Sluggish market sees net sales decline

Omron Corporation has announced consolidated results for the first half ended September 30, 2005.

Omron has announced consolidated results for the first half ended 30th September 2005.

In a sluggish market for consumer and commerce components for IT and digital-related products, net sales for the period were JPY285.3 billion, a 5.6% decrease from the previous interim.

This decrease, however, reflected the substantial effect of the transfer of the ATM and other information equipment business to an equity affiliate in October 2004.

Excluding the transferred information equipment business, net sales increased 3.7% over the previous interim as a result of solid sales of the Omron Group's core factory automation control systems and automotive electronic components business.

Income levels remained near levels of the previous interim as a result of Omron's ongoing measures to raise efficiency to realise a strong profit structure.

Operating income was JPY31.2 billion, an increase of 0.2% compared with the previous interim, income before income taxes was JPY 31.7 billion, an increase of 9.5%, and net income posted at JPY16.7 billion, represents an increase of 1.8%.

Industrial Automation Business: in Japan, investments to improve quality and safety were firm, and sales of the safety business and quality solutions business, which Omron has positioned as strategic growth businesses, grew steadily.

However, sales of products for the semiconductor and digital appliance industries, which are in an adjustment phase, were sluggish, and overall domestic sales were down compared with same period in the previous fiscal year.

In overseas markets, overall sales were strong in North America, due to increased sales of products to the automobile industry and of the quality solutions business.

In Europe, despite the effect of restrained investment among manufacturers due to weak economic conditions, sales of inverters and servo-motors increased, and foreign currency translation also increased sales.

Sales were strong in South-East Asia and Greater China, where exports continued to grow briskly.

As a result, segment sales for the interim period were JPY130,272 million, an increase of 2.4% from the same period in the previous fiscal year.

Electronic Components Business: in Japan, overall sales of products such as miniature backlights for mobile devices and relays for air conditioners were weak due to factors including inventory adjustments in the consumer and commerce industry, which started in the second half of the previous fiscal year.

Overseas, Omron strengthened sales and marketing in the IT and mobile markets in the USA and Europe, which are growth areas, and expanded production capacity and reinforced sales capabilities aimed at the rapid growth of the China business.

However, sales were weak due to factors such as a delayed recovery in sales of communications relays against the backdrop of a weak economy in Europe and restrained public works investments in China, and greater price competition for electronic appliances.

As a result, segment sales were JPY45,924 million, a decrease of 8.1% from the same period in the previous fiscal year.

Automotive Electronic Components Business: global automobile production volume during the interim period was strong overall, although there were differences by manufacturer and country.

In addition, needs are increasing for car electronics for automobile safety and environmental friendliness, and Omron released products that meet those needs to match customers' new vehicle investment.

Sales were strong in Japan, North America and Asia, and increased substantially in Europe due to the effect of the acquisition of a subsidiary in the previous fiscal year.

As a result, segment sales were JPY35,130 million, an increase of 16.3% from the same period in the previous fiscal year.

Social Systems Business: in the public transportation systems business, despite the strong contribution from equipment deliveries related to the opening of new train lines in the Kanto region and renovation demand, sales decreased substantially compared with the previous fiscal year, when there was major demand associated with the issue of newly designed currency bills.

In the security solutions business, sales grew favourably, centred on demand from large customers.

In addition to the above, the ATM and other information equipment business was transferred to an equity affiliate in October 2004.

As a result, segment sales were JPY33,991 million, a decrease of 42.3% from the same period in the previous fiscal year.

Healthcare Business: in Japan, interest in healthcare continued to increase, and despite the slackening growth rate of body composition monitors, which expanded strongly in the previous fiscal year, sales of digital blood pressure monitors and other products were favourable, and overall sales increased over the same period in the previous fiscal year.

In overseas markets, sales declined due to slower demand for digital blood pressure monitors in the USA and China, but sales of digital blood pressure monitors and nebulisers, which are core products, increased in Europe and South-East Asia.

As a result, segment sales were JPY27,550 million, an increase of 15.3% from the same period in the previous fiscal year.

Among other existing businesses, in the entertainment business, although competition continued to intensify for commercial game machines, including printed sticker machines, overall sales increased over the same period in the previous fiscal year due to steadily expanding sales of content for cellular phones and other new businesses.

In the computer peripheral business, IT investment recovered against the backdrop of improved corporate earnings, and sales of products such as permanent power supplies increased solidly.

In addition, the commissioned software business performed well amid improvement in corporate IT investment.

In new business themes, sales of the radio frequency identification (RFID) business grew steadily along with the trend toward practical application of IC tags in Japan and overseas.

As a result, segment sales totalled JPY12,495 million, an increase of 3.0% from the same period in the previous fiscal year.

In accordance with the 'Basic Policy for Distribution of Profits' stated above and in consideration of results in the interim period ended 30th September 2005, Omron will increase the interim dividend by JPY2.00 per share compared with the previous interim dividend to JPY12.00 per share.

Although elements of uncertainty regarding the outlook for the global economy will remain, including pressure on corporate profits due to high crude oil and raw material prices and the direction of exchange rates, factors such as the rebound in IT and digital-related demand that started in summer are expected to support a gradual recovery trend.

In markets related to the Omron Group, the market for factory automation control systems for manufacturing industries in Japan and overseas is expected to expand gradually, supported in part by an upturn in capital investment demand.

In addition, demand for automotive electronic components is projected to remain favourable.

The market for consumer and commerce components for IT and digital-related products, which was weak during the first half of the fiscal year, is expected to rebound slowly starting in the second half.

Based on these economic projections, the Omron Group expects net sales for the fiscal year to remain in line with its initial forecast, following interim period results.

Income is also expected to be in line with the initial forecast, as the Omron Group will continue to aggressively make growth investments in China and in new business areas, and will also work to enhance the profit structure of existing businesses.

For the full fiscal year, Omron projects net sales of JPY625.0 billion, operating income of JPY65.0 billion, income before income taxes of JPY63.0 billion and net income of JPY36.0 billion - unchanged from the forecast announced on 27th April 2005.

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