Omron Corporation Annual Report 2013

Plain-text annual report

Integrated Report 2013 Year ended March 31, 2013 New Automation Solutions for a Changing World Omron Corporation is commemorating the 80th anniversary of its founding. Corporate Value Initiatives 48 Omron at a Glance 50 52 54 56 58 60 Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Automotive Electronic Components Business (AEC) Social Systems, Solutions and Service Business (SSB) Healthcare Business (HCB) Other Businesses Environmental Solutions Business, Electronic Systems & Equipments Business, Micro Devices Business, and Backlight Business About Omron 2 Message from the President 4 Omron’s 80-Year History 10 Omron’s Businesses 14 Omron’s Global Network 16 Omron through the Year 18 11-Year Financial Highlights 20 Financial and Non-Financial Highlights 22 Interview with the President 28 Core Theme: 28 Industrial Automation Business (IAB) Where We’re Headed and Emerging Countries 34 Healthcare Business (HCB) and Emerging Countries 38 Environmental Solutions Business and Social Systems Business (SSB) 42 Omron’s Risk Management as Explained by Directors Corporate Value Foundation 62 Intellectual Property Strategy 63 R&D 64 Quality 66 Human Resources 68 Resolving Environmental Issues 72 Relationship Building with Shareholders 74 The Omron Principles and CSR Management 77 Corporate Governance 82 Directors, Audit & Supervisory Board Members, and Executive Ofﬁ cers Financial Section 86 Financial Section (U.S. GAAP) 102 Internal Control Section Inclusion in SRI Indexes Omron’s CSR activities have earned high praise from around the world, and the Company’s shares are included in two major socially responsible investment (SRI) indexes: the Morningstar Socially Responsible Investment Index and the Asia Paciﬁ c (AP) version of the Dow Jones Sustainability Indexes (DJSI). As of July 2013 Asia Paciﬁ c (AP) Editorial Policy The scope of this report covers the 165 companies of the Omron Group, consisting of 153 consolidated subsidiaries and 12 non-consolidated subsidiaries and afﬁ liates accounted for under the equity method (as of March 31, 2013). Through its environmental and governance-related activities, Omron is contributing to the development of a sustainable society. Since 2012, we have included in our annual reports information on activities that had previously only been available in the CSR report. Caution Concerning Forward-Looking Statements Statements in this integrated report with respect to Omron’s plans, strategies, and beneﬁ ts, as well as other statements that are not historical facts, are forward-looking statements involving risks and uncertainties. Important factors that could cause actual results to differ materially from such statements include, but are not limited to, general economic conditions in Omron’s markets, which are primarily Japan, Americas, Europe, Asia Paciﬁ c, and Greater China; demand for and competitive pricing pressure on Omron’s products and services in the marketplace; Omron’s ability to continue to win acceptance for its products and services in these highly competitive markets; and movements of currency exchange rates. Integrated Report 2013 1 A b o u t O m r o n W h e r e W e ’ r e H e a d e d C o r p o r a t e V a l u e I n i t i a t i v e s C o r p o r a t e V a l u e F o u n d a t i o n F i n a n c i a l S e c t i o n of 27.0% and a dividend on equity (DOE) ratio of 2.4%. In ﬁ scal 2012, we raised the deﬁ ned minimum for the dividend payout ratio from 20% to 25%, targeting a 2% DOE ratio in consideration of stable dividend payments. Further, we cancelled a portion of treasury stock and introduced a shareholder beneﬁ t program to enhance shareholder returns. Pursuit of Higher Corporate Value In pursuit of higher corporate value, we emphasize capital efﬁ ciency in our management. To that end, we have been utilizing return on invested capital (ROIC) as an internal management index. In April 2013, we disclosed our consolidated ROIC target. In order to facilitate our efforts on this front, we established the new position of Chief Financial Ofﬁ cer (CFO) in ﬁ scal 2013. This is a change that I advocated myself based on the belief that it would help accelerate our decision making, im- prove the quality of management, and heighten corporate value. In Value Generation 2020 (VG2020), the long-term management strategy released in July 2011, we declare our dedication to growth. The ﬁ rst three years of the 10-year period leading up to 2020 have been desig- nated as the “GLOBE STAGE,” during which we will target A b o u t O m r o n the establishment of a global proﬁ t and growth structure. Fiscal 2013 is the ﬁ nal year of this stage, and our goal for this year is to transform Omron into a stronger company that realizes synergetic relationships between growth potential, proﬁ tability, and responsiveness to change. As such, we will work even harder on proﬁ t and growth structure reform. The economic climate is currently under- going substantial change as the too-strong yen depreciates. We will transform such changes into opportunity and accelerate our growth strategies. To Become a Company That Society Requires Omron will remain dedicated to resolving the numer- ous issues facing people through its business. We will strive to make Omron a company that people around the world require, with high expectations. I would like to ask for your continued support. July 2013 Yoshihito Yamada President and CEO Message from the President Omron Reaches 80-Year Milestone On its way to becoming a sustainable company that contributes to the global society through innovative products and services The Milestone of 80 Years Omron Corporation celebrated the 80th anniversary of its founding on May 10, 2013. Reaching this mile- stone could not have been done without your sup- port, for which I am most grateful. In the 80 years since Omron’s founding, the world has changed dramatically. In 1933, the world’s population was around 2 billion; today, it exceeds 7 billion. Not only that, per capita GDP has increased by roughly four times and the average lifespan has nearly doubled. Throughout its 80-year history, Omron has taken on countless challenges as it pursued technological innovation ahead of social needs. By creating new value centered on automation, I am conﬁ dent that we contributed to the sound and sustainable growth of society and the improvement of people’s lives. Omron has grown by leaps and bounds and is now a global leader in the ﬁ eld of automation with over 35,000 employees working in more than 110 countries around the world. Omron’s core corporate value is “Working for the beneﬁ t of society.” This represents our commitment to coexist and grow in harmony with society. To accomplish this intrepid spirit everyone will work together to propel the Company forward to quickly uncover latent social needs around the world and provide products and services to contribute to the sustainable development of society. Fiscal 2012 Performance and Shareholder Returns In ﬁ scal 2012, of our ﬁ ve mainstay businesses, Auto- motive Electronic Components Business (AEC), Social Systems, Solutions and Service Business (SSB), and Healthcare Business (HCB) saw favor- able growth in sales. As a result, overall net sales increased 5.0% year on year to ¥650.5 billion, and operating income was up 13.0%, to ¥45.3 billion. In regard to proﬁ t structure reforms, sales and market- ing divisions worked to increase proﬁ tability while production and development divisions introduced competitive, new products and improved their Net Sales and Gross Proﬁ t Margin Net Sales (Billions of yen) Gross Proﬁt Margin (%) 700 34.8 35.1 37.5 36.8 37.1 627.2 617.8 619.5 650.5 524.7 600 500 2008 2009 2010 2011 2012 (FY) Operating Income and Operating Income Margin 7.8 48.0 6.5 40.1 7.0 45.3 Operating Income (Billions of yen) Operating Income Margin (%) 50 25 0 2.5 13.1 0.9 5.3 2008 2009 2010 2011 2012 (FY) operating processes. These steadfast efforts led to a 0.3-percentage-point rise in the gross proﬁ t margin, to 37.1%. To shareholders, we paid total annual cash divi- dends of ¥37.00 per share, including a commemora- tive dividend of ¥5.00 per share and up from ¥28.00 in ﬁ scal 2011. This resulted in a dividend payout ratio Dividend, Dividend Payout Ratio, and EPS Annual Dividend (Yen) Dividend Payout Ratio (%) Net Income per Share Attributable to Shareholders (Yen) 106.4 16.0 17 25 121.7 24.7 30 74.5 37.6 28 137.2 27.0 37 50 25 0 2008 2009 2010 2011 2012 (FY) 2 Omron Corporation Integrated Report 2013 3 Omron’s 80-Year History Continuing to Grow by Contributing to the Sustainable Development of Society The corporate core value of “Working for the beneﬁ t of society” lies at the heart of the Omron Principles. Until today, we have continued to be a pioneer in contributing to the development of a sustainable society as a proactive benefactor. Net Sales (Billions of yen) Japan Americas Europe Asia Paciﬁ c Greater China * Net sales for the geographic segments of Americas, Europe, and Asia Paciﬁ c are presented from 1990 and from 2004 for Greater China. A b o u t O m r o n 600 300 0 1933 1948 1960 1970 1980 1990 2000 2010 2012 (FY) Addressing the age of automation Responding to the cybernation revolution Meeting the needs of the advanced information age G’90s GD2010 VG2020 1933: Tateisi Electric Manufacturing Co. 1968: OMRON Tateisi Electronics Co. 1988: Asia Paciﬁ c regional management 1998: Machine capable of identifying 2007: New R&D center opened in China. established in Osaka and begins production of X-ray timers. established as company’s ofﬁ cial English name. center established in Singapore (Omron Asia Paciﬁ c Pte. Ltd.). 1945: Production moved to Kyoto after main factory in Osaka is destroyed by ﬁ re during World War II. 1948: Company name changed to Tateisi Electronics Co and Kazuma Tateishi assumes role of president. 1959: Company motto and “OMRON” trademark established. 1960: World’s ﬁ rst non-contact (solid state) 1969: World’s smallest desk-top electronic calculator, “CALCULET-1200,” launched. 1971: World’s ﬁ rst online automated cash 1989: North American regional management center established in the United States (Omron Management Center of America, Inc.). dispenser developed. 1989: Golden ’90s Plan (G’90s) long-term 1972: OMRON Taiyo Electronics Co., Japan’s ﬁ rst factory for workers with disabilities, jointly established with Japan Sun Industries. vision announced. 1990: Company name changed to Omron Corporation. 1991: In-line inspection system developed. 1994: Greater China regional management center established in Beijing, China (Omron (China) Co., Ltd.). switch developed. 1983: Electronic thermometer goes on sale. 1960: Central R&D Laboratory completed in 1987: World’s ﬁ rst ultra-high-speed fuzzy Nagaokakyo, Kyoto. logic controller developed. 1964: World’s ﬁ rst automated trafﬁ c signal 1988: European regional management 1995: Distance warning system for motor developed. 1967: World’s ﬁ rst unmanned train station system developed. center established in the Netherlands (Omron Europe B.V.). vehicles developed. 1996: “VT-WIN” PCB solder inspection system developed. 4 Omron Corporation counterfeit notes in various currencies developed. 1999: Internal company system established to separate management oversight and business operations. 2001: Grand Design 2010 (GD2010) plan announced. 2003: Global R&D hub Keihanna Technology Innovation Center established in Soraku-gun, Kyoto. 2004: Face recognition technology for mobile phones developed. 2006: New Omron Principles established. 2006: Global design/production center for control devices begins operations in Shanghai, China. 2007: Omron ramps up development of safety business (machine safeguarding). 2007: Omron 3D image sensing technology put to practical use through world’s ﬁ rst real-color 3D Vision Sensor. 2009: Full-ﬂ edged participation in environmental solutions business commenced. 2010: METI Minister’s Prize in Energy Conservation Grand Prix Program received, along with City of Kyoto Board of Education, in recognition of activities to track energy usage volume and support energy conservation education at Kyoto municipal schools. 2010: “WellnessLink” health management web service launched. 2011: Long-term management strategy, Value Generation 2020 (VG2020), announced. 2011: Sysmac NJ series of comprehensive machine automation controllers launched. 2012: OMRON Management Centre of India established in Gurgaon, Haryana State, India. 2012: 2012 Integrity Award Grand Prize from Japan’s Integrity Award Council received. 2012: OMRON Management Center of Latin America established in Sao Paulo, Brazil. 2013: Two METI Minister’s prizes received in environmental solutions ﬁ eld (Energy Conservation Grand Prix Program and New Energy Grand Prix Program). Integrated Report 2013 5 Omron’s 80-Year History A History of Creating Social Innovations Using Advanced Technologies Developing products to tackle the electricity crises that followed World War II In May 1933, Kazuma Tateishi founded Tateisi Electric Manufacturing Co., Omron’s predecessor. In the years that followed, the company continued to create products that were the ﬁ rst in Japan or in the world. In 1948, the company was reborn as Tateisi Electronics Co. after succeeding in the mass-production of the current limiters it had developed to tackle the electricity crises that followed World War II. 1948 Current limiter Leading the times with an unrelenting intrepid spirit The origins of Omron’s innovation lie in X-ray timers, followed by the ﬁ rst domestically produced micro switch and the world’s ﬁ rst non-contact switch, all developed to lead industrial innovation. Founding (1933) Addressing the age of automation 1960 Anticipating the coming of the age of automation, Omron declared 1955 as “Year One of Automation.” Since then, it has continued to evolve these operations while working to equate the Omron name with technology. 1943 First domestically produced micro switch 1960 World’s ﬁ rst non-contact switch 1970s 1960s Responding to the cybernation revolution A b o u t O m r o n Omron founder Kazuma Tateishi with engineers 1960 Central R&D Laboratory after completion of construction Promoting automation at production sites At a time when automation in the manufacturing industry was trending toward high-mix, low- volume production, Omron was quick to realize the need for controllers with high- processing speeds that allowed programs to be rewritten. Omron developed a sequence programmer for machine tools in 1968, and then in 1972 it released the revolutionary programmable sequence controller called Sysmac. After this, Omron continued to promote the standardization of program control manufacturing styles, making large contributions to spreading automation and improving productivity in factories. Realizing improved operational efﬁ ciency and automation of railway operations To respond to the needs for improved opera- tional efﬁ ciency and automation in railway operations, Omron introduced its multi-function automated ticket vending machine into Kobe Station of Japanese National Railways (currently Japan Railways Group) in 1965. Later, in 1966, Omron developed automated ticket gates through a joint effort with Kinki Nippon Railway and Kinki Sharyo Research Institute. In 1967, three years before Expo ’70 was held in Osaka, Omron introduced the world’s ﬁ rst fully unmanned train station sys- tem into Kita-Senri Station of Hankyu Railway. 1967 World’s ﬁ rst fully unmanned train station system Acting in accordance with the philosophy of “To the machine, the work of the machine, to man the thrill of creation,” Omron continued to provide automation systems in response to social needs for increased productivity and efﬁ ciency, making large contributions to the development of a more fulﬁ lling society. The Company also worked to automate social infrastructure and healthcare. Omron’s history is an 80-year story of contributing to society through automation technologies. Hands-on programming experience corner at Sysmac exhibition Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Social Systems, Solutions and Service Business (SSB) 6 Omron Corporation Integrated Report 2013 7 Omron’s 80-Year History Contributions to the Development of a Safer and More Comfortable Global Society Signing of production outsourcing agreement with Shanghai Huayi Electronic Production sites established and operated in Shanghai to produce sensors, FA systems, and control equipment 1970s Meeting the needs of the advanced information age Present Contributing to Chinese society Looking to contribute to industrial develop- ment in China, Omron began outsourcing production to Shanghai Huayi Electronic Factory in 1980. After this, Omron expanded its Chinese operations, establishing numerous distributors, joint venture companies, and even companies created through its own investment. In 1994, the Company was converted into a holding company, marking the ﬁ rst time for the Chinese government to permit a Japanese manufacturer to establish such a company in China. Today, Omron’s operations in China are realizing strong growth and are making large contributions to the development of the Chinese economy and society. First-generation blood pressure monitor, launched in 1973 With the aim of making Omron a globally recognized brand, Omron began expanding its business overseas in the 1960s. In accordance with its global expansion policy of “planning, manufacturing, and selling globally,” Omron began establishing regional management centers in the late 1980s, developing centers in the Netherlands, Singapore, the United States, and ﬁ nally China. Regional management center, the Netherlands Regional management center, Singapore Regional management center, the United States * Photographs are at time of establishment. Blood pressure monitor currently being sold in Russia Contributing to healthcare by people moved by ideals and dreams Measuring one’s blood pressure at home— this is something that would have been unimaginable around 30 years ago. Today, the importance of monitoring one’s blood pressure at home is well known, but at the time it was commonly recognized that such monitoring was a doctor’s job. Omron’s blood pressure monitors are now used in more than 110 countries around the world. This accomplishment required these devices to undergo clinical trials at medical institutions and be made compliant with legal regulations and for us to develop sales channels and educate people with regard to the use of the monitors. In these efforts, countless people were moved by ideals and by the dream of contributing to healthcare by moving these devices out of the hospital to the home. Passing the waypoint of 80 years to advance toward the next challenge A b o u t O m r o n Creating deﬁ nite value in Asia and around the world Present The milestone of 80 years marks the end of one chapter in Omron’s history; at the same time, it represents a waypoint. We are not satisﬁ ed with our current position, and we will continue work- ing to quickly uncover social needs related to safety, security, healthcare, and the environment, which we will address by using new automation technologies. In this way, we will support people in living more comfortable and fulﬁ lling lives around the world. Future Commencing full-ﬂ edged participation in the environmental solutions business In 2009, when impacts on society of global warming and other environmental issues were rising, Omron commenced full-ﬂ edged partici- pation in the environmental solutions business. By leveraging its energy conversion and con- trol technologies, Omron will construct a unique value chain that helps energy be created without waste, stored effectively, and used wisely. Through these efforts, we will contrib- ute to the maximization of energy efﬁ ciency through all stages of the energy life cycle. Supporting the evolution of motoring societies with our automotive electronics business Omron commenced full-ﬂ edged participa- tion in the automotive electronics business in 1983. Since then, we have created nu- merous technologies as we constantly developed new products in response to customer needs. In the future, society will expect automobiles to be more eco-friendly and more comfortable and convenient while also being safer and more reliable. Omron will continue to pursue innovation as it works to further evolve motoring societies and provide them with new value. Product for eco-friendly vehicles Omron’s new quest to create global value has only just begun. Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Electronic and Mechanical Components Business (EMC) Electronic and Mechanical Components Business (EMC) Automotive Electronic Components Business (AEC) Social Systems, Solutions and Service Business (SSB) Social Systems, Solutions and Service Business (SSB) Social Systems, Solutions and Service Business (SSB) Healthcare Business (HCB) Other Businesses 8 Omron Corporation Integrated Report 2013 9 Industrial Automation Business (IAB) Omron’s mainstay business, leading the innovation of global manufacturing through factory automation (FA) More than 100,000 FA controllers, sensors, switches, relays, and safety devices to help improve the productivity of manufacturing facilities. Omron boasts the top share of the Japanese market for control equipment and has operations in more than 40 countries and 160 regions, including China and countries in Europe, North America, and the rest of Asia. 40% Leading Market Shares (Approx.) (As of July 2013) Control-Related Equipment (Japanese Market Share) 40% Source: Nippon Electric Control Equipment Industries Association (NECA) FY1960 Net Sales ¥0.83 billion Constructed Central R&D Laboratory Solidiﬁ ed foundations for future business growth A b o u t O m r o n Omron’s Businesses Committed to contributing to the development of emerging countries and other societies through our business activities: • Industrial Automation • Electronic and Mechanical Components • Automotive Electronic Components • Social Systems • Healthcare • Environmental Solutions Creating the unique type of value that only Omron can. Electronic and Mechanical Components Business (EMC) Providing the global market with sophisticated components that create beneﬁ cial relationships between people and machines in a variety of ﬁ elds Relays, switches, connectors, and other fundamental components for use in industrial equipment, consumer and commercial products, automotive equipment, and various other items. Components that are steeped in our superior technologies and have developed over our long history of operation. 13% Relays (Global Market Share) 20% Source: Internal survey Automotive Electronic Components Business (AEC) Undertaking new challenges in the automotive electronics ﬁ eld to help make automobiles safer and friendlier toward people and the environment Power window switches with anti-pinching functions, keyless entry systems, and various other products that utilize our highly functional controller, sensor, switch, and relay technologies to make motoring safer and more comfortable. 15% Body Control Units for keijidousha (a class of small automobiles deﬁ ned by Japanese standards) (Japanese Market Share) ¥59.2 billion (9%) 50% ¥71.5 billion (11%) Social Systems, Solutions and Service Business (SSB) Offering diverse systems for social infrastructure to assist making society safer and more comfortable for everyone Includes train station solutions, such as automated ticket gates and ticket vending machines, as well as trafﬁ c control systems and other road trafﬁ c solutions. Healthcare Business (HCB) Providing a comprehensive product lineup to support daily healthcare efforts, whether at home or at medical facilities Digital blood pressure monitors highly accurate and easy to use at home, with the number one share of the global market. Continually introducing new healthcare products and services into the global market, including thermometers, nebulizers, and pedometers. 11% 11% Other Businesses Exploring and developing new businesses outside the realm of the main ﬁ ve segments / Environmental solutions business and other operations playing an important part in advancing the Omron Group’s growth strategy Energy conversion and control technologies to help maximize energy efﬁ ciency with regard to energy creation, storage, and saving, and plug-in module PC and uninterruptible power supply units to provide security and reliability for the IT and industrial equipment markets. 9% 10 Omron Corporation Source: Internal survey Railway Infrastructure Equipment (Japanese Market Share) 40% Source: Internal survey HCB CB Home-Use Digital Blood Pressure Monitors (Global Market Share) SSB 50% Source: Internal survey Residential-Use PV Inverters (Japanese Market Share) ¥68.8 billion (11%) FY1990 Net Sales ¥464.4 billion Changed name from OMRON Tateisi Electronics Co. to Omron Corporation Began operating as a “New Omron” ¥263.0 billion (40%) Eliminations and corporate ¥6.3 billion (1%) Other r FY2012 Net Sales ¥650.5 billion IAB A AEC EMC 33% Source: Internal survey ¥97.6 billion (15%) ¥84.1 billion (13%) Integrated Report 2013 11 Display and Operating Devices Proximity Sensors Nerve System = Network Indicator Display Equipment Senses = Sensing Devices Brain = Control Equipment Limbs = Motion Devices and Drives • Safety Equipment IAB’s safety equipment meets international safety standards and contributes to the creation of a safe workplace environment by automati- cally sounding an alarm or safely shutting down machinery when a worker enters a deﬁ ned danger zone in a factory. Safety Controllers Safety Light Curtains • Environmental Equipment IAB’s environmental equipment provides constant monitoring of manufacturing environment data, such as the presence of foreign particles and temperature and humidity levels, and provides analysis of electric power consumption data, thereby contributing to maintaining product quality standards while also providing data to help reduce excess power consumption and improve energy efﬁ ciency. cy.y Air Particle Sensors • Automated Optical Inspection Devices Segment Information P.50 IAB’s automated optical inspection devices use visual cameras and other means to detect defective products, thereby helping production processes to be automated. Vision Sensors Photoelectric Sensors t T Temperature Controllers Programmable Logic Controllers Inverters Servomotors and Servo Drivers Safety Door Switches Safety Laser Scanners Air Cleaning Units Ionizers Air Thermal Sensors • OKAO Vision OKAO Vision is gaining wide use as a technology for correcting exposure in digital photography and brightness in photo printing, and its face recognition capability is utilized in mobile phone user veriﬁ cation as well as in estimat- ing age and determining gender. OKAO Vision Facial Image Sensing Printed Circuit Board Power Relays Surface Mount Switches Transmitter Key Engine start systems enable car engines to be started or shut down by pressing a switch from the driver’s seat of the car without taking the transmitter key out of one’s bag. • Social Sensing Sensors located in public settings gather data on the movement and conditions of people, automobiles, and other objects and provide optimal information to people and control equipment. • Connectors Connectors are used as an interface between electronic devices and are widely used in mobile devices, industrial equipment, and other electronics. • Automotive Switches / Controllers AEC supplies multi-function control units that integrate control of diverse automobile body features, including switches to automatically open and close power windows, lock and unlock doors, and turn on and off windshield wipers, using multiple communication technologies. Printed Circuit Board Inspection Systems Segment Information P.52 Printer Toner Sensors Power Supply Units for Amusement Devices Segment Information P.54 FPC Connectors • Sensors and Modules We respond to various needs from the digital imaging and amusement industries. • Electric Power Steering Controllers Electric power steering controllers are equipped with high-output and high-precision sensing functions to enable smooth steering. These devices help achieve energy savings and better mileage. Power Window Switches Electric Power Steering Controllers • Road Trafﬁ c Solutions In addition to control systems for trafﬁ c volumes and trafﬁ c conditions, SSB is developing next-generation trafﬁ c safety systems designed to prevent accidents by transmitting data on pedestrians, bicycles, and other objects collected by sensors to nearby vehicles. Segment Information P.56 Segment Information P.58 • Industrial Automation Business IAB’s product lines comprise devices for sensing lighting, imaging, vibration, temperature and humidity levels, location, speed, and other data necessary for the operation of manufacturing equipment; control and motion devices that process large volumes of data into meaningful and useful information and execute optimal control; and display and operating devices that monitor the control status at the production site and enable conﬁ guration and adjustment. Interconnecting IAB’s devices for data communication enables high-speed, high-precision control to contribute to enhancing “quality, safety, and the environment” at the production site. • Relays and Switches Relays are composed of electromag- nets that convert electric signals to mechanical movement and switches that turn electricity on and off. Relays and switches are used in virtually all electric and electronic devices, including refrigerators, microwave ovens, and air conditioners. • Transmitter Key and Engine Start Systems Entry systems enable car doors to be locked and unlocked by touching the door handle or pressing a switch for the door without taking out the transmitter key. • Train Station Solutions SSB provides systems solutions, including the newest models for automated ticket gates and ticket vending machines using universal design concepts, to increase the comfort and efﬁ ciency of train stations. • Healthcare and Medical Devices for Home Use HCB supports the health of individuals by connecting daily personal health management at home and disease management at medical institutions. Automated Ticket Gates Ticket Vending Machines Smile Scan Tablets Trafﬁ c Control Systems • Medical Devices for Professional Use By supplying medical institutions with highly safe technologies, we are reducing the risks associated with healthcare. At the same time, we are helping develop a society in which the elderly live healthily. Sleep Sensors Blood Pressure Monitors Body Composition Monitors Body Glucose Meters Thermometers Activity Monitors Spot Check Monitors Non-Invasive Vascular Screening Devices • PV Inverters for Solar Power Generation Systems These PV inverters are used to convert the DC electricity generated by solar panels into AC electricity usable in the home. They contribute to the spread of solar power systems, a source of renewable energy, by giving engineers more freedom of design and improving system efﬁ ciency. • LCD Backlights Microlens array technology with several million micron-sized micro lenses to maximize light utilization efﬁ ciency contributes to brighter and slimmer mobile phones with lower power consumption. • Micro Devices Omron provides new applications centering on micro electrical mechanical systems (MEMS). • Electronic Systems and Equipment Business activities related to computers, devices, uninterruptible power supply units, and other electronic systems and equipment. Segment Information P.60 PV Inverters for Indoor Solar Systems LCD Backlights MEMS Absolute Pressure Sensors BY-S Series, Uninterruptible Power Supply Units 12 Omron Corporation Integrated Report 2013 13 Omron’s Global Network Local-oriented business in 35 countries and regions across the globe, including Japan. More than 35,000 Group employees actively express their values and appreciate others, strongly bonded toward creative innovations. Europe Japan Greater China Americas Asia Paciﬁ c Countries and Regions with Omron Bases Americas Brazil Canada Mexico The United States Greater China China Hong Kong Taiwan Europe (Including Europe, Russia, Africa, and the Middle East) Austria Belgium The Czech Republic Denmark Finland France Germany Hungary Italy The Netherlands Norway Poland Portugal Russia South Africa Spain Sweden Switzerland Turkey The United Kingdom Asia Paciﬁ c Australia India Indonesia Malaysia New Zealand Singapore South Korea Thailand Vietnam 14 Omron Corporation Direct Exports 1.6% ¥10.6 billion Asia Paciﬁ c 8.4% ¥54.8 billion Greater China 16.3% ¥106.3 billion Europe 12.4% ¥80.5 billion Americas 12.4% ¥80.4 billion Asia Paciﬁ c 13.8% 4,895 Greater China 41.7% 14,778 A b o u t O m r o n Ratio of overseas sales to net sales 51.1% FY2012 Consolidated Net Sales by Region ¥650.5 billion Japan 48.9% ¥318.0 billion FY2012 Employee Numbers by Region 35,411 Ratio of overseas employees to total employees 67.7% Japan 32.3% 11,449 Americas 6.5% 2,284 Europe 5.7% 2,005 As of March 31, 2013 Integrated Report 2013 15 Omron through the Year Q1 –1.0% Consolidated net sales Consolidated operating income ¥8.2 billion –32.7% ¥149.9 billion Q2 ¥154.3 billion Consolidated net sales Consolidated operating income ¥9.8 billion +1.7% –7.1% Q3 +6.6% Consolidated net sales Consolidated operating income ¥9.9 billion +32.7% ¥159.5 billion Q4 ¥186.8 billion +12.1% Consolidated net sales Consolidated operating income ¥17.5 billion +75.0% (YoY change) (YoY change) (YoY change) (YoY change) 2012 April May June July August September October November December January February March 2013 A b o u t O m r o n Management Topics Apr. 9 Press Release Donation of ¥18,723,000 from sales proceeds of KM Series of electricity monitors to assist post- Great East Japan Earthquake reconstruction June 1 Commencement of joint venture between Omron (China) Co., Ltd., and Hangzhou Tongling Automation Co., Ltd., a system integrator and sales agent M June 12 Establishment of regional head ofﬁ ce in Brazil Press Release strengthens operations in this country’s market, an emerging market prioritized after India July 2 Joint establishment of docomo Healthcare, Inc., a company that plans, develops, and provides healthcare services, by NTT Docomo, Inc., and HCB July 6 Opening ceremony held at new factory of AEC in Rojana Industrial Park, Ayutthaya, Thailand M Aug. 24 OMRON TAIYO Co., Ltd., celebrates 40th an- niversary and holds ceremony commemorating opening of new building M Management Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Automotive Electronic Components Business (AEC) Social Systems, Solutions and Service Business (SSB) Healthcare Business (HCB) Other Businesses Sept. 3 Agreement reached between Sobal Corporation Jan. 30 Announcement of joint project to utilize big and Omron to collaborate in development of embedded software Oct. 1 Conversion of SK Solution Co., Ltd., a dealer of control equipment, into subsidiary M Nov. 7 Donation of US$20,000 for relief of hurricane Press Release victims in eastern United States M Nov. 8 Press Release Receipt of IR Grand Prix Award from Japan Investor Relations Association data at production sites by Microsoft Japan and Omron; collaboration between two companies leads to development of system for tracking production activities Mar. 7 Opening ceremony held at new factory of Shanghai OMRON CONTROL COMPONENTS Co., Ltd., designed to be the No.1 automated EMC factory in China Product-Related Topics April 13 Receipt of Award for Excellence in Japan Electrical Manufacturers’ Association 2012 (61st) Electrical Industrial Technology Achievement Awards for development of ﬁ ber laser marker capable of ﬁ ne mark- ing on highly reﬂ ective materials and low-absorbance materials May 10 Launch of MedicalLink blood pressure management service for medical institutions employing information technology Simultaneous launch of HEM- 7251G blood pressure monitor that automatically transmits measure- ment data over 3G networks May 28 (Press release) Development of hand gesture recognition technology that makes trigger motion unnecessary when combined with face-sensing technologies June 1 Launch of Demand Light Service, a new application service provider (ASP) demand monitoring service capable of monitoring electricity demand through remote monitoring systems, realizing lowest market price June 20 Launch of HBF-215F Karada Scan body composition monitors, which feature compact, thin designs with easy-to-view displays and commu- nications functions June 30 Launch of non-contact MEMS using infrared thermal sensor that is smaller and more sensitive and contributes to energy-saving home electronics July 2 Release of industry’s ﬁ rst clamp electricity data logger that acceler- ates energy-saving efforts at manufacturing sites July 5 (Press release) Development of MEMS absolute pressure sensor with world-class sensitivity and power efﬁ ciency August 1 Release of Smart Camera FQ2 featuring multi-function image sensors that enable inspection and positioning to be decided using the camera alone August 23 Launch of HEM-6310F, world’s thinnest, lightest, and quietest wrist-type blood pressure monitor that enables measurement data to be easily transmitted to PCs for management September 3 Launch of HBF-252F Karada Scan, a body composition monitor equipped with instantaneous automatic recognition function for measurement in approximately four seconds and communication func- tion for easy management of data on AndroidTM smartphones or PCs October 1 Launch of world’s smallest and lightest DC power relay for eco- friendly vehicles and condensers October 15 Commencement of sales of uninterruptible power supply units in China November Launch of KP55M Series of outdoor single phase PV inverters compat- ible with feed-in tariff scheme for renewable energy (KP44M Series launched in December) December Launch of ultra-compact CMOS laser sensor E3NC-S series capable of being installed in narrow spaces December Launch of backﬂ ow preventing relay MM1X-PV, which contributes to maximized energy conversion efﬁ ciency at megasolar facilities December 3 Launch of NB series of programmable terminals that provide undisputed levels of cost performance Addition of CP1E to lineup of programmable controllers December 18 Launch of English and Chinese versions of TranScope real-time translation application, which pro- vides instant translations by reading text through iPhone or AndroidTM smartphone cameras January 25 Receipt of METI Minister’s Prize in Energy Conservation Grand Prix Program for promoting an eco- conscious initiative for plant diag- nostics and optimization through Andon environmental information system January 25 Receipt of METI Minister’s Prize in New Energy Grand Prix Program in recognition of KP-K series of PV inverters for solar power generation systems February 20 Launch of HR-500U, which can be strapped to one’s wrist to measure pulse while walking or jogging March 1 Launch of Mediclean HT-B601 ultrasonic electric toothbrush, which comes with handy mobile case equipped with charger that is ideal for vacations or business trips March 21 Launch of thermal ﬂ ow-type MEMS differential pressure sensor aimed at maximizing air- conditioning efﬁ ciency March 28 Provision of Solamoni3G, a solar power generation system support service that helps guarantee generation efﬁ ciency and quality of medium-scale systems 16 Omron Corporation Integrated Report 2013 17 11-Year Financial Highlights Omron Corporation and Subsidiaries Operating Results (for the year): Net sales Gross proﬁ t Selling, general and administrative expenses (excluding research and development expenses) Research and development expenses Operating income EBITDA (Note 2) Net income (loss) attributable to shareholders Cash Flows (for the year): Net cash provided by operating activities Net cash used in investing activities Free cash ﬂ ow (Note 3) Net cash provided by (used in) ﬁ nancing activities Financial Position (at year-end): Total assets Total interest-bearing liabilities Total shareholders’ equity Per Share Data: Net income (loss) attributable to shareholders (basic) Shareholders’ equity Cash dividends (Note 4) Ratios: Gross proﬁ t margin Operating income margin EBITDA margin Return on shareholders’ equity (ROE) Ratio of shareholders’ equity to total assets Total return ratio (Note 5) FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2012 Millions of yen Thousands of U.S. dollars (Note 1) A b o u t O m r o n ¥522,535 201,816 ¥575,157 235,460 ¥598,727 245,298 ¥616,002 232,667 133,406 139,569 141,185 157,909 40,235 28,175 57,851 511 41,854 (30,633) 11,221 (1,996) 567,399 71,260 251,610 2.1 1,036.0 10.0 38.6% 5.4% 11.1% 0.2% 44.3% 2475.3% 46,494 49,397 77,059 26,811 80,687 (34,484) 46,203 (28,119) 592,273 56,687 274,710 110.7 1,148.3 20.0 40.9% 8.6% 13.4% 10.2% 46.4% 49.2% 49,441 54,672 83,314 30,176 61,076 (36,050) 25,026 (40,684) 585,429 24,759 305,810 126.5 1,284.8 24.0 41.0% 9.1% 13.9% 10.4% 52.2% 29.1% 55,315 60,782 91,607 35,763 51,699 (43,020) 8,679 (38,320) 589,061 3,813 362,937 151.1 1,548.1 30.0 37.8% 9.9% 14.9% 10.7% 61.6% 47.8% ¥723,866 278,241 164,167 52,028 62,046 95,968 38,280 40,539 (47,075) (6,536) (4,697) 630,337 21,813 382,822 165.0 1,660.7 34.0 38.4% 8.6% 13.3% 10.3% 60.7% 49.7% ¥762,985 293,342 176,569 51,520 65,253 101,596 42,383 68,996 (36,681) 32,315 (34,481) 617,367 19,809 368,502 185.9 1,662.3 42.0 38.4% 8.6% 13.3% 11.3% 59.7% 74.7% ¥627,190 218,522 164,284 48,899 5,339 38,835 (29,172) 31,408 (40,628) (9,220) 21,867 538,280 54,859 298,411 (132.2) 1,355.4 25.0 34.8% 0.9% 6.2% (8.7%) 55.4% (29.1%) ¥524,694 184,342 ¥617,825 231,702 ¥619,461 227,887 ¥650,461 $6,919,798 241,507 2,569,223 133,426 142,365 145,662 152,676 1,624,213 37,842 13,074 40,088 3,518 42,759 (18,584) 24,175 (20,358) 532,254 38,217 306,327 16.0 1,391.4 17.0 35.1% 2.5% 7.6% 1.2% 57.5% 106.7% 41,300 48,037 71,021 26,782 41,956 (20,210) 21,746 3,333 562,790 46,599 312,753 121.7 1,421.0 30.0 37.5% 7.8% 11.5% 8.7% 55.6% 25.2% 42,089 40,136 62,753 16,389 31,946 (26,486) 5,460 (33,492) 537,323 18,774 320,840 74.5 1,457.5 28.0 36.8% 6.5% 10.1% 5.2% 59.7% 37.7% 43,488 45,343 67,795 30,203 53,058 (28,471) 24,587 (18,550) 573,637 5,570 366,962 462,638 482,372 721,223 321,309 564,447 (302,883) 261,564 (197,339) 6,102,521 59,255 3,903,851 Yen U.S. dollars (Note 1) 1.46 17.73 0.39 137.2 1,667.0 37.0 37.1% 7.0% 10.4% 8.8% 64.0% 27.0% Notes: 1. U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate on March 31, 2013, of ¥94 = $1. 2. EBITDA = Operating income + Depreciation and amortization 3. Free cash ﬂ ow = Net cash provided by operating activities + Net cash used in investing activities 4. Cash dividends per share represent the amounts applicable to the respective year, including dividends to be paid after the end of the year. 5. Total return ratio = (Total dividends paid + Amount of Company’s own shares repurchased) / Net income (loss) attributable to shareholders Long-term corporate vision Grand Design 2010 (GD2010) Operating Income Omron applies the “single step” presentation of income under U.S. GAAP (that is, the various levels of income are not presented) in its consolidated statements of income. For easier comparison with other companies, operating income is presented as gross proﬁ t less selling, general and administrative expenses and research and development expenses. Discontinued Operations Figures for FY2006 and prior years have been restated to account for businesses discontinued in FY2007. Value Generation 2020 (VG2020) FY2001 – FY2003 FY2004 – FY2007 FY2008 – FY2010 FY2011 – FY2020 1st Stage Establishing a Proﬁ t Structure Concentrating on cost structure reform and restructuring the Company as a proﬁ t- generating business 2nd Stage Balancing Growth and Earnings Reinforcing business foundations through aggressive investment in growth areas, such as M&A, and cost cutting Achievements • ROE of 10% • Withdrew from unproﬁ table business, spun off of the Healthcare Business • Raised the level of corporate governance to the global standard Achievement • Increased EPS (Earnings per Share) from ¥110.7 (FY2003) to ¥185.9 (FY2007) 3rd Stage Achieving a Growth Structure Fortiﬁ cation of growth business (high proﬁ tability) Revision of 3rd stage due to an abrupt change in the business environment Revival Stage (February 2009 to March 2011) • Emergency Measures (Cost reduction target of approx. ¥63.0 billion achieved in ﬁ scal 2009) 14 months (February 2009 – March 2010) • Structural Reform (Strengthening of proﬁ t base over the medium term) 26 months • May 2010: Spun off the Automotive Electronic Components Business • April 2011: Spun off the Social Systems, Solutions and Service Business GLOBE STAGE (FY2011 – FY2013) Establishment of proﬁ t and growth structures on a global basis • Sales: ¥710 billion • Operating income: GOALS ¥58 billion GOALS • Gross proﬁ t margin: 39% • Operating income margin: 8.2% Note: Target ﬁ gures were revised in April 2013. EARTH STAGE (FY2014 – FY2020) New value generation for growth • Sales: ¥1 trillion • Operating income: ¥150 billion or higher • Operating income margin: 15% or higher 18 Omron Corporation Integrated Report 2013 19 Financial and Non-Financial Highlights Net Sales and Operating Income Operating Income Margin (Billions of yen) 1,000 (Billions of yen) (%) 100 10 800 600 400 200 0 80 60 40 20 0 8 6 4 2 0 08 09 10 11 12 (FY) 08 09 10 11 12 (FY) Ratio of Social Contribution Activity Expenditures by Type (Fiscal 2012) Ratio of Employees with Disabilities to Total Employees (%) (Japanese operations) Culture and Arts 0.3 Social Welfare 2.0 Science and Technologies 12.0 International Exchange, Environmental, and Others 0.3 Type (%) Voluntary Programs 85.5 4 3 2 1 0 08 09 10 11 12 (FY) Omron Omron Group (Japan) National Average (Japan) A b o u t O m r o n Net Sales [left axis] Operating Income [right axis] Cost Composition (Billions of yen) 750 600 450 300 150 0 Net Income (Loss) Attributable to Shareholders and Return on Shareholders’ Equity (ROE) Occupational Accident Frequency Ratio of Participation in Human Rights Training (Billions of yen) 60 45 30 15 0 –15 –30 (%) 20 15 10 5 0 –5 –10 (Frequency) (Japanese operations) (People / hours) 1.0 0.8 0.6 0.4 0.2 0 2.5 2.0 1.5 1.0 0.5 0 15,000 12,000 9,000 6,000 3,000 0 (%) 100 80 60 40 20 0 08 09 10 11 12 (FY) 08 09 10 11 12 (FY) 08 09 10 11 12 (FY) 08 09 10 11 12 (FY) Cost of Sales R&D Expenses SG&A Expenses Operating Income Net Income (Loss) Attributable to Shareholders [left axis] Return on Shareholders’ Equity (ROE) [right axis] Omron Group [Japan, left axis] All Industries [right axis] Electric Equipment Manufacturing Industry [left axis] Frequency = Deaths Due to Accidents Aggregate Work Hours ×1 Million Hours Japanese Group Employees [including temps, left axis] Aggregate Training Hours [left axis] Ratio of Participation in Human Rights Training [right axis] Earnings per Share (EPS) and Price-Earnings Ratio (PER) (Yen) 150 120 90 60 30 0 Net Sales per Employee (Times) (Millions of yen) CO2 Emissions Volumes (Thousand t-CO2) (Global production sites) (Million yen / t-CO2) 150 120 90 60 30 0 25 20 15 10 5 0 200 160 120 80 40 0 5 4 3 2 1 0 (Global production sites) Energy Usage (TJ) 4,000 3,000 2,000 1,000 0 08 09 10 11 12 (FY) 08 09 10 11 12 (FY) 10 11 12 (FY) 10 11 12 (FY) Earnings per Share (EPS) [left axis] Price-Earnings Ratio (PER) [right axis] Capital Expenditures and Cash Flows Cash Dividends per Share (Billions of yen) (Yen) 60 45 30 15 0 50 40 30 20 10 0 08 09 10 11 12 (FY) 08 09 10 11 12 (FY) Capital Expenditures　 Cash Flows　 * Cash Flows = Net Income (Loss) Attributable to Shareholders + Depreciation & Amortization 20 Omron Corporation CO2 Emissions Volumes [left axis] Net Sales to CO2 Emissions [right axis] * Net Sales to CO2 Emissions: Net Sales per Ton of CO2 emitted Environmental Contribution of Products and Services (Thousand t-CO2) 400 300 200 100 0 10 11 12 (FY) * Environmental Contribution: Reduction in CO2 emissions resulting from the use of Omron’s energy-saving or energy-creating products Electricity LPG City Gas (13A) Fuel Oil A LNG Diesel Oil Kerosene Employee Ratios (As of April 20, 2013) Female 20.6 Male　 79.4 Sales 16.5 Others 11.0 Research　 21.9 (Japanese operations) Gender (%) Type of Job (%) Production 21.5 Ofﬁce Work 29.1 Integrated Report 2013 21 Interview with the President Interview with the President Inter Inter We conducted necessary investments, centered on the core IA Business, regardless of the harsh operating environment. (FA) markets of emerging countries, where demand will be supported by economic growth, higher personnel expenses, and rising quality consciousness. While the IA Business may face ups and downs in its growth pace, it is sure to realize growth over the long term. Proﬁ t structure reforms were another area of focus. We have implemented measures to minimize the impacts of foreign exchange rate ﬂ uctuations, steadily constructing proﬁ t structures that are resilient to external changes. Proﬁ tability is also being boosted in non-IA Business, such as AEC, SSB, and HCB. In addition, our environmental solutions business, a new area of focus, is developing into a highly promising business by generat- ing revenues at a faster pace than had been initially anticipated. While implementing reforms, we are also taking action with the next EARTH STAGE now in view. In the EARTH STAGE, our focus will be targeting new value generation for growth. We are allocating management resources to focus businesses to facilitate the develop- ment of the new products and sales networks that will be necessary for future growth. W h e r e W e ' r e H e a d e d Yoshihito Yamada President and CEO VG2020 Scenario GLOBE STAGE EARTH STAGE Net sales Establishment of proﬁt and growth structures on a global basis New value generation for growth Q1 How are the strategies of the “GLOBE STAGE” progressing, and what initiatives are being implemented in preparation for the following “EARTH STAGE”? First of all, I have to tell you that we made a downward revision to the performance targets for the “GLOBE STAGE.” Originally, we targeted net sales of ¥750.0 billion, oper- ating income of ¥100.0 billion, and a gross proﬁ t margin of 42%, but we revised these targets to net sales of ¥710.0 billion, operating income of ¥58.0 billion, and a gross proﬁ t margin of 39%. It was a hard decision, but one that was fully considered. One reason for the revision was out-of-control external factors, including unfavorable foreign exchange rates, natural disasters, and global economic recession. However, we admit that there were also internal issues, such as our vulnerability to foreign exchange. We have already taken steps to address this issue. Also, performance in the Industrial Automation (IA) Business, which is sensitive to capital investment trends, was lower than expected. Looking on the brighter side, we’ve been on the right course in that the GLOBE STAGE is a period for the establishment of proﬁ t and growth structures on a global basis. We conducted necessary investments, centered on the core IA Business (IAB & EMC), re- gardless of the harsh operating environment. These investments were geared toward developing competitive products and expanding sales networks in emerging countries. We intend to turn these investments into success. While up until just recently a head- wind has been blowing in the external operating environment, it is possible that this may change to a tailwind. Should this occur, the investments and preparations we have ad- vanced until now will generate substantial returns, particularly in the factory automation Creation of new business for the “Optimization of Society” Growth in emerging markets FY2020 Maximization of Industrial Automation Business Proﬁt structure reform Global human resources strengthening FY2011 FY2013 Policy for Fiscal 2013 Complete the GLOBE STAGE! Transform Omron into a stronger company that demonstrates synergies between growth potential, proﬁ tability, and responsiveness to change Continue and complete the tasks deﬁ ned for the GLOBE STAGE TASKS Reinforcement of IA Business Proﬁ t structure reform Sales expansion in emerging markets Strengthening of global human resources Focus on environmental solutions business 22 Omron Corporation Integrated Report 2013 23 Q2 What are your projections for the environmental solutions business and other businesses that address social needs? Let me take our HCB and environmental solutions business as examples. HCB aims to contribute to improving the health of people around the world through its products. Presently, we are seeing a rise in the number of sufferers of respiratory illnesses in emerging nations, where air pollution issues are growing ever graver. In addition, changes in lifestyle environments are resulting in an increase in the number of people with high blood pressure, diabetes, and other cardiovascular related diseases, and this is becoming a serious social issue. In this market environment, contributing to health- care will require higher awareness whereby people monitor and manage their health condition at home as well as in hospitals. Should the concern for disease prevention rise in emerging countries, it could lead to a decrease in serious event risks related to heart attacks, strokes, or other inﬂ ictions. To facilitate such a change, Omron is working to foster proper understanding with regard to health issues among practitioners, such as doctors and pharmacists, and patients alike. At the same time, we are developing and selling easy-to-use healthcare devices to meet the local circumstances and speciﬁ c demand. HCB currently operates in more than 110 countries around the world, and we are actively expanding sales channels in this business with a particular focus on emerg- ing nations. In ﬁ scal 2012, this focus area recorded a 30% year-on-year increase in sales on a yen basis. In ﬁ scal 2013, we will aggressively develop the business to increase our contribution to addressing growing healthcare issues. In the environmental solutions business, we are working to resolve social issues in the clean energy ﬁ eld through the sale of PV inverters for solar power generation systems and DC power relays for electric vehicles. In particular, installations of PV inverters doubled in ﬁ scal 2012 due to the beneﬁ ts of the feed-in tariff scheme for renewable energy that was launched in Japan during July 2012. We expect the market will expand in light of concerns for the depletion of fossil fuel re- serves and environmental pollution, such as that from CO2 emissions. Personally, I have the highest expectations for energy-saving busi- nesses in the FA market. Energy management at production sites will be more important than ever to lead to an expansion of business opportu- nities for the Company. Omron itself is vigorously advancing electricity- saving initiatives at its plant in Kyoto. By leveraging the knowledge gained through this venture, we will grow energy-saving businesses targeting manufacturing markets around the world. Enhancing corporate value—that’s our focus. Q3 Q4 W h e r e W e ' r e H e a d e d You mentioned transforming Omron into a stronger company that demonstrates synergies between growth potential, proﬁ tability, and responsiveness to change. What exactly do you mean by “responsiveness to change”? Put simply, it’s the ability to transform risks and changes into opportunities, and when I say changes I am referring to both positive and negative changes. We can't do business without taking negative changes and risks into consideration. We must take steps to limit the impacts of risks on our business. Even an unprecedent- ed event, such as the Great East Japan Earthquake of 2011, must be incorporated into medium-to-long-term management plans. For example, based on what we learned from the earthquake, we reevaluated our production sites in consideration of the risk of a large-scale natural disaster. And we developed systems that will allow the production operations at one site to be quickly shifted to another should that site be rendered tem- porarily unable to produce. I believe that the ability to create beneﬁ ts from risks is one form of responsiveness to change. Moreover, as a global company, we need to respond to changes on a global scale. Over the past two years, we have placed a particular focus on making our operations more resilient to ﬂ uctuations in foreign exchange rates and rises in personnel expenses in emerging nations. Faced with the strong yen, we worked to limit the impacts of for- eign exchange on proﬁ ts by increasing transactions in foreign currencies, procuring more items locally, and other means. Also, we installed automation systems into our own factories in China and other Asian countries to offset the rise in personnel expenses in these countries. At the same time, we recognize that positive changes represent opportunities we must grasp. Since the introduction of the “Abenomics” economics stimulus plan, the too-high yen became weaker and export-oriented companies in Japan are tending healthy. We are working to quickly reap the beneﬁ ts of these and subsequent accompanying market changes, seeking to turn the various risks and changes that surround the Company into opportunities so that we may transform Omron into a stronger company. How are you pursuing increased shareholder value in management? To raise corporate value, we are looking at both the quantitative and qualitative sides of operations. For the quantitative side, we emphasize management of capital costs and cash ﬂ ows in our operations. Looking at capital costs to begin with, we utilize the management index of return on invested capital (ROIC) to ensure that each business generates returns that are appropri- ate in consideration of their individual capital costs. This index is considered from the stage of developing strategies for each business, and we evaluate investment projects and propose improvement measures for asset efﬁ ciency accordingly. Next, we are focusing on cash ﬂ ow management to realize growth. Currently, free cash ﬂ ow is positive, and net cash is trending upward. While we are of course always considering returns to shareholders, at the moment we feel it is best to invest these funds in future growth, through such means as M&A activities. Finally, to further reinforce this quantitative focus, from ﬁ scal 2013, we have established the new position of Chief Financial Ofﬁ cer (CFO). We anticipate the CFO, by serving as the “brain” of the ﬁ nancial side of operations, will be a driving force in boosting both the quality and speed of decisions related to portfolio management. 24 Omron Corporation Integrated Report 2013 25 Q5 The post of CFO has been ﬁ lled by Yoshinori Suzuki, who was previously responsible for management of AEC. Mr. Suzuki has accumulated a wealth of ﬁ nancial knowledge throughout his career. He also has a strong reputation in the Company for his ability to reconstruct AEC as its company president during a time when the business was per- forming quite poorly. Moreover, Mr. Suzuki has been responsible for Companywide management in the past, when he was placed in charge of formulating management strategies. For these reasons, we have very high expectations for him. With the new inclusion of the CFO in the management team, we will conduct even more effective management with our emphasis on improving corporate value. Is there anything else you view as important in enhancing corporate value? Developing human resources and cultivating the corporate culture are both crucial tasks as these elements underpin corporate activities. As the Company will continue to ex- pand its business on the global stage and seek to transform into a stronger company, the development of human resources around the world is crucial. Currently, we have deﬁ ned 170 “core positions”, and we are actively working to discover and promote human resources to ﬁ ll these positions. In particular, we are working to ﬁ ll overseas management positions locally. Elsewise, we are still faced with diversity issues, such as the promotion of women. However, we are taking steps to address these issues by establishing specialized teams. In regard to corporate culture, in ﬁ scal 2012 we inaugurated The OMRON Global Awards (TOGA). This award program was designed to reward employees for acting on the spirit we have held since our founding and embarking on bold undertakings to meet ambitious goals they themselves have declared. The program was also designed to culti- vate a corporate culture that encourages employees to take on new challenges without fear of failure. In this competition, more than 20,000 entries, representing over half of our staff worldwide, formed teams that stepped across national and organizational boundaries. Then, on “Founder’s Day” in May 2013, awards were presented to the top 13 teams. We intend to continue this initiative into the future. What matters most is to Production site in China Sales base in Singapore We are boldy addressing social issues on a global basis to make Omron a social must. proactively take on difﬁ cult tasks. For this reason, I hope to cultivate a superior corporate culture that will inspire employees to unite as a strong team that communicates openly and continues to endeavor to do great things, whether or not we hold such events. Also, I am aware that communication forms the basis of a good corporate culture. In accordance with this belief, we hold “The KURUMAZA,” a meeting in which I speak directly with employees. In ﬁ scal 2012, I visited a number of production sites, principally in Asia. No suit and tie, I walk around factories in work clothes and speak to the staff therein. Speaking face-to-face makes it easier for me to express myself and for employees to ex- press themselves as well. This also enables me to directly learn issues in these worksites. Outside of work, cheering on our women’s handball team is an important event. The Omron Handball Team has been reigning champion of the women’s league in Japan. As a handball player myself in my student days, I get over-excited when it comes to hand- ball. Cheering our team with employees is thus a special occasion for me. In particular, the championship match of the Japan league, held in March 2013, was incredibly exciting as we rooted for our team until our throats were sore and shared in the victory together. W h e r e W e ' r e H e a d e d Omron Handball Team wins Japan women’s league for the 16th time and for the 2nd consecutive year (March 14, 2013) In closing, I would like to share with you something that is of exceptional importance to myself. This is the Omron Principles. Currently, roughly two-thirds of the employees that advance Omron’s international operations are non-Japanese. As such, a diverse range of values exist within the Company. For this reason, the Omron Principles play an important role as the binding force that unites all employees throughout the Group. The spirit em- bodied by these principles and our corporate motto guide us as we work to overcome cultural and language barriers and form a tightly knit team in which all members hold high ambitions. We continue to boldly take on new challenges to address global issues as we strive to make Omron a company that people around the world require, with high expec- tations. Please look forward to the future endeavors of Team Omron. 26 Omron Corporation Integrated Report 2013 27 Research and production base in the United States Core Theme 1 Industrial Automation Business (IAB) and Emerging Countries History of Automation and Asian Market of Today Factory Automation (FA) Growing Together with People’s Lives Evolution of Automation at Production Sites By supporting factories, Omron has continued to encompasses all aspects of product creation, includ- ing production and other processes, management systems, and quality management techniques. Omron created the world’s ﬁ rst contactless switch, which contributed to the development of machines contribute to the daily development of a more ful- that could conduct mass production without wear ﬁ lling and convenient society. As the focus of production activities changed from people to machines, we have continued to or malfunction. The realization of mass production resulted in an ample supply of products being put on the market, helping consumers acquire the advance technological innovation in the ﬁ eld of FA. items they need with greater ease. In the mid-20th century, automation was advanc- In 1972, Omron successfully developed its Sys- ing in strides in developing nations. Omron de- mac programmable controller and continued to lead clared 1955 as “Year One of Automation.” It was the advance of automation by proposing new value one of the ﬁ rst companies in Japan to begin devel- using its revolutionary technologies, such as its oping and promoting the spread of relays, timers, ultra-high-speed fuzzy logic controller and visual and switches, all items that are indispensable in sensors that can play the part of human eyes, both automating the movement of machines. Through world ﬁ rsts. The advance of automation drove those efforts, Omron helped drive the shift from growth in the economy, which in turn made peo- people to machines as agents of production, there- ple’s lives more comfortable and convenient. We by reducing human error brought about by extend- ed work periods and subsequently improving believe that such automation advancements made substantial contributions to Japan’s period of strong production efﬁ ciency and making workplaces safer economic growth. for people. At the same time, we developed the base for mono zukuri (manufacturing) technology, which Development of Safer Workplaces The advance of automation led to a decline in the need for humans to conduct dangerous tasks. However, as machines became more powerful, they eventually came to pose risks to people. Omron identiﬁ ed that guaranteeing the safety of machines toward humans is an important theme and developed safety sensors, which automatically halt dangerous machines should a worker approach them, and safety door switches that prevent work- ers from approaching dangerous machines in the ﬁ rst place. At the same time, Omron actively pro- moted the standardization of automation safety regulations and transmitted information to educate the market with regard to safety, working to create safer production sites around the world. W h e r e W e ' r e H e a d e d For Safer Workplaces • Safety Light Curtains Halt machines when a person approaches equipment that contributes to energy savings. Fur- ther, we have created means of applying “Sensing and Control” technologies to energy to reduce consumption, and these technologies have been introduced into Omron’s own production sites. For Environmental Preservation • Temperature and Humidity Sensors • Electricity monitors Measure electricity usage • Safety Door Switches Halt machines when doors are opened Preservation of Natural Resources When considering natural resources, it is clear that the energy used by machinery and the impure substances they emit represent serious environ- mental issues. Omron has been proactive in making the automa- tion equipment it produces lead-free and therefore more eco-friendly. In addition, we have developed more precise control technologies to prevent mate- rials from going to waste due to the production of defective products. • Differential Pressure Sensors Measure pressure differences between clean rooms and the outside environment • Particle Sensors Measure dust in clean rooms and equipment Future Potential of Automation FA around the World Automation has undergone a startling evolution in Japan over the years. Today, the contributions of To lower energy consumption, which is particu- automation’s evolution are everywhere and automa- larly high in the manufacturing industry, we have tion technologies have spread throughout the lives developed an array of sensing, display, and control of countless people. 28 Omron Corporation Integrated Report 2013 29 Operations Well Established in Each Country Industrial Automation Business (IAB) currently the 1990s, we continued to develop production and sales bases while working to make these bases more locally operated. Later, in 2005, we consoli- tions of the fundamental mechanisms of equip- ment and their usage and are made available in 13 languages, including English, Chinese, Vietnam- operates out of more than 160 bases in more than dated three factories in China to make a facility that ese, Thai, and Indonesian. We began developing operations in China imme- Hong Kong, Taiwan, China, Indonesia, Thailand, Repair center in Thailand 40 countries. would become the core production and develop- IAB was quick to expand operations into Asia, a ment base for the global development of IAB. This move that was partially based on geographic con- was the birth of Omron (Shanghai) Co., Ltd. (OMS). siderations. Over half of the world’s population is Today, we have a comprehensive range of business concentrated in this region, as emphasized by the functions well-established in China, including pro- presence of such “populous giants” as China and duction, sales, development, planning, services, India, which boast the world’s ﬁ rst and second support, and research functions. largest populations respectively, as well as by the In addition, IAB has 98 sales bases in 11 coun- ASEAN countries, which collectively represent the tries throughout Asia, including Japan. third largest population. Realizing the great poten- The development of operations in the Asia Paciﬁ c tial for automation to contribute to the development region began with the establishment of the OM- of Asia, we were not hesitant in ﬁ rmly establishing RON Singapore PTE LTD. in 1972. Later, we estab- operations in this region, which we then utilized to lished our ﬁ rst production base in Malaysia. Since, continue our ongoing pursuit to further the advance we have continued to be a leader in Asia, quickly of automation. developing operations that are ﬁ rmly established in diately after Sino-Japan trade relations were re- Vietnam, India, and other areas. stored in 1972, and Omron founder Kazuma Tateishi proceeded to deepen relationships with this coun- try thereafter. In the 1980s, we began outsourcing production to China, helping introduce our accumu- Connection of Customer Feedback to All Areas of Operation Today, it is more important than ever for us to posi- lated Japanese production technologies into this tion ourselves closer to customers so that we can country. At the same time, we established sales quickly recognize their needs and use these to outlets in major operating bases, enabling us to drive change. It is important to reﬂ ect market support the development of the Chinese economy needs and changes as well as customer feedback with our state-of-the-art automation equipment. In into our products and services. Further, the feed- Development and Product Improvement Bases Japan, China Repair Centers Japan, China, Taiwan, Singapore, Thailand, Malaysia, India, Vietnam, Indonesia, the Philippines back gained from customers who use the products and services created through this process must once again be incorporated into products and ser- vices to spur us forward on the path of constant evolution. Through the ever revolving cycle of incor- porating customer feedback into products and ser- Shanghai Plant vices, we are actively adapting our operations to the characteristics of individual regions. Automation Centers Japan, China, India (Planned) This cycle has led to the development Sales Bases Japan: 27, South Korea: 4, Greater China: 53, Asia Paciﬁc: 14 Malaysia Plant Help Desks for Japanese Customers China (Shanghai, Beijing, Guangzhou), Thailand, Indonesia Indonesia Plant Call Centers Japan, China of a rich lineup of services and support. For example, our free e-learning courses are a form of service and support born out of the demand for ways to quickly and easily learn about the latest products and technologies. These courses provide comprehensive explana- e-Learning Programs—Virtual FA Tours Vietnamese Thai W h e r e W e ' r e H e a d e d and medicine bottles in India was often poor, and bottles with chipped or warped mouths were fre- quently shipped and sold at stores. However, con- sumers became more sensitive toward the quality and safety of the products they purchased, and this resulted in a movement devoted to preventing manufacturers from placing bottles with quality Indonesian issues on the market. To support this movement, Evolution of Automation In Asian countries, global issues must be addressed in conjunction with region-speciﬁ c issues. 1. Automation Examples (India) Food Packaging Equipment Company A is a food packaging equipment manu- IAB supplied visual sensing equipment that was able to analyze the condition of bottle mouths from recorded images. This enabled all bottles to be quickly and automatically inspected, thereby pre- venting the shipment of low-quality bottles. Metal Processing Equipment Company C is a manufacturer of metal processing equipment. This company recognized the need to ensure worker safety, but at the same time it want- ed to avoid declines in production volumes or pro- ductivity that would have resulted from excessive facturer. As consumption trends accelerated in India, safety measures, such as fencing off all machines. this company was faced with the need to further IAB helped this company realize a workplace that expand its production volumes. However, the equip- is both safe and productive by utilizing the safety ment control system it possessed was unable to respond to the higher production volumes. To ad- sensors that are standard equipment on machinery in developed nations. These sensors were placed dress this issue and improve productivity, IAB in optimal positions around areas where danger helped the company shift to a state-of-the-art sys- was present. tem combining controllers and motion, which real- ized substantial improvements in processing speed and control precision in comparison to the previous system. After the shift, the company was able to up 2. Automation Example (Indonesia) Food Production Equipment Company D is a sugar manufacturer. At the com- its production volumes 1.5 times, enabling it to pro- vide customers with a stable supply of products. pany, employees previously had to directly conﬁ rm temperature, humidity, and other variables related to Food Product Inspection Equipment Company B is a manufacturer of food product in- the sugar reﬁ ning processes and then record this information in production logs by hand. For this reason, employees were unable to leave reﬁ ning spection equipment. In the past, the quality of drink equipment unattended, and they often spent eight 30 Omron Corporation Integrated Report 2013 31 hours a day doing nothing but conﬁ rming variables. In order to respond to such global issues related to By introducing computers equipped with data log- safety and the environment as well as the need for ging software along with controllers, IAB helped high-speed, high-precision control, IAB accumulates create a system in which all this numeric data is recorded automatically by computers. This system successfully reduced the amount of time employ- cutting-edge technical expertise within its Automation Centers* so that it may transmit unique technologi- cal applications throughout the world. ees devoted to these monitoring tasks to one hour a day. Workers were thus freed from the task of con- ﬁ rming variables all day long, which in turn allowed them to use this time to revise production process- es and implement other improvement activities. * Automation Centers provide support services to help people make machines move as they please. The support services provided by these centers include easing the connection of equipment from different manufacturers, a task that previously required substantial time investments, and assistance in realizing high-speed, high-precision control for demanding pieces of machinery. Also, the centers help customers quickly install machinery with ease. In these ways, the centers aid our customers in developing competitive machinery setups. 3. Automation Example (Thailand) Electricity-Saving Initiatives Rising costs in Thailand have resulted in a shift Evolution Driven by Customer Needs We work to address the various issues faced by speciﬁ c regions by developing solutions from the perspective of local customers in these regions. toward less-wasteful activities at production sites. The number of products with different speciﬁ ca- Efﬁ cient electricity use is being considered as one tions produced by OMS has grown 2.5 times over way of realizing such activities. As such, factories the past three years. When looking at the average are increasingly introducing electricity monitoring equipment, which can be used to track how much employee turnover rate in China, OMS has em- ployee retention rates that are 3 to 5 times better electricity is being used in speciﬁ c parts of a facility. than the average. Nonetheless, its operations are impacted by the rising labor costs and labor short- falls in coastal areas. For this reason, OMS is em- ploying Low Cost Intelligent Automation (LCIA) to make its production operations in this country more ﬂ exible. Such ﬂ exible production operations are supported by small robots, a culmination of our accumulated knowledge and expertise, and the skills of employees are used to backup this system while eliminating wastes. Also, OMS is currently holding tours of its factories for a wide range of visitors. We hope that these tours will provide customers with a model example to be considered in solving their automation issues while at the same time offering an opportunity for local companies to learn from our production expertise. 32 Omron Corporation Soldering by hand LCIA soldering robots • Stable levels of quality • Capital investment 1/3–1/4 Yearly Personnel Expenses in Asia’s Manufacturing Sector (US$) 8,000 6,000 4,000 2,000 0 China Thailand Malaysia The Philippines Fiscal 2009 Fiscal 2012 India Indonesia Vietnam Bangladesh Myanmar Source: Japan External Trade Organization (JETRO) Note: Personnel expenses include basic salary, allowances, social security, overtime payments, and bonuses. Collaboration between Industry, Government, and Academia to Invigorate Local Societies As one way of rooting our operations to the regions W h e r e W e ' r e H e a d e d Design Contest to help foster the development of prospective automation engineers and provide edu- cation regarding state-of-the-art technologies. * Equivalent to technical colleges in Japan Optimal Relationship between People and Machines Out of our development bases in Japan, Europe, and the United States, we are able to develop an understanding of the latest trends related to tech- nologies and international standards. By leveraging this advantage of our global operations, we hold seminars and otherwise provide information to help spread knowledge. We also participate in committees for developing safety standards. In such ways, we are working to develop social foundations that enable a safe and optimal relationship to be developed between people and machines. Pursuit of Further Evolution The future of market conditions remains unclear. Nevertheless, we will continue to take on new challenges to create innovation while advancing steady improvements through straightforward and earnest effort. To this end, we are rethinking the parts we use, reducing the number of parts con- tained in our products, revising production pro- cesses, and otherwise reﬁ ning our technologies. As automation spreads, people’s lives become in which we work, we are placing an emphasis on more fulﬁ lling, which in turn enables them to be more education, not only of our employees but also of the students that will support the future of these regions. creative at work, leading to the further evolution of automation. Looking back at the history of automa- Omron is working to share its corporate philoso- tion, it is clear that demand for automation will con- phy with educators in Asia while also providing tinue growing into the future, as will its potential. opportunities for students to learn about environ- IAB will create cycles in which changes in soci- mental issues and the latest technologies. At Chi- nese vocational and technical colleges*, we help teach students about manufacturing while they are ety’s needs and technical innovation give birth to one another. And these cycles will be created around the world. IAB will also work to grow as the in school and hold Omron Classes, which attract vast quality human resources. In addition, we hold the provider that is “No. 1 in control,” “No. 1 in product lineup,” and “No. 1 in the future” so that it can Omron Cup Sterling Engine CAR Contest and design make greater contributions to the ever changing contests, which are based on the themes of environ- Asian market. mental preservation and recycled resources. We also hold the National University Student Photoelectric We automate! Integrated Report 2013 33 memeememmmm Core Theme TThh CC CCoree TThheem CCoree TThheem Core Them 222222222222222222222222 2 222 Healthcare Business (HCB) and Emerging Countries Helping Improve the Health of People in Emerging Countries As society develops, social needs for means of preventing and treating illness are constantly rising. HCB develops its operations based on the unique approach of using these needs as drivers for advancing innovation in its business. We spoke with representatives from sales and marketing and global product planning divisions that have engagements in emerging countries in Asia. Rapid Rise in Asthma and COPD Sufferers in Emerging Countries — Looking at the particulate matter 2.5 (PM2.5) issue in China, it would seem that many emerging coun- tries are facing air pollution issues, and these issues are growing ever more serious. Is this the case? Ozeki: Yes. The air pollution issues in emerging countries are serious, and not only limited to China. In conjunction with development, chronic malady is starting to replace infectious disease as the most common ailment faced by the populous. In China, this situation is being compounded by a rise in smoking*1, and we are noticing a rapid increase in the number of people with chronic obstructive pulmonary disease (COPD)*2 as a result. In this manner, environmental pollution and the trend regarding respiratory diseases are driving a sub- stantial increase in the number of people suffering from asthma and COPD. — Going forward, how do you plan to address the social needs created by this situation? Umeda: I believe we can provide a viable option for addressing this situation in the form of the nebuliz- ers. They are a type of medical device that enables vaporized medicines to be inhaled by sufferers of asthma and other respiratory diseases. There are primarily three different types: compressor nebuliz- ers, ultrasonic nebulizers, and mesh nebulizers. Compressor nebulizers account for approximately 90% of the entire nebulizer market. However, as these require liquid medicines to be converted into a ﬁ ne mist, they are often heavy and noisy. By re- vising the structure of parts, Omron has success- fully resolved this issue by creating compressor nebulizers that are both small and quiet. As an example of this structural revision, we modiﬁ ed a pump from one of our mainstay blood pressure monitors to be used in these nebulizers. Innovating parts in this manner helps cut costs. Nevertheless, this was not an easy process as using the blood pressure monitor pump placed increased importance on the output capacity of the atomizing unit in ensuring that the pump could supply a sufﬁ cient amount of medicine mist. The development process for this atomizing unit was conducted steadily over a long period of time. I think Omron is a rarity among manufacturers in the world for devoting such effort to a single unit. Mesh nebulizers are generally smaller and quieter than compressor nebulizers and can be used while lying down. However, they are also more expensive than compressor nebulizers and maintenance of parts is more of a hassle. *1 Rise in smoking in China: According to a survey conducted in 2012, the smoking popu lation in China represents one-third of the total global smoking population. Moreover, in terms of the percentage of smokers, China is No. 2 in Asia after Indonesia. *2 COPD: This term refers to chronic bronchitis or emphysema, which is the No. 4 leading cause of death worldwide. The main cause is smoking, with more than 90% of sufferers also being smokers. Compressor nebulizer Mesh nebulizer Importance of Imagining Usage Situations — It would seem that the ability to use mesh nebulizers while lying down would be a signiﬁ cant advantage in terms of usage. Umeda: When nebulizers are used by small chil- dren, it is common for them to be watched over by their mothers. However, there are those mothers who want to have their children use nebulizers while lying down should symptoms permit. Our desire to Toru Ozeki Executive Ofﬁ cer and Senior General Manager in charge of the Sales and Marketing HQ–Asia OMRON HEALTHCARE Co., Ltd. Masahiro Umeda Manager, Group Leader, Product Planning Strategy HQ OMRON HEALTHCARE Co., Ltd. W h e r e W e ' r e H e a d e d develop products that are easier for patients to use in recognition of this fact led to the creation of prod- ucts customers can use while lying down. In this way, imagining the actual circumstances under which customers use our products is of ex- treme importance in the product planning process. After conducting usage investigations in various countries, we learned that there were cases in which proper treatment methods are not well known and cases in which our products were being used in incorrect manners. Ozeki: Usage circumstances are an important point of focus even with regard to sales. In other words, simply introducing products that we developed for Japan, Europe, or the United States into the markets of emerging countries does not always work. In developed countries, users tend to prefer products that are smaller, lighter, and more comfortable to use, even if they might be more expensive. However, in emerging countries, the primary concern is price, with the second concern being ease of use. Talking to customers in Asia, we were surprised to hear how their opinions with re- gard to the weight and noisiness of products differed from that of customers in Japan. In some Asian countries, a heavy product is seen as sturdy and therefore reliable, and a loud product is perceived as more effective. — Are there any other examples of differences between developed and emerging countries? Umeda: In Japan, a user would generally place their nebulizer on a table and use it while sitting in a chair. However, our investigations in Brazil and India show that it is common to use nebulizers in bed or on couches. Also, nebulizers are used to treat colds or nasal inﬂ ammation in addition to asthma. In this way, the usage environments for our products differ from country to country. Oxygen generators for Chinese market Importance of Downstream Management — Specially, what product strategies have you envisioned for emerging countries? Ozeki: First, we will introduce products into China, which is a massive market with large numbers of potential users. In 2012, we launched an oxygen generator for people with COPD in China. As such, our initial goal will be to expand sales in this market, targeting substantial sales volumes, while simultaneously acquiring sales knowledge. Next, we will apply this experience to India, Bangladesh, and other countries. Umeda: In the future, we will utilize Omron’s techno- logical prowess to provide these markets with lower- priced products. If we are to expand sales of nebulizers, which until recently could only be bought by the wealthy, among the middle class, we must provide responses to the unaddressed needs of people in the middle class and then reduce the price of these responses. In this endeavor, we will fashion products that accurately respond to the needs of emerging countries by taking advantage of the tech- nologies we have accumulated through the process of creating products for developed countries. Ozeki: In regard to sales strategies, the method of supplying products to local sales agents and then leaving the act of selling up to them is an obsolete way of developing overseas operations. 34 Omron Corporation Integrated Report 2013 35 By leveraging the blood pressure monitors for which Omron holds the top share in the global market, we have established a sales network consisting of approximately 110,000 stores throughout Asia. The way in which our products are being sold and bought mainly in drug stores, the downstream end of the distribution chain, is of utmost importance. Each store serves as an opportunity for custom- ers to become acquainted with Omron. As such, we are actively holding product explanation semi- nars for store staff and implementing other initia- tives to make better use of these opportunities. Further, if we are to contribute to improved health among the populous, we have to supply our prod- ucts to a wide range of customers. However, this means that we must address more demanding expectations with regard to product speciﬁ cations and prices. To help guide a wider range of custom- ers to our products, we offer extensive advice to stores, which serve as opportunities for customers to encounter our products. This advice goes as far as to make suggestions regarding product displays. This type of steadfast effort has led us to obtain the leading share of more than 60% for blood pressure monitors in India. Storefront in India Educational forum for distributor in India — How high is Omron’s brand recognition in emerging countries? Also, what competition does Omron face? Ozeki: We are actively conducting branding activities in these countries. For example, in China, we hold events in which consumers can have their blood pressure tested for free, and we are also broadcast- ing commercials featuring characters that appeal to the populous. As a result of these efforts, 60% of consumers recognize Omron as a company that helps prevent and treat lifestyle-related diseases. In addition, after the Lushan earthquake in April 2013, we donated approximately 500 blood pressure moni- tors as relief items to help support the victims of the earthquake. I believe that efforts such as these are contribut- ing to improved recognition of the Omron brand. Similarly, in India, we employ outdoor advertise- ments, participate in health-related events, and are otherwise working to improve brand recognition of the entire Omron Group. Umeda: In terms of competition, we have to com- pete with local companies and many other rivals. In such an environment, it is not enough to simply sell our products. We must continue to meet the mar- ket’s needs for evidence and quality while also retaining necessary approval, all of which represent hurdles to be cleared if we are to further develop our operations. This is no easy task, and even man- ufacturers from Europe and the United States are having difﬁ culty accomplishing it. Ozeki: In recent years, Chinese and South Korean manufacturers have been a rapidly growing pres- ence. These manufacturers all share a strong entre- preneurial spirit committed to cutting open new markets. However, these manufacturers still only provide consumer goods. Conversely, Omron not only offers consumer goods, it also has a robust lineup of products for medical institutions. In addi- tion, we are conducting clinical evaluations with medical practitioners and educational activities tar- geting pharmacists. Our ability to promote the Omron brand as a brand for medical professionals—equating Omron’s blood pressure monitors with cardiovascular dis- Our mission is to help treat people with respiratory illnesses in Asia and around the world. Toru Ozeki It is not enough to just provide equipment; I want to provide proper treatment environments as well. Masahiro Umeda W h e r e W e ' r e H e a d e d eases, nebulizers with respiratory illnesses, and blood glucose monitors with endocrine system diseases—is a powerful tool for differentiating HCB. For example, in China, we worked on guidelines for hypertension in cooperation with the Chinese Soci- ety of Hypertension. I believe that strengthening our relationship with local academic circles pertaining to medical institu- tions and medical practitioners is an important point to consider when advancing into the markets of emerging countries. I also must say that I am always surprised at how many government or academic leaders create opportunities to meet with us whenever we visit Asian countries. — What factors do you think have contributed to this warm reception? Ozeki: It is most likely a result of the reputation that accompanies our leading share in the global market for blood pressure monitors. In addition, the factory automation technologies of Industrial Automation Business (IAB) are garnering a great deal of attention in government sectors. In this manner, both IAB and HCB have established strong reputations in society. Economic Value Creates Social Value — What is the situation regarding environmental issues in emerging countries? Ozeki: As one initiative of China’s Twelfth Five-Year Guideline (2011–2015), mercury was banned for use in industrial applications, and it is expected that the Thirteenth Five-Year Guideline will forbid the use of mercury for medical applications. A similar guide- line was established in India just recently. For this reason, I feel that offering clinical-minded support to these countries in making the switch from the mercury-based blood pressure monitors to elec- tronic monitors will create economic value and social value. — How is economic support for healthcare in emerging countries? Ozeki: While the range of healthcare services offered under health insurance is gradually expand- ing in emerging nations, we are also seeing a rise in the number of sufferers of chronic malady, including such representative examples of this ailment as asthma and COPD. Accordingly, the spread of nebulizers, which enable patients to undergo inhalation-based treatments at home, will make signiﬁ cant contributions to establishing a sound balance between health insurance and public ﬁ nances in these countries. It could be seen as Omron’s mission to help drive the spread of nebulizers in emerging countries through pricing measures and educational activities. Umeda: Prior, I spoke of mesh nebulizers and com- pressor nebulizers that employed blood pressure monitor pumps. These are no doubt revolutionary products, but they still face issues with regard to price and maintenance procedures. We are currently in the process of developing new products to address these remaining issues, and it is my hope that we will be able to develop new products that change the very deﬁ nition of nebulizers. — In closing, what are your wishes and goals for the future? Umeda: There are still countless people around the world that are unable to receive proper treatment of asthma and COPD. However, for these people, it is not enough to just provide equipment; I want to provide proper treatment environments. Ozeki: Our mission is to help treat people with respiratory illnesses around the world. To fulﬁ ll this mission, we are improving the capabilities of each product in our rich lineup and raising brand recogni- tion to enable Omron’s products to better contrib- ute to the resolution of the health issues of people around the world. Currently, more than 30% of HCB’s earnings are generated in Asia, and we have the goal of achieving a 50% increase from ﬁ scal 2012 sales in this region by 2020. 36 Omron Corporation Integrated Report 2013 37 TThh Core Theme CC CCoree TThheemmme CCoree TThheemmme Core Theme ee 333333333333333333333333333 3 3333333333333333 Environmental Solutions Business and Social Systems Business (SSB) Contributing to the Spread of Renewable Energy Systems The Environmental Solutions Business is one of the pillars of Value Generation 2020 (VG2020). In this area, we boast the top share of the Japanese market for residential-use PV inverters for solar power generation systems, which are the most popular option among renewable energy systems. Omron offers unique, comprehensive solutions that contribute to the realization of a low-carbon society while at the same time providing customers with the maximum level of convenience. As one prime example of these solutions, a coordinated effort is being conducted linking the PV inverters and other environment-related equipment of the Environmental Solutions Business HQ with the engineer- ing and maintenance services provided by Omron Field Engineering Co., Ltd. (OFE). We asked senior managers from each entity about plans to expand the respective operations and to contribute to society through the Environmental Solutions Business. Market Environment and Business Overview — Please explain your business? a reduction of 70% in suspended particulate matter (SPM). In January 2013, these efforts were recog- nized and awarded the Minister of Economy, Trade Yukumoto: Trends related to energy usage are un- and Industry Prize in the Energy-Saving Activities dergoing drastic changes in light of progressive glob- Category of the 2012 Energy Conservation Grand al warming and natural energy resource depletion. Prix Program. We plan to apply the expertise ac- It will grow ever more important for companies to cumulated through this project to the development contribute to the development of a low-carbon of equipment for supporting energy-saving efforts society. Amid such changes in the surrounding and addressing environmental issues. social context, the Environmental Solutions Busi- ness HQ was established in March 2009. I as- — Why did OFE decide to cooperate in developing sumed my position as senior general manager of this division in April 2012. the Environmental Solutions Business? Echizen: OFE was established more than 40 Not only does the Environmental Solutions Busi- years ago, when Omron launched AFCs and trafﬁ c ness HQ develop its own business, it also works in systems, as a company for providing systems cooperation with other business divisions, such as and maintenance related to trafﬁ c signals and IAB and SSB, to advance business operations in the ﬁ elds of energy saving and energy creation. railway facilities. In the energy-saving ﬁ eld, one example of our Japanese Market Forecasts activities would be the eco-conscious optimization initiatives conducted at the Ayabe Plant in Kyoto. In October 2010, the Ayabe Plant launched an initia- tive to halve its energy usage by March 31, 2014. The unique environmental information monitoring system provided by the HQ is helping support that effort. While the plant still has a ways to go before ac- complishing this goal, it has already successfully halved electricity usage in clean rooms and realized 38 38 Omron Corporation Omron Corporation (Solar power installations) 8,000 6,000 4,000 2,000 0 2010 2011 2012 2013 (Forecast) 2014 (Forecast) 2015 (Forecast) (FY) Residential Use Small-to-Medium Scale (Several kWs–100kW) Large Scale (250kW–500kW) Source: Fuji-Keizai Group, 2012 market forecasts PV inverter W h e r e W e ' r e H e a d e d Shizuto Yukumoto Izumi Echizen Executive Ofﬁ cer Senior General Manager Environmental Solutions Business Headquarters President and Representative Director Omron Field Engineering Co., Ltd. When the Environmental Solutions Business HQ In particular, the market for inverter sales to indus- was formed, it was assumed that the division trial users (over 10kW) has signiﬁ cantly beneﬁ ted would see support demand over the next 10 to 20 from the introduction of this system. years and that OFE would have a role to fulﬁ ll in Presently, the electricity sales market is not only capturing this demand, which led to our cooperat- limited to energy-related companies, but we are ing in this venture. seeing newcomers from different industries, and it Many of our engineers hold qualiﬁ cations for is therefore entirely possible that this market will electrical installation and construction manage- grow to a massive scale. While displaying enor- ment, and we are seeing a rise in the number of mous potential for the future, these businesses employees that are motivated to take on duties in must address the task of stabilizing the operation new ﬁ elds by taking advantage of these basic skills. of solar power generation systems, as these OFE’s Network — How is the market for the PV inverter business, which is central to this cooperative venture? Yukumoto: In the energy-creation business, we are experiencing signiﬁ cant increases in installations of PV inverters, and, in ﬁ scal 2012, the capacity of the inverters we installed greatly exceeded 650MW. This brought the cumulative capacity of supplied PV invert- ers to approximately 2GW, which is roughly equiva- lent to the generation capacity of two power plants. On a cumulative basis, our share of the market for residential-use systems is approximately 30%. In addition, the 2012 launch of the feed-in tariff scheme for renewable energy has driven strong growth in the electricity sales market. Okayama Hiroshima Fukuoka Kitakyushu Saga Nagasaki Kumamoto Oita Miyazaki Kagoshima Asahikawa Sapporo OMRON Field Engineering Hokkaido Co., Ltd. Morioka Sendai Tokyo Hokuriku Nagano Saitama Gifu Otsu Kyoto Shizuoka Nagoya Kobe Osaka Hamamatsu Chiba Yokohama Osaka Call Center Tokyo Call Center Head ofﬁce Major base Service base Call center OMRON Field Engineering Kyushu Co., Ltd. Integrated Report 2013 Integrated Report 2013 raterate 3999 39 We will work to contribute to society by fulﬁ lling our mission of maximizing energy efﬁ ciency. Shizuto Yukumoto systems often suffer from malfunctions and other 2012 to develop the skills of more than 100 troubles, presenting a serious problem. construction engineers. Echizen: Based on the terms of the feed-in tariff system, customers’ proﬁ ts go down unless their solar power generation systems function stably for Solamoni Service — Please tell us about Solamoni. a period of 10 to 20 years. At the same time, mal- Echizen: Solamoni is a solar power generation functions are often discovered late because of the system monitoring service. More speciﬁ cally, it dependence on sunlight for output. This has cre- provides remote monitoring combined with the ated a need for monitoring systems, but at present dispatch of engineers. a number of PV inverter installations are still only Yukumoto: The PV inverter business is built upon using cloud-based monitoring systems. Should a portion of solar panels experience a decline in gen- eration efﬁ ciency, these cloud-based systems are Omron’s core “Sensing and Control” technolo- gies—a prime example of which is AICOT®*—and the unique energy conversion technologies that not prepared to investigate and rectify the causes have been developed based on those technologies. of the decline. Conversely, OFE is able to provide This business is also responsive to the needs of all analyses of malfunction causes. We can send engi- areas of the solar power generation system value neers to inspect or repair systems directly and chain. There are not many companies in this ﬁ eld provide these services 24 hours a day, 365 days a with operations that span from marketing to devel- year due to OFE’s approximately 1,200 engineers positioned in about 140 bases throughout Japan. opment, production, sales, installation, and ﬁ nally maintenance. We also have a neutral position in the To bolster the quality of these services, OMRON industry, being not attached to group companies’ Aso Co., Ltd., in Kyushu, has been holding training businesses, and this is an important factor in being sessions at its PV Training Center since summer chosen by customers. Solamoni Service Process Technology division Technical support Reliability point 2 Inspection services Inspection Nationwide maintenance bases Inspection Restoration Help desk Monitoring for malfunction or abnormality Equipment preparation Report reception Manufacturer Repair Reliability point 1 Monitoring services Dispatch Abnormality detection Malfunction Report Distribution center Equipment distribution Stocking of quality items Repair request Remote monitoring system Replacement, etc. Customers’ solar systems Reliability point 3 Restoration services W h e r e W e ' r e H e a d e d Echizen: I have witnessed ﬁ rsthand the importance fundamental level, the reason was simple; it coin- of a system that can offer services in all areas up to cides with our corporate philosophy. maintenance. While there are some misunder- Omron has always endeavored to develop ventures standings in this area, solar power generation sys- that beneﬁ t society. My division was just established tems are not “maintenance free.” In fact, the rate in 2009, but we already feel that we are conducting at which trouble occurs is fairly well deﬁ ned. a business that practices the Omron Principles. The products we provide to customers become Echizen: One of the Management Principles is part of social infrastructure, and therefore our in- “Innovation driven by social needs.” However, there volvement cannot merely end with the sale. The are not many businesses that can effect direct ability to respond to customer needs throughout a change on people’s lifestyles and social infrastruc- product’s life cycle is one of Omron’s core strengths. ture. The Environmental Solutions Business is one Yukumoto: Components, systems, and services of those few businesses that can drive such change are all interconnected. In order to maximize energy by responding to social needs. efﬁ ciency throughout a product’s life cycle, we Yukumoto: Realizing the “optimization of energy” provide customers with comprehensive support, by effectively utilizing the world’s limited resources including maintenance. In other words, we want is a requirement of the current times. As we possess our customers to know that “We are always beside the technological and infrastructure development them!.” We are conﬁ dent Omron is the only com- capabilities required to realize such optimization, I pany to possess systems for providing such com- am sure we are in a unique position on the global prehensive service. A Business That Practices the Omron Principles — How about the resolution of social issues and social contribution? stage. We will continue to practice healthy competi- tion as we work to contribute to society by fulﬁ lling our mission of maximizing energy efﬁ ciency. Echizen: We are committed to sharing dreams and a sense of pride and conﬁ dence throughout the Company. At OFE, our pride comes from our contri- Yukumoto: Some people may be curious as to why Omron is working on an environmental solu- bution to the social infrastructure business. On the fresh stage represented by the environmental solu- tions business. Part of the decision was based on tions ﬁ eld, we will take on new challenges as we the fact that we possess PV inverters employing work to fulﬁ ll our mission and contribute to society energy conversions technologies, monitoring sys- through our business. tems steeped in energy control technologies, and other relevant products that call upon our strong technological capabilities. However, on a more * AICOT® (Anti-Islanding Control Technology): AICOT is a proprietary Omron technology that prevents the danger of PV inverters operating under islanding conditions in grid-connected multiple solar power systems. This technology thereby supports the smooth introduction of solar power generation systems and also removes installation limitations. For this reason, AICOT is expected to make strong contributions to the spread of these systems. At OFE, our pride comes from our contribution to the social infrastructure business. Izumi Echizen 40 Omron Corporation Integrated Report 2013 41 CoCCoCCoCC Core Theme 4 Omron’s Risk Management as Explained by Directors Two Keywords: Integration and Global Omron will pursue integrated global risk management by striking a balance between advance preparation and proactive action. —What does risk management mean to Omron? Also, why is risk manage- ment necessary? Sakumiya: Risk management has two sides. One is the advance preparation for managing risks and the other is the proactive action of taking risks. A company must pursue the maximization of earnings I feel that strengthening such efforts is a matter of pressing importance for Omron given the circum- stances I just described. —What are some important points for Omron? Sakumiya: Omron is developing a diverse range of under the given operating conditions. At the same businesses on a global scale under a decentralized W h e r e W e ' r e H e a d e d Akio Sakumiya Senior Managing Director time, a company must fulﬁ ll its responsibility toward management structure. Its operating conditions are Integrated Global Risk Management Policies society. It is impossible to move forward without such that trouble in an individual business in one properly managing risks. Losses can be incurred if region could instantly develop into a large risk for opportunities are missed by not taking risks; these the overall management of the Omron Group. For are equitable to those resulting from losses from this reason, it is essential to manage information insufﬁ cient advance preparation. Business activities are always accompanied by and countermeasures for all possible risks in an integrated and global manner. As such, “integra- risks. Legal and compliance risks are a given. tion” and “global” are keywords for risk manage- Recently though, companies have been forced to ment. Accordingly, we named our efforts address a series of natural disasters, including the “integrated global risk management.” Great East Japan Earthquake, ﬂ oods in Thailand, Further, Omron’s risk management is not simply and the outbreak of the new form of inﬂ uenza about reducing exposure to risks. The corporate virus, as well as the rising risks of terrorism and core value of the Omron Principles is “Working for international political issues. To become a stronger the beneﬁ t of society,” and accordingly Omron also company, adaptability to change is essential, in views risk management as an opportunity to work addition to the realization of growth potential and toward such beneﬁ t. For example, we have the proﬁ tability. The Omron Group is advancing the important mission of protecting public transportation strategies of VG2020 and has displayed its intention systems in the event of a disaster. To that end, we to proactively expand operations in emerging coun- have deﬁ ned critical products for this purpose from tries and conduct M&A activities. However, as the among such items as trafﬁ c signals, ticket vending Group takes on challenges in new areas, it will machines, and automated ticket gates and prepared be important to predict accompanying risks. As replacements parts for such equipment. We also a member of the Board of Directors, which is re- consider alternative modes of transportation should sponsible for monitoring and supervising the risk management efforts of executive departments, public transportation systems be rendered unusable and have readied emergency rations and disaster- 1 2 3 4 We will integrate and carry out risk-related activities from a global perspective for the purpose of securing the continued existence of the Companies and enabling them to achieve their targets and fulﬁ ll their corporate social responsibilities. Based on the Basic Rules of Integrated Global Risk Management, we will endeavor to avoid, reduce, and transfer losses by collecting risk information, conducting risk analyses, and implementing countermeasures against risks. We will identify critical risks to the Group and enable Groupwide responses through the Executive Council. In a time of crisis, we will make reports in accordance with established procedures and form response teams necessary to address the crisis. 42 Omron Corporation Integrated Report 2013 43 Global risk information is to be integrated throughout the Omron Group. er or not they are functioning properly. Directors also (4) procurement and distribution; (5) IT; and (6) the Need for Integrated Global Risk Management Globalization of various business activities Increased exposure to risks Supply chains spreading across national and regional boundaries Rise in suddenly realized risks and unpredicted risks Need for Integrated Global risk management RM’s positioning is not clear in management of the Omron Group. RM is executed by each business unit based on its own understanding. Dispersed risk information makes it difﬁ cult to have a bird’s eye view of the whole situation. RM is not a routine activity at genba (operating sites) but is an extra non-routine activity. I II III IV Traditional frameworks unable to address unpredicted risks RM is to be integrated into the management of the Omron Group. (RM’s positioning is to be clearly deﬁ ned.) Intra-Group RM activities are to be integrated under a common framework. RM is to be integrated at genba (operating sites). No uncovered major risks Endeavor to achieve the targets Fulﬁ ll corporate social responsibility Ensure continu- ing existence of the Companies * RM = Risk management response gear for people living nearby disaster ticular emphasis on both of these categories. zones. In these ways, Omron is conducting activi- To summarize, risk management activities ties that give form to its corporate philosophy. throughout the year are conducted in this order: the —Could you please provide an overview of Omron’s risk manage- ment systems? Sakumiya: Omron’s basic risk management identiﬁ cation of risks; the analysis of risks; the des- ignation of signiﬁ cant risks; the establishment of plans for response, veriﬁ cation, revision, and report- ing to the Board of Directors; and then ﬁ nally rel- evant disclosure. In other words, this process policies are deﬁ ned within the Resolution by forms a risk management plan-do-check-act (PDCA) Board of Directors of Maintaining an Internal cycle. Going forward, Omron will reinforce these Control System, and these policies are listed in activities and further instill them into its global man- the Company’s Business Report and Corporate agement activities. Governance Report. The basic ﬂ ow of the risk management systems is as follows. Every year, we identify and analyze the various risks we are facing from a global perspec- tive. We then rate these risks, with the greatest —What systems are being put in place to facilitate global risk manage- ment efforts? Sakumiya: For executive departments, the Global threats to the Group being assigned an S rank, and Resource Management Headquarters plays a key those risks that pose lesser but still represent sig- role in advancing initiatives as the Company works niﬁ cant threats being ranked as A. We place a par- to develop stronger team relations vertically among business lines and horizontally between the corpo- rate headquarters and regional head ofﬁ ces, making for a closely coordinated global vertical-horizontal matrix management system. As one facet of these —How are measures to respond to S-ranked business continuity risks progressing? Sakumiya: The Great East Japan Earthquake reaf- efforts, the Corporate Ethics & Risk Management ﬁ rmed the importance of ensuring the continuity of Committee has been established under the Execu- business operations under any circumstances, and, tive Council of the Company. In addition, we have to this end, Omron chose to revise its business appointed risk managers at all Omron Group com- continuity plan (BCP). The revised BCP prescribes panies around the world, and we are utilizing our speciﬁ c measures regarding recovery time and global network to share risk information and discuss level objectives, methods of recovering relevant response measures in the course of daily activities. functions, and measures to prevent their loss. At the same time, directors take on the perspective Six major functions are considered in the BCP: of shareholders and other investors from which they (1) corporate headquarters, both global and re- monitor executive departments to determine wheth- gional; (2) business headquarters; (3) production; W h e r e W e ' r e H e a d e d advise these departments in conducting their duties. safety of operating bases. Further, in the event of an occurrence that threat- For example, with regard to (3) production ens the continuation of our business, a Company- functions, we have established that the production wide Emergency Response Headquarters must be volumes of all business companies should be recov- established. In preparation for such an occurrence, ered to predetermined levels within a deﬁ ned period directors and executive ofﬁ cers develop ordered of time. For accomplishing this goal, we are in the lists of possible candidates for heading this Emer- process of considering detailed procedures for gency Response Headquarters ahead of time. setting up alternative production sites, securing —What kind of risks do you identify as serious? Sakumiya: For ﬁ scal 2013, risks assigned the necessary parts and production facilities, and devel- oping backups of necessary information documents, including manuals, and standardizing such docu- ments. Furthermore, over the two years since the S rank are business continuity risks, including re- earthquake, Omron has made particular progress sponse to avian inﬂ uenza and the risk of violation of in deﬁ ning concrete procedures pertaining to laws in countries of operation. A-rank risks include (1) corporate headquarters functions, and full- the risk of fraud within the Company; the risk of ﬂ edged drills related to these procedures have violating environmental laws and regulations; the risk of violating personal data protection laws; already begun. However, these actions require investments of and the risk of failure to properly manage subsidiar- both time and money at operating sites. As such, it ies in emerging countries. is common for companies to prioritize short-term Meeting of risk managers BCP drill at Emergency Response Headquarters 44 Omron Corporation Integrated Report 2013 45 performance over such efforts. Nevertheless, I feel rights by supporting armed rebel groups in the that of foremost importance is the willingness to Democratic Republic of Congo in Africa. To avoid formulate concrete targets to address risks and, the realization of this risk, corporate headquarters then, consider what must be done to realize these divisions related to purchasing, legal affairs, and targets. Such consideration can lead to ways of CSR have been cooperating with business divisions installing business continuity measures with mini- to investigate the situation regarding such minerals mal burden to operations. Moreover, this process and implement response measures as necessary. can also provide us with good opportunities to re- * ESG: Environmental, Social, and Governance view existing operations for other purposes. —Recently, risks related to ESG* issues have been gaining attention. In what ways is Omron addressing these issues? Sakumiya: As businesses expand globally, the —What issues must Omron address going forward? Sakumiya: Omron has constructed its foundation for integrated global risk management. It will be important to continue to enhance efforts in this area going forward while applying the PDCA cycle. potential for a company’s business activities to Of particular importance will be improving activities impact the environment and society is ever rising. outside Japan. It is vital that each regional head- In light of this situation, incorporating ESG consid- quarters practice risk management in accordance erations into business activities and installing these with the characteristics of their respective region. principles into the core of management strategies Omron will include more information regarding its is now more important than ever. risk management efforts in the Annual Securities In ﬁ scal 2012, one example of focus initiatives in Report, on its website, and Integrated Report. this area was our response to the conﬂ ict mineral I also hope that Omron will incorporate the valuable issue. The act of procuring parts and materials in- opinions of stakeholders into its management in cluding such minerals for use in products can, albeit the future. indirectly, contribute to the violation of human There are countless issues to be addressed in the area of risk management. For this reason, it is necessary to prioritize these issues and continue to address them in a systematic manner. Akio Sakumiya Evaluation of Omron’s Risk Management by an Outside Director Sustainable Growth and Aggressive Risk Management W h e r e W e ' r e H e a d e d Outside Director Kazuhiko Toyama President and CEO of Industrial Growth Platform, Inc. Kazuhiko Toyama previously held positions at Boston Consulting Group, Inc. He also helped found and later served as President and CEO of Corporate Direction Co., Ltd., Japan’s ﬁ rst independent management strategy consultancy. In 2003, Mr. Toyama was appointed Senior President and COO of the Industrial Revitalization Corporation of Japan at its inception, where he successfully turned around 41 Japanese companies. In April 2007, he founded Industrial Growth Platform, Inc., which provides management support services focused on realizing long-term sustainable business operations and elevating corporate value. Mr. Toyama currently serves as a Vice Chairman of the Japan Association of Corporate Directors and a Vice Chairperson of the Japan Association of Corporate Executives. There are two main factors that have a signiﬁ cant impact on a company’s capacity to grow sustainably. One is the company’s ability to achieve har- mony with society, or, in other words, the ability of the company to orient its pursuit of proﬁ tability to match social values. Investors, consumers, and employees are all fundamental elements of society. If a company is not in harmony with them, it will not be able to grow over the long term. This is because a company’s most important customer is society itself. Harmony with society is imperative for any company. However, it is often the case for companies that maintain harmony with society at home to not do the same overseas. An important point of consideration for the future of a company is its ability to cross national boundaries and overcome ethnic, religious, and cultural differences to establish a shared set of values. I believe that Omron, with its corporate core value of “Working for the beneﬁ t of soci- ety,” has done a very good job at internalizing this principle in its organization. The other main factor affecting a company’s sustainability is the ability to practice aggressive risk management. Companies must win out against constant, ﬁ erce competition. As such, a company that does not take risks can only decline. At the same time though, a company that takes unneces- sary risks is doomed to fail. What is needed is a style of management that effectively controls risks and, then, takes those deemed necessary. The success of risk management is hinged on the effective use of the PDCA cycle. Companies do not have the option of being “risk free.” Rather, they must maintain an understanding of the risks present and control these, respond quickly to unforeseen circumstances, and, when the cycle has been completed, decide what they will incorporate into the next spin. There is no correct path in this process, and companies must continue to address these issues as long as they exist. I feel that Omron has strong systems in place to aid it in this undertaking. If Omron continues to maintain harmony with the global society, while building solid risk management systems and practicing aggressive risk management, I am conﬁ dent that the Company will continue to grow into the future. 46 Omron Corporation Integrated Report 2013 47 Omron at a Glance Performance and Forecasts by Segment Net Sales and Operating Income Net Sales by Segment (Billions of yen) Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Automotive Electronic Components Business (AEC) Social Systems, Solutions and Service Business (SSB) Healthcare Business (HCB) Other Businesses Eliminations and Corporate Operating Income (Loss) by Segment (Billions of yen) 800 700 600 500 400 300 200 100 0 09 10 11 12 13 (Forecast) (FY) 90 60 30 0 –30 Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Net Sales Operating Income and Operating Income Margin Net Sales Operating Income and Operating Income Margin (Billions of yen) (Billions of yen) 282.0 263.0 300 250 200 150 100 50 0 50 40 30 20 10 0 36.5 31.3 12.9％ 11.9％ (%) 20 16 12 8 4 0 (Billions of yen) 100 94.0 84.1 (Billions of yen) 12 80 60 40 20 0 9 6 3 0 (%) 12 9 6 3 7.4% 7.0 5.2% 4.4 09 10 11 12 13 (Forecast) (FY) 09 10 11 12 13 (Forecast) (FY) 09 10 11 12 13 (Forecast) (FY) 09 10 11 12 13 (Forecast) 0 (FY) C o r p o r a t e V a l u e I n i t i a t i v e s 09 10 11 12 13 (Forecast) (FY) Automotive Electronic Components Business (AEC) Social Systems, Solutions and Service Business (SSB) R&D Expenses and Capital Expenditures Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Automotive Electronic Components Business (AEC) Social Systems, Solutions and Service Business (SSB) Healthcare Business (HCB) Other Businesses Eliminations and Corporate R&D Expenses by Segment Capital Expenditures by Segment (Billions of yen) (Billions of yen) 60 50 40 30 20 10 0 09 10 11 12 (FY) 40 30 20 10 0 09 10 11 12 (FY) Notes: 1. From ﬁ scal 2013, certain operations previously included in EMC have been included in IAB following a change in management categorizations. Accordingly, the segment information ﬁ gures for ﬁ scal 2012 and prior ﬁ scal years have been restated to reﬂ ect this change. 2. Beginning in ﬁ scal 2010, the Omron Group has been revising the management guidance fees for the purpose of concentrating capital funds at the headquarters to reinforce selection and concentration and strategically allocate resources. This inclusion has had an effect on the operating income (loss) of each segment. Net Sales (Billions of yen) 120 108.5 97.6 90 60 30 0 09 10 11 12 13 (Forecast) (FY) Operating Income and Operating Income Margin Net Sales Operating Income and Operating Income Margin (Billions of yen) (Billions of yen) (Billions of yen) (%) 12 7.0 5.0 6.5% 5.1% 9 6 3 09 10 11 12 13 (Forecast) 0 (FY) 76.0 68.8 80 60 40 20 0 09 10 11 12 13 (Forecast) (FY) 5 4 3 2 1 0 (%) 10 4.5 5.9% 2.9 4.2% 8 6 4 2 09 10 11 12 13 (Forecast) 0 (FY) Healthcare Business (HCB) Other Businesses 82.5 71.5 Net Sales (Billions of yen) 100 80 60 40 20 0 09 10 11 12 13 (Forecast) (FY) Operating Income and Operating Income Margin Net Sales Operating Income (Loss) and Operating Income Margin (Billions of yen) 7.0 8.5% 4.4 6.2% (%) 12 9 6 3 09 10 11 12 13 (Forecast) 0 (FY) 3.5 2.5 5.6% 4.3% (Billions of yen) (Billions of yen) 62.0 59.2 80 60 40 20 0 4 2 0 –2 –4 –6 09 10 11 12 13 (Forecast) (FY) 09 10 11 12 13 (Forecast) (%) 12 6 0 –6 –12 –18 (FY) 8 6 4 2 0 8 6 4 2 0 48 Omron Corporation Integrated Report 2013 49 Segment Information Industrial Automation Business (IAB) Manufacturing and sales of control systems and components for factory automation and industrial equipment % of net sales 40% IAB has established a complete lineup of state-of-the-art equipment that plays a principal role in automation. This lineup includes the sensors that provide automation systems with the senses of “vision” and “touch,” the controllers that serve as their “brain,” the drives that form their “limbs,” and the networks that connect these various items as the “nerve system.” With these sophisticated products, we are contributing to quality, safety, and the environment by supporting the innovation of manufacturing industries around the world. Fiscal 2012 in Review Sales in Americas and China were solid regardless of the rebound from the previous year’s temporary sales increases. IAB net sales declined 2.9% year on year, to ¥263.0 billion, In China, demand for automobiles and machine tools was down, but demand remained relatively stable on a full-year basis, and sales proved solid even when compared with the previous ﬁ scal year, when temporary increases stemming from earthquake-related demand were recorded. In Asia, and operating income decreased 11.6%, to ¥31.3 billion, in while sales held ﬁ rm in ASEAN and emerging countries, ﬁ scal 2012. the impacts of limited capital investment in South Korea’s In Japan, sales were down 5.6% year on year, to ¥116.3 semiconductor industry weighed heavy, and overall sales billion. Capital investment demand in the automobile industry were down as a result. was relatively unchanged, but demand was poor in electronic In Europe, various economic indicators improved during component related industries, and particularly in the semicon- the second half of the year. However, production and new ductor industry. In addition, IAB experienced a rebound from investments continued to be limited, resulting in low de- the temporary increase in sales seen in the previous ﬁ scal year mand. In the Americas, meanwhile, automobile-related due to the inﬂ uences of the Great East Japan Earthquake and demand was favorable, and sales were solid accordingly. the Thailand ﬂ oods. IAB pursued more efﬁ cient operations to reduce ﬁ xed Overseas, sales were strong in China, ASEAN countries, costs while steadily conducting investment necessary for and Americas, while conditions remained uncertain in Eu- the future. However, the heavy impacts of overall sales rope due to ongoing ﬁ nancial instability. As a result, overseas declines could not be offset, and operating income de- sales were relatively unchanged from the previous ﬁ scal creased as a result. year, declining only 0.7% year on year, to ¥146.7 billion. IAB Results and Forecasts Check it out! (Billions of yen) 2009 2010 2011 2012 Fiscal Year Net sales Japan Overseas Americas Europe Asia Paciﬁ c Greater China Direct exports Operating income Operating income margin R&D expenses Depreciation and amortization Capital expenditures 203.9 91.2 112.7 18.9 51.2 16.8 25.5 0.3 14.6 7.2% 12.0 5.2 1.9 271.9 123.9 148.0 26.7 56.7 25.0 38.8 0.7 41.1 270.8 123.1 147.7 29.3 55.3 25.3 36.8 1.0 35.4 263.0 116.3 146.7 31.6 50.4 24.7 39.4 0.6 31.3 2013 (Forecast) 282.0 117.0 165.0 32.5 56.0 29.9 46.0 0.6 36.5 15.1% 13.1% 11.9% 12.9% 14.2 4.5 2.2 15.4 4.2 3.8 16.5 3.5 2.8 * From ﬁ scal 2013, certain operations previously included in EMC have been included in IAB following a change in management categorizations. Accordingly, the segment information ﬁ gures for ﬁ scal 2012 and prior ﬁ scal years have been restated to reﬂ ect this change. * Beginning in ﬁ scal 2010, the Omron Group has been revising the management guidance fees for the purpose of concentrating capital funds at the headquarters to reinforce selection and concentration and strategically allocate resources. This inclusion has had an effect on the operating income of each segment. * The sales ﬁ gures given indicate sales to external customers and exclude intersegment transactions. Operating income indicates income including internal income prior to the deduction of such amounts as intersegment transactions and head ofﬁ ce expenses that are not apportionable. * The forecasts for R&D expenses, depreciation and amortization, and capital expenditures are not publicized. 50 Omron Corporation Analysis of external environment Index of Machinery orders and IAB sales (Billions of yen) 100 80 60 40 20 0 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2011 FY2012 Index of Machinery Orders* (Seasonally adjusted) [left axis] IAB Sales [right axis] *Source: Calculated based on materials prepared by the Cabinet Ofﬁ ce, Government of Japan Japanese IAB sales trends tend to reﬂ ect those in the machinery orders index. Business Strategy and Outlook for Fiscal 2013 We will continue to evolve as the best automation partner for manufacturers worldwide. In ﬁ scal 2013 we are forecasting a year-on-year rise in net sales of 7.2%, to ¥282.0 billion, and a 16.4% increase in operating income, to ¥36.5 billion. In Japan, sales are forecasted to be in line with ﬁ scal 2012. While we expect customers to improve performance Yoshinobu Morishita Representative Director and Executive Vice President Company President, Industrial Automation Company due to yen depreciation, capital investment demand in the network consisting of more than 160 bases. automobile and machine tools industries will be unchanged We will continue to contribute to the substantial improve- from ﬁ scal 2012. Overseas, we are projecting a year-on-year ments in machine productivity by realizing safer, faster, and increase in sales. Markets are becoming increasingly linked more precise control. In this pursuit, we will work to create on a global scale, resulting in higher volatility, but the machines that anyone can operate with ease and realize expectations for ever growing automation are surely a deeper understanding of applications while developing rising nonetheless. Evolving as an automation partner to new applications on a global scale. manufacturers worldwide, IAB will relentlessly invest and We will continue to strengthen our operations in emerging put plans into action throughout ﬁ scal 2013. countries, where automation needs continue to grow, and Leveraging the monozukuri (manufacturing) capabilities we have developed through our global operations, we will launch also actively work to acquire new technologies that will contribute to the future of manufacturing. Aiming to evolve more products than in the previous ﬁ scal year, providing as an automation partner to manufacturers worldwide, IAB them to customers around the world through our global will develop stronger ties within and outside Omron. What’s New Joint Project with Microsoft Japan to Utilize Big Data Manufacturers are increasingly seeking higher levels of quality This new solution directly links Omron’s Sysmac control with the SQL Server of Microsoft Corporation to help advance re- and safety. At the same time, there is a rising need for trace- forms at production sites by providing the world with a new ability that allows information to be collected and analyzed on a means of tracking and utilizing data related to manufacturing. C o r p o r a t e V a l u e I n i t i a t i v e s single item basis to instantly determine when, where, and under what conditions certain items were produced. By strengthening Omron’s lineup of advanced “Sensing and Control” products, indispensable to the process of control, we have made it pos- sible to quickly and accurately upload vast quantities of data related to individual items mass-produced at production sites to top servers in real time. By combining these products with Microsoft’s technologies, we have realized systems for monitor- ing and analyzing vast quantities of data at production sites in an accurate, quick, and easy manner. Further, these systems en- able data to be arranged in a way that is meaningful to onsite staff and management. Monitoring Site Data Data analysis Feedback Link Defect detection (CEP) Quickly collect data from equipment Industry First—Integrated Tool with 3D Motion Trace Functions Sysmac Studio is for high-speed, high-precision motion control Industry First—Photoelectric Sensor Reborn through the Production Method This sensor is the ﬁ rst in the FA industry to be produced using design and safety control in an engineering environment. Using laser bonding technologies, thereby realizing quality not im- this tool, the movements of machine structures can be simu- pacted by differences in parts. Requiring one-tenth the normal lated using 3D animations on one’s desktop before construction. capital investment and half the average development period, This makes it easier to discover errors in control programs and this method allows us to swiftly respond to customer needs. parameter conﬁ gurations. These features employ a new, light 3D drawing engine developed for industrial applications. Large-scale equipment Desktop equipment 2.5m Integrated engineering tool Sysmac automation platform 2.0m 0.7m 2.0m 0.7m 0.7m Integrated Report 2013 51 Segment Information Electronic and Mechanical Components Business (EMC) Manufacturing and sales of electronic components for consumer appliances, telecommunications equipment, mobile telephones, amusement devices, and office automation equipment % of net sales 13% EMC utilizes its cultivated strength in monozukuri (manufacturing) technology, integrating its relays, switches, connectors, and other electromechanical component products to supply products to customers in a wide range of industries. Fiscal 2012 in Review Sales increased following a recovery in Japanese demand. Performance was solid in new businesses in China. EMC net sales were up 1.3% year on year, to ¥84.1 billion, Supported by the solid performance of businesses in China during the second half of the year, overseas sales were practically unchanged from the previous ﬁ scal year, declining 0.5%, to ¥57.4 billion. In Americas, demand was brisk in the automobile industry but stagnant in consumer-related industries. Similarly, inven- and operating income was down 14.9%, to ¥4.4 billion, tory adjustment trends continued in the consumer-related in ﬁ scal 2012. industries in Europe, and automotive electronic component In Japan, sales increased 5.6%, to ¥26.7 billion. During the demand recovery continued to be delayed even during the ﬁ rst half of the ﬁ scal year, demand from consumer-related second half of the ﬁ scal year. In this opaque economic industries was relatively unchanged from the previous ﬁ scal environment, exports from China and other parts of Asia into year, but demand in the automobile industry recovered from Europe displayed a downward trend. However, demand the impacts of the Great East Japan Earthquake, driving an began recovering during the second half of the year. Also, overall increase demand. In the second half of the year, performance was solid in new businesses in environmental demand for “white goods” home appliances was sluggish. ﬁ elds in China. Due to the above, full-year overseas sales However, demand was solid in infrastructure-related indus- showed almost no change overall. tries, and we saw increased demand in the ofﬁ ce equipment Operating income was down year on year due to the and mobile device industries. These factors contributed to impacts of the weak euro and the ongoing decline in the increase in full-year sales. internal sales. EMC Results and Forecasts Check it out! Fiscal Year Net sales Japan Overseas Americas Europe Asia Paciﬁ c Greater China Direct exports Operating income 2009 2010 2011 2012 70.7 22.3 48.4 7.3 11.7 7.6 19.8 1.9 4.8 81.2 24.9 56.3 13.7 13.0 8.4 19.8 1.5 9.0 83.0 25.3 57.7 13.2 12.9 7.6 22.7 1.3 5.1 84.1 26.7 57.4 13.1 11.3 7.1 24.6 1.4 4.4 (Billions of yen) 2013 (Forecast) 94.0 29.5 64.5 14.5 13.9 9.0 26.1 1.0 7.0 Operating income margin 6.8% 11.0% 6.2% 5.2% 7.4% R&D expenses Depreciation and amortization Capital expenditures 4.1 8.5 4.2 4.6 6.9 8.7 5.5 7.2 9.9 5.2 7.4 8.9 * From ﬁ scal 2013, certain operations previously included in EMC have been included in IAB following a change in management categorizations. Accordingly, the segment information ﬁ gures for ﬁ scal 2012 and prior ﬁ scal years have been restated to reﬂ ect this change. * Beginning in ﬁ scal 2010, the Omron Group has been revising the management guidance fees for the purpose of concen- trating capital funds at the headquarters to reinforce selection and concentration and strategically allocate resources. This inclusion has had an effect on the operating income of each segment. * The sales ﬁ gures given indicate sales to external customers and exclude intersegment transactions. Operating income indicates income including internal income prior to the deduction of such amounts as intersegment transactions and head ofﬁ ce expenses that are not apportionable. * The forecasts for R&D expenses, depreciation and amortization, and capital expenditures are not publicized. Analysis of external environment Global shipments of electronic components and sales of EMC products for consumer electronics (Billions of yen) 1,500 (Billions of yen) 50 1,200 900 600 300 0 40 30 20 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2012 FY2011 Global [left axis] Japan [left axis] EMC Products for Consumer Electronics [right axis] Source: Japan Electronics and Information Technology Industries Association (JEITA) In ﬁ scal 2012, consumer electronics sales were strong centered on emerging countries. Business Strategy and Outlook for Fiscal 2013 We will improve proﬁ tability by expanding sales in new ﬁ elds related to the environment and energy and by exercising our advanced monozukuri capabilities. We plan to increase EMC net sales 11.8% year on year, to ¥94.0 billion, and boost operating income 60.9%, to ¥7.0 billion, in ﬁ scal 2013. Koichi Tada Managing Ofﬁ cer Company President, Electronic and Mechanical Components Company Looking at the operating environment for electronic com- strengthening our lineup of power latching relays for use ponents, demand is expected to hold strong in the United in smart meters, which we expect to experience growing States and the Asia Paciﬁ c region. Meanwhile, demand in demand in emerging countries going forward. Europe and China is forecast to recover steadily. In Japan, we will capture new customers for businesses centered on ﬁ elds related to the environment and energy. Overseas, we To improve proﬁ tability, we intend to utilize Omron’s advanced monozukuri capabilities. As one facet of these efforts, we will reduce the amount of silver used in the will work even more closely with large-scale customers contact portions of relays, decrease losses of gold and silver while acquiring new small and medium-sized customers by plating, and conserve and recycle molding materials in order utilizing our global sales network. Through these efforts, we to limit the impacts of raw material price ﬂ uctuations. In will target higher sales. addition, we will introduce automated production systems In addition, we will bolster our lineup of relays, switches, and low-cost automation systems into factories in China and and connectors for consumer electronics, automotive other parts of Asia to reduce the number of people needed electronic components, ofﬁ ce equipment, and industrial to operate these facilities. These systems will allow us to machinery and, at the same time, explore new markets mitigate the impacts of the rising cost of labor in these areas by leveraging new products. One area of focus will be and, thereby, accelerate our efforts to reduce costs. What’s New Release of World’s Smallest and Lightest DC Power Relay for Eco-Friendly Vehicles and Condensers In the automobile industry, the market is expanding for electric and hybrid-electric vehicles and other eco-friendly vehicles equipped with high-voltage batteries. As this market grows, automobile manufacturers are increasingly in need of DC load control technologies for these clean energy vehicles as well as means of extending drivable distances by downsizing and reducing the weight of onboard electrical equipment. To respond to these needs, EMC released the world’s small- est and lightest DC power relay. This component can be used as a main relay or pre-charge relay in the high-voltage batteries of eco- friendly vehicles and is approxi- mately half the size and weight of relays with similar speciﬁ cations. DC power relay Industry’s Smallest Battery Connector Created Using Omron’s Unique Electroforming Technology: XD2B Employing Omron’s unique electroforming Round Water-Resistant Connector That Enables Easy Connection of Different Shaped Cables with One Type of Connector: XS5C/G Developed to aid installation workers, Facial Expression Estimation Technology That Further Evolves Face-Sensing Technologies Omron’s Facial Expression Estimation technology is capable of estimating technology using advanced microfabrica- this connector is based on the concept of seven different facial expressions—hap- tion and materials technologies, this easily connecting different shaped cables piness, surprise, fear, disgust, anger, connector is compatible with the batter- with only one type of connector and no sadness, and neutral—all in real time. It ies of mobile devices and helps make specialized tools. By applying a pressure is expected to be used for various ap- devices smaller while increasing the size connection method to cables, this con- plications, such as communication robots of batteries. nector can greatly simplify the process of or in video games that react to users’ connecting cables. facial expressions. C o r p o r a t e V a l u e I n i t i a t i v e s 52 Omron Corporation Integrated Report 2013 53 Segment Information Automotive Electronic Components Business (AEC) Production and sales of electronic components for automobiles % of net sales 15% OMRON Automotive Electronics Co., Ltd. (AEC), conducts business operations catering speciﬁ - cally to the ever evolving automotive electronics ﬁ eld, a subsection of the automobile industry, which continues to grow on a global basis. This business continues to contribute to the realization of a safer, more secure, and more comfortable driving society by producing technologies and products designed to create “the best matching of automobiles to people.” Fiscal 2012 in Review Sales and income increased in both Japanese and overseas operations. We set a new record for sales following the 2008 China, but impressive sales of new models of keijidousha (a class of small automobiles deﬁ ned by Japanese standards) helped support demand nonetheless. As a result, full-year sales in Japan improved year on year. ﬁ nancial crisis. Overseas sales rose 20.0%, to ¥67.4 billion, supported by AEC net sales grew 14.8% year on year, to ¥97.6 billion, robust demand in certain countries. Demand was low in and operating income rose 86.1%, to ¥5.0 billion, in ﬁ scal Europe, especially during the ﬁ rst half of the year, and sales 2012. In Japan, sales were ¥30.2 billion, up 4.8% from the of Japanese automobiles took a sharp downturn in China. previous ﬁ scal year, setting a new record for after the 2008 Nevertheless, overall demand from overseas automobile ﬁ nancial crisis. manufacturers and emerging markets was brisk. In Americas, In Japanese operations, while ﬁ scal 2011 was impacted by demand was strong throughout the year, and demand in the temporary production adjustment trend that followed the China increased during the second half of the year. In addi- Great East Japan Earthquake, this trend disappeared in ﬁ scal tion, we experienced a rebound from the temporary declines 2012. In addition, the ﬁ rst half of the year felt the beneﬁ ts of in sales in the previous ﬁ scal year that resulted from the government measures to promote the purchase of eco- ﬂ oods in Thailand. This rebound was particularly prominent friendly automobiles, such as the extension of tax breaks in the ﬁ rst half of the year. As a result of the above factors, and the reinstatement of subsidies. These factors drove overall full-year overseas sales showed a signiﬁ cant increase strong automobile-related demand during the ﬁ rst half of the from the previous ﬁ scal year. year. In the second half of the year, we saw such detracting Operating income was also substantially higher due to the factors as a decline in exports to Europe as a result of the rebound from the abovementioned impacts of the Great economic recession in Europe and lower sales related to East Japan Earthquake and the Thailand ﬂ oods. AEC Results and Forecasts Check it out! Fiscal Year Net sales Japan Overseas Americas Europe Asia Paciﬁ c Greater China Direct exports Operating income 2009 2010 2011 2012 75.2 23.9 51.3 24.0 2.0 13.1 6.3 5.9 1.7 84.3 28.4 55.9 23.9 2.6 14.2 9.1 6.2 4.2 85.0 28.9 56.1 21.5 2.4 16.2 9.5 6.5 2.7 97.6 30.2 67.4 25.0 2.8 19.5 13.9 6.2 5.0 (Billions of yen) 2013 (Forecast) 108.5 25.0 83.5 30.5 3.0 24.0 19.0 7.0 7.0 Operating income margin 2.3% 4.9% 3.2% 5.1% 6.5% R&D expenses Depreciation and amortization Capital expenditures 5.0 2.1 3.6 5.3 2.1 2.0 6.6 2.1 5.2 7.0 2.4 5.5 * Beginning in ﬁ scal 2010, the Omron Group has been revising the management guidance fees for the purpose of concen- trating capital funds at the headquarters to reinforce selection and concentration and strategically allocate resources. This inclusion has had an effect on the operating income of each segment. * The sales ﬁ gures given indicate sales to external customers and exclude intersegment transactions. Operating income indicates income including internal income prior to the deduction of such amounts as intersegment transactions and head ofﬁ ce expenses that are not apportionable. * The forecasts for R&D expenses, depreciation and amortization, and capital expenditures are not publicized. Analysis of external environment Worldwide automobile production (unit basis) (Millions) 6 5 4 3 2 1 0 China EU North America Asia Japan South America Middle East, Africa Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2011 FY2012 Source: CSM Worldwide, Inc. Sales were poor in Japan due to the impacts of the Great East Japan Earthquake, while sales improved signiﬁ cantly in China. Business Strategy and Outlook for Fiscal 2013 Automobile market growth is expected to center on emerging countries. For AEC, we are forecasting a year-on-year increase of 11.1%, to ¥108.5 billion, in net sales, with a 39.7% increase in oper- ating income, to ¥7.0 billion, in ﬁ scal 2013. In ﬁ scal 2012, new automobile sales recovered to 5 million Katsuhiro Wada Managing Ofﬁ cer President and CEO, OMRON Automotive Electronics Co., Ltd. vehicles in Japan for the ﬁ rst time in ﬁ ve years. However, these countries. At the same time, major suppliers from market conditions are proving to be weak due to the end of Europe and the United States are becoming more responsive the government subsidies for the purchase of eco-friendly toward demand in Asia, resulting in intensiﬁ ed competition. automobiles. Overseas, meanwhile, demand is expected to Aiming to respond to such market changes, AEC has been be strong in the North American market, and sales of Japa- establishing systems in each major region of the world for nese automobiles in China will gradually recover from the quickly uncovering new market needs and providing value- period of boycotting seen during ﬁ scal 2012. Also, the strate- added products by utilizing high-quality development, produc- gic vehicles that Japanese automobile manufacturers in tion, sales, and services functions. It is also working on the Thailand have developed for the global market are forecast to “Global One Team” management strategy, under which sell well, particularly in Southeast Asia. Accordingly, overseas global expansion will be pursued by leveraging the Omron sales should show an overall increase. Group’s accumulated human resources, technologies, and Further, the automobile market is expected to continue management structures. Through these efforts, AEC will work growing centered on emerging countries. Against this back- to uncover the social needs inherent to each different region drop, there is increasing demand from our customers for and quickly and efﬁ ciently introduce products that meet conducting development and production operations locally in those needs. What’s New Relocation of Aged Brazilian Factory In 2008, AEC acquired a 100% stake in a production site in respond to the automotive component demand in South Brazil. This site has since served as a major production base for America, with a particular our operations in South America. However, this base was far focus on Brazil, as we work from major automobile producing areas and its building and to expand our operations. The other facilities were quite aged. We relocated the base to a factory will also be a base for newly constructed factory in December 2012 and commenced the Omron Group’s ongoing full-ﬂ edged production in January 2013. social contribution efforts. Brazil is expected to be the world’s ﬁ fth largest automobile market in 2020. We will therefore utilize this new base to AEC’s new factory in Brazil commenced full-ﬂ edged operation in January 2013 Electric Power Steering Controllers AEC anticipates that a growing number of automobile models will utilize its electric Transmitter Key and Engine Start Systems AEC is carrying out the development Components for Eco-Friendly Vehicles AEC is developing a range of fundamental power steering controllers for smooth steering wheel operation and energy saving. Omron is ready to meet wide- ranging market needs with its control technologies that are compatible with and production of various devices by technologies and products to contribute integrating its wireless, miniaturization, to greater energy savings and fuel- and weight-reducing technologies for efﬁ ciency improvements in eco-friendly which it has established a strong market vehicles. These developments include reputation. These devices provide added lithium-ion battery leakage monitoring mid- and large-sized vehicles. Also, AEC is convenience for users and greater ease units and electricity leakage sensors strengthening its development and pro- duction functions in the rapidly growing Chinese market, responding to demand utomobile manufacturers. from Chinese automobile manufacturers. in locking and unlocking doors and start- for electric and hybrid-electric vehicles ing the engines of automobiles. as well as voltage conversion units for idling stop systems, which are expected to become standard equipment for gasoline vehicles. C o r p o r a t e V a l u e I n i t i a t i v e s 54 Omron Corporation Integrated Report 2013 55 Segment Information Social Systems, Solutions and Service Business (SSB) Providing solutions and services for contributing to a safer, more secure, and comfortable society % of net sales 11% OMRON SOCIAL SOLUTIONS Co., Ltd. (SSB), provides various equipment, systems, and services to support secure and comfortable living environments and a safe social infrastructure. Fiscal 2012 in Review Sales and income increased signiﬁ cantly due to growth in the safety and security and environmental solutions ﬁ elds. In ﬁ scal 2012, SSB sales and income both increased signiﬁ - centered on remote monitoring systems were strong. Accordingly, full-year net sales increased substantially. The trafﬁ c control and road control systems business continued to feel the negative trend toward limiting capital investment seen among customers. Nevertheless, full-year cantly, with net sales up 20.2% year on year, to ¥68.8 billion, net sales proved favorable due to the strong performance of and operating income at ¥2.9 billion, compared with ¥0.1 safety and security solutions. billion in ﬁ scal 2011. Environmental solutions related businesses recorded In the railway infrastructure business, railway companies impressive full-year net sales due to strong performance saw improvements in tourism revenues due to the rebound centered on growth ﬁ elds, such as solar power generation from the impacts of the Great East Japan Earthquake. As a system related services. Also, in the related maintenance result, replacement demand for railway infrastructure was business, there was a signiﬁ cant rise in the installation of solid throughout the year. In particular, deliveries of auto- PV inverters, and full-year net sales were solid as a result. mated ticket vending machines, automated ticket gates, and Operating income improved greatly year on year, sup- other equipment were up, as were orders for related installa- ported by higher net sales and the beneﬁ ts of proﬁ t structure tion. In addition, sales of safety and security solutions reforms in the railway infrastructure business. SSB Results and Forecasts Check it out! Fiscal Year Net sales Japan Overseas Americas Europe Asia Paciﬁ c Greater China Direct exports Operating income 2009 2010 2011 2012 58.0 57.5 0.5 0.0 0.0 0.0 0.0 0.5 2.7 63.8 63.1 0.7 0.0 0.0 0.0 0.0 0.7 1.7 57.2 56.9 0.3 0.0 0.0 0.0 0.0 0.3 0.1 68.8 68.5 0.3 0.0 0.0 0.0 0.1 0.2 2.9 (Billions of yen) 2013 (Forecast) 76.0 74.0 2.0 0.0 0.0 0.0 1.1 0.9 4.5 Operating income margin 4.6% 2.6% 0.2% 4.2% 5.9% R&D expenses Depreciation and amortization Capital expenditures 2.9 1.4 1.2 3.0 1.7 1.0 2.2 1.1 0.9 2.2 1.1 1.5 * Beginning in ﬁ scal 2010, the Omron Group has been revising the management guidance fees for the purpose of concen- trating capital funds at the headquarters to reinforce selection and concentration and strategically allocate resources. This inclusion has had an effect on the operating income of each segment. * The sales ﬁ gures given indicate sales to external customers and exclude intersegment transactions. Operating income indicates income including internal income prior to the deduction of such amounts as intersegment transactions and head ofﬁ ce expenses that are not apportionable. * The forecasts for R&D expenses, depreciation and amortization, and capital expenditures are not publicized. Analysis of external environment Changes in the number of rail transport passengers (year on year) Japan Railways (JR) Group Total Private Railways (%) 10 8 6 4 2 0 –2 1 2 3 4 5 6 7 8 9 10 11 12 2012 Source: Rail Transport Overview, Ministry of Land, Infrastruc- ture, Transport and Tourism SSB’s business covers a wide range of social ﬁ elds, and there are no speciﬁ c economic indicators that link closely to performance. In the railway segment, for example, SSB’s sales are strongly inﬂ uenced by customer budgets for IC card equipment installation and new railway and station construction plans. During ﬁ scal 2012, tourism levels recovered from the slump seen following the Great East Japan Earthquake, and the investment environment in the railway segment improved as a result. Business Strategy and Outlook for Fiscal 2013 We will continue to strengthen competitiveness and build foundations for growth. In ﬁ scal 2013, we are projecting a 10.5% year-on-year gain in SSB net sales, to ¥76.0 billion, and a 54.4% rise in operating income, to ¥4.5 billion. In existing businesses, such as those related to railways and trafﬁ c control, we have achieved proﬁ tability through the Kiichiro Kondo Managing Ofﬁ cer President and CEO, OMRON SOCIAL SOLUTIONS Co., Ltd. implementation of ongoing proﬁ t structure reforms. This expand. In this pursuit, we will take advantage of the Group’s proﬁ tability will be taken advantage of to steadily capture ability to provide package offerings, including products, replacement demand and thereby maximize earnings. In the system design, installation, maintenance, and other services, safety and security ﬁ eld, the experience and expertise ac- to capture the expanding demand. Further, we will focus on cumulated through operations thus far will help realize a the development of new energy-related products and ser- full-ﬂ edged expansion. vices from the three perspectives of creation, storing, and In growth businesses, we will pursue sales growth in the saving. Through these efforts, we hope to put SSB on the environmental solutions ﬁ eld, where demand continues to track toward medium-to-long-term growth. What’s New Ticket Reading Systems for Compatible Use of IC Cards On March 23, 2013, Japan’s major IC card systems became compatible with each other, enabling one card to be used at which enables the same card to be used across Japan at 52 railway companies, 96 bus companies, and approximately 200,000 stores. most stations in Japan’s largest cities between Hokkaido and Compatible Use of IC Cards Nationwide Kyushu. It was previously possible to use IC cards from one area in others, but this was only available in limited areas. As such, it was very inconvenient to travel through various different regions. The introduction of the compatible-use system will make travel and business trips much more convenient, creating new potential for IC cards. As a pioneer in the ﬁ eld of automated ticket vending ma- chines for almost 50 years, SSB contributed to society with its automated ticket gate systems. Its 50 years of experience and efforts to create social needs have led SSB to contribute to the realization of the world’s largest IC card compatible-use system, IC Cards C o r p o r a t e V a l u e I n i t i a t i v e s Stationary Lithium-Ion Electricity Storage System This system stores the electricity generated by solar power generation systems and purchased from power companies and thus may be used as a power supply when needed, such as during a blackout. The system employs lithium-ion rechargeable batter- ies made with olivine-type lithium iron phosphate, known for their safety, and boasts the high capacity of up to 19.2kWh coupled with a long lifespan that is resistant to repetitive charging and discharging. Under normal operating conditions, the system helps shift electricity usage away from peak hours, effectively cutting peak-hour usage and conserving electricity. Should a blackout occur, the system automatically activates to supply a deﬁ ned load to speciﬁ ed equipment, thereby ensuring that lighting, com- munications facilities, and other equipment necessary to respond to disasters may be kept functional. As a means of realizing local electricity production and consumption, electricity stor- age systems are gaining increased attention along with solar power generation systems, which are an ever more important part of generation infrastructure. Omron’s electricity storage systems can function as infrastructure for disaster countermeasures and will be used to contribute to the development of safer, more secure, and more eco-friendly social infrastructure. Electricity storage system 56 Omron Corporation Integrated Report 2013 57 Segment Information Healthcare Business (HCB) Providing health and medical devices and services for homes and medical institutions % of net sales 11% OMRON HEALTHCARE Co., Ltd. (HCB), is aiming to expand business with a focus on emerging economies by developing innovative products and services to enable people around the world to accurately and easily monitor their health status. Fiscal 2012 in Review A clear recovery was seen from the impacts of the Great East Japan Earthquake. Sales and income were substantially higher both in Japan and overseas. In ﬁ scal 2012, HCB sales and income were substantially among medical institutions recovered, and performance proved favorable. As result, net sales in Japan increased year on year. Overseas sales were up 19.4%, to ¥42.0 billion. Demand remained low in Southern and Eastern Europe. However, this was offset by ongoing strong demand for healthcare higher, with net sales rising 14.5% year on year, to ¥71.5 devices in Russia and China as well as in emerging countries billion, and operating income up 51.0%, to ¥4.4 billion. in the Asia Paciﬁ c and other regions, and overall sales were In Japan, sales increased 8.2%, to ¥29.5 billion. Demand favorable as a result. Operations also beneﬁ ted from a busi- for home-use healthcare devices recovered from the period ness alliance related to the sale of electric toothbrushes in of stagnancy that followed the Great East Japan Earthquake, Europe and the inﬂ uence of rapid yen depreciation in the and sales of mainstay blood pressure monitors and ther- third quarter and onward. All these factors contributed to the mometers were strong throughout the year. In addition, new substantial rise in full-year overseas sales. demand was stimulated by the launch of new products, such Operating income increased greatly due to sales growth as sleep duration trackers, sleep sensors, wrist-type blood in Japan and overseas, which offset the impacts of the pressure monitors, body composition monitors with IT weak euro. functions, electric toothbrushes, and electronic massagers. As a result, full-year sales were strong overall. Investment HCB Results and Forecasts Check it out! Fiscal Year Net sales Japan Overseas Americas Europe Asia Paciﬁ c Greater China Direct exports Operating income 2009 2010 2011 2012 63.4 29.6 33.8 10.8 12.7 2.3 7.4 0.7 7.1 60.6 26.9 33.7 10.2 12.2 2.5 8.0 0.8 4.1 62.4 27.2 35.2 9.8 13.0 2.9 8.6 0.9 2.9 71.5 29.5 42.0 10.8 15.9 3.5 11.1 0.7 4.4 (Billions of yen) 2013 (Forecast) 82.5 31.0 51.5 13.0 18.1 5.6 14.3 0.5 7.0 Operating income margin 11.1% 6.7% 4.7% 6.2% 8.5% R&D expenses Depreciation and amortization Capital expenditures 5.0 1.3 1.5 5.0 1.2 4.7 5.1 1.5 2.8 5.0 1.9 3.1 * Beginning in ﬁ scal 2010, the Omron Group has been revising the management guidance fees for the purpose of concen- trating capital funds at the headquarters to reinforce selection and concentration and strategically allocate resources. This inclusion has had an effect on the operating income of each segment. * The sales ﬁ gures given indicate sales to external customers and exclude intersegment transactions. Operating income indicates income including internal income prior to the deduction of such amounts as intersegment transactions and head ofﬁ ce expenses that are not apportionable. * The forecasts for R&D expenses, depreciation and amortization, and capital expenditures are not publicized. Analysis of external environment Japanese electronics market (blood pressure monitors) (Billions of yen) 2.5 2.0 1.5 1.0 0.5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2011 FY2012 Omron Products Other Products Source: GfK Sales of blood pressure monitors surged in the second half. Business Strategy and Outlook for Fiscal 2013 Sales growth will be targeted in emerging markets. We forecast a year-on-year gain of 15.4% in HCB net sales, to ¥82.5 billion, accompanied by a 58.8% increase in operating income, to ¥7.0 billion, in ﬁ scal 2013. Trends that accompany economic development, including improved standards of living, the adoption of Western diets, and other lifestyle changes in such emerging countries as Kiichiro Miyata Managing Ofﬁ cer President and CEO, OMRON HEALTHCARE Co., Ltd. China and India as well as those in Central and South Ameri- In developed countries, people are growing more commit- ca, have resulted in growing trends in lifestyle diseases. We ted to preventing illness as obesity increasingly becomes a anticipate these trends will result in the continued expansion social issue and healthcare costs rise. This trend is expected of healthcare device markets in these countries. To respond to drive growth in the preventative medical care market. HCB to such trends, we are strengthening sales systems on a will act ahead of this market growth and develop new sens- global basis and enhancing our network of distributors, phar- ing devices and solutions in the ﬁ elds of sleep and exercise macies, drugstores, and other sales channels. In these ways, that contribute to health improvement and illness prevention. we are targeting increased sales in emerging countries. These offerings will be used to create new markets. What’s New Simultaneous Launches of MedicalLink Blood Pressure Management Service and Blood Pressure Monitor That Automatically Transmits Measurements Over 3G Networks MedicalLink is an IT-based blood pressure management service for medical institutions. This service supports the treatment of hypertension by easily sending detailed at-home measurements to one’s doctor. In conjunction with the start of this service on May 10, 2012, Omron also launched the HEM-7251G digital blood pressure monitor, which allows home measurement data to be automatically transmitted to servers over 3G networks. MedicalLink is employed at more than 1,500 medical institu- With MedicalLink, the blood pressure measurements taken tions across Japan. This service was utilized in the regions that by hypertension sufferers at home are automatically analyzed were heavily impacted by the Great East Japan Earthquake to and shown in graph form on their doctors’ computers. Accord- watch over senior citizens living alone in temporary housing. ingly, this service frees patients from the hassle of manually Further, Aizumisato Town, Fukushima Prefecture, used Medical- keeping track of daily measurements. The service also makes Link as part of a system that enables citizens to earn points it easier for doctors to monitor changes in their patients’ blood each time they measure their blood pressure. These points can pressure, which was hard to do using hand-written records. be exchanged for gift certiﬁ cates and other services in their Further, users can share real-time data with family members, town. The system is a revolutionary new initiative that helps who if living separately can quickly contact a doctor should they raise health consciousness among citizens while simultaneously notice a sharp rise in blood pressure. stimulating the local economy. Karada Scan Body Composition Monitor: HBF-252F This monitor features a quick and easy-to- Blood Pressure Monitor: HEM-6310F The thinnest and lightest in the world, Sleep Duration Tracker: HSL-002C When placed bedside, this tracker re- cords the user’s time to fall asleep, total use automatic recognition to turn on the this wrist-type blood pressure monitor is sleep time, and the number of times device and start measurements when easy to store and carry around. Equipped rolled over while asleep by reading the one stands on it. It transmits data to PCs with communication functions that allow movements of bedding provoked by and smartphones and realizes Omron’s measurements to be viewed and man- bodily motion. Data can be sent to smart- fastest body composition measurement aged on PCs and smartphones, it has the phones to determine the user’s sleep time of approximately four seconds. quietest monitoring of any Omron blood type and provide advice. pressure monitor. C o r p o r a t e V a l u e I n i t i a t i v e s 58 Omron Corporation Integrated Report 2013 59 Segment Information Other Businesses Several other business incubation operations % of net sales 9% The main objective of operations in the Other segment is to undertake incubation activities for future business expansion. The Other segment advances business in future growth areas, including the environmental ﬁ eld, where energy-conservation and CO2-reduction needs are expected to continue growing, and the expanding smartphone market. Fiscal 2012 in Review Demand related to renewable energy and smartphones contributed to sales. In the Other segment, net sales increased 10.7% year on due to concern for electricity supplies in Japan, which re- sulted from the Great East Japan Earthquake. However, we saw reduced demand from major customers for industrial- use computers and contract development and manufacturing year, to ¥59.2 billion, and operating income of ¥2.5 billion services for electronic devices. This decrease in demand was recorded in ﬁ scal 2012, compared with an operating resulted in overall lackluster full-year sales. loss of ¥3.6 billion in ﬁ scal 2011. In the Micro Devices Business HQ, contract semiconduc- The Environmental Solutions Business HQ experienced tor manufacturing demand was down. Nevertheless, this a signiﬁ cant increase in full-year sales, with sales being decline was offset by the beneﬁ ts of increased demand for particularly strong for PV inverters (energy-creation busi- micro electrical mechanical systems (MEMS) microphone ness). The strong sales can be attributed to the rise in chips and custom integrated circuits for industrial use, and renewable energy opportunities in society and the launch sales proved favorable. of the feed-in tariff scheme for renewable energy in Japan In the Backlight Business, we worked to take advantage of during July 2012. increased demand in the smartphone market and success- In the Electronic Systems & Equipments Business HQ, fully began ﬁ lling large-scale orders during the second half of sales of uninterruptible power supply (UPS) units were brisk the ﬁ scal year. As a result, full-year sales were strong. Other Businesses Results and Forecasts Check it out! Fiscal Year Net sales Japan Overseas Americas Europe Asia Paciﬁ c Greater China Direct exports Operating income (loss) Operating income margin R&D expenses Depreciation and amortization Capital expenditures 2009 2010 2011 2012 43.6 24.7 18.9 0.0 0.0 0.0 17.5 1.3 (5.8) — 1.7 1.2 1.1 49.7 27.5 22.2 0.0 0.0 0.0 20.7 1.5 (4.7) — 2.5 1.2 1.9 53.5 29.5 24.0 0.0 0.0 0.0 22.6 1.4 (3.6) — 2.8 0.9 2.1 59.2 41.4 17.8 0.0 0.0 0.0 16.3 1.5 2.5 4.3% 3.0 1.4 2.5 (Billions of yen) 2013 (Forecast) 62.0 36.5 25.5 0.0 0.0 0.0 23.5 2.0 3.5 5.6% * Beginning in ﬁ scal 2010, the Omron Group has been revising the management guidance fees for the purpose of concen- trating capital funds at the headquarters to reinforce selection and concentration and strategically allocate resources. This inclusion has had an effect on the operating income of each segment. * The sales ﬁ gures given indicate sales to external customers and exclude intersegment transactions. Operating income indicates income including internal income prior to the deduction of such amounts as intersegment transactions and head ofﬁ ce expenses that are not apportionable. * The forecasts for R&D expenses, depreciation and amortization, and capital expenditures are not publicized. Analysis of external environment Facilities by approved output (Thousands of kW) 15,000 12,000 9,000 6,000 3,000 0 7 8 9 10 11 12 1 2 2012 2013 Megasolar (more than 1,000kW) Middle solar (less than 1,000kW) Small-scale solar (less than 10kW) Source: Agency for Natural Resources and Energy (ANRE) The number of solar power installations is growing rapidly due to the inﬂ uences of the feed-in tariff scheme. 60 Omron Corporation Business Strategy and Outlook for Fiscal 2013 The Environmental Solutions Business is targeting further growth. In the Other segment, in ﬁ scal 2013 we are forecasting development and manufacturing services for electronic devices. Simultaneously, we will bolster our lineup of UPS units, which continue to experience rising demand, in order to better promote sales of these items. a 4.7% year-on-year rise in net sales, to ¥62.0 billion, and In the Micro Devices Business H.Q., demand for custom a 38.6% increase in operating income, to ¥3.5 billion. integrated circuits and other existing products will likely In the Environmental Solutions Business HQ, we will remain at the same level as in ﬁ scal 2012. As such, we will further expand the scale of operations by developing focus our efforts on MEMS microphones and sensors, which comprehensive energy solutions businesses that combine are expected to see soaring demand, in markets for mobile energy creation, storage, and saving. As the feed-in tariff devices and consumer electronics. Through these efforts, scheme is expected to boost market activity for industrial we will work to expand sales. solar power generation systems in Japan, we will work to In the Backlight Business, we expect to enjoy the beneﬁ ts expand sales of PV inverters in the Japanese market as we of demand created by the ever increasing need for thinner target a higher market share. We will also expand the energy- smartphones and tablets with larger screens. Taking advan- creation business by providing services that support the tage of these beneﬁ ts, we will utilize our unique ultraﬁ ne stable operation of solar power generation systems over the processing technologies and pressing technologies to ex- long term. At the same time, we forecast higher sales in pand orders for backlight units to be used in high-end smart- the energy-saving components and services business. phones and tablets. Moreover, we will continue to advance In the Electronic Systems & Equipments Business HQ, the automation of and boost the productivity of production we aim to capture a higher volume of orders from major lines for mass-produced products while simultaneously customers for industrial-use computers and contract reducing costs in the pursuit of improved proﬁ tability. What’s New Omron Receives METI Minister’s Prize in New Energy Grand Prix Program Omron was awarded the highest Minister of Economy, Trade operate even during islanding condi- tions. To prevent this situation from occurring, it was previously necessary and Industry Prize (METI Minister’s Prize) in the Excellent Prod- for tests to be conducted to verify that ucts / Services Category of the 2012 New Energy Grand Prix Program in recognition of its proprietary AICOT® technology, which is anticipated to make signiﬁ cant contributions to the spread of solar power generation systems. interference problems will not occur between differing systems. Moreover, because islanding detection over a wide area was difﬁ cult, solar power systems were limited by safety regulations to approximately 10% of the sites in each area in order to keep the In recent years, there has been rising interest in renewable power grid safe. This issue has been a relatively unnoticed obstacle energy, which in turn has driven a rapid rise in solar power hindering the proliferation of solar power generation systems. generation system installations. Omron’s answer to this issue is PV inverters that employ the When solar power generation systems are connected to the proprietary AICOT® technology. power grids of power companies, it is necessary to ensure the systems remain safe during blackouts. For this reason, the PV inverters used in solar power generation systems must be able to detect when the system is islanding and contain provisions to Employing an islanding detection method that is signiﬁ cantly faster than conventional methods, AICOT® successfully eliminates the danger of interference. AICOT® can also be easily introduced into systems without gathering data through interference tests. prevent power from being transmitted during blackouts. However, On top of this, it features a wider area detection capacity, thereby the islanding detection methods used by PV inverters vary be- tween different manufacturers, and it is therefore possible that PV inverters will interfere with each other, leading PV inverters to removing the limitations on system installations. It is anticipated that these beneﬁ ts will help AICOT® make substantial contribu- tions to the spread of solar power generation systems. Backlight Units for High-End Smartphones This range of backlight units has been Uninterruptible Power Supply Units: BU-2RW Series This series provides a range of 200V MEMS Differential Pressure Sensor This thermal ﬂ ow-type sensor measures with superior sensitivity and reproduc- reﬁ ned to better meet customer needs rack-mounted, continuous inverter UPS ibility in low pressure environments and by using our breadth of experience and units ideal for industrial or embedded with a wider pressure range. Embedded sophisticated technologies. system applications. Moreover, these application speciﬁ c integrated circuits units are equipped with LCD monitors to carry out digital correction to read pres- easily conﬁ rm the status of the unit. sure with higher preci- C o r p o r a t e V a l u e I n i t i a t i v e s sion and with less inﬂ uence from tempera- ture than conventional analog output sensors. Integrated Report 2013 61 Intellectual Property Strategy R&D Enhancing Profitability and Promoting Business Growth The Intellectual Property Center defends high-value technical assets to boost the Group’s competitive strengths and protects and effectively utilizes the Company’s patents, brand names, and expertise to maximize the Omron Group’s long-term corporate value. The Center raises the success rate of the Group’s business activities and contributes to enhancing the proﬁ tability and promoting the business growth of the Omron Group. Establishment and Implementation of the Omron Intellectual Property Guidelines Omron has established the Omron Intellectual Property Guidelines, based on the Management Principles, to serve as guiding principles and judgment criteria for the execution of activities related to intel- lectual property. In addition, under the Intellectual Property Policy, derived from the Omron Intellectual Property Guidelines, the Company formulates an intellectual property strategy that is consistent with its business and technical strategies and implements that strategy. strategies, the Center aims to remove the obstacles that might impede business divisions when they operate in these countries. Over the long term, the Center contributes to the growth of our business value through intellectual property by strengthening internal coordination to respond to future business globalization and rapidly changing market conditions. We are accurately assessing our core technologies, creating an organized map of our businesses and technologies, and thus connecting our vertical businesses horizon- tally by leveraging our intellectual property strengths. Omron Intellectual Property Guidelines 1. Create high-quality intellectual property 2. Aggressively utilize intellectual property 3. Respect, protect, and manage intellectual property 4. Recognize Omron’s strengths and functions are based on intellectual property Intellectual Property Activities Contributing to Business The Intellectual Property Center prioritizes and determines the degree of importance of research projects, in accordance with our business strategies, and carries out the formulation of intellectual property strategies in a focused manner, with the objective of contributing to business through the efﬁ cient and effective use of management resources. Speciﬁ cally, in the core Industrial Automa- tion (IA) Business (IAB & EMC), we aim to secure high growth rates and signiﬁ cant proﬁ tability during the period of our Value Generation 2020 (VG2020) long-term strategy. To this end, the Center will strengthen ties with business divisions and clearly identify the competitive circumstances surrounding key product lines. We expect that this will enable us to advance more precise intellectual property strategies. The Center also identiﬁ es and analyzes technological trends in growth markets, such as the environment and healthcare markets. Based on the ﬁ ndings, the Center establishes intellectual property strategies in cooperation with business divisions to ensure the divisions are fully prepared to create an Omron-style business using fundamental Omron technology and to respond swiftly when the markets begin expanding. Further, the Center is responsible for developing intellectual property portfolios in conjunction with busi- ness strategies and in response to the globalization of Omron’s business. By accelerating the acquisition of intellectual property rights in countries that represent important markets for Omron’s future ahead of the advancement of business globalization Intellectual Property and R&D-Related Data Strengthening Globalization of Intellectual Property Omron is working harder on its intellectual property in conjunction with the globalization of its business. In particular, the Singapore site is positioned as a hub that is capable of consolidating patent applica- tions and ﬁ lings for those innovations created by the Group globally. At the same time, the headquarters is developing the systems necessary to support intellectual property activities in general in the Asia Paciﬁ c region, which is anticipated to experience rapid market growth. In addition, we have expanded both our production and development activities in China. As such, we aim to greatly enhance our intellectual property in this country to support localized innova- tion. To this end, we are providing intensive training for Chinese staff to cultivate local intellectual property management and specialist staff that will be key to this innovation. Similarly, in the United States and Europe, we are strengthening intellectual property systems and cultivating related regionally oriented staff. Thus, we are making steady progress in fortifying our foundation for intellectual property through the active cultivation of staff at all our operating sites who can contribute to the Group’s business success with intellectual property expertise. We are also establishing a global intellectual property management system and reducing intellectual property risks to strengthen the foundation of this global intellectual property management system. Intellectual Property Holdings in Japan and Overseas Trademark rights 12% Design rights 12% Overseas Patent rights, Utility model rights 27% Patent rights, Utility model rights 30% Japan Design rights 10% Trademark rights 9% 2012 1,084 1,172 6,448 43.5 6.7% Total number of intellectual properties held: 11,367 (as of March 31, 2013) 2011 1,068 915 5,959 42.1 6.8% Fiscal Year Number of patents: Applications Approvals Total patents R&D expenses (billions of yen) R&D expenses / Sales ratio 62 Omron Corporation 2008 1,119 826 5,205 48.9 7.7% 2009 794 730 5,218 37.8 7.2% 2010 901 753 5,452 41.3 6.7% Omron aims to provide society with higher levels of safety, security, and healthcare and eco-friendly products and services. To that end, we are constantly developing new technologies and products. Omron Will Concentrate on Strengthening 10 Areas of Technology Omron has continually worked on enhancing its core “Sensing and Control” technologies with the aim of contributing to the development of the “post-industrial society.” In Omron’s long-term management strategy, Value Generation 2020, we set the following 10 areas of technology as areas to strengthen through increased R&D with an eye to future needs. Through reinforcing these10 areas throughout the Omron Group, we are aiming to optimize performance, cost, and speed in order to respond to intensifying global competition. 10 Areas of Technology Sensing & control + intelligence technologies Extracting needed data from a range of information and processing this in a more intelligent way to create greater value 1. Detection, identiﬁ cation, and recognition technologies 2. Power electronics design technologies 3. Control technologies 4. Knowledge information technologies Methodology and facilities designed to realize greater productivity Methodology and facility technologies Utilization of open technologies Technology development efﬁ ciency enhancement 5. Materials and methods technologies 6. Facility and process technologies Creating technological innovations through collaborative development utilizing original technologies and open technologies 7. Network technologies 8. Embedded technologies Through development process innovation, we aim to greatly enhance technology development efﬁ ciency in order to be able to create new products with overwhelming speed. 9. Computer-aided engineering (CAE) 10. Development processes C o r p o r a t e V a l u e F o u n d a t i o n Integrated Report 2013 63 Quality Provision of Safe and Secure Products and Services Omron is constantly improving the quality of its products and services to satisfy its customers. In this endeavor, Creation of Safe and Secure Products That Meet Area Needs OMRON HEALTHCARE Co., Ltd., is accelerating the glocal- Initiatives to Improve the Reliability of Solar Power Systems OMRON Aso Co., Ltd., operates Omron’s main factory for we realize that ensuring the safety of the products and services we offer is important to the continuity of our business. ization* of products. To this end, it employs universal design eco-friendly products and is thus responsible for manufactur- We are therefore taking steps to guarantee that our products function safely and can be used with peace of mind. IAB’s Global Quality Assurance System Omron’s Industrial Automation Business (IAB) generates product functions from the user’s perspective. These plans are used to evaluate the design of all products. Should an approximately 60% of its sales overseas, and it is becoming issue be discovered, response teams quickly develop ap- increasingly more important to respond to the diversifying propriate revisions and preventative measures and then needs for products and services of customers in Europe, rapidly communicate these measures throughout all areas of Americas, Greater China, and the Asia Paciﬁ c region. operation in accordance with global standards. In this way, IAB is dedicated to preventing the creation and shipment the quality management methods developed in Japan have of defective products as well as the recurrence of any issues been made the standard for our global operations, and we that may occur. Accordingly, IAB has developed a quality have installed an effective improvement cycle in all regions assurance system that is standard throughout its global of operations. As a result, the number of requests to analyze operations. The underlying foundations for this system are products in response to issues discovered declines with the quality management techniques and design technologies each coming year. Omron has accumulated to date. At the same time, the information gained from repairing IAB procures components from around the world in and analyzing products brought into repair centers in each search of those that will best meet its customers’ product region helps us develop an understanding of the differences needs. To ensure the quality of these components, Omron’s in infrastructure and product usage methods between re- specialized technicians periodically inspect the production gions. This understanding in turn enables us to adapt the lines of component manufacturers, and we otherwise work speciﬁ cations of products to the needs of speciﬁ c areas. For with these manufacturers to manage quality. In this manner, example, in response to feedback from China, we developed we have put in place systems that prevent defective prod- power supply equipment that functions stably even in areas ucts from being created by suppliers. with unstable power supplies. Through such efforts, we are IAB also conducts quality management during the develop- creating new products, services, and support methods ment phase. Based on a clear understanding of the charac- based on the feedback received daily through our global teristics of each component to be used, component quality network of more than 160 bases. plans are established to provide a multifaceted evaluation of Our global network of more than 160 bases is a powerful tool for supporting customers in advancing the globalization of their business. Each base provides technical consulting, repairs, and other services to meet the needs of the region in which they are located. Europe concepts to make its products easy for anyone to use. At the ing PV inverters and energy monitoring equipment. For same time, the company works to uncover latent needs some time now, this company has been working to reduce stemming from the unique lifestyles and cultural back- energy wastes and stabilize usage by installing energy moni- grounds seen in the markets of emerging countries, which toring systems and actively tracking energy usage. In order are known for featuring a diverse range of lifestyles. to further accelerate these efforts, we established the Aso Solar Power Training Center, which serves as a training site for improving engineering capabilities and acquiring the ability to verify whether or not energy is being used optimally in solar power generation systems. Aso Solar Power Training Center Professional blood pressure monitor HBP-1300 (Japan model) This training center employs nine solar power generation systems (total generation capacity of 100kW), including One example of these efforts would be the HBP-1300 those from both Japanese and overseas makers, which are blood pressure monitor for medical institutions, which was used to conduct training geared toward fostering technical developed to be especially easy to use for the nurses that skills related to improving product reliability and conducting measure the blood pressure of patients in Chinese hospitals. veriﬁ cation testing on products as well as constructing solar This product employs universal design concepts to enhance systems, which is learned through hands-on practice. In this operability in medical institutions. The monitor is slanted to manner, the training center supports the company in devel- make the display easier to see by nurses when they mea- oping engineering systems that enable it to conduct techni- sure patients’ blood pressure while standing. The HBP-1300 cal veriﬁ cation and offer high-quality services nationwide to is also the ﬁ rst Omron blood pressure monitor equipped respond to customer needs. C o r p o r a t e V a l u e F o u n d a t i o n with shock-absorbing bumpers to protect the device should it be dropped. Further, to meet the requests of nurses, the device features a backlight that allows for measurement results to be read even in dark places, such as the nighttime hospital ward. In addition, OMRON HEALTHCARE respond- ed to the needs of medical institutions, where measure- ments are frequently conducted, by utilizing more durable pumps and sensors to increase the overall durability of the HBP-1300. Greater China The HBP-1300 has since been adjusted in consideration of Solar system construction training Africa Asia Paciﬁc South Korea, Japan Americas Oceania Sales Representative Ofﬁces Sales Branches the needs of Japan, India, and other markets, and it is now catering to the needs of a diverse range of medical institu- tions around the world. Going forward, OMRON HEALTH- CARE will continue to plan products ahead of social trends in order to propose the use of items that satisfy people around the world. * Glocalization: A combination of globalization and localization 64 Omron Corporation Integrated Report 2013 65 Human Resources Respect for Individuality and Diversity and Cultivation of Human Resources That Can Compete on the Global Stage One of the Management Commitments described within the Omron Principles is “Respect for individuality and diver- sity.” Based on this spirit, Omron believes that it is vital to motivate employees with various values and opinions to fully demonstrate their capabilities without regard to their nationality, gender, or disability in order to achieve both individual development and growth of the Company. In accordance with this belief, we aim to make Omron a com- pany that encourages people to grow. Global Human Resources Strategies for Individuals and Teams Omron has positioned human resources strategies as an and take on challenges while working together as a team. As one concrete initiative, we began presenting The OMRON Global Awards (TOGA). In this competition, employees sub- important element of its overall management strategy to mit examples of themselves undertaking challenges related be advanced in order to ensure the steady progress of its to the three Management Principles of the Omron Prin- long-term management vision, Value Generation 2020 ciples—Challenging ourselves to always do better, Innovation (VG2020). The main constituents for advancing these strate- driven by social needs, and Respect for humanity. We then gies will be the individuals and teams within the Group, and select superior examples of employees exercising the corpo- Omron’s human resources strategies call for both of these to rate philosophy through presentation rallies and qualifying be strengthened. Specially, we are implementing the follow- competitions, with winning entries shared throughout the ing three human resources strategies, which have been Omron Group. In ﬁ scal 2012, more than 20,000 entries were developed in consideration of tasks that currently need to received from around the world on approximately 2,500 be addressed. different themes. This competition will continue to be based The ﬁ rst is the development of human resources that can on voluntary entry to encourage employees to act on their ﬁ ll “core positions,” or posts that have been deﬁ ned as criti- words so that we may subsequently share throughout the cal. This strategy aims to address the task of maintaining a Group examples of exercising the corporate philosophy that sufﬁ cient number of quality global business leaders. Omron we want other employees to emulate. We believe that this has deﬁ ned 170 core positions, 60 of which are based over- approach will further ensconce a corporate culture that seas, that are critical to advancing the VG2020 strategies, and inspires employees to take on challenges. it is actively seeking out and educating human resources capable of ﬁ lling these positions. In addition, the same posi- tion evaluation standards are applied throughout Omron’s global operations to assign the best employee to each posi- tion from a total optimization perspective, no matter where in the world the employee is based. The second strategy is to establish global uniformity with regard to human resources systems. In concrete terms, we will adjust systems for positioning, transferring, developing, and evaluating human resources on a global basis. In ﬁ scal 2012, we instituted a program for selecting and educating future business leaders. At the same time, we began estab- lishing education programs for all Omron employees world- TOGA qualifying competition held at corporate headquarters in Kyoto wide and developed standard global programs for new Going forward, we will continue to establish the necessary employees and new managers. systems for strengthening our global operations and advance The third is developing a global corporate culture united by our human resources strategies to guarantee the success of practicing the Omron Principles, our corporate philosophy. VG2020. We have deﬁ ned the appropriate corporate culture for guar- anteeing the success of VG2020 as a strong team-based culture that encourages employees to continue taking on Empowerment of Women on a Global Scale Realizing the importance of empowering women, Omron new challenges. For individuals, we expect them to be strong established a new department for this purpose in ﬁ scal 2012, as professionals while also having strong ties to their cowork- and it is actively advancing women empowerment initiatives. ers. More speciﬁ cally, we are targeting a corporate culture in Omron has been committed to recruiting talented people which all employees around the world share the same goals without regard to gender while also working to establish a workplace environment that can allow them to fully demon- strate their capabilities and contribute to the Company’s management. Over the years, Omron has continued to institute a number of measures to this end, including the launch of a training program targeting mid-career or assistant manager class female employees. Also, we hold social events, workshops, and seminars for female employees to help them network. With regard to the workplace environ- ment, we are taking steps to improve systems for support- OMRON Taiyo factory innovated to provide a comfortable workplace environment for people with disabilities ing female employees in balancing their work-life with their more comfortable workplaces for people with disabilities. home-life. As a result of these efforts, we are seeing a Thanks to these efforts, the factories are becoming an ever steady rise in the number of female employees in leadership more conducive environment for enabling employees to roles in Japan. Nevertheless, in Japan, only 1.5% (23 em- exercise their skills. Improvements to the workplace environ- ployees) of managerial positions were ﬁ lled by women as ment at these factories have been realized through the of April 2013. Going forward, we will establish concrete introduction of production tools, support equipment, and goals for promoting female employees and work to draw out semi-automatic devices that employees develop themselves the potential of female members of the Omron Group so in accordance with their own needs, as well as through that we may further improve corporate value. other activities seeking improvement in such areas as pro- Message from Representatives Megumi Hamada (right) and Chie Uemura (left) from the Global Human Resource Development Department In the Omron Group outside Japan, women already ﬁ ll many managerial positions. In Japan, we are making efforts to promote it as the diversity management. For this reason, we are going to develop a workplace environment in Japan that will further empower Omron’s female employees. Expansion of Employment Opportunities for People with Disabilities OMRON Taiyo and OMRON Kyoto Taiyo At Omron, we respect individuality and diversity, as is pledged by the Omron Principles. As such, we are expanding employment opportunities for people with disabilities. Inspired by our corporate core value—“Working for the beneﬁ t of society”—we established OMRON Taiyo Co., Ltd., in 1972 in cooperation with social welfare organization Japan Sun Industries. Based in Beppu, Oita Prefecture, this com- ductivity or quality. At the same time, employees are devel- oping their own skills so that they may better utilize this environment. OMRON Taiyo lists examples of improvement activities from ﬁ ve perspectives—quality, productivity, the environment, occupational health and safety, and work range expansion— on its website. At OMRON Kyoto Taiyo, improvement activities are ad- vanced by all employees under the slogan of “A step of a hundred is greater than 100 steps of one.” These activities focus on organization, orderliness, and cleanliness and help cultivate a drive for improvement and a pioneer spirit. Both factories manufacture blood pressure monitors and digital thermometers equipped with voice functions. Employ- ees from OMRON Kyoto Taiyo participate in the development of some of these healthcare devices from the design phase, proposing ways of making them easier to assemble and use for people with disabilities. C o r p o r a t e V a l u e F o u n d a t i o n Healthcare device production line at OMRON Kyoto Taiyo pany established Japan’s ﬁ rst factory for the employment of Furthermore, we draw on the knowledge gained from people with disabilities. Later, in 1986, we established OM- these employees, as well as on our universal design RON Kyoto Taiyo Co., Ltd., in Kyoto. expertise, to help contribute through other activities to Over the years, a number of measures have been imple- the development of more comfortable working and living mented to make OMRON Taiyo and OMRON Kyoto Taiyo environments for people with disabilities. 66 Omron Corporation Integrated Report 2013 67 Resolving Environmental Issues New Vision Contributing to the Global Environment Omron Group Environmental Policy Recognizing environmental preservation as a management priority, Omron revised its environmental management vision, which is now called “Green Omron 2020,” in 2011. Based on this new vision, the Company will promote two key measures: environmental contributions of its products and services and reduction of the environmental impact of its business activities. Green Omron 2020 Reduction of Environmental Impact on a Global Scale Environment Contributions Exceeding Our Environmental Impact Omron established the Group’s Environmental Policy in activities on a global scale by creating and supplying products and services that reduce the environmental footprint of society. 1996 and its environmental management vision, “Green Under this vision, we aim to contribute to the develop- Omron 21” in 2002. Based on this policy and vision, ment of a sustainable society by maximizing the effec- Omron has promoted environmental management prac- tiveness of management resources. Meanwhile, rather tices centered on lessening the impact of its business than merely focusing on the environmental impact as- activities on the environment. Efforts were concentrated sociated with increased business activities, we will also on reducing total CO2 emissions and the amount of concentrate on reducing environmental impact by gener- waste associated with business activities in Japan. ating more products and services that contribute to the The Omron Group formulated its new environmental global environment. Having expressed these thoughts in management vision, “Green Omron 2020,” in September our Environmental Policy, we have established Company- 2011. In addition to continuing with efforts to reduce the wide environmental targets and have also deﬁ ned Activ- environmental impact of its internal business activities, ity Areas and Action Guidelines to realize the objectives the vision prescribes for the Group to contribute to the of Green Omron 2020. reduction of the environmental impact of its business Maximizing effective use of management resources (Improvement of energy/resource productivity) Offering products/services beneﬁcial to society (Expansion of business that contributes to the global environment) Reducing environmental loads of business activities Less Expanding contribution to improving the environment through products/services More Based on the Omron Group Corporate Motto and the Omron Principles, we will contribute to the reduction of global environmental loads by maximizing the effective use of management resources, such as human resources, materials, money, and energy, and providing useful products and services for society. 1. Considering the environmental impact of the Omron Group’s business activities, products, and services, we will establish the Environmental Management System globally and ensure continual improvements. 2. We will comply with the legal and other requirements to which we subscribe concerning environmental aspects, and we will take actions for environmental conservation and the prevention of pollution. 3. Under the Environmental Policy, we will establish and implement objectives, targets, and programs, and through their periodic evaluations we will strive to improve, maintain, and review our activities. 4. To accomplish the objectives of the Environmental Policy smoothly and efﬁ ciently, we will communicate it to all employees by providing environmental education and activities as well as subcontractors engaged in activities with the Omron Group. 5. We will disclose the Environmental Policy and the status of our environmental activities to the public in an appropri- ate manner as necessary. Green Omron 2020 Environmental Targets The Omron Group’s Environmental Targets for Fiscal 2020 C o r p o r a t e V a l u e F o u n d a t i o n 1. Improve carbon productivity*1 (targeting global sales / CO2 emissions from global production sites) by 30% compared with the ﬁ scal 2010 level on a global basis *1 Carbon productivity: Net sales per ton of CO2 emitted 2. Environmental contribution*2 > CO2 emissions from global production sites *2 Environmental contribution: Reduction in CO2 emissions resulting from the use of Omron’s energy-saving or energy-creating products For more information regarding the progress of 1. and 2., please refer to Financial and Non-Financial Highlights on page 21. Activity Areas and Action Guidelines Strive to minimize the input of energy/ resources for business activities while promoting recycling/reuse and reduction to minimize waste. Offer customers environmentally warranted products that help reduce negative environ- mental impact throughout their life cycles. Eco-Factories / Ofﬁ ces / Laboratories Eco-Products Assess environmental impact of the entire supply chain, ranging from the procurement of raw materials to production, sales, and distribution, and strive to reduce its negative impact on the environment. Expand acquisition of ISO 14001 certiﬁ cation and establish a multi-site ISO registration system while reducing environmental risk and ensuring legal/regulatory compliance. Eco-Logistics Eco-Management Promote environmental education and awareness-raising activities to encourage all employees to heighten their ecological awareness and upgrade the level of environ- mental preservation activities they are in- volved with. Eco-Mind Proactively release information on Omron’s environmental activities and results and promote social and community contributions. Eco-Communication 68 Omron Corporation Integrated Report 2013 69 Quest to Become the No. 1 Eco-Factory in the Industry Receipt of the METI Minister’s Prize in the Energy Conservation Grand Prix Program Promoting an eco-conscious initiative for plant diagnostics and optimization through the Andon environmental information system In ﬁ scal 2012, Omron received the Minister of Economy, Trade and Industry Prize (METI Minister’s Prize) in the Energy- Saving Activities Category of the 2012 Energy Conservation Grand Prix Program. This award program is hosted by the Energy Conservation Center, Japan (ECCJ), and supported by the Ministry of Economy, Trade and Industry. Omron was awarded this highest honor for the environmentally responsible initiative being implemented at its Ayabe Plant in Kyoto. The initiative employs the Andon system to conduct diagnoses used to optimize the plant’s power usage and other production-related variables. Eco-Factory Initiative In October 2010, the Ayabe Plant launched an initiative to usage. This system enabled the real-time monitoring and diagnoses of events for which no improvements had been further enhance energy-saving efforts at its production site. possible up until this point due to the time-consuming nature Through this initiative to maximize energy efﬁ ciency, the of examination and analysis processes. This in turn helped Ayabe Plant aims to cut power usage in speciﬁ ed areas to half facility management staff (suppliers of energy) and factory the existing level by March 31, 2014. The ultimate goal of this operators (users of energy) to work collaboratively to pro- effort is to become the “No. 1 eco-factory in the industry.” mote energy conservation. The efforts at this plant began with monitoring electricity As a result of these efforts, the Ayabe Plant was able to usage data and were then expanded to include energy- realize a 50% reduction in power consumed by clean rooms, saving activities conducted by identifying causes of energy which require a large amount of electricity. At the same waste and improving operational efﬁ ciency. The plant will time, the amount of air-borne dust was reduced by two- subsequently use control technologies to further boost thirds. These are just some examples of the 34 documented energy savings. In the future, the plant intends to utilize energy-saving and environmental improvements that the renewable energy and regenerative energy to create and plant had achieved in January 2013 by cutting electricity usage store energy. Through this series of efforts, the Ayabe Plant while improving productivity and product quality. The Ayabe is devoted to optimizing energy usage throughout the Plant has been continuously implementing new energy-saving entire facility. activities in order to increase the number of improvement To this end, the Ayabe Plant has installed a variety of cases to 50, aiming to attain its initial goal of halving power sensors and its own Andon diagnostic system for power usage in speciﬁ ed areas by March 31, 2014. The Ayabe Plant’s Eco-Factory Goal Targeting a factory with optimal energy use that generates, stores, and controls energy for savings Store Create Energy savings through control Use Improved operational efﬁciency Identiﬁcation of energy waste causes 10% 1st STEP INDUSTRY’S NO.1 ECO-FACTORY 50% 3rd STEP 30% 2nd STEP We deﬁne “eco-factories” as those factories that address environmental issues head-on and are fully equipped with technological systems for using industrial products with reduced environmental impact, lowering pollution, preserving ecosystems, saving energy, and employing recycling production systems that conserve resources. 2010 2011 2012 2013 (FY) The plant is also active in sharing its improvement efforts by environmental data among the production ﬂ oor staff that arranging factory tours and holding seminars for manufactur- are most knowledgeable about operations. ers at home and abroad. From Monitoring to Diagnostics: The Andon Environmental Information System Effective monitoring entails helping track recorded electricity This system provides constant, real-time monitoring of electricity and environmental data. It also provides central- ized monitoring, which enables data to be arranged by facility, production line, ﬂ oor, or production stage, and consequently makes it easy for viewers to see the informa- and environmental data by displaying it through graphs, tion they want while also facilitating easier understanding. bulletin boards, and other means. In order to make further One function that is particularly characteristic of this sys- use of this information, it can be deciphered and analyzed tem is the abnormality monitoring function that informs ﬂ oor according to usage goals. It is also possible to further evolve staff what to do should operating conditions change or an these analyses to provide diagnostics that inform users abnormality be detected. Another characteristic function is about the differences between their goals and reality and, the system’s communication function, which makes it easy more importantly, help them realize what they must do in for all members of the production staff to view actual, cen- order to address these issues. tralized data, thereby enabling them to maintain a better Omron’s Andon environmental information system is understanding of the circumstances at their plant. This in capable of providing such diagnostics through constant turn makes it easier for energy and environmental matters to and centralized monitoring of relevant variables. The Andon be discussed at the workplace. In this manner, the Andon system is not a monitoring tool to be used by managers in system effectively fosters awareness regarding energy charge of energy savings. Rather, the system is ideally used saving among all employees and helps all-hands initiatives as a bulletin board for communicating energy-saving and be advanced. Contribution to the Future It is often believed that energy savings cannot be realized at productions sites without sacriﬁ cing quality or productivity. However, Omron feels that fundamental improvements in energy-saving and environmental initiatives can enable these activities to be advanced while simultaneously realizing improvements in quality and productivity. The Andon environmental information system was com- mercialized in June 2013. By providing products such as this, Omron aims to share the knowledge it has gained through eco-conscious optimization initiatives with manufacturers and other customers in Japan and the rest of the world. In this way, we aim to contribute to the future of manufacturing by enabling customers to more easily maximize their energy efﬁ ciency. C o r p o r a t e V a l u e F o u n d a t i o n Evolving Monitoring into Diagnostics and Finally Optimization Optimize Diagnose in Comparison to Standards (goals) (Evaluate differences between goals and reality Control and prevention) Diagnose Decipher and Analyze (Compile databases, stratify and deepen data Improvement) Analyze Sense (Make Apparent) (Acquire data, arrange in charts and graphs Awareness) Monitor IAB’s lineup of products for supporting monitoring efforts Electricity monitoring systems and humidity sensors Andon environmental information system in use 70 Omron Corporation Integrated Report 2013 71 Relationship Building with Shareholders IR Activities Focusing on Dialogue Undertaking Proactive Information Disclosure We employ an IR site and various other tools to support • The president, head of management, has continued interactive communications with shareholders and other to conduct active dialogues with investors since his With its investor relations (IR) policy emphasizing interactive communication with current and potential investors by disclosing information on product develop- appointment. investors, Omron provides timely and accurate information on the Company’s business conditions and ment and sales activities tailored to speciﬁ c markets as • Important information is accumulated within the IR management policies. Omron also aims to reﬂ ect investors’ comments in its management strategies to well as information on operating performance. Our IR department, which is placed under direct control of the fullest extent possible to maximize corporate value. Creating More Open and Interactive Shareholders’ Meetings In an effort to make its shareholders’ meetings more attendance ﬁ gure ever. In addition, 84.3% of voting rights were exercised, which represented an increase of 2.6 percentage points from the preceding year. open and easier for shareholders to attend, Omron In order to provide information to shareholders as quick- schedules meetings to avoid days on which the share- ly as possible, the convocation notice for the 76th general holders’ meetings of other companies are concentrated. meeting of shareholders, released in May 2013, was We use a conveniently located hotel at the JR Kyoto posted on the Company’s website prior to being mailed. Station as the venue for these meetings. Also, we have adopted systems that allow shareholders to exercise their voting rights by post as well as an electronic voting system that enables shareholders to exercise their voting Aiming to Strengthen Two-Way Communications To enhance communications with individual investors, rights via personal computer or mobile device. Since Omron conducts corporate presentations and participates 2006, Omron has offered access to the Electronic Voting in investor fairs. In ﬁ scal 2012, Omron participated in 17 Platform, creating an environment whereby institutional IR events, communicating with some 1,100 investors. investors in Japan and overseas can quickly provide docu- ments for the general meeting and smoothly exercise their voting rights. After the close of the general meeting, a separate pre- sentation to explain management conditions is held as well as a shareholder round-table conference. These events provide the opportunity to offer shareholders fur- ther information on Omron’s initiatives that could not be communicated during the general meeting. Tokyo Stock Exchange IR Festa 2013 For institutional investors, Omron provided about 800 communication opportunities in ﬁ scal 2012. In addition, we actively utilize our website. As one example, we posted a video containing a message from the president to individual investors in which he explains the introduction of the shareholder beneﬁ t program. In ﬁ scal 2012, we worked to make the convocation Input and feedback obtained through dialogues are notice for the general meeting of shareholders easier to relayed via the IR department to the Company’s senior understand. To this end, notices were printed in color and management. Examples of improvements implemented made more visual through the inclusion of photographs in response to dialogues with shareholders include the and graphs. The information content of the notice was introduction of the shareholder beneﬁ t program and the also enhanced. Our June 2012 meeting was attended cancellation of treasury stock. Going forward, we will by 796 shareholders, 134 more than in the meeting in continue to draw on the opinions of shareholders to help the preceding year (ﬁ scal 2011), making for the highest formulate various management strategies. site features a message from the president, explanations the president, and the department offers appropriate of our strategies and operating performance, and responses to inquiries. video footage. • The IR department displays strong motivation toward In ﬁ scal 2012, we held tours of our plant in Kumamoto improvement and discloses easy-to-understand informa- Prefecture for institutional investors and analysts. tion and explanations with regard to each business Tour of OMRON RELAY & DEVICES Corporation plant In addition, we received the IR Grand Prix Award in the Japan Investor Relations Association’s Seventeenth An- nual IR Grand Prix. The IR Grand Prix Award is only pre- sented to companies that have received the Best IR Award at least two other times in the past. Having re- ceived the Best IR Award in ﬁ scal 2006 and ﬁ scal 2007, Omron was thus presented with the prestigious IR Grand Prix Award as this is its third time to receive an award through this program. The Japan Investor Relations As- sociation’s reasons for presenting this award to Omron are as follows. division. • The investor relations department values investor feed- back and holds internal explanatory forums and con- ducts other activities to transmit this feedback throughout the Company. • The Company conducts activities to respond to the needs of individual investors through a multifaceted program incorporating its website, investor fairs, and explanatory forums. • The annual report has highly evaluated statements from representatives of each business division, and the CSR report has been integrated into this report. C o r p o r a t e V a l u e F o u n d a t i o n Award ceremony for IR Grand Prix Award Going forward, we will continue to pursue improve- ment to better provide information to our shareholders, investors, and all of our other stakeholders. Asia Paciﬁ c (AP) As of July 2013 72 Omron Corporation Integrated Report 2013 73 The Omron Principles and CSR Management Living Up to the Corporate Core Value of “Working for the Benefit of Society” Maintaining Honest Dialogue with Stakeholders to Build Relationships of Trust Corporate Motto and the Omron Principles CSR Management Corporate Motto At work for a better life, a better world for all The Omron Principles Corporate Core Value Working for the beneﬁ t of society Management Principles • Challenging ourselves to always do better • Innovation driven by social needs • Respect for humanity Management Commitments Guiding Principles for Action • Respect for individuality and diversity • Quality ﬁ rst • Maximum customer satisfaction • Relationship-building with shareholders • Awareness and practice of corporate • Unceasing commitment to challenging ourselves • Integrity and high ethics citizenship • Self-reliance and mutual support Corporate Core Value: “Working for the Beneﬁ t of Society” On May 10, 2006, in honor of Omron’s Foundation Day, the Company announced its new corporate principles: the Omron Principles. The new principles were established to respond to the change in values society requires from companies as well as Omron’s drive to promote business globally. According to the Omron Principles, “Working for the beneﬁ t of society” is positioned as the corporate core value that describes the true purpose of the Omron Group’s existence. The underlying philosophy of these principles is that a company’s reason for existence is to serve society, and only companies that add value and meet social needs can earn trust and conﬁ dence from society as good corporate citizens and thus successfully continue to survive as businesses. The core value reemphasizes the Company’s commitment to offering beneﬁ ts for society while also clearly stating Omron’s determination to promote business management that emphasizes value for stakeholders that comprise society. Instilling “Management Commitments” and “Guiding Principles for Action” Based on the Corporate Core Value through Two Guidelines To ensure the fundamental CSR concepts speciﬁ ed in corporate philosophy. These lectures were held over the period from 2008 to 2009 and were attended by a cumula- tive total of 3,000 executives. Between 2011 and 2012, Omron’s chairman and vice chairman visited the sites of global operations, where they met with 300 executives to the Management Commitments are being thoroughly prac- discuss the concepts behind the Omron Principles and their ticed by all Group employees, Omron has formulated two implementation. These meetings assisted in conﬁ rming guidelines. The CSR Practice Guidelines establish a code mutual understanding with regard to the principles. In ﬁ scal of conduct outlining the societal responsibilities of each 2012, we launched two new initiatives—The Omron Prin- organization in the Omron Group. The second guideline, ciples Dialogues and The OMRON Global Awards (TOGA). Implementing the Guiding Principles for Action, details These initiatives are designed to cultivate a corporate culture speciﬁ c actions expected of all employees in the course of with an emphasis on addressing new challenges by facilitat- their everyday activities and constitutes Guiding Principles ing understanding with regard to the Omron Principles so for Action for the corporate philosophy. that they may be linked to one’s work and practiced therein. We distribute both guidelines to all employees in Japan, and we are striving to instill and entrench them through our CSR-based concept of our corporate core value, “Working The Omron Principles Dialogues The Omron Principles Dialogues are a series of group work- for the beneﬁ t of society.” To cultivate employee understand- shops focused on developing a pioneer spirit within the ing, workplace meetings are held once each year to conﬁ rm framework of the corporate philosophy. These workshops are and debate the content of these guidelines. held for all Omron Group employees around the world. To We have translated these two guidelines into 25 languages further deepen understanding with regard to the importance so that they can be put into practice on a global basis. Activities to Instill the Omron Principles Throughout its history, Omron has continued to advance of the Omron Principles and their implementation at overseas subsidiaries, the Company’s chairman meets with the senior management of these subsidiaries and holds lectures and group discussions on the subject. After such meetings with activities geared toward instilling its corporate philosophy senior management are held, these managers conduct group on a global basis. After the 2006 revision of the Omron sessions at the operating sites around the world. We expect Principles, the Company’s directors held a series of lectures that these efforts will produce results during ﬁ scal 2013 as all targeting executives to explain and further instill this employees come together in exercising a pioneer spirit. Basic CSR Policy While remaining true to the basic spirit of our corporate motto and corporate core value, as expressed in our Management Commitments, we manage our business in a way that emphasizes the importance of honest dialogue with shareholders to forge relationships of trust. CSR Practice Policies • Contribute to a better society through business operations. Continuously offer advanced technologies and high-quality products and services by stimulating innovation driven by social needs. • Show a commitment to addressing societal issues as a concerned party. Address issues such as human rights, the environment, diversity, and community relations in a way that draws on Omron’s distinctive strengths. • Always demonstrate fairness and integrity in the promotion of corporate activities. Framework of CSR Activities Business Society Environment Promote more transparent corporate activities that Corporate Governance / Internal Controls maintain fairness and integrity not only through strict compliance with laws, regulations, and social rules but also through increased accountability. 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While considering international guidelines, such as ISO 26000 and the United Nations Global Compact (UNGC), we will identify individual CSR issues, and supervisory departments and the CSR-related committees will take primary charge as we work to resolve these issues on a Groupwide basis. C o r p o r a t e V a l u e F o u n d a t i o n Framework of CSR activities Individual CSR issues Departments in charge Heads of CSR-related committees Business Environment Society Innovation driven by social needs Business divisions, R&D division Safety assurance for products and services and protection of customers Environmentally conscious business activities Environmental conservation activities Business divisions, quality department Companywide quality assurance council Business divisions, environment department Group Environment Activity Committee Respect for human rights Personnel department, general affairs department Labor standards compliance and respect for individuality and diversity Personnel department Occupational health and safety Personnel department, general affairs department Community involvement and social contributions (Corporate citizenship) General affairs department Central Human Rights Committee Committee for Promoting Employment of People with Disabilities Occupational Safety and Health Committee Central Disaster Prevention Committee Management of information and intellectual property Legal affairs department, information systems department, intellectual property department Information Security Management Committee Competition and fair dealing Prevention of corrupt practices Legal affairs department, purchasing department Corporate Ethics & Risk Management Committee Legal affairs department Governance Proper discharge of tax responsibilities, accounting, and investment activities Finance department Respect for local communities Legal affairs department, general affairs department Strict trade management for the maintenance of international peace and security Legal affairs department Prohibition of abuse of corporate position in personal life Legal affairs department, personnel department, investor relations department Export Management Committee Information Disclosure Executive Committee Overall control of CSR Formulation of CSR policy and guidelines, gathering of related information CSR department 74 Omron Corporation Integrated Report 2013 75 Observance of International CSR Standards and Guidelines Omron considers such international standards and guidelines as the Universal Declaration of Human Rights, the UNGC, ISO 26000, and the OECD Guidelines for Multinational Enterprises and has formulated CSR Practice Guidelines as a framework for the Groupwide code of conduct. In 2008, Omron declared its support for the 10 Principles of the UNGC, which are universally accepted principles in the areas of human rights, labor standards, the environment, and anti-corruption. Accordingly, Omron joined the Global Compact Japan Network (GC-JN), a local Global Compact network. Omron will continue to uphold the UNGC’s 10 principles and sincerely implement them to meet the expectations of stakeholders. July 2013 Omron Corporation Fumio Tateishi Chairman of the BOD Promotion of CSR throughout the Value Chain The Omron Group aims to create products that customers Accordingly, we now make requests to suppliers with regard to the following nine areas. (1) Compliance with laws, regulations, and social norms (2) Assurance of the best quality (3) Best pricing for parts and materials (4) Consideration of the global environment (5) Request for non-use of conﬂ ict minerals (6) Stable supply of parts and materials (7) Technical capabilities (8) Sound business operation (9) Thorough information management Proﬁ ts from the trading of minerals mined in the Democratic Republic of Congo and its neighboring nations have been used to ﬁ nance armed rebel groups, allowing them to con- tinue ﬁ ghting and encouraging ongoing inhumane acts, such as violence, plunder, abuse, human trafﬁ cking, and child labor. For this reason, such minerals, which include tin, tantalum, tungsten, and gold, are called “conﬂ ict minerals.” Aiming to bring conﬂ ict to an end by cutting off the source of funds for armed groups, the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law on July 21, 2010. Section 1502 of the Dodd-Frank Act has man- dated that companies registered with the Securities and Exchange Commission (SEC) must publicly disclose their use of conﬂ ict minerals. By upholding the purpose of the Dodd-Frank Act and fulﬁ ll- ing its corporate social responsibility, Omron is determined to can trust while fulﬁ lling its social responsibilities in all of its promote the procurement of minerals in a responsible man- business activities. In order to accomplish this, it is not ner. In ﬁ scal 2012, we began conducting investigations of enough for us to act alone; cooperation will be required from suppliers to determine whether or not they use conﬂ ict our customers, suppliers, and other partners throughout all minerals, and we also asked our suppliers to avoid the use of areas of the value chain. conﬂ ict minerals. Should the use of any conﬂ ict minerals in As one facet of these efforts, Omron has developed a Omron Group products be discovered, we will take corrective self-analysis checklist based on the Electronics Industry action as quickly as possible. Code of Conduct (EICC), which is used primarily at produc- tion sites in China and the Asia Paciﬁ c region. This checklist is utilized as a means of evaluating the current progress of CSR initiatives, uncovering issues, and formulating respons- es to these issues. Further, in ﬁ scal 2012, we included a “request for non-use of conﬂ ict minerals” among our requests to suppliers. Corporate Governance, Internal Controls, and Compliance and Risk Management Promoting Sound and Proper Corporate Management Omron is committed to maintaining and exercising a proper corporate governance system while increasing manage- ment transparency. To ﬁ rmly establish a high standard of corporate ethics, we will continue to enhance our compliance system and strengthen the risk management framework that supports ongoing improvement in corporate value. Corporate Governance Basic Policies At Omron, senior management was quick to realize the importance of corporate governance and has progressively developed foundations for supporting good corporate gover- nance. As such, Omron has worked to drive the spread of such foundations in Japan and other countries by having ofﬁ cials assuming principal posts in relevant external organi- zations and through other means. Omron’s basic policy is to fortify corporate governance based on the belief that the most crucial factor in earning stakeholders’ support is building an optimal management structure and conducting fair business operations while enhancing the mechanism (a super visory system) for such veriﬁ cation and realizing sustainable growth. In line with this basic policy, Omron has adopted an execu- tive ofﬁ cer system and clearly separates management over- sight and business execution. Under an internal company system, Omron is realizing faster decision making and ef- ﬁ cient business operations by delegating substantial authority to the president of each internal company. Moreover, autono- mous individual business units that can specialize in creating value for customers take the initiative in conducting business. At the same time, through commitment-based management, we clarify roles and responsibilities and practice corporate value management based on shareholder value. Management and Oversight Frameworks Omron is a “Company with Audit & Supervisory Board.” The corporate governance regime has a supervisory and observational function pertaining to the actions of the Board of Directors and also involves auditing carried out by the Audit & Supervisory Board. Omron has set the number of members of its Board of Directors at seven to encourage efﬁ cient and meaningful discussion. Since June 2013, the Company has begun in- creasing the number of directors serving concurrently in positions related to business execution. This revision will effectively expedite decision making by directors and improve the efﬁ ciency of business execution. In addition, the Company has appointed outside and independent directors, thereby ensuring that directors concurrently fulﬁ lling busi- ness execution roles do not represent a majority in the Board of Directors. In this manner, we are simultaneously improving corporate governance functionality. To increase objectivity in management, the positions of chairman and president and CEO are separated. At the same time, every effort is made to bolster management oversight functions. The chairman of the Board of Directors monitors business execution activities as a representative of the Company’s stakeholders. Furthermore, Omron has estab- lished the Personnel Advisory Committee, the CEO Selection Advisory Committee, the Compensation Advisory Committee, and the Corporate Governance Committee, all chaired by outside directors. In this manner, the Company is working to increase the transparency and objectivity of management’s decision-making process. By incorporating the best aspects of the Companies with Committees system, we have created a type of hybrid corporate governance regime that we feel is the most appropriate for the Company. Auditing Functions The Audit & Supervisory Board, composed of four audit & supervisory board members, audits governance practices and monitors the everyday management activities of the Board of Directors and other management staff as well as the nature and operational conditions of the corporate gover- nance regime. The Internal Audit Division, which reports directly to the president and CEO, periodically conducts internal audits of accounting, administration, business risks, and compliance in each headquarters division and in each business company as part of its internal auditing function. Moreover, the Internal Audit Division offers speciﬁ c advice for improving business functions. Appointment of Outside Executives To allow the Board of Directors to monitor business execution as a representative of the Company’s stakeholders, two of the seven directors are outside directors and two of the four audit & supervisory board members are outside members. Emphasizing the independence of outside executives, Omron has formulated its own original Outside Executive Eligibility Criteria in addition to the requirements under Japan’s Corporate Law. Also, the Corporate Governance Committee takes steps to conﬁ rm the Outside Executive Eligibility Criteria do not pose any problem with respect to determination criteria concerning independence formulated by the appropriate securities ex- change. After obtaining a resolution of the Board of Directors, notiﬁ cations are submitted with the appropriate securities exchange for all outside executives as independent ofﬁ cers. C o r p o r a t e V a l u e F o u n d a t i o n 76 Omron Corporation Integrated Report 2013 77 Corporate Governance Initiatives Fiscal 2012 Director and Audit & Supervisory Board Member Remuneration (Millions of yen) President Chairman of the Board of Directors/CEO Separation of management oversight and business execution Advisory Board Outside directors Audit & Supervisory Board members (Part-time) 1999 2003 2011 1987– President Yoshio Tateishi 2003– President Hisao Sakuta 2011– President Yoshihito Yamada President serves as Board of Directors’ Chairman and CEO Chairman serves as Board of Directors’ Chairman / President serves as CEO 30 directors 1999~ Number of directors reduced to seven 1999~ Introduction of executive officer system 1999 Advisory Board 1998 One member 1996 – Management Personnel Advisory Committee 2001 One member 2003~ Two members (seven directors) 1999~ Two members 2003~Three members (four auditors) 2011~Two members (four auditors) 2000 – Personnel Advisory Committee Classiﬁ cation Directors (Outside Directors) Audit & Supervisory Board Members (Part-time) Total (Total for Outside Directors and Audit & Supervisory Board members) Number of People Basic Compensation Bonus Total Remuneration 7 (2) 4 (2) 11 (4) 360 (21) 82 (17) 442 (38) 144 (–) – (–) 144 (–) 504 (21) 82 (17) 586 (38) * Director compensation consists of basic compensation (monthly salary), bonus, and stock-based compensation*1. * Outside director compensation consists of basic compensation (monthly salary). * Audit & supervisory board member compensation consists of basic compensation (monthly salary). *1 Stock-based compensation is administered following guidelines specifying set remuneration amounts to be paid on a monthly basis and utilized to acquire Company stock (through a director stock ownership plan), which is then held during the individual’s tenure. Advisory committees 2003 – Compensation Advisory Committee Appointments of Directors and Audit & Supervisory Board Members Corporate philosophy Corporate motto formulated in 1959 Omron Principles formulated in 1990 Revised in 1998 Corporate Governance Structure Shareholders’ Meeting 2006 – CEO Selection Advisory Committee 2008 – Corporate Governance Committee Revised in 2006 Audit & Supervisory Board Board of Directors Chairman: Chairman of the BOD Audit & Supervisory Board Office Board of Directors Office Accounting Auditor Executive Organization President & CEO Executive Council Personnel Advisory Committee CEO Selection Advisory Committee Compensation Advisory Committee Corporate Governance Committee CSR-Related Committees* Head office divisions Business companies (Internal companies) Internal Audit Division * This includes: Corporate Ethics & Risk Management Committee, Information Disclosure Executive Committee, Group Environment Activity Committee, etc. Board of Directors (BOD) The BOD oversees business activities and decides important business matters, such as management objectives and strategies. Personnel Advisory Committee This committee, chaired by an outside director, sets election standards for directors and executive ofﬁ cers, selects candidates, and evaluates current executives. Compensation Advisory Committee This committee, chaired by an outside director, determines the compensation structure for directors and executive ofﬁ cers, sets evaluation standards, and evaluates current executives. Executive Council This council determines and reviews important business operation matters that are within the scope of authority of the president. Audit & Supervisory Board This board oversees the corporate governance system and its implementa- tion and audits the day-to-day operations of directors and other executives. CEO Selection Advisory Committee This committee, chaired by an outside director, is dedicated to the nomination of presidents and deliberates on the selection of the new president for the upcoming term and on preparing contingency succession plans. Corporate Governance Committee This committee, chaired by an outside director, discusses measures to con- tinuously enhance corporate governance and increase fairness and transparency in management. Director and Audit & Supervisory Board Member Remuneration To increase objectivity and transparency, the Compensation Advisory Committee, chaired by an outside director, is con- sulted on the compensation of directors. This committee discusses the compensation of each individual and makes recommendations. After receiving these recommendations, the amount of compensation for each director is determined by a resolution of the Board of Directors, and the amount of compensation for each audit & supervisory board member is determined by discussions among the audit & supervisory board members (resolution of the Board of Corporate Auditors). The following amounts are within the scope of the aggregate compensation amounts for all directors and all audit & supervisory board members, as each has been set by a resolution of the General Meeting of Shareholders. Personnel Advisory Committee CEO Selection Advisory Committee Compensation Advisory Committee Corporate Governance Committee Position Chairman of the BOD Name Fumio Tateishi Representative Director and President and CEO Yoshihito Yamada Representative Director and Executive Vice President Yoshinobu Morishita Senior Managing Director Senior Managing Director Outside Director Outside Director Akio Sakumiya Yoshinori Suzuki Kazuhiko Toyama* Eizo Kobayashi* Audit & Supervisory Board Member (Full-time) Masayuki Tsuda Audit & Supervisory Board Member (Full-time) Tokio Kawashima Audit & Supervisory Board Member (Part-time) Eisuke Nagatomo* Audit & Supervisory Board Member (Part-time) Yoshifumi Matsumoto* Indicates Chairperson * Independent Ofﬁ cer Internal Controls Maintaining and Operating an Internal Control System to Ensure Healthy and Effective Organizational Operations Omron has established the Basic Policy on the Maintenance of an Internal Control System to ensure the healthy and effective operation of its organization. This policy provides the basis for the maintenance and operation of an internal control system throughout the Omron Group to ensure the controls are functioning effectively in each of the four objec- tive areas of ﬁ nancial report accuracy, legal compliance, operating efﬁ ciency, and asset safeguarding. Omron maintains a monitoring system undertaken by the Internal Audit Division after each division and subsidiary conducts its own review of the maintenance and operation of business processes in accordance with the Internal Con- trol Reporting System (J-SOX) requirements of Japan’s Financial Instruments and Exchange Act, promulgated in June 2006. The reviews enable each division and subsidiary to deepen their understanding of the internal controls associ- ated with ﬁ nancial reporting and thereby serve as a system for promoting self-governing controls. Two Types of Internal Audits to Ensure Healthy and Effective Organizational Operations Omron conducts two types of internal audits to ensure the healthy and effective operation of its organization. The Internal Control Audit is conducted to ensure the internal controls are functioning effectively in each of the four objective areas of ﬁ nancial report accuracy, legal compliance, operating efﬁ ciency, and asset safeguarding. The Manage- ment Audit examines the solutions and improvement mea- sures implemented for speciﬁ c management issues. In the event the results of these audits include items recommend- ed for improvement, the Company supports measures to carry out the improvements. In addition, the Omron Group has established the Audit & Supervisory Board Ofﬁ ce and placed full-time auditors in each of its four regions of global business—Americas, Europe, Greater China, and Asia Paciﬁ c—to implement internal audits based on local practices and legal systems at its business sites worldwide. C o r p o r a t e V a l u e F o u n d a t i o n 78 Omron Corporation Integrated Report 2013 79 Compliance and Risk Management Strengthening Global Response Systems Aiming to promote legal and regulatory compliance across the Group, Omron set up the Group Corporate Ethical Con- duct Promotion Committee. In addition, we have installed stringent legal affairs and compliance functions into regional head ofﬁ ces overseas to ensure that we can practice effec- tive compliance and risk management in each region, wheth- er overseas or in Japan. In recent years, economic and business globalization has been accelerating, bringing about changes in legislation and other elements of the external environment. At the same time, Omron is progressively advancing its operations on a global scale, which includes expansion into emerging coun- tries, and this expansion has resulted in exposure to risks that could not be previously predicted. In order to respond to such changes in external and internal conditions, we have positioned compliance as a matter to be considered alongside risks, and we are conducting integrated global risk management initiatives accordingly. Commenced in ﬁ scal 2011, these initiatives are geared toward addressing risks faced by the Group, such as natural disaster risks, in an integrated manner. In ﬁ scal 2012, Omron revised the Group Corporate Ethical Conduct Promotion Committee, transforming it into the Corporate Ethics & Risk Management Committee to enable better responses to compliance matters and other risks on a global scale. The membership of this committee consists of compliance and risk management representatives from the corporate headquarters and each business company as well as from regional head ofﬁ ces. In addition, we have appointed risk managers at all Group companies in Japan and abroad and are taking other steps to create systems that allow for quick responses to risk-related matters on a global basis. Further, we have established the Basic Principles of Integreat- ed Global Risk Management. These rules are applicable throughout the Omron Group, both in Japan and overseas, and serve as a framework for implementing an integrated global risk management plan-do-check-act (PDCA) cycle. In accordance with the Basic Principles of Integreated Global Risk Management, we identify major risks faced by the Omron Group by collecting and analyzing risk-related information. The Executive Council then guides the entire company in implementing countermeasures to prevent the realization of such risks. In response to crises, we have established the Global Crisis Management Rules, which deﬁ ne a “crisis” as any event that has or may have a signiﬁ - cant negative impact on the continuation of management and business activities by the Omron Group or any event that does or may harm the social credibility of the Company. These rules cover a wide range of areas while also outlining basic policies, reporting procedures, and the establishment of an Emergency Response Headquarters. In ﬁ scal 2013, regional head ofﬁ ces will play a central role in practicing integrated global risk management in order to raise overall responsiveness to change, which will be es- sential to ensuring Omron becomes a stronger company. Risk Management Omron conducts global risk analyses each year, based on which the Company identiﬁ es major risks and then responds to these risks in a prioritized manner. The following is an explanation of such risks and the measures being imple- mented in response to these risks. • Business continuity risks The Company has established a business continuity plan (BCP) to minimize the impacts of emergency situations on operations. This plan contains provisions deemed necessary to facilitate the safety as well as the continuity and early restoration of business operations in the event of a large- scale earthquake, such as a quake in the Nankai Trough or directly under the Tokyo metropolitan area, or other natural disasters; ﬁ res; a worldwide outbreak of a new form of inﬂ uenza virus; and other emergency situations. To this end, the plan deﬁ nes the conditions under which it will be insti- tuted, describes methods of deciding alternative bases and transferring functions, and sets out what procedures are core to the Company’s operations. Related operating manu- als have also been established. We are continually improving our BCP by conﬁ rming its effectiveness and conducting BCP-related evaluations and drills. • Risk of violation of laws in countries of operation Omron develops its operations on a global basis, and it is therefore necessary to take precautions against violating laws related to the prevention of bribery of public ofﬁ cials, personal information protection, antitrust measures, and security trade control. For this reason, the Company con- ducts employee education and training programs to ensure that employees are able to act in compliance with such laws. • Information leakage risk (information security) Omron has the basic policy of fulﬁ lling its responsibility toward customers, society, investors, and other stakehold- ers through appropriate security management. In accor- dance with this policy, we conduct integrated management of conﬁ dential and personal information. Periodically, we also conduct employee training, checks of information manage- ment conditions at worksites, investigations of information management by subcontractors, and information security monitoring. Further, information security measures are constantly revised in accordance with the ﬁ ndings of these activities and changes in the external environment. Overseas, we implement technological information leak- age prevention measures and monitor information manage- ment at our various overseas production and R&D bases, implementing improvement measures as necessary. In addition, subsidiaries have formulated internal information management regulations in accordance with globally accepted rules and standards. Recently, we have strengthened technological information security in light of the possibility of a cyber-attack against our Whistle-Blower Hotline Establishing operational regulations with clearly stated provisions for the protection of whistle-blowers In 2003, a whistle-blower hotline was established for Omron Group executives, full-time employees, and temporary staff as well as their families. Staff of the Legal Affairs Depart- ment handles hotline information within the Company, while an external attorney ofﬁ ce serves to accept information. In operating the whistle-blower hotline, we have established internal regulations ensuring strict maintenance of security and the protection of whistle-blowers from any detrimental treatment. Moreover, Omron informs employees of the availability of the hotline through corporate ethics cards, through the intranet, and during new employee training. Overseas, a similar whistle-blower hotline has been estab- lished for operations in Americas, which was the ﬁ rst area to establish such a hotline outside of Japan. In ﬁ scal 2012, operations in Europe were equipped with a whistle-blower hotline, joining the ranks of Japan and the Americas, and such hotlines were installed for operations in the Asia Paciﬁ c region at the end of the ﬁ scal year. During ﬁ scal 2012, a total of 20 hotline reports and consultations were made in Japan, six were made in the Americas, and one was made through the new hotline in Europe. In ﬁ scal 2013, we will install a whistle-blower hotline in the remaining Great China area. Further, in Japan and overseas, we will continue to promote employee awareness as to the hotlines’ existence and analyze case studies to help enhance the skills of advisors. In these ways, Omron will improve its response to whistle-blowing. C o r p o r a t e V a l u e F o u n d a t i o n information systems. Going forward, we will continue to improve the level of information security management in Japan and around the world. • Risks associated with transferring employees across borders As Omron accelerates the global expansion of its operations, it is seeing a rise in the number of opportunities for person- nel to be exchanged between companies and for employees to work in cooperation with people of various different na- tionalities. This in turn has increased the possibility that labor issues may appear due to differences in culture, customs, or treatment. To prevent such issues from occurring, we are enhancing risk communication efforts and bolstering our ability to manage people with different cultural backgrounds. • Purchasing and procurement risks Omron conducts procurement by selecting reliable suppliers and asking that they cooperate with certain requests. These requests include those related to compliance and prohibition of child labor, forced labor, and bribery. From the perspective of socially responsible procurement, Omron endorses the efforts to address conﬂ ict minerals issues that were instigated in the United States. Accordingly, we conduct investigations of major suppliers to determine whether or not they use conﬂ ict minerals and are otherwise addressing this issue in our mineral procurement efforts. We are committed to conducting appropriate purchasing and procurement activities, and, should the use of any conﬂ ict minerals in Omron Group products be discovered, we will take corrective action as quickly as possible. • Environmental management risks The Group works to comply with a wide variety of environ- mental laws and regulations, including those related to climate change, air and water pollution, hazardous sub- stances, waste, product recycling, and the contamination of soil and groundwater. In ﬁ scal 2013, we will implement measures to further improve our responsiveness to environmental laws and regu- lations, with a particular emphasis placed on our operating sites and factories. These measures will include training related to such laws and regulations, compliance-related audits at production sites in China and the Asia Paciﬁ c region, and education programs on auditing methods for ensuring legal compliance. 80 Omron Corporation Integrated Report 2013 81 Directors, Audit & Supervisory Board Members, and Executive Ofﬁ cers As of June 21, 2013 Directors Senior Managing Director Akio Sakumiya Outside Director Eizo Kobayashi April 1975 June 2003 Joined Omron Executive Ofﬁ cer and President and CEO of OMRON Ichinomiya Co., Ltd. (now OMRON Amusement Co., Ltd.) March 2009 President of Electronic and Mechanical Components Company June 2010 Managing Executive Ofﬁ cer Senior Managing Director June 2011 (to present) Senior Managing Director and CFO Yoshinori Suzuki April 1975 June 2003 Joined Omron Executive Ofﬁ cer and Senior General Manager of Corporate Strategy Planning HQ June 2006 Managing Executive Ofﬁ cer March 2007 President of Automotive May 2010 April 2013 June 2013 Electronic Components Company President and CEO of OMRON Automotive Electronics Co., Ltd. Senior Managing Executive Ofﬁ cer and CFO Senior Managing Director and CFO (to present) Back row, from left: Masayuki Tsuda Audit & Supervisory Board Member (Full-time) Eisuke Nagatomo Audit & Supervisory Board Member (Independent) Kazuhiko Toyama Outside Director Eizo Kobayashi Outside Director Yoshifumi Matsumoto Audit & Supervisory Board Member (Independent) Tokio Kawashima Audit & Supervisory Board Member (Full-time) Front row, from left: Akio Sakumiya Senior Managing Director Fumio Tateishi Chairman Yoshihito Yamada President and CEO Yoshinobu Morishita Executive Vice President Yoshinori Suzuki Senior Managing Director and CFO Directors Chairman Fumio Tateishi President and CEO Yoshihito Yamada Executive Vice President Yoshinobu Morishita Audit & Supervisory Board Member (Independent) Eisuke Nagatomo Joined Tokyo Stock Exchange April 1971 November 2001 Executive June 2003 Managing Director June 2007 Advisor October 2007 Representative Director of EN Associates Co., Ltd. (to present) June 2008 Assumed the position of Audit & Supervisory Board Member (Independent) of Omron April 2004 Joined ITOCHU Corporation Executive Ofﬁ cer April 1972 June 2000 April 2002 Managing Executive Ofﬁ cer Representative Director and June 2003 Managing Director Representative Director and Senior Managing Director President and CEO Chairman and Representative Director Chairman (to present) June 2004 April 2010 June 2011 June 2013 Director of Omron (to present) Audit & Supervisory Board Members Audit & Supervisory Board Member (Full-time) Masayuki Tsuda April 1977 June 2008 September 2008 Chairman and President of Joined Omron Executive Ofﬁ cer OMRON ELECTRONIC COMPO- NENTS (SHENZHEN) LTD. March 2013 Senior General Manager of Global Internal Auditing HQ June 2013 Assumed the position of Audit & Supervisory Board Member (Full-time) of Omron (to present) Audit & Supervisory Board Member (Independent) Yoshifumi Matsumoto April 1989 Registered as attorney with Osaka Bar Association; Joined Miyake Law Ofﬁ ce (now Miyake & Partners) January 1996 Partner (to present) June 1997 Registered as patent attorney with Japan Patent Attorneys Association June 2013 Assumed the position of Audit & Supervisory Board Member (Independent) of Omron (to present) Honorary Chairman C o r p o r a t e V a l u e F o u n d a t i o n Joined Omron Aug. 1975 June 1997 Director June 1999 June 2001 June 2003 June 2008 June 2013 Retired as Director, Managing Executive Ofﬁ cer Senior General Manager of Corporate Strategy Planning HQ Executive Ofﬁ cer and Executive Vice President, and President of Industrial Automation Company Executive Vice Chairman Chairman of the Board (to present) April 1984 June 2008 Joined Omron Executive Ofﬁ cer and President and CEO of OMRON HEALTHCARE Co., Ltd. March 2010 Senior General Manager of Corporate Strategy Planning HQ June 2010 Managing Executive Ofﬁ cer June 2011 President and CEO (to present) April 1972 June 2003 Joined Omron Executive Ofﬁ cer and General Manager of Sensing Device Department, Industrial Automation Company June 2008 June 2006 Managing Executive Ofﬁ cer March 2008 President of Industrial Automation Company Senior Managing Executive Ofﬁ cer Executive Vice President Representative Director and Executive Vice President (to present) President of Industrial Automation Company (to present) June 2011 June 2012 July 2012 Outside Director Kazuhiko Toyama April 1985 April 1986 Joined Boston Consulting Group, Inc. Established Corporate Direction Co., Ltd. March 1993 Director April 2000 Managing Director President and CEO April 2001 Senior President and COO April 2003 of Industrial Revitalization Corporation of Japan (IRCJ) President and CEO of Industrial Growth Platform, Inc. (to present) April 2007 June 2007 Director of Omron (to present) Audit & Supervisory Board Member (Full-time) Tokio Kawashima April 1982 Joined Mitsubishi Bank Ltd. (now The Bank of Tokyo- Mitsubishi UFJ, Ltd.) September 2008 Regional Head for Germany April 2011 and General Manager, Dusseldorf Retired from The Bank of Tokyo-Mitsubishi UFJ, Ltd. April 2011 Joined Omron June 2011 Assumed the position of Audit & Supervisory Board Member (Full-time) of Omron Honorary Chairman Yoshio Tateishi Director August 1963 Joined Omron May 1973 June 1976 Managing Director June 1983 June 1987 June 2003 Senior Managing Director President and CEO Representative Director and Chairman of the Board Chairman of Kyoto Chamber of Commerce and Industry (to present) May 2007 June 2011 Honorary Chairman (to present) 82 Omron Corporation Integrated Report 2013 83 Managing Officers Masaki Arao Senior General Manager, Technology & Intellectual Property HQ Katsuhiro Wada President and CEO, OMRON Automotive Electronics Co., Ltd. Kiichiro Kondo President and CEO, OMRON SOCIAL SOLUTIONS Co., Ltd. Executive Officers Kiichiro Miyata President and CEO, OMRON HEALTHCARE Co., Ltd. Shigeki Fujimoto Business Development Executive Koichi Tada Company President, Electronic and Mechanical Components Company Yutaka Miyanaga Senior General Manager, Global Strategy HQ Taiji Sogo Senior General Manager, Global Internal Auditing HQ Koji Doi Chairman and President, OMRON (CHINA) CO., LTD. (China Resident Ofﬁ cer) Kiyoshi Yoshikawa Senior General Manager, Global Manufacturing Innovation HQ Shizuto Yukumoto Senior General Manager, Environmental Solutions Business HQ Shinya Yamasaki Senior General Manager, Automation Systems Division HQ Industrial Automation Company Satoshi Ando Senior General Manager, Investor Relations HQ Nigel Blakeway Chairman, President and CEO, OMRON MANAGEMENT CENTER OF AMERICA, INC. (U.S. Resident Ofﬁ cer) Chairman and President, OMRON MANAGEMENT CENTER OF EUROPE Goshi Oba Chairman and President, OMRON INDUSTRIAL AUTOMATION (CHINA) Co., Ltd. Industrial Automation Company (China Resident Ofﬁ cer) Takayoshi Oue Senior General Manager, Global Finance and Accounting HQ Isao Ogino Director and Senior Managing Ofﬁ cer Senior General Manager, Management Strategy HQ OMRON HEALTHCARE Co., Ltd. C o r p o r a t e V a l u e F o u n d a t i o n Yoshihiro Taniguchi President and CEO, OMRON SWITCH & DEVICES Corporation Masanori Takahashi President and CEO, OMRON RELAY & DEVICES Corporation Koji Nitto Senior General Manager, Global Resource Management HQ and Senior General Manager, Global SCM and IT Innovation HQ Takashi Ikezoe Senior General Manager, Industrial Components Division HQ Industrial Automation Company Chairman, OMRON (SHANGHAI) CO., LTD. Toshio Hosoi Managing Director, OMRON SOCIAL SOLUTIONS Co., Ltd. 84 Omron Corporation Integrated Report 2013 85 Financial Section (U.S. GAAP) 87 Financial Highlights 88 Six-Year Summary 89 Fiscal 2012 Management’s Discussion and Analysis 94 Business and Other Risks 96 Consolidated Balance Sheets 98 Consolidated Statements of Income 99 Consolidated Statements of Comprehensive Income (Loss) 100 Consolidated Statements of Shareholders’ Equity 101 Consolidated Statements of Cash Flows Financial Highlights Omron Corporation and Subsidiaries Years ended March 31, 2013, 2012 and 2011 For the year: Net sales Income from continuing operations before income taxes and equity in loss (earnings) of afﬁ liates Net income Net income attributable to shareholders Per share data (yen and U.S. dollars): Net income attributable to shareholders Basic Diluted Cash dividends (Note 1) Millions of yen (except per share data) Thousands of U.S. dollars (Note 2) (except per share data) FY2010 FY2011 FY2012 FY2012 ¥617,825 ¥619,461 ¥650,461 $6,919,798 41,693 27,016 26,782 33,547 16,352 16,389 41,237 30,117 30,203 438,691 320,394 321,309 ¥ 121.66 ¥ 74.46 ¥ 137.20 $ 1.46 121.66 30.0 74.46 28.0 137.20 37.0 1.46 0.39 Capital expenditures (cash basis) Research and development expenses ¥ 21,647 ¥ 27,502 ¥ 30,383 $ 323,223 41,300 42,089 43,488 462,638 At year end: Total assets Total shareholders’ equity ¥562,790 ¥537,323 ¥573,637 $6,102,521 312,753 320,840 366,962 3,903,851 Notes: 1. Cash dividends per share represent the amounts applicable to the respective year, including dividends to be paid after the end of the year. 2. The U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate at March 31, 2013, of ¥94 = $1. F i n a n c i a l S e c t i o n 86 Omron Corporation Integrated Report 2013 87 Six-Year Summary Omron Corporation and Subsidiaries Years ended March 31 Net sales (Notes 3, 4): Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Automotive Electronic Components Business (AEC) Social Systems, Solutions and Service Business (SSB) Healthcare Business (HCB) Other Businesses Elimination and Corporate Costs and expenses: Cost of sales Selling, general and administrative expenses Research and development expenses Other expenses, net Income (loss) from continuing operations before income taxes and equity in loss (earnings) of affiliates Income taxes Equity in loss (earnings) of afﬁ liates Income (loss) from continuing operations Income from discontinued operations, net of tax (Note 2) Net income (loss) Net income (loss) attributable to noncontrolling interests Net income (loss) attributable to shareholders Per share data (yen): Income (loss) from continuing operations Basic Diluted Net income (loss) attributable to shareholders Basic Diluted Cash dividends (Note 1) Capital expenditures (cash basis) Total assets Total shareholders’ equity Value indicators: Gross profit margin (%) Income (loss) before tax / Net sales (%) Return on sales (%) Return on assets (%) Return on equity (%) Inventory turnover (times) Price-earnings ratio (times) Assets turnover (times) Debt / Shareholders‘ equity ratio (times) Interest coverage ratio (times) FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Millions of yen (except per share data) ¥339,161 ¥271,204 ¥203,917 ¥271,894 ¥270,835 ¥262,983 100,668 76,494 70,717 81,216 83,002 84,107 107,521 82,109 75,163 84,259 85,027 97,643 76,876 71,706 56,841 10,212 762,985 469,643 176,569 51,520 1,087 698,819 64,166 24,272 348 39,546 3,054 42,600 217 42,383 72,336 63,592 50,989 10,466 627,190 408,668 164,284 48,899 44,472 666,323 (39,133) (10,495) 811 (29,449) — (29,449) (277) (29,172) 57,981 63,359 43,592 9,965 524,694 340,352 133,426 37,842 2,879 514,499 10,195 3,782 2,792 3,621 — 3,621 103 3,518 63,846 60,629 49,672 6,309 617,825 386,123 142,365 41,300 6,344 576,132 41,693 14,487 190 27,016 — 27,016 234 26,782 57,200 62,446 53,535 7,416 619,461 391,574 145,662 42,089 6,589 585,914 33,547 17,826 (631) 16,352 — 16,352 (37) 16,389 68,754 71,520 59,240 6,214 650,461 408,954 152,676 43,488 4,106 609,224 41,237 14,096 (2,976) 30,117 — 30,117 (86) 30,203 ¥ 172.5 172.4 ¥ (132.2) — ¥ 16.0 16.0 ¥ 121.7 121.7 ¥ 74.5 74.5 ¥ 137.2 137.2 185.9 185.8 42.0 (132.2) — 25.0 16.0 16.0 17.0 121.7 121.7 30.0 74.5 74.5 28.0 137.2 137.2 37.0 ¥ 37,848 617,367 368,502 ¥ 37,477 538,280 298,411 ¥ 20,792 532,254 306,327 ¥ 21,647 562,790 312,753 ¥ 27,502 537,323 320,840 ¥ 30,383 573,637 366,962 38.4 8.4 5.6 10.3 11.3 5.0 11.0 1.2 0.68 44.34 34.8 (6.2) (4.7) (6.8) (8.7) 4.5 — 1.1 0.80 6.01 35.1 1.9 0.7 1.9 1.2 4.2 135.8 1.0 0.73 22.15 37.5 6.7 4.3 7.6 8.7 4.7 19.2 1.1 0.80 101.96 36.8 5.4 2.6 6.1 5.2 4.4 23.9 1.1 0.67 153.01 37.1 6.3 4.6 7.4 8.8 4.5 16.9 1.2 0.56 153.01 Notes 1. Cash dividends per share represent the amounts applicable to the respective year, including dividends to be paid after the end of the year. 2. In accordance with Financial Accounting Standards Board (FASB) issued Accounting Standards Codiﬁ cation (ASC) No. 250, “Presentation of Financial Statements,” the ﬁ gures of the consolidated statements of operations related to the discontinued operations have been separately reported from the ongoing operating results. 3. Starting with ﬁ scal 2010, the PV inverter business in the “Industrial Automation Business” was transferred to “Other.” The ﬁ gures of the segment informa- tion for the prior years have been restated to conform with the current year presentation. 4. From ﬁ scal 2009, the Companies adopted the ASC No. 280, “Segment Reporting. The ﬁ gures of the segment information for the prior years have been restated to conform with the current year presentation. Fiscal 2012 Management’s Discussion and Analysis Note: The business divisions are presented using their abbreviated names: Industrial Automation Business (IAB), Electronic and Mechanical Components Business (EMC), Automotive Electronic Components Business (AEC), Social Systems, Solutions and Service Business (SSB), and Healthcare Business (HCB). Market Environment 1. Macroeconomic Environment In fiscal 2012, the Japanese economy benefited from the gradual alleviation of the residual impacts of the Great East Japan Earthquake. However, recession in the semiconductor industry continued, and overall conditions remained relatively unchanged from fiscal 2011. While real GDP experienced negative growth in the second quarter, the rapid rise in Japanese stock prices and depreciation of the yen seen in the latter half of the fiscal year helped improve consumer confidence. Personal consumption drove GDP at the end of the fiscal year, and year-on-year growth of 0.9% was recorded in the fourth quarter. Overseas, the financial crisis in Europe persisted and economic growth decelerated in China, resulting in an operating environment that was opaque on the whole. However, signs of economic recovery were seen in ASEAN countries and there was a clear recovery trend centered on the United States that began in the fourth quarter. As a result of these factors, Japan’s real GDP grew 1.2% over the full fiscal year and 2.0% for the calendar year. Growth Rates of Real GDP for Each Country / Region (Calendar-Year Basis) 2011 2012 2013 Estimates Japan –0.7 2.0 1.6 0.2* 1.2* U.S. 1.8 2.2 1.9 EU 1.4 –0.6 –0.3 China India Brazil Total 9.3 7.8 8.0 7.7 7.8 8.0 2.7 0.9 3.0 4.0 3.2 3.3 Source: IMF, “World Economic Outlook,” April 2013 Note: Fiscal-year basis for ﬁ gures marked with an asterisk (*) Japanese Macroeconomic Environment Growth Rate of Real Private Capital Investment (%) 8 6 4 2 0 –2 –4 –6 –8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 (FY) Note: Seasonally adjusted Source: Cabinet Ofﬁce, Government of Japan Growth Rate of Machinery Orders (Manufacture) (Billions of yen) 1,000 950 900 850 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 (FY) Orders [left axis] Change from the previous quarter [right axis] Note: Seasonally adjusted Source: Cabinet Ofﬁce, Government of Japan (%) 60 40 20 0 –20 2. The Omron Group Market Environment In regard to markets related to the Omron Group, white goods, other consumer electronics, electronic components, and healthcare devices saw robust demand throughout the entire fiscal year, while demand for semiconductors and machine tools was generally sluggish. Concerning automotive electronic components, capital investment and component demand was brisk outside Europe. However, the end of the government subsidies for the purchase of eco-friendly automobiles in Japan resulted in a decline in demand during the second half of the fiscal year. Further, we were freed from the heavy impacts of the strong yen, which placed pressure on earnings throughout fiscal 2011, as the yen began to depreciate in the third quarter. Similarly, the prices of raw materials, which had also placed pressure on earnings previously, remained low throughout the first half of the year, but then rose once again during the second half of the year in conjunction with the depreciation of the yen. The average exchange rates for fiscal 2012 were ¥83.2 to the U.S. dollar, down ¥3.9 from the previous fiscal year, and ¥107.6 to the euro, a ¥2.7 year-on-year rise. In raw material prices, the average price per kilogram of silver was ¥83,042, down ¥9,337 year on year, and copper was ¥686 per kilogram, down ¥52. F i n a n c i a l S e c t i o n Index of Electronic Parts and Devices (Seasonally adjusted indices, 2005 average =100) Silver and Copper Prices Exchange Rates 300 250 200 150 100 50 2009 2010 2011 2012 (FY) Production Shipments Inventory Source: Ministry of Economy, Trade and Industry (Yen/kg) 120,000 100,000 80,000 60,000 40,000 20,000 0 (Yen/kg) 1,200 1,000 800 600 400 200 0 (FY) (Yen) 140 130 120 110 100 90 80 70 2009 2010 2011 2012 2009 2010 2011 2012 (FY) Silver [left axis] Copper [right axis] US$ EUR 88 Omron Corporation Integrated Report 2013 89 Overview of Consolidated Results and Financial Condition Note: Segment operating income is prepared using the single-step method (which does not show individual income levels) based on U.S. GAAP. For an easier comparison with other companies, operating income represents gross proﬁ t minus selling, general and administrative (SG&A) expenses and research and development (R&D) expenses. In this market environment, the Omron Group’s consolidated net sales for ﬁ scal 2012 rose 5.0% year on year, to ¥650.5 billion. This increase was due to strong sales in the Automo- tive Electronic Components Business (AEC), the Social Systems, Solutions and Service Business (SSB), and the Healthcare Business (HCB). Due to higher sales as well as the beneﬁ ts of improved efﬁ ciency with regard to ﬁ xed costs and reduced variable expenses in all segments, operating income was up 13.0%, to ¥45.3 billion; income before income taxes rose 22.9%, to ¥41.2 billion; and net income attributable to shareholders soared 84.3%, to ¥30.2 billion. In this manner, all income ﬁ gures showed substantial increases. Total assets rose 6.8% from the end of the previous ﬁ scal year, to ¥573.6 billion, largely due to increased notes and accounts receivable—trade and cash and cash equivalents. Total shareholders’ equity was up 14.4%, to ¥367.0 billion, as a result of foreign currency translation adjustments and treasury stock cancelation. This led to a rise in the share- holders’ equity ratio, to 64.0%, from 59.7% at the end of the previous ﬁ scal year. Return on equity (ROE) stood at 8.8%, and return on invested capital (ROIC) was 8.6%, both percentages up from 5.2% and 6.9%, respectively, in the previous ﬁ scal year. Net Sales and Income (Loss) before Income Taxes Net Income (Loss) Attributable to Shareholders and ROE Shareholders’ Equity and Ratio of Shareholders’ Equity to Total Assets (Billions of yen) (Billions of yen) 160 800 600 400 200 0 –200 120 80 40 0 –40 08 09 10 11 12 (FY) Net sales [left axis] Income (loss) before income taxes [right axis] * Figures have been restated to account for businesses discontinued in FY2007. (Billions of yen) 50 25 0 –25 –50 08 09 10 11 12 (FY) Net income (loss) attributable to shareholders [left axis] ROE [right axis] (%) 20 10 0 –10 –20 (Billions of yen) 400 300 200 100 0 08 09 10 11 12 (FY) Shareholders’ equity [left axis] Ratio of shareholders’ equity to total assets [right axis] (%) 80 60 40 20 0 Review and Analysis of the Statements of Income Net Sales In ﬁ scal 2012, the Group implemented measures targeting the reinforcement of the Industrial Automation (IA) business, sales expansion in emerging markets centered on Asia, and the expansion of sales in the environmental solutions business through the development of a strong business model. These measures proved to be successful, and net sales were up ¥31.0 billion year on year, or 5.0%, to ¥650.5 billion, as a result. By region, sales in Europe declined 3.7% year on year, primarily as a result of the persisting ﬁ nancial crisis. Regard- less, sales were up 6.8% in Japan, 7.5% in the Americas, 5.2% in the Greater China region, and 4.7% in the Asia Paciﬁ c region. Performance in the Greater China region continued to lead other overseas segments in terms of both net sales and operating income. Consolidated Operating Income Analysis (YoY) Billions of yen Sales increase, product mix +11.9 Forex, raw material costs +1.2 –0.9 Fixed manufacturing costs increase –5.8 SG&A increase Gross proﬁt up ¥11.0 billion (excluding forex and raw materials) Operating income increase ¥5.2 billion –1.2 R&D increase (including strategic investment increase) 45.3 2012 Actual (FY) 40.1 2011 Actual Cost of Sales and SG&A Expenses Cost of sales increased 4.4% year on year following higher net sales, and the cost of sales ratio declined 0.3 percentage point, to 62.9%. In ﬁ scal 2012, the average price per kilogram of silver was ¥83,042, lower than the level of ¥92,379 seen in the previous ﬁ scal year. The average price per kilogram of copper likewise declined, to ¥686 from ¥738 in ﬁ scal 2011. However, the prices of these raw materials began rising once again in conjunction with yen depreciation in the latter half of ﬁ scal 2012, and it will be necessary to carefully monitor these trends going forward. SG&A expenses increased ¥7.0 billion, or 4.8%, from the previous ﬁ scal year, but the SG&A-to-sales ratio declined 0.1 percentage point, to 23.4%. At the same time, R&D expenses were up ¥1.4 billion, or 3.3%, but the R&D-to-sales ratio was relatively unchanged from the previous ﬁ scal year’s 6.8%, at 6.7%. Other Expenses Other expenses decreased ¥2.5 billion year on year, to ¥4.1 billion, due to improvement in foreign exchange loss, net. Income before Income Taxes, Net Income Attributable to Shareholders, and Proﬁ t Distribution As a result of the above, income before income taxes and equity in loss (earnings) of affiliates amounted to ¥41.2 billion, up ¥7.7 billion from the ¥33.5 billion recorded in the previous fiscal year. Likewise, net income attributable to shareholders was ¥30.2 billion, up ¥13.8 billion from the previous year’s ¥16.4 billion. Basic net income attributable to shareholders per share rose from ¥74.5 in fiscal 2011 to ¥137.2 in fiscal 2012. The Company’s basic policy for dividend payments is to secure sufficient internal capital resources for future growth while maintaining a minimum 20% dividend payout ratio, targeting a 2% dividend on equity (DOE) ratio, and returning profits to shareholders to the greatest extent possible after these conditions are met. Beginning in fiscal 2013, the Company will raise the defined minimum for the dividend payout ratio to 25% and will issue dividends in accordance with that policy going forward. For fiscal 2012, the Company issued a commemorative dividend of ¥5.0 per share to show its appreciation for its shareholders on the 80th anniversary of the founding of Omron on May 10, 2013. Combined with the regular dividend payment, this made for a total annual cash dividend of ¥37.0 per share, ¥9.0 per share higher than in the previous fiscal year. The consolidated dividend payout ratio was 27.0%, and the DOE ratio was 2.4% in fiscal 2012. Dividends per Share (Yen) 50 40 30 20 10 0 08 09 10 11 12 (FY) Costs, Expenses, and Income as Percentages of Net Sales Net sales Cost of sales Gross proﬁ t Selling, general and administrative expenses Research and development expenses Other expenses, net Income before income taxes and equity in loss (earnings) of afﬁ liates Income taxes Net income Segment Information FY2009 100.0% FY2010 100.0% FY2011 100.0% FY2012 100.0% 64.9 35.1 25.4 7.2 0.6 1.9 0.7 0.7 62.5 37.5 23.0 6.7 1.1 6.7 2.3 4.3 63.2 36.8 23.5 6.8 1.1 5.4 2.9 2.6 62.9 37.1 23.4 6.7 0.7 6.3 2.2 4.6 Note: Segment operating income is prepared using the single-step method (which does not show individual income levels) based on U.S. GAAP. For easier comparison with other companies, operating income represents gross proﬁ t minus SG&A expenses and R&D expenses. Note: In segment information, sales represent sales to external customers and exclude intersegment transactions. Conversely, operating income includes income from intersegment transactions before deductions of headquarters expenses and other non-apportionable amounts. 1. Review of Operations by Business Segment Industrial Automation Business (IAB) IAB net sales decreased 2.9% year on year, to ¥263.0 billion. Operating income dropped 11.6%, to ¥29.5 billion, as a result of the lower sales, which offset the beneﬁ ts of efforts to improve efﬁ ciency with regard to ﬁ xed costs. In Japan, sales were lower than seen in the previous ﬁ scal year, when we recorded temporary sales increases following the Great East Japan Earthquake and ﬂ oods in Thailand. Further, capital invest- ment demand in the automobile industry was unchanged from the previous ﬁ scal year, while demand was sluggish in the electronic component industry and particularly low in the semiconductor industry. Overseas, demand in the automobile industry of the Americas was solid as was overall demand in China and ASEAN countries. Regardless, the impacts of the economic recession in Europe and limited capital investment in South Korea’s semiconductor industry were heavy. Electronic and Mechanical Components Business (EMC) EMC net sales increased 1.3% year on year, to ¥84.1 billion. However, operating income declined 13.8%, to ¥6.2 billion, due to the impacts of the euro depreciation that continued throughout the ﬁ scal year and a decrease in internal sales. In Japan, during the ﬁ rst half of the year under review, demand in the automobile industry recovered from the slump seen following the Great East Japan Earthquake. In the second half of the year, we saw recovery of demand in the infrastructure, ofﬁ ce equipment, and mobile device industries. Overseas, the impacts of the recession in Europe persisted, but these impacts were offset by brisk demand for automobile-related products in the Americas and environment-related products in China. Automotive Electronic Components Business (AEC) AEC net sales increased 14.8% year on year, to ¥97.6 billion. Operating income grew 86.1%, to ¥5.0 billion, as a result of the rise in sales as well as the rebound from the previous ﬁ scal year’s period of temporary production adjustment. In Japan, demand for the Company’s products was strong throughout the entire ﬁ scal year. The number of new automo- biles sold in Japan rose for the ﬁ rst time in two years. This was because demand beneﬁ ted from government measures to promote eco-friendly automobiles during the ﬁ rst half of the year and the popularity of small vehicles in the second half of the year. Overseas, sales suffered from the impacts of the economic recession in Europe and the sudden drop in sales of Japanese automobiles in China. However, sales in emerging countries and other regions were for the most part favorable. Social Systems, Solutions and Service Business (SSB) SSB net sales increased 20.2% year on year, to ¥68.8 billion. F i n a n c i a l S e c t i o n 90 Omron Corporation Integrated Report 2013 91 infrastructure business resulted Higher sales and proﬁ t structure reforms centered on the railway in a 2,874.5% increase in operating income, to ¥2.9 billion. In the railway infrastructure business, replacement demand for railway infrastructure equipment recovered from the slump that followed the Great East Japan Earthquake, and performance of safety and security solutions centered on remote monitoring systems was particularly strong. Further, sales were brisk for the trafﬁ c control and road control systems business’s safety and security solutions; the environmental solutions business’s solar power system services, electricity storage systems, and monitoring and control systems; and the related maintenance business’s solar power-related products. In this manner, all major business areas saw favor- able sales. Healthcare Business (HCB) HCB net sales stepped up 14.5% year on year, to ¥71.5 billion, and operating income was up 51.0%, to ¥4.4 billion, following strong sales in Japan and overseas. In the home-use health- care device ﬁ eld in Japan, sales of mainstay blood pressure monitors and thermometers recovered, and we worked to stimulate new demand through the introduction of new products. As a result, overall performance in this ﬁ eld was strong. In equipment for use in medical institutions, there was a gradual recovery trend in investment among major hospitals, and performance proved favorable. Overseas, demand for healthcare devices continued to increase in Russia and China as well as in emerging countries in the Asia Paciﬁ c and other regions. Operations also beneﬁ ted from a business alliance related to the sale of electric toothbrushes in Europe and the inﬂ uence of yen depreciation in the second half of the ﬁ scal year. All these factors contributed to earnings in overseas operations. Other Businesses The Other segment’s net sales increased 10.7% year on year, to ¥59.2 billion. Further, operating income of ¥2.5 billion was recorded, compared with an operating loss of ¥3.6 billion in the previous ﬁ scal year. This improvement can be attributed to higher sales in the Environmental Solutions Business as well as to the beneﬁ ts of proﬁ t structure reforms instituted in all businesses. In July 2012, a feed-in tariff scheme for renew- able energy was launched in Japan, sparking interest for renewable energy throughout the country and contributing to signiﬁ cant increases in sales of mainstay PV inverters in the Environmental Solutions Business. In the Micro Devices Business, demand for microphones and custom integrated circuits for industrial use was up, driving strong performance. Likewise, performance was also impressive in the Backlight Business due to increased demand from the smartphone market. However, the Electronic Systems & Equipments Business suffered from sluggish performance due to reduced demand from major customers for industrial-use computers, for contract development and manufacturing services electronic devices, and other offerings. This offset the solid demand for uninterruptible power supply units that resulted from electricity shortages in Japan. Growth in Net Sales by Business Segment Composition of Net Sales by Business Segment IAB EMC AEC SSB HCB Other FY2010 33.3% FY2011 (0.4)% FY2012 (2.9)% 14.8 12.1 10.1 (4.3) 13.9 2.2 0.9 (10.4) 3.0 7.8 1.3 14.8 20.2 14.5 10.7 IAB EMC AEC SSB HCB Other FY2010 44.0% FY2011 43.7% FY2012 40.4% 13.2 13.6 10.3 9.8 8.0 13.4 13.7 9.2 10.1 8.6 12.9 15.0 10.6 11.0 9.1 Note: The composition of net sales is based on the classiﬁ cations reported in the Six-Year Summary (page 88). 2. Review of Operations by Region Japan In Japan, capital investment demand for electronic compo- nents was sluggish and particularly poor for semiconductors. However, demand recovery was seen in a wide range of other ﬁ elds, including those for automotive products and medical equipment. Also, the change in the mindset of the populous of Japan following the Great East Japan Earthquake drove sales of products related to safety and security and to the environ- ment to impressive levels. As a result, sales in EMC, AEC, SSB, HCB, and the Other segment all showed year-on-year increases. Accordingly, net sales (including direct exports) in Japan rose 6.8% year on year, to ¥328.5 billion, and operating income was up 45.2%, to ¥31.5 billion. Americas In the Americas, there were signs of improvement in employ- ment conditions and the housing market, resulting in a gradual recovery in the economy. In particular, conditions in the automotive markets were brisk, supporting sales in IAB and EMC. As a result, net sales in the Americas rose 7.5% year on year, to ¥80.4 billion. However, operating income was down 62.4%, to ¥1.1 billion, due to the worsening of product mixes. Europe In Europe, while the economy showed signs of bottoming out, certain countries continued to suffer from the impacts of the sovereign debt crisis, and overall economic conditions Sales Breakdown by Region (%) 100 80 60 40 20 0 8.1% 15.7% 13.7% 12.0% 8.5% 16.3% 13.5% 12.1% 8.4% 16.3% 12.4% 12.4% 50.5% 49.6% 50.5% 10 11 12 (FY) Asia Paciﬁc Greater China Europe Americas Japan* * Includes direct exports remained poor. During the second half of ﬁ scal 2012, amid the depreciation of the yen, we undertook new business ventures, such as an alliance in HCB related to the sale of electric tooth- brushes. Regardless though, earnings in IAB and EMC were low. As a result, net sales in Europe declined 3.7% year on year, to ¥80.5 billion, and operating income decreased 24.0%, to ¥2.3 billion. Greater China In China, the rate of economic growth decelerated and there were signs of deterioration in other economic indicators as well. Nevertheless, demand remained solid on the whole. There were some reasons for concern, such as the slump in product exports to Europe and the sudden drop in sales by Japanese automobile manufacturers, but brisk internal demand for environment-related products, health- and medical-care equipment, and other products continued. As a result, net Financial Condition Assets Total assets amounted to ¥573.6 billion at the end of ﬁ scal 2012, representing an increase of ¥36.3 billion, or 6.8%, compared with the previous ﬁ scal year-end. This rise was largely due to increases in notes and accounts receivable— trade and cash and cash equivalents accompanying higher sales and income. Liabilities and Shareholders’ Equity Total liabilities amounted to ¥204.9 billion, down ¥10.8 billion from the previous fiscal year-end. This decline was largely due to lower short-term debt and termination and retirement benefits. Total shareholders’ equity was up ¥46.1 billion, to ¥367.0 billion, as a result of foreign currency translation adjustments stemming from yen depreciation and treasury stock cancella- tion. This caused the shareholders’ equity ratio to rise 4.3 percentage points, to 64.0%, compared with 59.7% at the end of the previous ﬁ scal year. The debt/equity ratio was 0.56 times, showing improvement from the previous year’s 0.67 times. Shareholders’ equity per share was ¥1,667.40 at the end of the ﬁ scal year, compared with ¥1,457.51 per share at the end of the previous ﬁ scal year. Cash Flows sales in the Greater China region rose 5.2% year on year, to ¥106.3 billion, and operating income increased 34.4%, to ¥11.3 billion, with the Greater China region once again accounting for the largest portion of sales and income compared with other overseas segments. Asia Paciﬁ c In the Asia Paciﬁ c region, the impacts of limited semiconductor- related capital investment in South Korea weighted heavy, but demand related to reconstruction from the Thailand ﬂ oods was generally strong, as was demand in other areas. There has also been a recent rise in demand for healthcare devices in conjunc- tion with the establishment of a middle-income group. As a result, net sales in the Asia Paciﬁ c region increased 4.7% year on year, to ¥54.8 billion. Operating income, however, contracted 15.5%, to ¥4.0 billion, due to the worsening of product mixes. Working Capital and Current Ratio (Billions of yen) 250 200 150 100 50 0 08 09 10 11 12 (FY) Working capital [left axis] Current ratio [right axis] (%) 240 220 200 180 160 140 Outstanding Interest-Bearing Debt and Debt/Equity Ratio (Billions of yen) (Times) 2.0 60 45 30 15 0 1.5 1.0 0.5 0 08 09 10 11 12 (FY) Outstanding interest-bearing debt [left axis] Debt/equity ratio [right axis] Cash and cash equivalents at the end of the fiscal year stood at ¥55.7 billion, a ¥10.5 billion increase from the end of the previous fiscal year. Cash Flows from Operating Activities Net cash provided by operating activities totaled ¥53.1 billion, up ¥21.1 billion from the previous ﬁ scal year. Major factors included an increase in net income before the deduction of noncontrolling interests and a decrease in inventories. Cash Flows from Investing Activities Net cash used in investing activities amounted to ¥28.5 billion, up ¥2.0 billion from the previous fiscal year. This increase was the result of higher investments in such areas as production facilities. Cash Flows from Financing Activities Net cash used in financing activities was ¥18.6 billion, down ¥14.9 billion from the previous fiscal year. Major outflows included those to repay debt and issue dividend payments. Free Cash Flow (Billions of yen) 40 30 20 10 0 –10 08 09 10 11 12 (FY) F i n a n c i a l S e c t i o n 92 Omron Corporation Integrated Report 2013 93 Business and Other Risks Regarding a number of items described in the status of business and the status of accounting of this report, some items may pose risks and inﬂ uence the Omron Group’s management results and ﬁ nancial condition (including share price), and Omron believes these items may substantially affect investor decisions. Note that items referring to the future reﬂ ect the Omron Group’s forecasts and assumptions as of June 21, 2013, the release date of its Yukashoukenhou- kokusho (Annual Securities Report ﬁ led under the Financial Instruments and Exchange Act of Japan). (1) Economic Conditions The Omron Group conducts business worldwide, and its operations are affected by ﬂ uctuations in the economy and social conditions in Japan and overseas. Therefore, recessions occurring in the Omron Group’s markets both within Japan and overseas may have an adverse affect on the Group’s results and ﬁ nancial condition. Furthermore, we assume that the ratio of overseas business will continue to increase as the Group actively expands globally. The Group maintains a solid structure resistant to changes in the external environment by, for example, coping with foreign exchange risk by expanding overseas production and increasing local procurement to improve the balance of foreign currency denominated income and expenditures. We also hedge foreign exchange risk through short-term forward contracts executed with ﬁ nancial institu- tions. Nonetheless, rapid ﬂ uctuations in the exchange rates of currencies, such as the U.S. dollar and the euro, as well as a protracted period of yen strength, could have an adverse impact on the Group’s operating results and ﬁ nancial condition. (4) International Relations The Omron Group actively conducts such business activi- ties as production and sales in overseas markets. The Group may be subject to operating difﬁ culties in countries outside Japan related to possible social unrest due to factors including differences in culture or religion; political turmoil and uncertainty in economic trends; differences in business customs in areas such as the structure of relation- ships with local businesses and the collection of receiv- ables, regulations governing conﬂ ict minerals, speciﬁ c legal systems, and investment regulations; changes in tax systems; difﬁ culty guaranteeing safety, labor shortages, and problems in the labor management relationship; and terrorism, wars, and other political circumstances. These risks associated with overseas operations may have a negative impact on the Omron Group’s operating results and ﬁ nancial condition. (5) Human Resources Cross-corporation personnel exchanges and opportunities for employees of a variety of nationalities to work together are expanding in line with increasing globalization. Therefore, labor troubles may arise due to differences in culture, customs, and treatment. Also, while the localization of management must proceed amid accelerating business globalization, it may not be possible to secure a sufﬁ cient number of superior candidates for management-level positions. Furthermore, the Omron Group employs a large number of personnel in Asia, where a rise in employee wages could have an impact on the Group’s operating results and ﬁ nancial condition. (2) Legal and Regulatory Risks The Omron Group operates worldwide and is therefore subject to a wide variety of laws and regulations, including investment rules, labor laws, personal data protection laws, laws against bribery of public ofﬁ cials, and anti-monopoly laws. Our compliance efforts include training and education programs for our employees and others. Nonetheless, instances in which additional expenses are incurred to ensure compliance in the event of the enactment of new laws, changes to existing laws, or the adoption of stricter interpre- tations of laws and ordinances by regulators could have an adverse impact on the Group’s operating results and ﬁ nancial condition. (6) Management of Funds The Omron Group raises funds by issuing commercial paper and other means. Therefore, ﬁ nancial market instability, rising interest rates in Japan, or a rating agency downgrade could result in restrictions on fund-raising and an increase in ﬁ nancing costs, which could affect the Group’s operating results and ﬁ nancial condition. In order to maintain ﬂ exibility in capital expenditures and M&A at the global level, as well as to improve capital efﬁ ciency, the Group pays close attention to the level of cash reserves and the deployment of funds. Cash reserves are held as working capital or as a source of funds for business investment and are not employed for investment purposes. (3) Natural Disasters The Omron Group has established a business continuity plan (BCP) that formulates necessary safety measures and steps to facilitate business continuity and early restoration of opera- tions in the event of ﬁ re or natural disaster, including large- scale earthquakes in the Nankai Trough or directly under the Tokyo metropolitan area, as well as hypothetical events, such as the outbreak of new inﬂ uenza viruses that raise concerns about a global pandemic. The Group and its business partners maintain operating bases in Japan and around the world, making it virtually impossible to completely avoid the risks that would arise from an unforeseen natural disaster, ﬁ re, or other calamity. A major event of an unforeseen scale could impact Group operations by, for example, causing a reduction of business, which could have an impact on the Group’s operating results and ﬁ nancial condition. (7) Information Security The Omron Group possesses operationally important infor- mation and obtains conﬁ dential personal information and information on its business partners in the course of business. The Omron Group is taking steps to reinforce control over the information the Group handles and further improve employee information literacy with the goal of preventing misappropria- tion of that information by third parties due to theft or loss. Nonetheless, leaks of such information due to unforeseen circumstances could have an impact on the Group’s operating results and ﬁ nancial condition. Moreover, although the Group is strengthening technolog- ical measures in preparation for cyber-attacks against its infor- mation systems, as well as damage, alteration, or leaks of important data, information system stoppages or similar incidents caused by cyber-attacks surpassing the assumed system security level could have an impact on the Group’s operating results and ﬁ nancial condition. (8) Risks Associated with Patent Rights and Other Intellectual Property Rights The Omron Group’s R&D and design consists of researching technologies developed by other companies as well as those in the public domain. The Group’s business and product lines encompass an extremely large number of intellectual property rights, with new intellectual property rights declared on a daily basis. A third party could therefore present a claim regarding a speciﬁ c Group product or component, negatively impacting the Group’s operating results and ﬁ nancial condition. The exercise of our rights as a means to resolve issues related to Group intellectual property could result in disputes with third parties, in the form of measures to oppose by the counter- party. The Omron Group takes appropriate measures to recog- nize and compensate employees for inventions, such as through the Employee Invention Compensation Program and the Invention Commendation Program. Disputes regarding the value of an invention can arise among inventors, including inventors who have retired from the Group. The Omron Group has always focused on brand manage- ment and, in recent years, has initiated prompt and appro- priate countermeasures against the use of domain names similar to “Omron” that have appeared overseas. Nonethe- less, it is difﬁ cult to comprehend fully and take action against all aspects of improper domain name registration, so the danger exists that the fraudulent use of the “Omron” brand or similar domain name could damage trust in the Group. (9) Production The Omron Group has manufacturing bases outside Japan, including in China as well as in other Asian countries, and supplies products to customers worldwide through its inter- national sales ofﬁ ces. To ensure continued manufacturing stability, the Group has established and is executing the measures called for under its BCP, which covers the entire supply chain from production through logistics, including IT. Nonetheless, disaster, disease, labor disputes, deterioration of public order, terrorism, and international relations issues can cause a partial or full cessation of production, which could have an impact on the Group’s operating results and ﬁ nancial condition if supplies to customers are disrupted. (10) Purchasing and Procurement Obtaining raw materials and parts of sufﬁ cient quality in a timely manner and in necessary quantities is absolutely essential to the Group’s manufacturing. Therefore, we strin- gently select suppliers for reliability. Nonetheless, limits on supply or other supply issues could arise in cases such as signiﬁ cant supply chain disruption due to an accident or a natural disaster, the imposition of supply limits or cessation due to management issues at the supplier, or a broad increase in market demand. In such cases, difﬁ culties in changing suppliers, securing additional suppliers, or switching to different parts under such conditions could have an impact on the Group’s operating results and ﬁ nancial condition. While the Group contracts with suppliers to determine prices, the market prices for materials such as petrochemi- cals, steel, silver, copper, rare earths, and other raw materials are linked to increased demand as well as the inﬂ ux of capital into emerging countries. The resulting price ﬂ uctuations can affect manufacturing costs and could have an impact on the Group’s operating results and ﬁ nancial condition. (11) Quality Assurance The Omron Group seeks to maximize customer satisfaction by providing the best quality products and services based on its “quality ﬁ rst” principle. Regarding quality, the Group develops and manufactures products in accordance with its ISO-certiﬁ ed quality control system. A Groupwide quality check system is in place for the ongoing improvement of the quality of the Group’s entire line of products and services. While Omron takes every precaution against the occurrence of defects, it has become difﬁ cult to guarantee that defects will not occur (including defects that arise due to the changing environments in which the products are used) or that recalls will not occur. Changing conditions in Japan have necessitated greater attention to consumer protection. Product quality is also increasingly a major issue overseas. For these reasons, product defects that require large-scale product recalls or that carry damage beyond the scope of the Group’s liability insur- ance could seriously damage trust in the Company and the Omron brand, possibly leading to declining sales that could have a negative impact on the Group’s ﬁ nancial condition. The Group also strives to provide Environmental Assurance Products that do not include banned substances designated in the Restriction of Hazardous Substances (RoHS) Directive adopted by the European Union in July 2006. The Group is investigating the status of regulated chemical substances in components and materials and strives to use components and materials that do not contain banned substances. Since 2009, the Group has adhered to the European Union’s Registration, Evaluation and Authorisation Chemicals (REACH) Regulation concerning the identiﬁ cation of contained substances. Despite the Group’s efforts, frequent modiﬁ cations of the regulations on controlled substances that complicate supervisory efforts could result in infractions, such as failure to comply with modiﬁ ed regulations. (12) Environmental Conservation The Group must comply with a wide variety of environmental laws and regulations, including those related to climate change, air and water pollution, hazardous substances, waste, product recycling, and the contamination of soil and ground- water. These laws and regulations apply not only to the Omron Group’s current business, but may also be retroac- tively applied to past business activities or the past activities of businesses transferred from other companies through acquisition or some other means. It is possible that compli- ance with future environmental laws and regulations or efforts to improve the environmental soundness of operations could result in a rise in expenses related to the environment, which in turn could have an impact on the Group’s operating results and ﬁ nancial condition. F i n a n c i a l S e c t i o n 94 Omron Corporation Integrated Report 2013 95 Consolidated Balance Sheets OMRON Corporation and Subsidiaries March 31, 2012 and 2013 ASSETS Current Assets: Cash and cash equivalents Notes and accounts receivable-trade Allowance for doubtful receivables Inventories Deferred income taxes Other current assets Millions of yen FY2011 FY2012 Thousands of U.S. dollars FY2012 ¥ 45,257 ¥ 55,708 $ 592,638 143,304 158,911 1,690,543 (2,205) 92,253 17,975 11,513 (1,988) 91,013 17,611 12,439 (21,149) 968,223 187,351 132,330 Total Current Assets 308,097 333,694 3,549,936 Property, Plant and Equipment: Land Buildings Machinery and equipment Construction in progress Total Accumulated depreciation 26,950 128,870 142,148 7,417 26,591 137,821 156,186 6,729 282,883 1,466,181 1,661,553 71,585 305,385 (184,679) 327,327 3,482,202 (200,492) (2,132,894) Net Property, Plant and Equipment 120,706 126,835 1,349,308 Investments and Other Assets: Investments in and advances to afﬁ liates Investment securities Leasehold deposits Deferred income taxes Other assets 14,443 36,161 7,219 34,516 16,181 17,939 38,193 6,914 30,612 19,450 190,840 406,309 73,553 325,660 206,915 Total Investments and Other Assets 108,520 113,108 1,203,277 Total ¥ 537,323 ¥ 573,637 $ 6,102,521 U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate on March 31, 2013, of ¥94 = $1. LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Short-term debt Notes and accounts payable-trade Accrued expenses Income taxes payable Other current liabilities Millions of yen FY2011 FY2012 Thousands of U.S. dollars FY2012 ¥ 18,774 ¥ 5,570 $ 59,255 79,331 29,179 623 24,989 75,592 32,818 3,907 27,814 804,170 349,128 41,564 295,894 Total Current Liabilities 152,896 145,701 1,550,011 Deferred Income Taxes Termination and Retirement Beneﬁ ts Other Long-Term Liabilities 738 60,432 1,577 595 56,944 1,634 6,330 605,787 17,382 Shareholders’ Equity: Common stock, no par value: Authorized: 487,000,000 shares in FY2012 and FY2011 Issued: 227,121,372 shares and 239,121,372 shares 64,100 64,100 681,915 in FY2012 and FY2011, respectively Capital surplus Legal reserve Retained earnings Accumulated other comprehensive income (loss) Treasury stock, at cost: 6,992,907 shares and 18,991,739 shares 99,078 10,034 260,557 (68,433) 99,066 10,876 253,654 (44,349) 1,053,894 115,702 2,698,447 (471,798) in FY2012 and FY2011, respectively (44,496) (16,385) (174,309) Total Shareholders’ Equity Noncontrolling Interests Total Net Assets Total 320,840 840 321,680 366,962 1,801 368,763 3,903,851 19,160 3,923,011 ¥537,323 ¥573,637 $6,102,521 F i n a n c i a l S e c t i o n 96 Omron Corporation Integrated Report 2013 97 Consolidated Statements of Income OMRON Corporation and Subsidiaries Years ended March 31, 2011, 2012 and 2013 Consolidated Statements of Comprehensive Income (Loss) OMRON Corporation and Subsidiaries Years ended March 31, 2011, 2012 and 2013 Millions of yen FY2010 FY2011 FY2012 Thousands of U.S. dollars FY2012 ¥617,825 ¥619,461 ¥650,461 $6,919,798 Net Income FY2010 ¥ 27,016 Millions of yen FY2011 ¥16,352 FY2012 ¥30,117 Thousands of U.S. dollars FY2012 $320,394 Net Sales Costs and Expenses: Cost of sales Selling, general and administrative expenses Research and development expenses Other expenses, net 386,123 142,365 41,300 6,344 391,574 145,662 42,089 6,589 408,954 152,676 43,488 4,106 4,350,575 1,624,213 462,638 43,681 Total 576,132 585,914 609,224 6,481,107 Income before Income Taxes and Equity in Loss (Earnings) of Afﬁ liates Income Taxes Equity in Loss (Earnings) of Afﬁ liates Net Income Net Income (Loss) attributable to noncontrolling interests 41,693 14,487 190 27,016 234 33,547 17,826 (631) 16,352 (37) 41,237 14,096 (2,976) 30,117 (86) 438,691 149,957 (31,660) 320,394 (915) Net Income attributable to shareholders ¥ 26,782 ¥ 16,389 ¥ 30,203 $ 321,309 Per Share Data: Net Income attributable to shareholders Basic Diluted FY2010 Yen FY2011 FY2012 U.S. dollars FY2012 ¥121.66 121.66 ¥74.46 74.46 ¥137.20 137.20 $1.46 1.46 U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate on March 31, 2013, of ¥94 = $1. Unrealized holding gains (losses) arising during the year (1,566) Other Comprehensive Income (Loss), net of tax: Foreign currency translation adjustments: Foreign currency translation adjustments arising during the year Reclassiﬁ cation adjustment for the portion realized in net income Net unrealized gain and loss Pension liability adjustments: Pension liability adjustments arising during the year Reclassiﬁ cation adjustment for the portion realized in net income Net unrealized gain and loss Unrealized gains (losses) on available-for-sale securities: Reclassiﬁ cation adjustment for losses on impairment realized in net income Reclassiﬁ cation adjustment for net gains on sale realized in net income Reclassiﬁ cation adjustment for net gains on share exchange in net income Net unrealized gain and loss Net gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Reclassiﬁ cation adjustment for net gains (losses) realized in net income Net unrealized gain and loss Other Comprehensive Income (Loss) Comprehensive Income Comprehensive Income (Loss) attributable to noncontrolling interests (10,376) (1,613) 22,523 239,606 (14) (10,390) (1,534) (649) (2,183) 466 (10) (4) (1,114) 893 (841) 52 (13,635) 13,381 (892) (2,505) (43) (457) 22,480 239,149 625 (704) (79) 460 227 (188) (74) 425 3 (57) (54) (2,213) 14,139 (21) (894) (915) (223) (9,511) (9,734) 2,317 24,649 693 7,372 (425) (4,521) — 2,585 — 27,500 (455) (4,840) 549 94 24,244 54,361 5,840 1,000 257,915 578,309 212 (44) 74 787 Comprehensive Income attributable to shareholders ¥ 13,169 ¥14,183 ¥54,287 $577,522 U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate on March 31, 2013, of ¥94 = $1. F i n a n c i a l S e c t i o n 98 Omron Corporation Integrated Report 2013 99 Consolidated Statements of Shareholders’ Equity OMRON Corporation and Subsidiaries Years ended March 31, 2011, 2012 and 2013 Number of common shares issued Common stock Capital surplus Legal reserve Millions of yen Accumulated other comprehensive income (loss) Retained earnings Total Shareholders’ Equity Noncontrolling interests Total Net Assets Treasury stock Balance, March 31, 2010 239,121,372 ¥64,100 ¥99,081 ¥ 9,363 ¥230,859 ¥(52,614) ¥(44,462) ¥306,327 ¥ 808 ¥307,135 Balance, March 31, 2011 239,121,372 64,100 99,081 9,574 250,824 (66,227) (44,599) 312,753 (0) (1) (140) 3 (140) 2 26,782 (6,605) 211 (211) 26,782 234 27,016 (6,605) (6,605) (0) (0) — (121) (121) — (13,613) (13,613) (22) (13,635) 16,389 (6,164) 460 (460) (140) 2 899 (37) 313,652 16,352 16,389 (6,164) (6,164) — (15) (15) — Net income Cash dividends paid to OMRON Corporation shareholders, ¥30 per share Cash dividends paid to noncontrolling interests Equity transactions with noncontrolling interests Transfer to legal reserve Other comprehensive income (loss) Acquisition of treasury stock Sale of treasury stock Net income Cash dividends paid to OMRON Corporation shareholders, ¥28 per share Cash dividends paid to noncontrolling interests Transfer to legal reserve Other comprehensive income (loss) Acquisition of treasury stock Sale of treasury stock (3) (32) (2,206) (2,206) (7) (2,213) (10) 113 (10) 78 (10) 78 Balance, March 31, 2012 239,121,372 64,100 99,078 10,034 260,557 (68,433) (44,496) 320,840 840 321,680 Net income Cash dividends paid to OMRON Corporation shareholders, ¥37 per share Cash dividends paid to noncontrolling interests Equity transaction with noncontrolling interests Transfer to legal reserve Other comprehensive income (loss) Acquisition of treasury stock Sale of treasury stock Retirement of treasury stock (12,000,000) 30,203 (8,145) (12) 842 (842) 30,203 (86) 30,117 (8,145) (8,145) (2) (2) (12) — 889 877 — 24,084 24,084 160 24,244 (0) (28,119) (9) 1 28,119 (9) 1 — (9) 1 — Balance, March 31, 2013 227,121,372 ¥64,100 ¥99,066 ¥10,876 ¥253,654 ¥(44,349) ¥(16,385) ¥366,962 ¥1,801 ¥368,763 Common stock Capital surplus Legal reserve Thousands of U.S. dollars Accumulated other comprehensive income (loss) Retained earnings Total Shareholders’ Equity Noncontrolling interests Total Net Assets Treasury stock Balance, March 31, 2012 $681,915 $1,054,022 $106,745 $2,771,882 $(728,011) $(473,362) $3,413,191 $ 8,937 $3,422,128 Net income Cash dividends paid to OMRON Corporation shareholders, $0.39 per share Cash dividends paid to noncontrolling interests Equity transaction with noncontrolling interests Transfer to legal reserve Other comprehensive income (loss) Acquisition of treasury stock Sale of treasury stock Retirement of treasury stock Balance, March 31, 2013 321,309 (86,649) (128) 8,957 (8,957) 321,309 (915) 320,394 (86,649) (86,649) (21) (21) (128) — 9,457 9,329 — 256,213 256,213 1,702 257,915 (0) (299,138) (96) 11 299,138 (96) 11 — (96) 11 — Consolidated Statements of Cash Flows OMRON Corporation and Subsidiaries Years ended March 31, 2011, 2012 and 2013 Operating Activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Millions of yen FY2010 FY2011 FY2012 Thousands of U.S. dollars FY2012 ¥ 27,016 ¥ 16,352 ¥ 30,117 $ 320,394 Depreciation and amortization 22,984 22,617 22,452 238,851 Net loss on sale and disposal of property, plant and equipment Loss on impairment of long-lived assets Net gain on sale of investment securities Loss on impairment of investment securities Loss on impairment of goodwill Termination and retirement beneﬁ ts Deferred income taxes Equity in loss (earnings) of afﬁ liates Changes in assets and liabilities: Increase in notes and accounts receivable-trade Decrease (increase) in inventories Decrease (increase) in other assets Increase (decrease) in notes and accounts payable-trade Increase (decrease) in income taxes payable Increase in accrued expenses and other current liabilities Other, net Total adjustments Net cash provided by operating activities Investing Activities: Proceeds from sale or maturities of investment securities Purchase of investment securities Capital expenditures Decrease (increase) in leasehold deposits, net Proceeds from sale of property, plant and equipment Decrease (increase) in investment in and loans to afﬁ liates Sale of business, net of cash acquired Acquisition of business, net of cash acquired Purchase of noncontrolling interests Other, net 606 413 (7) 805 — (4,785) 5,374 190 (16,227) (12,174) 1,048 9,301 (453) 8,383 (518) 14,940 41,956 109 — 861 671 (307) 391 2,009 (5,669) 9,981 (631) (6,838) (6,538) (483) 682 (1,562) 388 22 15,594 31,946 693 (911) 578 3,265 (677) 1,086 153 (4,433) 3,762 (2,976) (5,827) 8,641 21 (5,927) 3,121 1,519 (1,817) 22,941 53,058 1,658 (0) 6,149 34,734 (7,202) 11,553 1,628 (47,160) 40,021 (31,660) (61,989) 91,926 223 (63,053) 33,202 16,160 (19,330) 244,053 564,447 17,638 (0) (21,647) (27,502) (30,383) (323,223) 276 1,066 20 (34) — — — (101) 2,307 (480) — (1,012) — 520 457 836 4,862 8,894 (1,884) (20,043) 90 141 (10) 624 957 1,500 (106) 6,638 Net cash used in investing activities (20,210) (26,486) (28,471) (302,883) Financing Activities: Net borrowings (repayments) of short-term debt Repayments of long-term debt Dividends paid by the Company Dividends paid to noncontrolling interests Proceeds from equity transactions with noncontrolling interests Other, net Net cash provided by (used in) ﬁ nancing activities Effect of Exchange Rate Changes on Cash and Cash Equivalents Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of the Year 29,052 (20,000) (5,285) (0) — (434) 3,333 (2,070) 23,009 51,726 (26,744) (13,273) (141,202) — (6,604) (15) — (129) (33,492) (1,446) (29,478) 74,735 — — (6,164) (65,574) (2) 819 70 (21) 8,713 745 (18,550) (197,339) 4,414 10,451 45,257 46,956 111,181 481,457 F i n a n c i a l S e c t i o n $681,915 $1,053,894 $115,702 $2,698,447 $(471,798) $(174,309) $3,903,851 $19,160 $3,923,011 Cash and Cash Equivalents at End of the Year ¥ 74,735 ¥ 45,257 ¥ 55,708 $ 592,638 U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate on March 31, 2013, of ¥94 = $1. U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate on March 31, 2013, of ¥94 = $1. 100 Omron Corporation Integrated Report 2013 101 Internal Control Section Management’s Report on Internal Control NOTE TO READERS: The following is an English translation of the management’s report on internal control over ﬁ nancial reporting (“ICFR”) ﬁ led under the Financial Instru- ments and Exchange Act of Japan. This report is presented merely as supplemental information. There are differences between an assessment of ICFR under the Financial Instruments and Exchange Act (“ICFR under FIEA”) and one conducted under the standards of the Public Company Accounting Oversight Board (United States) (“ICFR under PCAOB”); In an assessment of ICFR under FIEA, there is detailed guidance on the scope of an assessment of ICFR, such as quantitative guidance on business location selection and/or account selection. In an assessment of ICFR under PCAOB, there is no such detailed guidance. Accordingly, regarding the scope of assessment of internal control over business processes, we selected locations and business units to be tested based on annual consolidated net sales (after the elimination of transactions between consolidated companies), and companies with net sales of approximately two-thirds of the total amount on a consolidation basis were selected as “signiﬁ cant locations and/or business units.” At selected “signiﬁ cant locations and/or business units,” we included in the scope of assessment, business processes leading to sales, accounts receivable and inventories as signiﬁ cant accounts that may have a material impact on our business objectives. Further, in addition to selected signiﬁ cant locations and/or business units, we also included in the scope of assessment, as business processes having greater materiality, business processes relating to (i) greater likelihood of material misstatements and/or (ii) signiﬁ cant accounts involving estimates and the management’s judgment and/or (iii) a business or operation dealing with high-risk transactions, taking into account their impact on the ﬁ nancial reporting. Management’s Report on Internal Control 1. Matters relating to the basic framework for internal control over ﬁ nancial reporting Yoshihito Yamada, President and Chief Executive Ofﬁ cer; and Yoshinori Suzuki, Senior Managing Director and Chief Financial Ofﬁ cer are responsible for designing and operating effective internal control over ﬁ nancial reporting of Omron Corporation (the “Company”) and have designed and operated internal control over ﬁ nancial reporting in accordance with the basic framework for internal control set forth in “The Standards and Practice Standards for Management Assessment and Audit Concerning Internal Control Over Financial Reporting (Council Opinion)” released by the Business Accounting Council. The internal control is designed to achieve its objectives to the extent reasonable through the effective function and combination of its basic elements. Therefore, there is a possibility that misstate- ments may not be completely prevented or detected by internal control over ﬁ nancial reporting. 2. Matters relating to the scope of assessment, the basis date of assessment and the assessment procedures The assessment of internal control over ﬁ nancial reporting was performed as of March 31, 2013 which is the end of this ﬁ scal year. The assessment was performed in accordance with assessment standards for internal control over ﬁ nancial reporting generally accepted in Japan. In conducting this assessment, we evaluated internal controls which may have a material effect on our entire ﬁ nancial reporting on a consolidation basis (“entity-level controls”) and based on the results of this assessment, we selected business processes to be tested. We analyzed these selected business processes, identiﬁ ed key controls that may have a material impact on the reliability of the Company’s ﬁ nancial reporting, and assessed the design and operation of these key controls. These procedures have allowed us to evaluate the effectiveness of the internal controls of the Company. We determined the required scope of assessment of internal control over ﬁ nancial reporting for the Company, as well as its consoli- dated subsidiaries and equity-method afﬁ liated companies, from the perspective of the materiality that may affect the reliability of their ﬁ nancial reporting. The materiality that may affect the reliability of the ﬁ nancial reporting is determined by taking into account the materiality of quantitative and qualitative impacts on ﬁ nancial reporting. In light of the results of assessment of entity-level controls conducted for the Company and its consolidated subsidiaries, we reasonably determined the scope of assessment of internal controls over business processes. Consolidated subsidiaries and equity-method afﬁ liated companies determined to have an insigniﬁ cant quantitative and qualitative inﬂ u- ence on the reliability of ﬁ nancial reporting are not included in the scope of assessment of entity-level controls. Regarding the scope of assessment of internal control over business processes, we selected locations and business units to be tested based on the previous year’s consolidated net sales (after the elimination of transactions between consolidated companies), and the companies whose net sales reaches two-thirds of total amount on a consolidation basis were selected as “signiﬁ cant locations and/or business units.” At selected “signiﬁ cant locations and/or business units,” we included in the scope of assessment, business processes leading to sales, accounts receivable and inventories as signiﬁ cant accounts that may have a material impact on the business objectives of the Company. Further, in addition to selected signiﬁ cant locations and/or business units, we also included in the scope of assessment, as business processes having greater materiality, business processes relating to (i) greater likelihood of material misstatements and/or (ii) signiﬁ cant accounts involving estimates and the management’s judgment and/or (iii) a business or operation dealing with high-risk transactions, taking into account their impact on the ﬁ nancial reporting. 3. Matters relating to the results of the assessment The above assessments determined that the Company’s internal control over ﬁ nancial reporting was effective as of the last day of the ﬁ scal year under review. 4. Additional notes No material items to report. 5. Special notes No material items to report. June 21, 2013 Yoshihito Yamada President and CEO Omron Corporation Yoshinori Suzuki Senior Managing Director and CFO Omron Corporation Corporate Information As of March 31, 2013 Date of Establishment May 10, 1933 Number of Employees (Consolidated) 35,411 Paid-in Capital ¥64,100 million Common Stock Authorized 487,000,000 shares Issued 227,121,372 shares Number of shareholders 30,794 Stock Listings Tokyo Stock Exchange Frankfurt Stock Exchange Ticker Symbol Number 6645 Custodian of Register of Shareholders Mitsubishi UFJ Trust and Banking Corporation 1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-8212, Japan Depositary and Transfer Agent for American Depositary Receipts JPMorgan Chase Bank, N.A.1 Chase Manhattan Plaza, New York, NY 10005, U.S.A. Brazil OMRON Management Center of Latin America (Sao Paulo) Tel 55-11-2101-6348 Fax 55-11-2101-6301 ADR Holder Contact: JPMorgan Service Center P.O. Box 64504, St. Paul, MN, 55164-0504, U.S.A. Tel 1-800-990-1135 E-mail jpmorgan.adr@wellsfargo.com Asia Paciﬁ c Omron Asia Paciﬁ c Pte. Ltd. (Singapore) Tel 65-6835-3011 Fax 65-6835-2711 Head Ofﬁ ce Shiokoji Horikawa, Shimogyo-ku, Kyoto 600-8530, Japan Tel 81-75-344-7000 Fax 81-75-344-7001 Overseas Headquarters Europe Omron Europe B.V. (The Netherlands) Tel 31-23-568-1300 Fax 31-23-568-1391 North America Omron Management Center of America, Inc. (Illinois) Tel 1-224-520-7650 Fax 1-224-520-7680 India OMRON Management Center of India (Haryana) Tel 91-124-4921700 Fax 91-124-4921777 Greater China Omron (China) Co., Ltd. (Shanghai) Tel 86-21-5888-1666 Fax 86-21-5888-7933 Major Japanese Manufacturing, Sales & Marketing, and Research & Development Locations Manufacturing Kusatsu Ofﬁ ce Tel 81-77-563-2181 Fax 81-77-565-5588 Ayabe Ofﬁ ce Tel 81-773-42-6611 Fax 81-773-43-0661 Yasu Ofﬁ ce Tel 81-77-588-9000 Fax 81-77-588-9901 Sales & Marketing Tokyo Ofﬁ ce Shinagawa Front Building 7F 2-3-13, Konan, Minato-ku, Tokyo 108-0075, Japan Tel 81-3-6718-3400 Fax 81-3-6718-3408 Mishima Ofﬁ ce Tel 81-55-977-9000 Fax 81-55-977-9080 Nagoya Ofﬁ ce Tel 81-52-571-6461 Fax 81-52-565-1910 Osaka Ofﬁ ce Tel 81-6-6347-5800 Fax 81-6-6347-5900 Research & Development Keihanna Technology Innovation Center Tel 81-774-74-2000 Fax 81-774-74-2001 Okayama Ofﬁ ce Tel 81-86-277-6111 Fax 81-86-276-6013 Website For more detailed information, please refer to our website. About Omron http://www.omron.co.jp/ (Japanese) http://www.omron.com/ (English) Investor Relations http://www.omron.co.jp/ir/ (Japanese) http://www.omron.com/ir/ (English) CSR http://www.omron.co.jp/about/csr/ (Japanese) http://www.omron.com/about/csr/ (English) F i n a n c i a l S e c t i o n 102 Omron Corporation Integrated Report 2013 103 Stock Information As of March 31, 2013 Stock Price Osaka Securities Exchange* (Index) 200 180 160 140 120 100 80 60 40 20 0 2004/3 Monthly Volume Omron Nikkei 225 Index 2005/3 2006/3 2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 (1,000 Shares) 30,000 20,000 10,000 0 Note: Share index (2004/3E=100) Ownership and Distribution of Shares (%) 100 23.8% 24.6% 19.3% 80 60 40 20 0 37.2% 37.6% 44.1% 5.5% 0.4% 5.7% 0.8% 5.6% 0.7% 33.1% 31.3% 30.3% 10 11 12 (FY) (As of March 31) Individuals and others Foreign institutions and individuals Other corporations Financial instruments dealers Financial institutions Yearly High and Low Prices* FY 2003 2004 High (¥) Low (¥) 2,740 1,648 2,885 2,150 2005 3,620 2,210 2006 3,590 2,615 2007 3,510 1,950 2008 2,385 940 2009 2,215 1,132 2010 2,418 1,749 2011 2,357 1,381 2012 2,478 1,436 * Stock price information is for the 1st section of the Osaka Securities Exchange before the July 16, 2013, integration of the cash equity markets of the Tokyo Stock Exchange and the Osaka Securities Exchange. Publication of Integrated Report 2013 Omron conducts management from a long-term perspective in its quest to work for the beneﬁ t of the global society through its business. Integrated thinking has always been a core element of this perspective. As one aspect of this, we are actively disclosing information and conducting investor relations activities to practice “relationship-building with shareholders,” which is one of Omron’s management commitments. For this reason, we made the switch to integrated reporting in 2012, and this report is thus our second integrated report. Integrated Report 2013 has been constructed to provide the Company’s stakeholders with concrete and easy-to-understand information regarding Omron’s management. I feel conﬁ dent that this report will prove to be a viable tool for the shareholders and other investors that provide the Company with stable funding over the long term. Several organizations, including the International Integrated Reporting Council (IIRC), are providing frameworks and other guidelines for integrated reporting. While following such guidelines, we went creative and sought our way of helping readers better understand Omron’s management. Further, in July 2012, the Corporate Reporting Lab was established by a corporate accounting ofﬁ ce of the Ministry of Economy, Trade and Industry of Japan. This lab conducts studies on corporate governance and communication between compa- nies and investors from a variety of perspectives, and results of these studies are released in both Japanese and English. As a member of the lab’s Planning Committee, I took this lab’s ﬁ ndings into mind when constructing this integrated report. Omron has just begun undertaking the new challenge of publishing integrated reports. I would like to ask for your continued support and understanding as we continue to evolve our integrated reporting efforts going forward. Satoshi Ando Executive Ofﬁ cer Senior General Manager, Investor Relations Headquarters F i n a n c i a l S e c t i o n INQUIRIES Shinagawa Front Building 7F 2-3-13, Konan, Minato-ku, Tokyo 108-0075, Japan Investor Relations Headquarters Investor Relations Department Phone: +81-3-6718-3421 Fax: +81-3-6718-3429 URL: http://www.omron.com/ir/ Board of Directors Ofﬁ ce Corporate Social Responsibility Department Phone: +81-3-6718-3410 Fax: +81-3-6718-3411 URL: http://www.omron.com/about/csr/ 104 Omron Corporation Integrated Report 2013 105 Printed in Japan

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