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- 00:41:57.4 I have two questions. My first question is about the profit margin for IAB. The quarterly operating profit margin for IAB has declined every quarter this fiscal year; in Q3 OPM declined further. On slide 5, you show the increase in SG&A. It appears there was a significant YoY increase in SG&A spending in Q3 of ¥5.1 billion. Should we expect to see a similarly large YoY increase in SG&A spend in Q4? As a function of this, should we also expect to see the OPM come in at the 17% level?
- 00:42:44.2 (Ohue) The reason why IAB’s profit margin appears to be declining slightly is clearly the result of the acceleration of advance investments. As such, in Q4 you should expect to see a similar trend to Q3. However, the investments we are making are aimed at future growth, particularly for the front office; we expect these investments will result in topline growth in the future. This is the intention behind these investments.
(Nitto) Let me also say that there are two aspects to the investments we are undertaking. One is to enhance our sales capability by dramatically improving our ability to offer value added solutions across all regions. It includes mid-career hires for front office positions, where we are hiring people with significant expertise, as well as training and a general increase in headcount. Additionally, we are also making investments in Automation Centers, which will be the starting point for the development of new solutions. We are opening new Automation Centers around the world. These are the kind of investments that we are executing on now; these investments are pushing up SG&A.
We are also increasing R&D spending as we develop our innovative-Automation initiatives, hiring robotics, AI, IOT and other engineers to support further development in this area. We are accelerating our hiring efforts. We have made good progress, which has contributed to an increase in spending thus far. However, we view investments in these areas as advance investments that will allow us to achieve higher topline growth in future. Therefore, although margins may dip temporarily, we feel it is more important to focus on building a solid foundation for growth rather than being overly concerned about near-term margins. We remain committed to making investments that will fundamentally generate growth on a medium- to long-term basis.
- 00:44:49.7 Thank you. Could I confirm that the dip in OPM is because of the advance investments and that it is not the case that GP margin for IAB on a standalone basis is in decline?
- 00:45:06.7 (Ohue) Although I cannot provide specific data points, the GP margin for IAB is definitely improving.
- 00:45:15.5 Thank you. My second question relates to slides 29 and 30. With regard to how you approach sales in HCB, I believe that you are seeing an increase in the proportion of sales from online. Can you talk about how the breakdown of BPM sales between online and real stores is changing? Can you also discuss how you see margins evolving for online and real stores going forward?
- 00:45:54.0 (Ogino) It does vary from country to country but a significant portion of our US sales is via Amazon and other online platforms. For China, around 40% of sales is now online. There is price competition between the online retailers and real store merchants but OMRON has solid relationships with both. If you look at the change in GP margins over the last 2-3 years, you can see that although online sales have been increasing, we have clearly been able to improve our GP margin. So although we are seeing changes in channel mix, we have been able to respond in such a way that profitability has improved.
- 00:46:54.5 Thank you.
- 00:46:57.1 Next, the person in the front row.