Omron 2001 Annual Report Download - page 22

Financial Strategy
During the fiscal year ended March 31, 2001, Omron
posted record consolidated net income as a result of the
policies the Company implemented to strengthen its
earnings structure. These included improving asset
efficiency, disciplined liquidity management, and efforts
to raise competitiveness. In addition, Omron is investing
capital according to specific plans and keeping capital
expenditures within the scope of cash flow, while
focusing on high-profit businesses to increase corporate
value.
Overview of Operations
In Japan, while consumer spending remained
restrained, favorable exports and increased private
capital investment supported a modest recovery.
Overseas, during the first half of the fiscal year, the U.S.
economy maintained a strong rate of growth, while the
economies of Asia continued to recover and economic
conditions in Europe were favorable. During the second
half, however, weakness in the U.S. information
technology (IT) sector contributed to a pronounced
slowdown in the overall U.S. economy. The Japanese
economy weakened as a result, evidenced by factors
including an increase in inventories in the domestic
semiconductor industry. In this environment, Omron
worked during the year ended March 31, 2001 to
transform its identity and position while consistently
improving its earnings base. The Company also
expanded its position in its markets and emphasized
Management’s Discussion and Analysis
20 Omron Corporation
Gross Profit Margin
(%)
SGA Expenses/Net Sales
R&D Expenses/Net Sales
(%)
Income Before Tax/Net Sales
Net Income/Net Sales
(%)
1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001
34.7 36.7
34.4
35.4
22.1
21.9 22.6
24.6 24.1
7.1
5.9 6.5 7.6 6.6
6.7
6.6
6.9
1.5
3.8
2.6 3.1
0.4
2.1
36.7
3.8
SGA Expenses/Net Sales
(excluding R&D expenses)
R&D Expenses/Net Sales
Income Before Tax/Net Sales
Net Income/Net Sales
improved competitiveness.
These efforts were supported by firm capital
investment in the Japanese semiconductor and IT
sectors. Domestic sales increased as a result. Overseas
sales also expanded.
The consolidation of operating bases and lower
production costs resulted in a decrease in the ratio of
cost of sales to net sales. This and other positive factors
resulted in a 90.3 percent increase in income before
income taxes and minority interests to ¥40.0 billion. Net
income rose 92.9 percent to ¥22.3 billion, a record high,
and ROE improved to 6.7 percent.
Sales
Consolidated net sales increased 7.0 percent to ¥594.3
billion, supported by firm capital investment in the
semiconductor and IT sectors and increased demand in
Omron’s core control components systems business.
Both domestic and overseas sales increased.
Cost of Sales, SGA Expenses and Income
Cost of sales increased ¥17.3 billion, or 4.8 percent,
over the prior fiscal year to ¥376.2 billion, and improved
to 63.3 percent of net sales, compared to 64.6 percent for
the previous fiscal year. Factors in the improvement
included higher productivity and lower raw material
prices resulting from the yen’s strength during the first
half of the fiscal year. As a result, gross profit increased
11.0 percent to ¥218.1 billion, and the ratio of gross
profit to net sales improved by 1.3 percentage points to