OMRON Corporation: Summary of Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2023 (U.S. GAAP)

Kyoto (pta023/26.10.2022/17:49 UTC+2)

Summary of Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2023 (U.S. GAAP)

October 26, 2022

OMRON Corporation (6645)

Exchanges Listed: Tokyo

URL: https://www.omron.com/global/en/

Representative: Yoshihito Yamada, President and CEO

Contact: Toyoharu Tamoi, Executive Officer, Senior General Manager, Global Finance and Accounting HQ

Telephone: +81-75-344-7070

Filing of Quarterly Securities Report (Shihanki hokokusho)(scheduled): November 11, 2022

Start of Distribution of Dividends (scheduled): December 2, 2022

Preparation of Supplementary Materials for the Quarterly Financial Results: Yes

Holding of Presentation of Quarterly Financial Results: Yes (Financial results presentation held via online streaming and teleconference for investors on October 26)

Note: Figures are rounded to the nearest million yen.

1. Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending March 31, 2023

(April 1, 2022 – September 30, 2022)

Note: Comprehensive income: Six months ended September 30, 2022: 67,880 million yen (62.8% change); Six months ended September 30, 2021: 41,691 million yen (89.7% change)

(2) Consolidated Financial Position

2. Dividends

Note: Revisions since the most recently announced dividend forecast: Yes

The Company has decided to pay an interim dividend of 49.00 yen per share for the fiscal year ending March 31, 2023. The amount had been undetermined previously. In addition, the Company has not changed the annual dividend forecast, including the year-end dividend. For more, see 1. Qualitative Information on Quarterly Financial Results (3) Determination of Dividends (Interim Dividend) and Revision of Year-End Dividend Forecaston P.8-9 in the attached materials.

3. Projected Results for the Year Ending March 31, 2023 (April 1, 2022 – March 31, 2023)

(Percentages represent changes compared with the same period of the previous fiscal year.)

Note: Revisions since the most recently announced performance forecast: Yes

For more, see 1. Qualitative Information on Quarterly Financial Results (2) Description of Information on Outlook, Including Consolidated Performance Forecast on P.5-7 of the attached materials.

*Notes

(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries due to changes in the scope of consolidation): No

New: - company (company name) Excluded: - company (company name)

(2) Application of simplified accounting methods and/or special accounting methods: No

(3) Changes in accounting policy

(a) Changes in accounting policy accompanying revision of accounting standards, etc.: No

(b) Changes in accounting policy other than (a) above: No

(4) Number of shares issued and outstanding

Note: As of the end of the consolidated first six months of the fiscal year ending March 31, 2023, 600,208 shares of OMRON stock held for Board Incentive Plan and Employee Stock Ownership Plan are included in period-end treasury stock. The average number of shares during the period includes treasury stock deducted in the calculation of net income per share attributable to OMRON shareholders.

Table of Contents

1. Qualitative Information on Quarterly Financial Results

(1) Description of Results of Operations

General Overview

OMRON Group sales increased year on year for the cumulative consolidated second quarter (April through September). Sales in the first quarter (April through June) were impacted significantly by the Shanghai lockdowns, mainly in the Industrial Automation Business. However, sales increased year on year for the second quarter (July through September) due to a recovery in production and the rapid ramp-up of supply capacity to respond to heavy order backlogs.

While we continued to optimize prices and otherwise improve added value ratios across the company, gross profit margin declined year on year due to the impact of lower capacity utilization rates at our main plant in the Industrial Automation Business and higher material prices in the first quarter. At the same time, we continued to be active in investing for future growth to achieve the goals of our medium-term management plan (SF 1st Stage).

As a result of the preceding, operating income decreased year on year; however, the scale of decrease narrowed from -54% in the first quarter to -9%.

Consolidated results for the cumulative consolidated second quarter of fiscal 2022 were as follows.

(Billions of yen, except exchange rate data and percentages)

Results by Business Segment

IAB (Industrial Automation Business)

(Billions of yen, %)

Note: Due to a revision of business management classifications, certain businesses of the IAB are included in the DMB business segment for disclosure beginning with the fiscal year ending March 31, 2023. Accordingly, the Company reclassified results for the fiscal year ended March 31, 2022, under this new categorization for presentation herein.

Sales

Although we saw signs of a slowdown in capital investment trends related to the manufacturing industry, demand for semiconductor production equipment, electric vehicles (EVs), and rechargeable batteries, which are our focus areas, remained steady.

Under these circumstances, first quarter performance was impacted significantly by a decline in capacity utilization at our main plant due to the Shanghai lockdowns. However, in the second quarter, in addition to a recovery in production, we accelerated efforts to strengthen supply capacity against the backdrop of a heavy order backlog. As a result, sales for the cumulative consolidated second quarter rose significantly year on year.

Operating Income

Although sales remained steady, operating income declined year on year due to the impact of lower factory utilization in the first quarter, as well as soaring material costs, logistics costs, and continued investments in growth.

HCB (Healthcare Business)

(Billions of yen, %)

Sales

Health consciousness continues to grow globally, however, demand for blood pressure monitors and other healthcare equipment slowed due to declining consumer confidence mainly in North America and Europe due to the impact of inflation. Activity among Chinese consumers declined in connection with the impact of closed sales outlets and stagnant distribution networks caused by restrictions on activities in various cities under the zero-Covid policy.

As a result, sales remained flat year on year, despite the positive factor of increased foreign exchange impact.

Operating Income

While sales was level year on year, operating income decreased significantly due to the impact of soaring parts costs and other factors.

SSB (Social Systems, Solutions and Service Business)

(Billions of yen, %)

Sales

The Energy Solutions Business continued to experience firm demand for renewable energy-related solutions, mainly products for captive consumption. In connection with a recovery in the number of railway users, the Public Transportation System Business saw major customers resuming certain upgrade investments which they had been delaying.

As a result, sales increased year on year.

Operating Income

In addition to the increase in sales, we continued efforts to optimize prices; however, operating income was flat year on year, due in part to certain foreign currency-denominated purchases.

DMB (Devices & Module Solutions Business)

(Billions of yen, %)

Note: Due to a revision of business management classifications, certain businesses of the IAB are included in the DMB business segment for disclosure beginning with the fiscal year ending March 31, 2023. Accordingly, the Company reclassified results for the fiscal year ended March 31, 2022 under this new categorization for presentation herein.

Sales

Demand for consumer industry components remained firm on a global basis overall. In particular, sales were strong for solar power, storage battery-related products, and semiconductor inspection equipment, focus areas for our company.

We continue to strengthen our supply capacity in response to this rising demand, which resulted in a significant increase in sales year on year.

Operating Income

Despite the impact of soaring raw material prices and other factors, operating income increased significantly year on year, mainly due to a significant increase in sales, as well as efforts to optimize prices and improve productivity.

(2) Description of Information on Outlook, Including Consolidated Performance Forecast

We expect the business environment surrounding the OMRON Group to increase uncertainty in the third quarter and beyond against the backdrop of a global economic slowdown. Given this business environment, the OMRON Group expects both net sales and operating income for the year to increase over our prior forecasts in response to our efforts to improve gross profit margin by strengthening supply capacity to meet heavy order backlog in the Industrial Automation Business and Devices & Module Solutions Business, in addition to company-wide price optimization. Foreign exchange impact will also have a positive effect on performance.

In light of these circumstances, we revised our full-year consolidated performance forecast upward from the forecast announced previously (April 26, 2022). We have set exchange rate assumptions for the third quarter and beyond to USD1 = JPY140.0, EUR1 = JPY140.0, and CNY1 = JPY20.0.

The following describes our main expectations for the business environment in connection with each business segment for the third quarter and beyond.

・Industrial Automation Business: While overall demand for capital investment is slowing, demand for semiconductors, EVs, rechargeable batteries, etc., will remain strong

・Healthcare Business: Demand for blood pressure monitors and other healthcare equipment will experience stagnation temporarily

・Social Systems, Solutions and Service Business: Energy management-related demand will be steady, as demand for public transportation recovers

・Devices & Module Solutions Business: Demand in the consumer industry will decelerate; demand will be firm in connection with EVs, semiconductor inspection equipment, etc.

Projected Consolidated Performance

(Billions of yen, except percentages)

Note: Full-year average rate based on historical rates for the first half and assumed exchange rates for the third quarter and later.

Forecasts by Business Segment

(Billions of yen, except percentages)

Note: Due to a revision of business management classifications, certain businesses of the IAB are included in the DMB business segment for disclosure beginning with the fiscal year ending March 31, 2023. Accordingly, the Company reclassified results for the fiscal year ended March 31, 2022 under this new categorization for presentation herein.

(3) Determination of Dividends (Interim Dividend) and Revision of Year-End Dividend Forecast

At a meeting held today (October 26, 2022) the OMRON Corporation board of directors resolved to approve a dividend from surplus (interim dividend) with a record date of September 30, 2022. The board also resolved to revise the year-end dividend forecast for the fiscal year ending March 31, 2023.

Determination of Dividends (Interim Dividend)

Revision of Year-End Dividend Forecast

Reasons for Revision

In line with our cash allocation policy and shareholder return policy, the annual dividend forecast will remain unchanged from the initial forecast of 98.00 yen. Our forecasts of interim dividends and year-end dividends are 49.00 yen per share, respectively, each representing half of our full-year dividend forecast. These amounts are a 3.00 yen per share increase year on year.

Cash Allocation Policy

(1) Aiming to maximize corporate value through the realization of the long-term vision, OMRON prioritizes the necessary investment to create new value from a medium- and long-term perspective. During SF 1st Stage, priority will be placed on investments in human resources and R&D to solve social issues and innovate driven by social needs; capital investments in production capacity increases and digital transformation (DX); investment in growth initiatives such as M&A&A (merger, acquisition, and alliance); and investment in sustainability initiatives such as decarbonization, reduction of environmental impacts, and respect for human rights in the value chain. On this basis, OMRON will return profits to shareholders in a stable and sustainable manner.

(2) Such investment for value creation and shareholder returns will be, in principle, sourced from internal reserves and operating cash flows that are generated continually, with appropriate financing facilities used as necessary. We will maintain a degree of financial soundness that allows us to seek financing regardless of the current financial situation.

Shareholder Return Policy

(1) With priority being placed on the investment necessary for value creation over the medium and long term, annual dividends will be based on "dividends on equity (DOE) of around 3%." Taking past dividend payments also into account, we intend to ensure stable and sustainable shareholder returns.

(2) After making the above investments and distributing profit to shareholders, OMRON will distribute retained earnings accumulated over the long term to its shareholders through strategic share buybacks and other measures.

2. Quarterly Consolidated Financial Statements and Notes

(1) Quarterly Consolidated Balance Sheets

(Millions of yen)

(Millions of yen)

(2) Quarterly Consolidated Statements of Operations and Quarterly Consolidated
Statements of Comprehensive Income

(Quarterly Consolidated Statements of Operations)

(Six months ended September 30, 2022)

(Millions of yen)

(Quarterly Consolidated Statements of Comprehensive Income)

(Six months ended September 30, 2022)

(Millions of yen)

(3) Consolidated Statements of Cash Flows

(Millions of yen)

Note: Free cash flow is cash flow from operating activities plus cash flow from investing activities.

(4) Notes Regarding Consolidated Financial Statements

(Notes Regarding Assumptions of Going Concern)

None applicable

(Notes in the Event of Significant Changes in Shareholders' Equity)

None applicable

(Segment Information)

Business Segment Information

(Millions of yen)

Note: Due to a revision of business management classifications, certain businesses of the IAB are included in the DMB business segment for disclosure beginning with the fiscal year ending March 31, 2023.Accordingly, the Company reclassified results for the fiscal year ended March 31, 2022 under this new categorization for presentation herein.

Sales by Geographical Region

(Millions of yen)

Note 1: Due to a revision of business management classifications, certain businesses of the IAB is included in the DMB business segment for disclosure beginning with the fiscal year ending March 31, 2023. Accordingly, the Company reclassified results for the fiscal year ended March 2022 31, under this new categorization for presentation herein.

Note 2: Major countries or regions belonging to segments other than Japan are as follows:

(1) Americas: United States of America, Canada, Brazil

(2) Europe: Netherlands, Great Britain, Germany, France, Italy, Spain

(3) Greater China: China, Hong Kong, Taiwan

(4) Southeast Asia and Others: Singapore, Republic of Korea, India, Australia

(5) Direct Exports: Direct export transactions

(end)

Emitter:	OMRON Corporation Shiokoji Horikawa, Shimogyo-ku 600-8530 Kyoto Japan
Contact Person:	Jan Hutterer
Phone:	+49 172 3462831
E-Mail:	jan.hutterer@kirchhoff.de
Website:	www.omron.com
ISIN(s):	DE0008647488 (Share) JP3197800000 (Share)
Stock Exchange(s):	Regulated Market in Frankfurt; Free Market in Berlin, Hannover, Stuttgart
Other Stock Exchanges:	NASDAQ, Tokio