5.2 45.3 +50.1% (8.8%) (8.7%) (+0.1%pt) (7.0%) (+1.8%pt) EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other Eliminations & Corporate Total (%): Operating income/External sales 10/38 GLOBE Stage (2) GLOBE Stage Review GLOBE Stage Performance 11/38 Sales and operating income notably up, with better profit structure. 773.0 +25% Net Sales 617.8 +1.0%pt Gross Profit Margin Operating Income (%) 38.5% 37.5% +42% 48.0 (7.8%) FY2010 +1.0%pt 68.1 (8.8%) FY2013 (Billions of yen) GLOBE Stage: Shareholder Value Up 12/38 GLOBE STAGE FY2013 FY2010 EPS +72% ¥210 ¥122 ROIC +3.5%pt 11.3% 7.8% ROE +2.9%pt 11.6% 8.7% ¥4,260 ¥2,338 Share Price +82% (Year-end) Record-high ¥4,730 on Jan 7. 2014 Dividend Per Share +77% ¥53 ¥30 3-Year TSR 87% -- -- (Total Shareholder Return) (Year-end) GLOBE Stage: Management Indicators FY2013 Actual Sales Operating Income FY2013 Targets (Apr. 2012) 13/38 FY2010 Actual ¥773.0bn approx. ¥700bn ¥617.8bn ¥68.1bn approx. ¥63.0bn ¥48.0bn GP Margin 38.5% 39% 37.5% OP Margin 8.8% 9% 7.8% ROIC 11.3% (not disclosed) 7.8% ROE 11.6% 11% 8.7% 1USD = ¥100 1USD = ¥78 1USD = ¥86 1EUR = ¥134 1EUR = ¥104 1EUR =¥114 GLOBE Stage: Top Tasks 14/38 FY2013 Actual FY2013 Targets FY2010 Actual (Apr. 2012) IA Sales ¥389.4bn ¥392.0bn ¥353.1bn Emerging Market Sales ¥247.6bn ¥220.0bn ¥163.6bn Sales in New Business for Optimization Society (Environment-related) ¥52.2bn ¥40.0bn ¥12.8bn 1USD = ¥100 1USD = ¥78 1USD = ¥86 1EUR = ¥134 1EUR = ¥104 1EUR = ¥114 GLOBE Stage: Done & Undone Achievements Growth 15/38 • Big growth in emerging markets and environmental business. • Brisk growth in AEC, SSB, HCB and Backlight Business. Profitability Response to Changes Remaining Tasks • Constant GP margin improvements. • Better profitability in all business segments. • Establishment of systems resistant to forex fluctuation. • ROIC-oriented, stronger global vertical-horizontal “matrix” management. (Intra-BC top-down & BCs-HQ ties) • IA Business: Establishment of growth structure. • Growth by better working with external enterprises. 16/38 EARTH Stage (1) EARTH-1 Stage Plans (FY14-16) VG2020 EARTH-1 Stage: Policy & Targets FY2016 Targets Policy Establishment of "Self-driven" Growth Structure Sales > ¥900bn GP Margin > 40% OP Margin > 10% ROIC* approx. 13% ROE approx. 13% EPS* approx. ¥290 *New **FY2016 assumed exchange rates: 1USD = ¥100; 1EUR = ¥135 17/38 EARTH-1 Stage Scenario GLOBE STAGE EARTH-1 STAGE 18/38 EARTH-2 STAGE Sales Existing business strategy Profit structure reform Global HR strategy FY2011 FY2013 FY2016 FY2020 EARTH-1 Stage Focus vs. GLOBE Stage Existing Business Continued efforts in IA Business reinforcement Super-Global Establishment of basis to achieve dramatic growth in wider Asia, (incl. Greater China) New Business for Optimization Society Creation of NBs in industry, society and daily life in addition to environmental business 19/38 EARTH-1 Stage Targets 20/38 FY2016 Targets FY2013 Actual Up by Existing Business IA Sales ¥440.0bn ¥389.4bn ¥50bn Super-Global Emerging Market Sales ¥320.0bn ¥247.6bn ¥72bn New Business for Optimization Society New Business Sales ¥90.0bn ¥52.2bn ¥38bn Sales Target by Segment 21/38 FY2016 Targets FY2013 Actual ¥325.0bn ¥291.7bn ¥33bn 4% ¥115.0bn ¥97.7bn ¥17bn 6% ¥135.0bn ¥126.6bn ¥8bn 2% ¥95.0bn ¥82.7bn ¥12bn 5% ¥120.0bn ¥89.3bn ¥30bn 10% ¥105.0bn ¥78.9bn ¥26bn 10% IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other *Excluding “Eliminations & Corporate” Up by value, %/yr Investments for Growth Three-year Investment Total Growth Investment approx. ¥100bn Capital Investment approx. ¥100bn R&D approx. ¥150bn 22/38 Toward Higher Shareholder Return OMRON aims to increase payout ratio to 30% by FY2016 (Three-year payout total of ¥50bn) 30% Payout ratio >25% Annual dividend per share ¥53 FY2013 FY2016 23/38 24/38 EARTH Stage (2) FY14 Plans: Earth-1 Startup FY14 Conditions 25/38 External Environment Developed countries will come back slowly, but emerging markets will still be uncertain. By Area: Japan will recover moderately after one-time drop due to consumption tax hike. Overseas Europe will keep going on a slow recovery track. US will be firm thanks to consumer spending and capital investment. China will still be vulnerable. Emerging markets will remain uncertain with some countries staying flat. Exchange Rates & Raw Material Costs Exchange rates Raw material costs • 1 USD = ¥100 • Silver = ¥72,000/kg • 1 EUR = ¥135 • Copper = ¥760/kg ¥1 fluctuation impact (full-year, approx.) USD EUR Sales ¥3.1bn ¥0.8bn OP ¥0.4bn ¥0.4bn Price change impact (full-year, approx.) Silver Copper Price change ¥1,000/kg ¥10/kg OP ¥100mn ¥100mn FY14 Consolidated P/L 26/38 Aiming at another highest-ever year in sales and profit. (Billions of yen) FY2014 Forecast Net Sales Gross Profit (%) Operating Income (%) NIBT Net Income attributable to shareholders FY2013 Actual Y/Y* 800.0 773.0 +3.5% 317.0 (39.6%) 74.0 (9.3%) 71.0 297.2 (38.5%) 68.1 (8.8%) 62.0 +6.7% 51.0 46.2 (+1.2%pt) +8.7% (+0.4%pt) +14.5% +10.4% *FY14 & FY13 figures rounded to million to calculate Y/Y growth. Operating Income Analysis, Y/Y 27/38 Aiming at higher OP while working on investments for growth. Sales up, Product mix Fixed manufacturing costs up -1.4 (Billions of yen) SG&A up -11.8 +21.2 R&D up 74.0 -2.1 68.1 (incl. strategic investments) Gross profit up ¥19.8bn (excl. forex & raw materials) Operating income up ¥5.9bn FY2013 Actual FY2014 Forecast FY14 Business Environment by Segment Segment IAB Industrial Automation FY2014 Business Environment • Japan: Automotive-related demand will come back gradually after one-time drop. Electronic components will remain solid as smartphone/tablet-related demand goes up. Infrastructure/ equipment-replacement related demand will show upward trend thanks to Abenomics economic policy. • Overseas: • Europe will show recovery signs. • Americas will remain steady, led by Automotive-related demand. • Greater China will remain uncertain. • Asia Pacific will be slow, especially Thailand. EMC • Japan: Home electronics will drop temporarily due to consumption tax hike in April. Automotive-related demand will slow down due to manufacturing transfer to overseas. Electronic & Mechanical Components • Overseas: Europe will recover gradually. US Automotive-related demand will go solid. Greater China and Asia, too, will go steady. AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Healthcare Other 28/38 • Japan: Consumption tax won’t hit so long, with automakers’ launching new models, and the government’s cutting automotive acquisition tax. • Overseas: North America and China will be solid. Europe will go back on a recovery track. Asia will slow down due to sluggish economy. Demand for train system will go flat, after one-time, consumption-tax-related investment is over. Environmental solutions will go brisk. • Japan: Consumer spending will go down temporarily, but will go healthy overall. • Overseas: Europe, Americas, and China will be solid. Asia will turn around Environmental Solutions and Backlight business will be brisk. Full-Year Sales & OP by Segment 29/38 Aiming at sales & OP growth in all segments 2 years in a row. (Billions of yen) Net Sales Operating Income, (%)* FY2014 Forecast FY2013 Actual 300.0 291.7 +2.8% 101.0 97.7 +3.4% 128.5 126.6 +1.5% 85.5 82.7 +3.4% Healthcare 98.5 89.3 +10.3% Other 83.0 78.9 +5.1% 3.5 6.1 -42.6% 800.0 773.0 +3.5% IAB Industrial Automation EMC Electronic & Mechanical Components AEC Automotive Electronic Components SSB Social Systems, Solutions & Service HCB Eliminations & Corporate Total Y/Y FY2014 Forecast FY2013 Actual 40.0 38.8 +3.2% (13.3%) (13.3%) (0.0%pt) 9.2 8.7 +6.3% (9.1%) (8.9%) (+0.2%pt) 9.2 9.1 +1.3% (7.2%) (7.2%) (0.0%pt) 6.5 5.6 +17.1% (7.6%) (6.7%) (+0.9%pt) 8.0 7.5 +6.0% (8.1%) (8.5%) (-0.4%pt) 9.5 8.7 +9.5% (11.4%) (11.0%) (+0.4%pt) -8.4 -10.3 -- 74.0 68.1 +8.7% (9.3%) (8.8%) (+0.5%pt) Y/Y *(%): Operating income/External sales FY14 Goals: Management Indicators & Top Tasks FY2014 Targets FY2013 Actual GP Margin 39.6% 38.5% OP Margin 9.3% 8.8% ROIC approx. 12% 11.3% ROE approx. 12% 11.6% Existing Business IA Sales ¥401.0bn ¥389.4bn Super-Global Emerging Market Sales ¥268.0bn ¥247.6bn ¥60.0bn ¥52.2bn New Business for Optimization Society New Business Sales 30/38 FY14 Dividend Forecast Annual dividend payout forecast: ¥63 (¥27 interim + ¥36 year-end) Annual dividend per share up ¥10 ¥63 ¥53 FY2013 FY2014 31/38 32/38 33/38 References 2015/01 80 2014/10 160 2014/07 2014/04 2014/01 2013/10 FY12 ¥83.2/$ 2013/07 2013/04 140 2013/01 FY11 ¥79.3/$ 2012/10 90 2012/07 FY11 ¥110.3/€ 2012/04 2012/01 2011/10 2011/07 130 2011/04 2011/01 2010/10 2010/07 2010/04 2010/01 2009/10 2009/07 2009/04 2009/01 2008/10 2008/07 2008/04 2008/01 2007/10 100 2007/07 150 2007/04 2007/01 2006/10 2006/07 2006/04 Exchange Rates (USD, EUR) 34/38 1JPY 170 USD EUR FY07 ¥161.9/€ FY14 ¥135.0/€ FY13 ¥134.0/€ FY12 ¥107.6/€ 120 110 FY07 ¥114.1/$ FY13 ¥100.1/$ FY14 ¥100.0/$ 70 Raw Material Prices (Silver, Copper) Silver price quotation, JPY/kg 35/38 Copper price quotation, JPY/kg 140,000 1400 Silver ■ FY11 Copper 120,000 ◆ FY07 ¥91,854 ¥916 1200 ■ FY12 ¥83,059 100,000 1000 ◆ FY14 ◆ FY13 ¥757 (¥733)** ¥760 80,000 800 60,000 600 ■ FY14 ◆ FY11 ¥717 ◆ FY12 ¥72,000 ¥697 ■ FY13 40,000 ■ FY07 ¥70,655 (¥76,713)** ¥54,230 400 20,000 200 *Monthly simple moving average (SMA) of price quotations. **(¥): Average used for FY13 earnings. 2015/01 2014/10 2014/07 2014/04 2014/01 2013/10 2013/07 2013/04 2013/01 2012/10 2012/07 2012/04 2012/01 2011/10 2011/07 2011/04 2011/01 2010/10 2010/07 2010/04 2010/01 2009/10 2009/07 2009/04 2009/01 2008/10 2008/07 2008/04 2008/01 2007/10 2007/07 2007/04 2007/01 2006/10 2006/07 0 2006/04 0 ROIC Definition 36/38 Consol. B/S Net income ROIC = attributable to shareholders Invested capital Invested capital* = Net assets + Interesting-bearing debt *Average of FY12 year-end & FY13 quarterly figures. Businesses and Major Products LCD backlights, semiconductors/MEMS, energy saving/environmental business, electronic systems and equipment • Electronic signal sensing • Electrical current/voltage control • Radio wave sensing • Automotive body control Other Relays, switches, connectors, amusement equipment parts, mobile device parts AEC EMC Automotive Electronic Components Business Electronic and Mechanical Components Business ・ Ticket gate mechanisms ・ Car & human sensing 37/38 Keyless entry systems, power window switches, automotive relays, EPS (electronic power steering) • Bio-information sensing • Behavior sensing Automated ticket gates and ticket vending machines, SSB road management systems, Social Systems, environmental solutions Solutions business & Service IAB Industrial Automation Business Business Sensing • Displacement and measurement sensing • Temperature control • Machine control • Vision sensing Proximity/photoelectric/vision sensors, PLCs, temperature controllers, machine safeguarding equipment, inspection systems Home- and professional-use digital blood pressure monitors, HCB body composition analyzers, Healthcare thermometers, pedometers, Business nebulizers, sleep sensors, patient monitors, cardiovascular screening monitors, health management service & Control Consolidated subsidiaries 156 Affiliates accounted for by the equity method 10 (as of March 31, 2014) 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. Investor Relations Department Investor Relations 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". 38/38