Omron 2009 Annual Report Download - page 56

54
Fiscal 2008 Management’s Discussion and Analysis
Overview of Consolidated Results and Financial Condition
Review and Analysis of the Statements of Income
In this market environment, Omron’s fiscal 2008 consoli-
dated net sales declined 17.8% year on year to ¥627.2
billion and operating income plummeted 91.8% to ¥5.3 bil-
lion despite efforts to reduce costs in every business
segment, restricting large investment, and launching wide-
ranging structural reform of business operations with the
objective of reestablishing our revenue bases. The
Company also recorded a consolidated net loss before
income taxes of ¥39.1 billion and a net loss of ¥29.2 bil-
lion, largely as a result of impairment losses for goodwill,
property, plant and equipment, and investment securities.
Total assets declined 12.8% from the previous fiscal
year owing to reduced sales and asset impairment losses.
The net loss contributed to a 19.0% year-on-year decline
in total shareholders’ equity, which lowered the equity ratio
to 55.4%, from 59.7% at the end of the previous fiscal year.
Return on equity (ROE) fell to -8.7%, as the Group was
unable to extend its streak of maintaining ROE above its
benchmark 10% level for five consecutive years.
Sales
Consolidated net sales declined 17.8% year on year to
¥627.2 billion as the global recession and the strong yen
led to declining revenue in all business segments. By
region, sales declined 15.6% in Japan and decreased in all
other regions as well, falling 21.1% in North America,
23.3% in Europe, 17.7% in the Greater China region, and
13.5% in Southeast Asia.
Cost of Sales and SG&A Expenses
The decline in sales led to a 13.0% year-on-year decrease
in cost of sales. However, the cost to sales ratio rose 3.6
percentage points to 65.2%. Raw materials prices, which
had risen sharply in the previous fiscal year, dropped back
as economic conditions worsened, but sales revenue was
strongly impacted by downward pressure on product prices
and the sharp rise in the value of the yen.
SG&A expenses were reduced by 7.0% from the pre-
vious fiscal year as a result of company-wide efforts to
counter the decline in sales by cutting costs and restrict-
ing large investment. The Company reduced R&D by 5.1%,
but the rapidity of the drop in sales resulted in the SG&A
expense ratio growing 3.1 percentage points to 26.2% and
the R&D expense ratio rising 1.0 percentage point to 7.7%.
Other Expenses (Income) *See Note 12 on page 79
The net amount of other expenses (income) was a net loss
of ¥44.5 billion, as loss in this category expanded ¥43.4 bil-
lion from the previous fiscal year. The main factors were
impairment losses for goodwill, property, plant and equip-
ment, and investment securities.
Net Income before Income Taxes, Net Income, and
Profit Distribution
As a result of the above, net income before income taxes
decreased ¥103.3 billion from ¥64.2 billion in the previous
fiscal year to a net loss before income taxes of ¥39.1 bil-
lion. Net income declined ¥71.6 billion from ¥42.4 billion
Note: Segment operating income is prepared using the single-step method (that does not show individual income levels) based on U.S. GAAP. For
easier comparison to other companies, operating income represents gross profit minus selling, general and administrative expenses, and
research and development expenses.
Billions of yen Billions of yen
Net Sales & Net Income before Income Taxes
Net sales [left axis]
Net income before income taxes [right axis]
* Figures have been restated to account for
businesses discontinued in FY2007.
-200
0
200
400
600
800
-40
0
40
80
120
160
04 05 0806 07 (FY)
Billions of yen %
Net Income & ROE
Net income [left axis]
ROE [right axis]
-50
-25
0
25
50
-15
-10
-5
0
5
10
15
04 05 0806 07 (FY)