【テロップ】
※各テロップ文字をクリックすると該当の場所がピンポイントで閲覧できます。
- 01:11:07.9 Thank you. I apologize for asking a question when you are about to wrap up and for also asking yet another question about IAB.
This is a question I have asked before, so I apologize for being persistent, but on the solutions-based sales, how much does this contribute to a higher GP margin? What is the current magnitude and how high to you think you can take it?
Also, while you are rolling out this business, you are continuing to make investments for future growth. Over the next three years, how will this impact IAB’s GP margin and how much of a contribution are you expecting to get from the solutions business? Even a general image would be helpful.
What I am concerned about is that the medium-term management plan target for GP margin is around 41%, largely unchanged from current levels, which suggests that you may not be expecting much of a positive contribution. Or is the level a function of a number of other factors, and if so, how should we think about this?
- 01:12:19.2 (Miyanaga) Our margins are clearly improving. As I said before, revenues have increased by around ¥100 billion from the ¥291.7 billion in FY2013. Moreover, OPM is up by around 5% points. It was around 13.4% at that time. The margin improvement is not the result of reducing fixed costs, since fixed costs have increased over this period. What is driving it is improved gross profit margins, which reflects an increase in added value.
Part of the improvement is related to a strategic focus on higher margin products, where we have made these products a key focus on our solutions at the grass roots level. We have focused on relatively newer products with high added value in building solutions. This has added to the margin push-up from solution sales.
As well, we have been gradually eliminating unprofitable businesses. As an example, last fiscal year, we sold our Oil & Gas business. This has clearly boosted margins.
So higher margins are the result of a combination of portfolio changes as well as actively leveraging high margin products in solutions. As a consequence, our GP margin is close to 50%. I would also say that we are seeing the improvements in margins earlier than I had initially expected.
If the question is have we fully tapped out this potential, then I don’t think so. I think we can enjoy more margin expansion by continuing to focus on high margin products and solutions. In addition, providing services could create opportunities to provide more value. Earlier, we talked about the business model. I believe that adding services into the mix should give us more room to improve GP margins.
This ties directly into our aim to achieve growth while also improving profit margins. Over the last three years, I believe we have been able to develop a way to make this possible.
(Yamada) Just to add to the comments, Mr. Miyanaga talked about how a focus on the business at the grass roots level has translated into improved profitability.
To quantify this, our long-term vision VG started in 2011. Overall GP margin for Omron, including IAB, was 36.8% on sales of ¥619.5 billion. Total gross profits were ¥227.9 billion. OPM was 6.5%. This fiscal year, we project sales of ¥850 billion and a GP margin of 41.6%, which would be a 4.8% point improvement to GPM. Gross profits are projected to be ¥353.5 billion, a ¥125.6 billion increase versus 2011.
We are intensely focused on GP margin as a metric, not just for IAB, but for all the other businesses. We believe the way to assess our success in selling our products to customers on the basis of added value should be judged by our GP margin. So rather than reducing R&D or SG&A in order to bolster OPM, our key management metrics are the absolute level of gross profits or GP margin.
Therefore, the progress is incremental and gradual, but we are consistently making progress. Our ability to expand GP margin is a key strength. We are doing this while evolving our business model, enhancing the attractiveness of our products and improving our sales capabilities. We believe this will allow us to contribute to value creation for our customers.
When I say I feel we are on the right track, what gives me the confidence is the consistent improvements we have seen in GP margin. I believe this reflects our improved strength. Today, the discussion centered on IAB but our other businesses are also seeing improved GP margins. In businesses where we are no longer able to add value for our customers, we have been exiting the low margin businesses. We have been consistently managing our businesses with discipline and this will not change.
- 01:17:34.7 Thank you. We have run a little over time so we will close the Q&A session now. We would be grateful if you can take the time to complete our feedback sheet.
This concludes the results briefing. Thank you for your participation today.
- 01:17:52.4 Thank you. We ask for your continued support.