OMRON : Presentation Materials of Financial Results w/ Script

FY2023 Earnings

Results Briefing

May 8, 2024

OMRON Corporation

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Hello everyone. I am Tsujinaga, President of OMRON. Thank you very much for taking time out of your busy schedules to attend our FY2023 earnings presentation.

Today, Mr. Takeda, our CFO, will discuss last year's performance, and I will explain this year's plans and our structural reform program. After that, we will move into the Q&A session. We hope to answer as many questions as possible within the allotted time. Thank you.

Now, let's proceed according to the presentation materials. Please turn to the next page.

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Summary

• FY2023 results
• Significant decrease in total sales and profits; mainly due to decrease of sales and profits in IAB and DMB
• HCB and SSB achieved significant increases in sales and profits capturing expanding business opportunities
• FY2024 full-year forecasts
• Gradual recovery in demand is expected from H2 in IAB and DMB. Business environments remain strong in HCB, SSB and DSB
• Targeting Y/Y growth in sales and profits. One-time expenses of approximately ¥28.0 bn for workforce/labor costs structural reform is factored in as non-operating expenses
• Full-yeardividend guidance unchanged YoY at ¥104
• Structural Reform Program "NEXT 2025"

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Copyright: 2024 OMRON Corporation. All Rights Reserved.

Today's presentation will focus on three main points.

The first point is the performance for FY2023. Last year, declines in sales and profits in the IAB and DMB businesses were main factors behind the significant reductions in both net sales and profit. On the other hand, the HCB and SSB businesses captured expanding business opportunities and achieved significant increases in both sales and profit.

The second point is the plan for FY2024. In the business environment, a gradual recovery in demand is expected from H2 of the year in the IAB and DMB businesses. Meanwhile, the HCB, SSB, and DSB businesses are expected to continue in a robust business environment.

Taking this business environment into account, we plan for an overall increase in net sales and profit. As part of our personnel and payroll cost restructuring, we have incorporated approximately JPY28 billion in non-operating expenses for one-time costs. Additionally, the annual dividend forecast will remain the same as last year, at JPY104.

Lastly, I will discuss the structural reform program "NEXT 2025." I will share our future outlook and the initiatives aimed at re-growth.

Now, let me turn it over to Mr. Takeda to explain the performance for FY2023.

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Contents

１．FY2023 Results	・・・・ P.4	- 7
２．FY2024 Forecasts	・・・・	P.8	- 17
３. Structural Reform Program "NEXT 2025"	・・・・	P.18 - 23

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Copyright: 2024 OMRON Corporation. All Rights Reserved.

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１．FY2023 Results

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Copyright: 2024 OMRON Corporation. All Rights Reserved.

From here, I will take over the explanation. Please turn to the next page.

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FY2023: Consolidated Results

Sales and profits decreased. Profits fell sharply, mainly due to
decrease in sales and drop in gross profit margin		(¥bn)
			FY2022	FY2023	Y/Y		FY2023		Change from
			Actual	Actual		Previous FCST Previous FCST
Net Sales		876.1	818.8	-6.5%	810.0		+1.1%
Gross Profit		393.9	346.5	-12.0%	339.0		+2.2%
(%)		(45.0%)	(42.3%)	(-2.7%pt)	(41.9%)	(+0.5%pt)
Operating Income		100.7	34.3	-65.9%	24.0		+42.9%
(%)		(11.5%)	(4.2%)	(-7.3%pt)	(3.0%)	(+1.2%pt)
Net income attributable to	73.9	*	-89.0%	1.5	*	+440.3%
OMRON shareholders		8.1
				(-9.5%pt)				ー
ROE		10.6%	1.1%		Approx. 1％
ROIC		10.4%	1.0%	(-9.4%pt)		Approx. 1%		ー
EPS(JPY)			372	41	-331		8		+33
Average USD rate (JPY)		135.2	143.9	+8.7	143.4		+0.5
Average EUR rate (JPY)		140.9	156.3	+15.4	155.0		+1.3
Average CNY rate (JPY)		19.7	20.1	+0.4	20.0		+0.1
	*Net income includes loss on revaluation of JMDC shares associated with its additional acquisition (¥12.0 billion)	5

Copyright: 2024 OMRON Corporation. All Rights Reserved.

First, let's look at the full-year performance for FY2023. Please focus on the shaded area in the middle of the table.

Net sales were JPY818.8 billion, gross profit was JPY346.5 billion, gross profit margin was 42.3%, and operating profit was JPY34.3 billion. Net income attributable to OMRON shareholders was JPY8.1 billion, which includes a loss of JPY12 billion recorded due to the revaluation associated with the additional acquisition of shares in JMDC.

Compared to our previous forecast, there was significant improvement in gross profit margin and efficiency in fixed costs, resulting in operating profit substantially exceeding our expectations.

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FY2023: Results by Segment

Decreased sales and profits in IAB and DMB.

Increased sales and profits in HCB and SSB

Sales

OP

(¥bn)

FY2022	FY2023	Y/Y
Actual	Actual

IAB	485.7	393.6	-19.0%
Industrial Automation
HCB	142.1	149.7	+5.3%
Healthcare
SSB	107.3	141.6	+32.0%
Social Systems, Solutions
and Service
DMB	138.9	114.4	-17.6%
Device & Module Solutions
DSB *2	ー	17.4	ー
Data Solutions
Eliminations & Corporate	2.1	2.1	+2.4%
Total	876.1	818.8	-6.5%

FY2022	FY2023	Y/Y
Actual	Actual

85.8	21.5	-75.0%
(17.7%)*1	(5.5%)	(-12.2%pt)
16.0	18.5	+15.3%
(11.3%)	(12.3%)	(+1.1%pt)
7.5	14.0	+87.2%
(7.0%)	(9.9%)	(+2.9%pt)
15.5	3.1	-79.7%
(11.2%)	(2.8%)	(-8.4%pt)
ー	2.2	ー
ー	(12.6%)	ー
-24.2	-24.9	ー
100.7	34.3	-65.9%
(11.5%)	(4.2%)	(-7.3%pt)

*1.	Figures shown in brackets under OP are segment OPMs
*2.	Includes JMDC results and related expenses (amortization of intangible assets and acquisition-related
	expenses) associated with the consolidation	6

Copyright: 2024 OMRON Corporation. All Rights Reserved.

Next, let's review the performance by business segment.

First, the IAB business. While net sales were stable during Q1 due to the backlog of orders, they declined from Q2 onwards as capital investment demand slowed, resulting in a 19% decrease YoY to JPY393.6 billion. Operating profit dropped by 75% to JPY21.5 billion, impacted by the decrease in net sales and the decline in gross profit margin.

For the HCB business, net sales increased by 5.3% to JPY149.7 billion, driven by strong demand for blood pressure monitors in Europe and nebulizers in China. Operating profit increased by 15.3% to JPY18.5 billion, thanks to improvements in product mix and reductions in variable costs.

In the SSB business, there was significant growth in net sales and profit, supported by the recovery in demand for the railway business and seizing market opportunities in the energy solutions business. Sales increased by 32% YoY to JPY141.6 billion, and operating profit increased by 87.2% to JPY14 billion.

For the DMB business, net sales declined by 17.6% to JPY114.4 billion, mainly due to stagnant demand from the consumer electronics sector. Operating profit fell by 79.7% to JPY3.1 billion, affected by the decrease in sales and worsening fixed cost ratios.

Finally, the DSB business. We have started accounting for the performance of JMDC and related consolidation costs from H2 of the year. It is worth noting that JMDC achieved significant increases in sales and profit for the full year.

Please turn to the next page.

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FY2023: Analysis of Change in Operating Income (Y/Y)

Impacted by decline in sales and GP margin in IAB and DMB.

SG&A expenses increased due to the impact of inflation on labor costs

Forex

impact

100.7 ＋4.5

• Decreased GP on lower sales
  -36.6

(¥bn)

Ref: Sales by BC

(Increase Y/Y) ・HCB +0.9 ・SSB ＋34.3 ・DSB +17.4

(Decrease Y/Y) ・IAB -105.3・DMB -28.7

• Lower

GP Margin ③Increased fixed costs

-24.2		-10.1 (Labor costs -8.3/Expenses-1.8)
			Higher SG&A
			▲10.9	Lower R&D
・Variable costs		＋0.8
down	+14.7
・Business/product	・Labor costs -7.2	・Labor costs	-1.1
mix	-21.8
・Expenses -3.7	・Expenses	＋1.9
・Production added
value		-5.0
・Inventory		-6.7
provision
・Others		-5.4

34.3

FY2022	-66.4 Y/Y	FY2023
Actual	Actual

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Copyright: 2024 OMRON Corporation. All Rights Reserved.

Here is the operating profit step chart. It shows the operating profit for FY2022 and FY2023, as well as the factors contributing to the changes. I will explain from the left.

Firstly, the decrease in gross profit was due to reduced net sales. While the HCB and SSB businesses saw an increase in net sales, the decline in net sales from the IAB and DMB businesses resulted in a total profit decrease of JPY36.6 billion for the Company.

Next, the decline in gross profit margin. Efforts to reduce logistics costs and lower material costs created a profit of JPY14.7 billion. However, changes in the sales composition ratio of the businesses, impacts from area and product mix in the IAB business, and an increase in allowance for inventory resulted in an overall profit decrease of JPY24.2 billion.

Lastly, the increase in fixed costs. Primarily due to the impact of inflation, personnel expenses in SG&A and development costs increased by JPY8.3 billion, leading to a total negative impact of JPY10.1 billion.

That concludes our report on the performance for FY2023.

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２．FY2024 Forecasts

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Copyright: 2024 OMRON Corporation. All Rights Reserved.

Next, I will explain the plan for FY2024. Please turn to the next page.

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Operating Environment Outlook

Overall improvement from FY2023.

Expect gradual recovery in IAB and DMB from H2

IAB

Industrial

Automation

HCB

Healthcare

Business environment remains sluggish in H1, with differences among markets.

In H2, expect gradual recovery in demand, mainly in digital market *Details on later pages

BPM market to grow gradually on a global basis Cardiovascular: Expect gradual growth on a global basis, centered on China and Asia

Respiratory: Demand for nebulizers continues to expand globally, although affected by the backlash from China's special demand for respiratory diseases

SSB	Overall favorable business environment continues
Social Systems,	Energy: Renewable energy-related investments in the residential area will continue. In the industrial field, the need for PV
Solutions &	installation is expected to increase
Service	Railway: Investment demand from railway companies is steady due to recovery in ridership and fare revisions

DMB	Demand remained sluggish in general in H1; gradual improvement from H2
DC Equipment/Microwave Devices: Driven by increased demand for advanced semiconductors, expect full-scale growth
Device & Module	from H2
Solutions	Commodity Devices: Despite some differences among markets, expect gradual recovery from H2 as the market continues
	to deplete inventory

DSB	Strong business environment continues, centered on health big data business
JMDC:Expect expansion of medical data utilization movements, mainly among pharmaceutical and Life and non-life insurance
Data Solutions	industries. In response to growing social awareness of health and prevention, expect demand for services for insurers and
	consumers to increase
	9

Copyright: 2024 OMRON Corporation. All Rights Reserved.

First, let's discuss our recognition of the business environment for FY2024.

In the IAB business, we anticipate a gradual recovery starting from H2 of the year, especially in the digital industry. I will provide more details on this later.

For the HCB business, we expect the blood pressure monitor market to experience gradual growth globally, particularly in China and other Asian regions.

In the SSB business, we foresee a continuation of the generally favorable business environment. Particularly, we expect ongoing investments in the residential and industrial sectors within the renewable energy market.

Regarding the DMB business, similar to the IAB business, we anticipate a gradual improvement starting from H2 of the year.

For the DSB business, JMDC is expected to continue thriving, especially in the health big data sector. The utilization of medical data is projected to expand further, primarily within the pharmaceutical, life insurance, and general insurance industries.

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(¥bn)

Forecasts: Consolidated Earnings

Increased sales and profits. Plan to significantly increase OP by improving GPM and fixed cost productivity

	FY2023	FY2024	Y/Y
	Actual	Forecast
Net Sales	818.8	825.0	+0.8%
Gross Profit	346.5	368.5	+6.4%
(%)	(42.3%)	(44.7%)	(+2.4%pt)

Operating Income

(%)

Net income attributable to OMRON shareholders

ROE

ROIC

EPS(JPY)

Average USD rate (JPY) Average EUR rate (JPY) Average CNY rate (JPY)

34.3	49.0	+42.7%
(4.2%)	(5.9%)	(+1.7%pt)
8.1	8.5*	＋4.9%
1.1%	Approx. 1%	ー
1.0%	Approx. 1%	ー
41	43	+2
143.9	145.0	+1.1
156.3	155.0	-1.3
20.1	20.0	-0.1

Copyright: 2024 OMRON Corporation. All Rights Reserved.

*Reflects non-operating expenses of approximately 28.0 billion yen as expenses such as special lump-sum	10
payments associated with "optimizing the number of personnel and capabilities" in structural reforms

Next, I will explain the performance plan for this fiscal year. Please focus on the shaded area in the center.

Net sales are projected at JPY825 billion, gross profit at JPY368.5 billion, operating profit at JPY49 billion, and net income attributable to OMRON shareholders at JPY8.5 billion.

While net sales are expected to remain at the same level as the previous fiscal year, we plan for a 42.7% increase in operating profit through improvements in gross profit margin and enhanced productivity in fixed costs.

This plan includes a reflection of approximately JPY28 billion in non-operating expenses, associated with one-time payments such as severance costs for a workforce reduction of about 2,000 people.

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