2019_2q_omron_e

39/42 Questioner(5)

Thank you for the presentation. I have 2 questions. The first is about IAB. Stepping back and looking at the disclosures made by your peers, the vast majority have indicated they expect H2 orders or sales to be flat H/H. From that perspective, OMRON’s forecasts stand out in that you are calling for sales and profits to rise H/H in H2. It would be very helpful to know where exactly you expect to see growth. In the absence of more detail here, I have to say that it is difficult to be convinced by your explanations, given what is being said by your peers. I recognize that it may be difficult to disclose specifics, but if you could comment on regional trends or point to a specific product that could drive growth, that would be helpful. You indicated that you were being conservative, but the numbers suggest otherwise in my opinion. So, could you talk about what you see as the key drivers or what gives you confidence in your forecasts, given the very strong growth you are expecting relative to Q2 on an annualized basis. Mr. Takeda will provide more detail, but one thing I will highlight is the SSB business. SSB typically reports the vast majority of revenue in Q4 so revenue recognition for this business is heavily skewed toward H2. Is your question primarily about IAB? Yes, just IAB. Specifically, the fact that IAB sales in Q2 was ￥98.7 billion but your forecast for H2 is ￥210 billion, which simplistically implies ￥105 billion per quarter. There aren’t many companies projecting this level of growth, so on a relatively basis, your figures appear aggressive. This is what I wanted to ask. (Takeda) With regard to IAB’s business domain, as discussed at the Q1 Analyst briefing, our sales organization takes a portfolio approach to the industries we target in order to mitigate risk. In terms of H2 growth drivers within this framework, we expect to see growth in H2 from the automotive industry, specifically EV and ADAS-related investments. Investments in this area will drive our H2 growth. We already have visibility into some specific projects, so this will be the core of growth. In addition, we also expect the Food & Beverages industries to continue to show firm growth in H2. Thank you. I apologize in advance but my second question is also about inventory, given the elevated levels. My understanding is that the lead time for orders and sales at IAB is relatively short. Could you talk about how we should think about inventory, including channel inventory at distributors? Also, although I recognize that you probably cannot disclose figures, could you comment on whether you expect production levels in H2 to rise H/H or not? The sales forecast implies an increase in production but when I compare OMRON to its peers, everyone else is indicating they will slow down production in order to ensure inventory returns to more normal levels. Looking at your numbers, I cannot tell whether you are slowing down production or not, so I would be grateful if you could tell me. With regard to production, we are not planning to significantly increase production in H2. The current inventory level is higher than we had initially anticipated so our immediate priority continues to be reducing inventory. However, as I have said a number of times, we are not pessimistic about the market as a whole. We cover a broad range of industries. Although the Digital industries are volatile in nature, the Automotive and Food & Beverage industries are solid and to the extent that we see public spending, that will boost Social Infrastructure-related investments. We will continue to cover a broad range of industries. Thank you. Next, the person in the front row, please.