2019_1q_omron_e

31/36 Questioner(3)

Thank you. I apologize for being persistent on this point, but I also have a question on added value. In Q1, IAB reported higher sales but lower profits. I believe I have understood your explanation. However, from Q2 onward as IAB shifts to positive Y/Y sales and profit growth, if we compare the implied marginal profitability backed out from plan figures, to the results for Q2 and beyond last fiscal year, it works out to be 40%. I apologize for my imperfect understanding, but could you share some specifics? For example, what would a new hire be doing that would specifically boost added value at IAB? Alternatively, were added value ratios of new products rolled out in Q1 not particularly high for some reason? What will specifically change to drive the significant gap between Q1 results and the implied trajectory for added value from Q2 onward at IAB? More specific color would be very helpful. Fundamentally, the initiatives to boost added value are a continuation of measures implemented to date. We continue to focus on these measures. One thing we are doing on the sales side is a continued focus on a solutions-based approach, in an effort to avoid competing purely on price points for individual devices. The second point I would make is with regard to specific key products. Although we have a broad product lineup, we strategically focus on what we refer to as key performance products (KPPs), which have higher added value. Our entire sales force is strategically focused on these products. This ensures that our customers are buying our products at appropriate price points, which is positive for profitability. Obviously in any given period, there is variability in the number of new products being launched, but we have been consistently focused on higher value added products. On the production side, we continue, as always, to focus on reducing costs over time. At the same time, we are proactively adopting innovative-Automation solutions in our own plants in order to drive better efficiencies. The aggregation of such activities is what continues to push up the GP margin. So you did not see delays or other developments that would have offset added value growth in Q1? No, that was not the case. Understood. Thank you. My second question is about HCB. I think you made good progress toward the full-year plan in Q1. It has also been a while since HCB has posted a margin of 14%. Topline growth appears to be strong. You indicated that you will continue to make advance investments in HCB but can we expect that you will be able to maintain the Q1 levels over time? Or were there one-off factors keeping costs low in Q1? (Takeda) Yes, we believe we can maintain the Q1 levels. The biggest contributing factor is selling prices. We have been able to mitigate downward price pressure on our BPMs by continuing to launch high value added products. This has allowed us to control selling prices in a narrow range. Therefore, as noted earlier, we believe we can maintain Q1 levels. Thank you. Next, the person in the second row on the aisle, please.