Omron 2005 Annual Report Download - page 43

41
Review and Analysis of the Income Statement
Sales
Sales increased 4.1 percent over the previous fiscal year to
¥608,588 million. Geographically, there was an increase in revenue
in all regions including Japan, North America, Europe and Asia. For
all business segments, all areas showed an increase in revenue,
with the exception of the Social Systems Business (SSB).
Cost of Sales and SG&A Expenses
In line with expanded sales, cost of sales and SG&A expenses
(excluding R&D expenses) increased by 4.1 percent and 1.5 per-
cent year-on-year respectively, in accordance with expanded
sales. As for increased materials expenses as part of the cost of
sales, there was an increase in materials expenses of roughly
¥1.0 billion. This was, however, absorbed by equivalent cost
reductions, and the gross profit margin was maintained on par
with the previous year at 41.0 percent. Also, the ratio of the cost
of sales and SG&A expenses (excluding R&D expenses) improved
by 0.6 percentage points over the previous year to 23.7 percent.
R&D expenses increased by ¥2,947 million over the previous year
to ¥49,441 million, and its ratio to net sales increased from 7.9
percent in the previous year to 8.1 percent. This represents part
of the Omron Group’s strategy to accelerate performance growth
by further strengthening its technological edge. In future policy,
the net sales ratio for this expense will be maintained around
roughly the 8 percent level.
Non-operating Profit and Loss
Net non-operating loss came to ¥3,563 million, on par with that
for the previous year (loss of ¥3,419 million). Net interest income
and expenses improved significantly due to reductions in interest-
bearing debts from a loss of ¥317 million in the previous year to
¥216 million for this current year. Also, foreign exchange loss was
reduced from ¥1,254 million in the previous year to ¥75 million.
However, other expenses increased by ¥1,856 million to ¥3,704
million, up from ¥1,848 million in the previous year. The primary
cause was an increase in losses by companies accounted for
under the equity method.
Net Income before Income Taxes, Net Income and Profit
Distribution
Due to the results noted above, net income before taxes showed
a 9.5 percent increase over the previous year to ¥52,548 million.
Moreover, net income showed a 12.6 percent increase over the
previous year to ¥30,176 million. This means that basic net
income per share reached ¥126.5, in contrast to ¥110.7 for the
previous year. Based on its profit distribution policy, an ordinary
cash dividend was set at ¥14.0 per share in consideration of the
current and previous fiscal years’ results. In combination with the
previous interim dividend of ¥10.0, the total dividend for the fiscal
year came to ¥24.0 with a dividend payout ratio of 19.0 percent.
Sales Breakdown by Business Segment
FY2004 FY2003
IAB ...................................... 41.1% 39.3%
ECB ..................................... 16.6% 15.2%
AEC ..................................... 10.6% 10.1%
SSB ..................................... 18.9% 23.3%
HCB..................................... 8.3% 8.0%
Other................................... 4.5% 4.2%
1. By Business Segment
•Industrial Automation Business (IAB)
Sales of the Industrial Automation Business (IAB) for this year
showed a slowdown over the previous year. However, with sup-
port from comparatively firm capital expenditures demand, there
was an increase of 9.0 percent over the previous year to ¥250,329
million (accounting for 41.1 percent of consolidated net sales).
Domestically, the market for cellular phone and digital con-
sumer electronics, which had done favorably in the first half of
the year, entered a phase of reduction in the second half of the
year. However, consumer willingness to invest in improved quali-
ty and safety was strong. With the provision of “Total solutions
for improved quality” and “IT integration of the manufacturing
process” to the semiconductor, flat panel display (FPD), electron-
ic component, automobile, food, machine tool, transportation
equipment, and packaging equipment industries, there was an
increase in sales including PCB Inspection Systems, displace-
ment sensors, vision sensors, network devices, motion con-
trollers, and safety-related devices.
Overseas, there was an impact on growth in mainland China
from measures to control the overheating of economic conditions,
casting a shadow on the market’s vitality. However, sales in China
and Southeast Asia showed significant increases due to direct
marketing aimed at customers, enhancement of sales channels,
and stronger efforts on social infrastructure. In Europe also, pri-
mary manufacturers relocated their manufacturing bases, advanc-
ing demand for capital expenditures in Northern and Eastern
Europe and leading to a rapid increase in sales. Furthermore, con-
ditions were favorable in North America as well, focused on the
automotive industry. Along with increased sales, operating income
increased 21.2 percent over the previous year to ¥41,425 million.
Segment Information
Sales in the segment information column show sales to external
customers, excluding intersegment transactions. Conversely,
operating income shows operating income including internal prof-
its, prior to the deduction of amounts such as intersegment trans-
actions and headquarters expenses that are not apportionable.