2021_1q_omron_e

5/37 - Operating Income Analysis (Y/Y)

This is the waterfall chart showing the major components of Y/Y change to operating income. I will explain from the left. Q1 FY2019 operating income was ￥10 billion. There was a negative forex impact of ￥2.4 billion yen from yen appreciation. As a result of our success in minimizing the sales decline, we were able to limit the decline in added value to ￥3.4 billion. Turning to fixed costs, we were able to achieve an overall reduction of ￥8.3 billion, primarily from manufacturing fixed costs and SG&A. Of this, cuts attributable to our own internal efforts as set out in the fixed cost reduction plan were ￥4.9 billion, excluding forex impact. The remaining \3.4 billion was a temporary decline resulting from lower levels of activity due to COVID-19 restrictions. Reflecting these factors, Q1 FY2020 operating income was ￥12.5 billion. In my view, this level was slightly too high. As I noted on the previous page, we did benefit from special demand. We estimate the profit contribution from such demand was around ￥1.4 billion. I believe a more realistic profit level reflective of OMRON’s current capabilities would be around ￥7.7 -8.0 billion, effectively ￥12.5 billion less a boost of ￥4.8 billion, the combination of special demand profits and the ￥3.4 billion in lower-than-expected fixed costs resulting from the impact of lockdowns. Let's look at the segment breakdown next. Please turn to slide 6.