OMRON Corporation Reports Consolidated Financial Results for the First Quarter Ended June 30, 2008

KYOTO, Japan--(BUSINESS WIRE)--OMRON Corporation (TOKYO:6645)(ADR:OMRNY) today reported consolidated results for the first quarter of fiscal 2008, ending March 31, 2009.

Net sales for the first quarter decreased 3.5 percent compared with the same period of the previous fiscal year to JPY 169,934 million, reflecting the effect of the stagnant U.S. economy and a worsening capital investment environment in the manufacturing sector in Japan. Although the OMRON Group worked diligently to reduce expenses, an increase in depreciation expenses associated with production facility expansions that are essential to sustainable growth, along with the decrease in net sales, led to a 50.3 percent decrease in operating income compared with the same period of the previous fiscal year to JPY 4,806 million. Income from continuing operations before income taxes decreased 53.6 percent to JPY 5,561 million and net income for the first quarter was JPY 3,503 million, a decrease of 63.9 percent compared with the same period of the previous fiscal year.

Note: All amounts are rounded to the nearest million yen.

Overview of Conditions

Economic conditions in first quarter of fiscal 2008 were harsh overall. The U.S. economy was flat due to factors including weak corporate earnings, the continuing slump in the housing market and a decline in consumer spending. In the European economy, the slowdown that began in the second half of the previous fiscal year continued. In China and Southeast Asia, economic growth remained solid, but inflation rates increased due to rising crude oil and raw material prices worldwide. In Japan, while consumer spending was firm, rising energy and raw material prices impacted corporate earnings, and overall economic growth slowed.

In markets related to the Omron Group, capital investment in manufacturing was generally weak. A trend toward restrained capital investment arose particularly in the semiconductor and automotive industries.

In this environment, the Omron Group set “securing a foothold for sustainable growth” as its policy for fiscal 2008. Our basic stance is to make the necessary investments to realize a mechanism for sustained growth in fiscal 2008, the start of the third stage of our long-term management vision “Grand Design 2010” (GD2010), and to ensure the achievement of profit targets, which take into account the effects of exchange rate changes and high crude oil prices. We have been carefully scrutinizing expenses throughout the Company and implementing cost reductions.

The average exchange rates for the first quarter ended June 30, 2008 were USD 1 = JPY 104.3 and EUR 1 = JPY 163.5 (16.4 yen less and 1.2 yen more than the same period of the previous fiscal year, respectively).

1.  Consolidated Sales and Income
(Percentages represent changes compared with the previous fiscal year.)
		Millions of yen - except per share data and percentages
		Three months ended June 30, 2008				Three months ended June 30, 2007
				Change (%)				Change (%)
Net sales		169,934		(3.5)		176,127		15.1
Operating income		4,806		(50.3)		9,669		4.1
Income before income taxes		5,561		(53.6)		11,992		(10.3)
Net income		3,503		(63.9)		9,716		41.7
Net income per share (yen)		15.80				42.14
Net income per share, diluted (yen)		15.80				42.11
Note: Pursuant to U.S. Financial Accounting Standards Board (FASB) Statement No. 144, net income from continuing operations before income taxes is presented in “Income before income taxes” for the three months ended June 30, 2007 due to the presentation of income from operations discontinued in the previous fiscal year as “Net income from discontinued operations.”

Results by Business Segment

Industrial Automation Business (IAB)

IAB segment sales for the first quarter totaled JPY 76,919 million, a decrease of 1.2 percent compared with the same period of the previous fiscal year, due mainly to weak capital investment among manufacturers in Japan, particularly in the semiconductor, electronic components and automotive industries. However, domestic sales of safety components and related products increased over the same period of the previous fiscal year as a result of increased demand in the applications business.

Overseas, demand for motion controllers, safety components and other products expanded in Europe, and in the United States, demand for control equipment for oil and gas-related companies rebounded. Nevertheless, overall sales were affected by slowing capital investment by automotive and other manufacturers. In China, there were concerns about the effects of a tighter fiscal policy on investment among manufacturers, but sales of programmable controllers and photoelectric sensors increased steadily due to ongoing efforts to strengthen sales operations.

Electronic Components Business (ECB)

ECB segment sales for the first quarter totaled JPY 34,465 million, a decrease of 9.7 percent compared with the same period of the previous fiscal year.

In Japan, this segment was affected by restrained capital investment in the semiconductor and automotive industries, which began in the second half of the previous fiscal year, along with general weakness in the consumer and commercial components industry.

Overseas, while sales were generally slow in North America from the second half of the previous fiscal year, business expansion of energy-efficient products such as air conditioners increased opportunities in China, where sales were solid. Sales were also firm in Europe. Sales of miniature backlights and HMI devices for mobile and IT devices remained strong because of the timely introduction of new products that met customer needs.

Automotive Electronic Components Business (AEC)

AEC segment sales for the first quarter totaled JPY 25,903 million, a decrease of 5.3 percent compared with the same period of the previous fiscal year.

This segment suffered a sharp decline in sales in North America as a result of decreased production volume among major North American auto manufacturers, but in China, where automobile manufacturers are shifting production and expanding global procurement, production expanded with the launch of new themes, and sales to the Chinese market were strong.

While the growth of worldwide automobile production volume slowed overall due to rising gasoline prices and the global economic downturn, needs for car electronics that support automobile safety and environmental friendliness increased.

Social Systems Business (SSB)

SSB segment sales for the first quarter totaled JPY 14,186 million, an increase of 2.6 percent compared with the same period of the previous fiscal year.

In the public transportation systems business, sales increased substantially compared with the first quarter of the previous fiscal year due to demand for installation of passenger gates, system monitoring panels, data aggregation systems and other equipment in connection with the opening of new train lines. In the ID management solutions business, sales decreased substantially compared with the same period of the previous fiscal year as demand related to the shift to electronic money dropped further. In the maintenance business, sales were solid even amid slumping capital investment in Japan. In the software business, sales declined sharply compared with the same period of the previous fiscal year due to a further drop in demand in the distribution industry and a decrease in consigned development due to the saturation of the mobile phone market in Japan.

Healthcare Business (HCB)

HCB segment sales for the first quarter totaled JPY 14,662 million, a decrease of 1.2 percent compared with the same period of the previous fiscal year.

In Japan, sales of pedometers and electric toothbrushes continued to expand strongly, but sales of digital blood pressure monitors, body composition analyzers and devices for medical institutions were sluggish. Overseas, sales were strong overall, led by sales to major distributors in North America and the digital blood pressure monitor business in Russia and Central and Eastern Europe. In China and the Southeast Asia region, products marketed for Mothers Day and Fathers Day sold well.

Others

The “Others” segment consists mainly of new businesses being explored and developed by the Business Development Group and development and expansion of other businesses that are not covered by internal companies.

Segment sales for the first quarter totaled JPY 3,799 million, a decrease of 7.2 percent compared with the same period of the previous fiscal year. In existing businesses, sales of uninterruptible power supplies and broadband routers in the computer peripherals business were weak. In new businesses, sales in the radio frequency identification (RFID) market were slow because of intensified competition and other factors, and sales were also sluggish in the electricity usage monitoring business.

Consolidated Financial Position and Cash Flows

Total assets as of June 30, 2008 increased JPY 5,522 million compared with the end of the previous fiscal year to JPY 622,889 million due to an increase in inventories and other factors. Shareholders’ equity increased JPY 15,217 million compared with the end of the previous fiscal year to JPY 383,719 million due to factors including the effect of the weaker yen on foreign currency translation adjustments. As a result, the net worth ratio increased to 61.6 percent from 59.7 percent at the end of the previous fiscal year.

Net cash provided by operating activities in the first quarter was JPY 12,775 million (a decrease of JPY 1,312 million compared with the same period of the previous fiscal year) due to a decrease in trade notes and accounts receivable. Net cash used in investing activities was JPY 10,642 million (an increase in cash used of JPY 3,135 million compared with the same period of the previous fiscal year) as a result of investments to expand production facilities to ensure sustained growth. Net cash provided by financing activities was JPY 165 million (compared with net cash used of JPY 6,506 million in the same period of the previous fiscal year) because although the Company paid dividends, it also obtained bank loans.

As a result, the balance of cash and cash equivalents at June 30, 2008 increased JPY 2,260 million from the end of the previous fiscal year to JPY 42,884 million.

Consolidated Financial Position
		Millions of yen - except per share data and percentages
		As of June 30, 2008		As of March 31, 2008
Total assets		622,889		617,367
Net assets		383,719		368,502
Net worth ratio (%)		61.6		59.7
Net assets per share (yen)		1,730.98		1,662.32
Note: In accordance with U.S. GAAP, net assets, net worth ratio and net assets per share are calculated using total shareholders’ equity.

Consolidated Cash Flows
		Millions of yen
		Three months ended June 30, 2008			Three months ended June 30, 2007
Net cash provided by operating activities		12,775			14,087
Net cash used in investing activities		(10,642)			(7,507)
Net cash provided by (used in) financing activities		165			(6,506)
Cash and cash equivalents at end of period		42,884			44,633

2. Dividends
		Dividends per share (yen)
		1st quarter		2nd quarter		3rd quarter		Year-end		Full year
Year ended March 31, 2008		—		17.00		—		25.00		42.00
Year ending March 31, 2009		—								—
Year ending March 31, 2009 (projected)				18.00		—		—		—
Notes:
1. There were no revisions to projected dividends during the three months ended June 30, 2008.
2. The year-end dividend for the year ended March 31, 2008 consists of a regular dividend of JPY 20.00 and a commemorative dividend of JPY 5.00.
3. Dividends for the third quarter of the year ending March 31, 2009 and thereafter are undetermined, but will be set and disclosed in accordance with the Company's Basic Policy for Distribution of Profits at a point when there is a high level of certainty of achieving the Company's performance forecast. The Company plans to announce the year-end dividend sometime between January and March 2009 at the latest. The Company's Basic Policy for Distribution of Profits (dividends for each year) depends partly on the necessary level of retained earnings, but is set from the standpoint of enhancing stable and continuing shareholder returns, taking into account factors such as return on equity (ROE) and dividends on equity (DOE) multiplied by the payout ratio. Specifically, the Company has the near-term objective of maintaining the payout ratio at a minimum of 20 percent and DOE at around 2 percent.

3. Consolidated Performance Forecast

The Omron Group has positioned fiscal 2008, the first year of the third stage of GD2010, as a year for “securing a foothold for sustainable growth.” First-quarter performance was weak in a challenging economic environment, but there is no change to the consolidated performance forecast announced on April 28, 2008 for the first half and the full fiscal year.

The assumed exchange rates for the second quarter and beyond, which have been used in the performance forecast for the first half and the full fiscal year, are USD 1 = JPY 100 and EUR 1 = JPY 155.

Projected Results for the Fiscal Year Ending March 31, 2009
(Percentages represent changes compared to the previous fiscal year for the full year and compared with the previous interim period for the interim year.)
		Millions of yen - except percentages
		Cumulative second quarter ending September 30, 2008		Change (%)		Year ending March 31, 2009		Change (%)
Net sales		368,000		0.5		780,000		2.2
Operating income		20,000		(24.8)		60,000		(8.1)
Income from continuing operations before income taxes		19,500		(28.6)		59,000		(8.1)
Net income		12,000		(36.2)		36,500		(13.9)
Net income per share, basic (yen)		54.24				165.34
Note: This information has been translated from Japanese as a guide for non-Japanese investors and contains forward-looking statements that are based on management’s estimates, assumptions and projections at the time of writing. A number of factors could cause actual results to differ materially from projections.

About OMRON

Headquartered in Kyoto, Japan, OMRON Corporation is a global leader in the field of automation. Established in 1933 and headed by President and CEO Hisao Sakuta, OMRON has over 33,000 employees in 36 countries working to provide products and services to customers in a variety of fields, including industrial automation, electronic components, social systems (ticket gate machines, ticket vending machines and traffic control) and healthcare. For more information, visit OMRON's website at www.omron.com.