MAY 11--Japanese automation company Omron Corp. (Osaka) recently posted a 59% rise in annual operating profit on the back of improving capital spending at home, but forecast modest growth this year. Omron, based in Japan's ancient capital city of Kyoto, has enjoyed a pickup in demand for its sensors and switches that keep factories running smoothly and prevent hiccups in production, thanks to a global manufacturing rebound. It forecast operating profit to rise 5% in the business year ending March 31 to 54 billion yen ($497 million), below consensus estimates for a 58.1 billion yen profit from 12 analysts polled by Reuters Research.
Omron is the latest in a string of Japanese companies to offer forecasts more conservative than market estimates inflated by expectations for continued growth in China and increased demand for digital electronic appliances this year. "Our earnings rebound can be attributed to two things: the effect of lower fixed costs from restructuring and sales gains," Omron chief executive Hisao Sakuta told a news conference.
For the past business year, Omron said operating profit totaled 51.4 billion yen on revenues of 584.9 billion yen, up 9.3% from 2002/03. The company forecasts sales to rise another 4% to 610 billion yen this year.
On a net basis, Omron scored a profit of 26.8 billion yen last year versus a 511 million yen profit in 2002/2003. It incurred a one-time charge of 38.5 billion yen to fund job cuts and asset write-downs in the business year ended March 31, 2003. It sees net profit up 8.2% to 29 billion yen this year.
On expectations of a strong result, Omron shares have risen 20% in the year to date. The stock closed down 3.16% at 2,605 yen before the earnings announcement, while the Nikkei average fell 1.62%.
Omron said it expected capital spending to remain strong and growing demand in the Chinese market to spark a 4% revenue gain this year in its mainstay industrial automation business, which accounts for 40% of its total sales. Omron forecasts revenues at its electronic-components business to jump 20% from strong sales of backlights used in mobile phones. Components demand is particularly strong in China, Omron said.
To stay ahead of rivals Siemens AG, Rockwell Automation Inc., Matsushita Electric Works, and Keyence in the Chinese automation market, Omron said it plans to move aggressively. "As part of our growth investment strategy, we plan to invest in infrastructure equipment and new technology for the Chinese market," Sakuta told reporters. He forecasts sales in the China region--including Taiwan and Hong Kong--to grow to 150 billion yen in 2007/08 from around 40 billion yen last year.
