2019_2q_omron_e

36/42 Questioner(2)

I would first like to confirm some figures. Could you provide us with more quantitative figures for the provisioning for inventory reserves? Also, H1 SG&A expenses increased by ￥8.5 billion; on a full-year basis you are projecting a ￥12.4 billion increase. In Q1, you indicated that about half of the increase in SG&A expenses was fixed in nature. Has this changed? Mr. Oue will answer the first question. To your second question about the H/H changes, in H1 FY2017 we had not yet started to execute on increasing the number of Automation Centers or hiring more sales engineers. Much of these investments were done in H2 FY2017 and H1 FY2018. So, in terms of changes in fixed expenses, the Y/Y increase in H2 will not be as large as the increase in H1. (Oue) With regard to the provisioning of inventory reserves, on slide 5, we show the one-off factors for change to GP margin. The impact for one-off factors was a negative 0.6%-points, including inventory reserve provisioning. Roughly slightly more than half of this is the result of provisioning. In other words, 0.3 or 0.4% points? (Oue) Yes My second question is related to expense control. You have indicated that on a full-year basis, you are now planning to reduce expenses by around ￥3.1 billion relative to the initial plan. I have two items I would like to confirm. First, can you tell me when specifically you started to cut back on spending? In other words, when you, CEO Yamada or the individual business companies, moved to review expenses. Second, although there is only 6 months remaining in the fiscal year, if the operating environment deteriorates further, how much more room do you have to cut expenses? Realistically speaking, my guess would be that it would be tough to double the scale of expense reductions but I would like to hear your view. In terms of timing, we did not make a change in one fell swoop. However, for IAB, one key time frame was in July. There had been some signs in the run up to that point, but July was when we saw customers specifically move to delay or reduce investment plans. In response, we reviewed our priorities in July and August. That said, our basic stance is to continue to execute on investments that support our ability to grow in the future, as planned. The ￥3.1 billion primarily represents expenditures that we felt were less of a priority at this time. Going forward, if we were to see a larger-than-expected deterioration, it is possible that we could choose to further reduce expenditures. However, our basic strategy is unchanged: we continue to focus on putting IAB on a growth trajectory, in order to achieve the targets set out in our medium-term business plan ending in FY2020. Therefore, we remain committed to executing on investments to further enhance our growth capabilities, be it R&D spend, hiring of new sales engineers or adding of new Automation Centers. Understood. If I could just clarify, you became aware of the change in July and moved to curb spending in August, is that correct? Well, yes, we moved to make changes in July and August. Understood. Thank you. Next, the person toward the back of the room.