2019_1q_omron_e

6/36 Operating Income Analysis, Y/Y

In order to fully capture the opportunities we see in FY2018 on the back of the continued strong demand from the previous fiscal year, we accelerated our investments from Q1. I will use the waterfall chart to explain this in more detail, commenting on the components of Y/Y change from left to right. First, we were able to increase added value, supported by sales growth and a higher added value ratio. Our ability to generate profits continues to improve. Manufacturing fixed costs increased as we responded to the recent robust demand, particularly in IAB and EMC. We also expanded production capacity in anticipation of future growth. SG&A and R&D expenses also rose on continued growth investments, including hiring, increased marketing and efforts to strengthen core technologies. The rough breakdown of the increases in SG&A and R&D is around 60% for IAB, 20% for HCB and 10% for HQ technologies. We accelerated our investments in Q1. By concentrating on reaping the benefits of these investments in Q2 and beyond, we believe we can achieve our full-year plan for higher Y/Y profits.