OMRON Corporation (6645) Earnings Call Transcript & Summary

Hello, everybody. Thank you for waiting. We would like to begin the OMRON Corporation ESG Presentation for FY 2022. This session will be held in person and remote, a hybrid style. The material that will be used in this presentation is on the company website. Therefore, you will be able to download it to your device now. The URL link is also listed on the Zoom chat. We also do have Japanese and English simultaneous translation for you. If you would like to listen to the translation, please use the headset on your table. Now, I would like to introduce to you the presenters today, President and CEO, Yoshihito Yamada.

Good morning, everybody. My name is Yamada. Hello. Pleasure to be here today.

Next is Senior Managing Executive Officer, CHRO, Masahiko Tomita.

Hello. My name is Tomita. Good morning.

Next is Managing Executive Officer, Senior General Manager, Global Investor & Brand Communications HQ and Sustainability Executive, Tsutomu Igaki. From April -- he will be appointed Senior Managing Executive Officer from April.

Hello, my name is Igaki. Pleasure to be here today.

Senior General Manager of Sustainability Office, Yue Liu.

Hello, my name is Liu. Good morning. Pleasure to be here today.

And my name is Okada, the General Manager of IR, and I will be moderating the session today. The agenda is as shown here. We will take about the first 50 minutes to do our presentation and move on to the Q&A. We are scheduled to finish at 11:30, but this may slightly change due to the Q&A session. Please kindly be noted that the video of today's session, including the Q&A, will be uploaded on to the company website. Now we would like to begin with the presentation. Yamada-san, please.

Good morning, everybody. I am Yamada, the CEO of OMRON. Thank you so much for your participation today to OMRON Corporation's ESG Presentation. As you may all be aware, OMRON announced our new long-term vision SF2030 last April and kicked off the start of a new path for the next 10 years. In today's ESG presentation, we would like to share with you what we had worked on over the last year. Thank you very much for your attendance once again. This is today's agenda. We have 4 main themes that we would like to cover today. First will be for myself. OMRON's corporate philosophy management and value maximization. Next will be about creating social and economic value by contributing to a sustainable society. Tsutomu Igaki will share with you the detailed initiatives we have taken. Thirdly, we will present to you about the initiatives to achieve nonfinancial targets that were set as part of the business targets in SF2030. It will be presented by Yue Liu. And lastly, regarding improving human creativity, we have continued to take action with this new index, human creativity. This topic will be presented by Masahiko Tomita, who will be newly taking the role as CHRO from this coming April. So I would like to get started on the first agenda, OMRON's corporate philosophy management and value maximization. This is Page 3. OMRON's company philosophy comes from the company founder, Kazuma Tateisi in 1959 to improve lives and contribute to a better society. The founder had 2 thoughts that he wanted to convey through his mission statement. First is to contribute to the development of society through our business, the belief that companies have an obligation to serve society. A company has value only if it contributes to the society, which allows us to profit, thus allowing us to exist. The founder clarified that message by setting this company mission. Second is our commitment to embracing the role of a pioneer to drive societal change. Better society won't just come to us. Someone continues to challenge to create new value. There may be failure along the way, but OMRON is determined to be that someone that continues to challenge. Through this mission statement, the management and employees have been able to feel the oneness and unity leading to the dramatic growth of the company. Please look at the next slide. This is a chart of the sales, bar graph of the sales. With the mission in mind, OMRON has created many of the first in the world, first in Japan innovations throughout the company history. We have created products and services such as automated station ticket gates, online cash dispenser and ATM, which were all solutions to answer the challenges and needs that the society faced, which has allowed us to mark this track record of growth over the years. In the FA area, we have been the first in the world to introduce the robot integrated system. However, as the company started to expand, the entrepreneurial spirit or the animal spirit, that ambitiousness to grow have started to slowly fade and the growth started to slow down as well. Furthermore, post-2000, there were various external environmental changes that challenged all of us, such as IT bubble burst and global financial crisis, which led to many of the manufacturers to face unprecedented crisis, and OMRON was one of them. Then in March of 2011, the great East Japan earthquake hit Japan. In such a difficult business environment, I took the role of CEO in 2011. When I was appointed this role, I was committed to make OMRON a very strong and profit-growing company that can withstand any headwind. So what were some of the things that we worked on to realize a very strong OMRON? There were 2 main things. One is the enhancement of power to generate profit. Second is to deepen the understanding of the OMRON principles. I would like to talk about each points. First, about enhancing profit-generating capability. After I was appointed CEO, I had set gross profit margin improvement as one of the business management targets. And this was because the GP margin is an index that directly shows the OMRON evaluation from our customers. And it is also a metric that unless all of the divisions, such as manufacturing, sales, R&D, marketing work together, we cannot improve on. And that's why we decided to focus on the GP margin. In order to improve the GP margin, we have worked on various initiatives to enhance the capabilities around growth, profit and adapting to change. I won't go into all the details of what we had worked on for today. But as a result of working on these initiatives as a company, as a result, the GP margin grew from 36.8% to 45.1%, which was an increase of 8.3 points since 2011. Also, the gross profit value for the same period grew by 1.7x and operating income value also grew by 2.4x. So as you can see, the power to generate profit in OMRON has significantly grown over the last 12 years. Next, I would like to explain about the second point regarding the OMRON principles. Please refer to Page 7. This is OMRON's current company principles. It was revised in 2015 and included in our Articles of Incorporation last year. The current principle keeps the mission set by the founder as our mission and summarize the values that every single employee should take to heart as our values. The values that we set are innovation driven by social needs, challenging ourselves and respect for all. So why do we revise the company principle? One of the reason is to regain the animal spirit from when the company was founded, which was gradually starting to fade over time. And also we not only wanted the mission to be the core principle of the organization but also because we are committed to being a company that generates value to the society, we wanted it to be the source of driver for further future development. In this new company principle, we have strong belief that OMRON exists to create a better society and that to create to meet the social needs is really our mission. And in order to push through this company principle in business management, what has been the biggest challenge as top management of the company? That is how can I foster the true understanding of the OMRON principles amongst employees and have them resonate and be inspired. In order to execute business based on company principles, sharing and empathy is not enough. We aim for resonance. We aim for employees to resonate with us and work as a company to penetrate the company principles. Please have a look at the next slide. Now initiatives to deepen understanding of OMRON principles are all low-profile, down-to-earth activities. Let us explain some of them in detail. Please take a look at the photo in the middle. In the upper [ row ], Chairman Tateisi is having a dialogue with middle managers, mainly from overseas at OMRON Principles Dialogue. The lower left photo shows the CEO Circle where I visited each business site to have a dialogue with frontline employees. During the CEO Circle, I spent about 2 hours talking about the why and conversing with employees in order to nurture the pilot flames for putting the principles into practice. After the CEO Circle, I get e-mails from all the participants, and I make sure to reply with more than double the amount of their enthusiasm. And then there is the OMRON Global Award, or TOGA, in the upper right corner. TOGA is an event where employees share their stories of putting principles into practice with the entire global challenges -- global colleagues. TOGA is a year-round program to expand the circle of empathy and resonance by listening to the presentations and praising each other. We have continued this program for 10 years. Please watch the video for a 3-minute summary of TOGA. [Presentation]

I hope you enjoyed the TOGA video and get the atmosphere of TOGA. And as shown in the video, a total of 51,736 people, far more than the number of our employees participate in TOGA last year. And our activities for this TOGA is expanding every year. And TOGA also has a hidden purpose. It is to create a culture of mutual praise. For the past 10 years through TOGA, I have been thoroughly committed to mutual praise. And we have been very committed to mutual praise. And as a result, I feel that the culture respect for each individual and of taking on challenges is spreading throughout OMRON. For OMRON putting our principles into practice is the driving force for maximizing corporate value and the very source of our growth. We will continue our efforts not only to deepen understanding of OMRON principles but also to achieve a level where they resonate with our employees. Please see the next slide. As I have mentioned, OMRON has continued to evolve into a strong company albeit gradually by strengthening its profit-generating capabilities and deepening understanding of its principles. What direction and path will OMRON take for growth over the next decade then? This is partially expressed in OMRON's new long-term vision, shaping the future 2030, SF2030 in short. We will create a sustainable strategy by continuing to create innovation driven by social needs with automation which empowers people. Please take a look at Page 12. In SF2030, OMRON will continue to solve social issues through its business and maximize its corporate value. We will contribute to a sustainable society and create social value. In doing so, we will also increase our economic value by achieving strong growth ourselves. We aim to maximize corporate value by creating both social and economic values. Please take a look at the next slide. In the next decade, leading up to 2030, we believe that many social issues will manifest themselves as all social systems and values change. In the midst of such social changes, we have identified 3 social issues to address, where we can leverage our strength and have a major social impact, achieving carbon neutrality, realizing a digital society and extending healthy life expectancies. And we have established 4 domains to solve these 3 social issues: industrial automation, health care solutions, social solutions and device and module solutions. Then what kind of sustainable society are we aiming for? What kind of social value will we create in order to create a sustainable society. Please take a look at the 2-minute video that summarizes that world view. [Presentation]

How did you find the video? I hope you have been able to visualize the kind of sustainable society that OMRON is aiming for. We will be focusing on automation thoroughly. And from the next chapter, we would like to share with you our efforts for the past year to realize OMRON's vision for society in 2030. Now I'll hand the microphone over to Mr. Igaki.

Thank you, Yamada-san. Hello, everybody. Once again, my name is Igaki. Pleased to be here to speak to you today. Now I would like to present to you about creating social and economic value by contributing to a sustainable society and share with you some cases we have been working on as well as the progress of the works. Please have a look at the next slide. As Yamada-san has explained earlier, OMRON will work to solve 3 social issues through these 4 domains. This slide shows you the structure through this chart. Please have a look. The horizontal axis is the 3 social issues that OMRON has addressed. Vertical access is the 4 domain and core businesses. The blue letters in the center are the social values we will create through these businesses. As you can see, each business will work to create social value in order to solve the 3 social issues. IAB will contribute to the advancement of manufacturing, which will support a sustainable society. HCB will be contributing to 0 events for cardiovascular disease. SSB will contribute to adoption and efficient use of renewable energy and sustainability of the infrastructure to support a digital society, and DMB will be contributing to the adoption of renewable energy and high-speed communications. Please look at the next slide. In the first stage of SF2030, which is the first midterm business plan of SF2030, we have set the businesses that will work to solve these social issues as our focus businesses. Please take a look at the left-hand side of the slide. The 4 core businesses and focus businesses in SF per stage and incremental sales plan up to FY 2024 is shown here. Now please have a look at the right side of the slide. This slide shows the overall company sales growth plan in the next 3 years. The blue part of the bar graph is the sales from the focus businesses. The focus businesses alone target a sales increase of JPY 149.4 billion, more than 45% growth in the next 3 years, driving the overall company's growth. So then how will we create the social values and link that to economical values? As time is limited today, I would like to introduce the initiatives from 1 of the 3 social issues we have addressed, realizing a carbon-neutral society. Please refer to Page 19. OMRON will contribute to the society with these 2 approaches in realizing a carbon-neutral society. First is promoting carbon neutrality through OMRON products and services provided to customers and society. Second, is promoting carbon neutrality through initiatives at our own sites. By mixing these 2 different approaches, we will create social value and also link it to economical values. Please allow me to explain in order. In order to promote carbon-neutrality through OMRON products and services provided to customers and society, I would like to introduce the initiative in the industrial automation business. Please have a look at the next slide. Currently, the manufacturing industry is being asked to realize sustainable manufacturing in realizing a sustainable society. And as the world continues to change, there is need to restructure supply chains at a global scale due to U.S.-China friction and geopolitical risks. As a result, the production is returning to domestic manufacturing and accelerates to keep and improve the competitiveness. In such new business environmental changes, each manufacturers are facing various challenges, including carbon neutral, environmental load reduction and labor shortages. Amongst those, the initiatives to carbon neutral and environmental load reduction is very urgent for sustainable manufacturing. In Industrial Automation business at OMRON, we are working on various initiatives for carbon-neutral and environmental load reduction so that the business can be more competitive and to ensure the effectiveness. As part of the initiatives, OMRON joined EP100 last October as the first Japanese manufacturing company to join. EP100 is an international corporate initiative with the goal of doubling the energy productivity of their business activities. Through high technology to pursue energy productivity, companies with goal of doubling their energy productivity participates in this EP100. OMRON participates in the EP100 initiative and have declared to make our energy productivity to 200% by 2040. Now I would like to explain how we will improve the energy productivity. Please take a look at Page 22. OMRON believes that improving energy productivity means not only reducing energy consumption at manufacturing sites but also improving productivity, quality and production volume. OMRON sees this concept as the core of its decarbonization efforts at manufacturing sites and is working to achieve this goal by providing technologies and solutions that utilize on-site data. OMRON will accelerate its efforts throughout the entire value chain, including customers and partners as well as the company itself. As an example, we'd like to introduce a co-creation project with Murata Manufacturing, a customer in our Industrial Automation business. Murata Manufacturing, in order to improve energy efficiency in their factories, was considering energy optimization for clean rooms, which consume the most energy among all manufacturing facilities. As a partner, OMRON aims to contribute to its 3 values. So in the middle of the slide that is shown here, you can see our efforts from fiscal year 2023. The first is constant visualization of energy-related information by making not only electric power information but also production and quality information visible at all times. It will be made possible to reduce energy consumption in clean rooms where strict quality standards are required. The second is data analysis and consulting. Based on the data obtained through visualization, you can identify the source of foreign materials and the time of the day when excessive energy is used and propose optimal solutions. The third is optimized energy control through OMRON's unique innovative applications. This application optimizes air conditioning power by supplying only the necessary amount of energy when needed through on and off control of air conditioning during non-operating hours while maintaining the clean room environment. Through these solutions, OMRON will contribute to Murata's efforts to achieve both energy savings and productivity improvements at its shop floor. That was about our efforts to promote carbon neutrality through OMRON products and services provided to customers and society. Next, I would like to give you an example of promoting carbon neutrality through initiatives at all sites. We have declared OMRON Carbon Zero, a goal to reduce greenhouse gas emissions from our own sites to 0 by 2050. Please take a look at the graph on the left of the slide. GHG emissions have been reduced by 50% by the last fiscal year compared to the base year of fiscal 2016. Based on this achievement, we are targeting a 53% reduction in fiscal 2024 and a 65% reduction by 2030, the goal of SF 2030. Next, please take a look at the right-hand side, in SF 1st Stage, which is aiming for the goal of 2024. To achieve these goals, we are promoting carbon zero at all 76 domestic locations while at the same time, expanding energy conservation and creation at all global sites. Please take a look at the next slide. It's about progress forecast for fiscal 2022. Please take a look at the left-hand side. For fiscal 2022, we are projecting a 58% reduction, well above our target of 51%. As you can see, the reductions are more than offsetting the increase in emissions resulting from the increase in sales. Next, please take a look at the right-hand side. These are the main initiatives. We have exceeded our initial target of 9 carbon-zero locations in Japan, reaching 10 locations, achieving carbon zero. This is the result of the deployment of IAB's energy productivity solution within the group and OMRON Group's first attempt for internal power transmission of renewable energy electricity. At our global sites, power generation initiatives are expanding mainly in Malaysia and China, and GHG emissions reductions are also making progress in each area overseas. Thus, we're making steady progress in our efforts to reduce GHG emissions at our own sites and steadily creating social value toward realization of carbon-neutral society. Achieving carbon neutrality at all sites adds value to OMRON's products as Carbon Zero and sets us apart from our competitors. By actively promoting the carbon neutrality of our own sites, we will link social values to economic values. So that's for our initiatives at all sites. Please take a look at the next slide. So this is my last slide. In fiscal 2022, even in challenging business environment, we steadily created social value and linked them to economic values. Please take a look at the left-hand side. This shows the progress of KPIs that quantitatively indicate our efforts to create social value. As you can see, we are making steady progress in each of our businesses, indicating that the products, services and solutions that we provide are linked to outcomes for society. In particular, in Industrial Automation Business, IAB, referred to today, we're making progress towards achieving carbon neutrality, social value KPIs are showing significant progress, as you can see here. Also, please take a look at the right-hand side. By linking these social value outcomes to economic values, we expect to achieve sales growth of 34% in fiscal 2022 over fiscal 2020. OMRON will continue to grow by solving social issues through its business and contributing to the realization of sustainable society. That's all that I have to say. Next, Ms. Liu will explain our efforts to achieve nonfinancial targets. Over to you, Ms. Liu.

Igaki-san, thank you very much. Hello, everybody. My name is Liu. I am the Senior General Manager of Sustainability Office. It is a pleasure to meet all of you today. Now I would like to present to you about the initiatives to achieve nonfinancial targets. I would like to share the current status as well as some of the detailed initiatives to achieve our targets. Please have a look at the next slide. In this slide, there are 11 nonfinancial targets that we have laid out in SF2030. Number one to seven are the goals we have set as a group. These are targets regarding the social value that OMRON will create as well as the acquisition of capabilities to create these values. Number 8 to 10 are targets set by the employees' votes globally. Why did we set the company targets through employees' votes? That is because we believe that the employees selecting their own targets will drive the motivation to take action on their own will and leading to the employees' active participation to achieve target and thus, strengthening the company's competitiveness. And the last plus one target was set for top management of each region to declare and execute their commitment to contribute to local communities in alignment with OMRON's sustainability policy. Please have a look at the next slide. This slide shows the progress update on initiatives to be achieved by fiscal year 2024. For each item, the milestone for this year differs. So of course, there are progress gaps overall. However, in all areas, the required action plans have been executed, showing solid progress to achieving the target by FY 2024. All of the global employees will continue to strongly promote these initiatives to achieve these important targets, which will be the growth driver from OMRON. Today, I would like to share with you a case from the plus one target highlighted in the blue box, the commitment to local communities from each region's top management. Now please have a look at the next slide. This slide is the details of the commitments set by each region. Each region has shared their strong commitments to contribute to resolving the region and community's social issues. Today, I would like to talk about the OMRON Greater China's commitment regarding redressing educational inequality in impoverished areas for children. Please look at the next slide. In China, the education inequality of children is becoming increasingly serious between urban cities and rural cities. For example, the number of books at schools are insufficient to the number of children in many of the rural elementary schools. Therefore, OMRON Greater China has launched a public project partnering with the local foundation and donated about 45,000 children books to multiple elementary schools in impoverished communities. We plan to take continuous actions, including donating school supplies and conducting school visits. We are already hearing some voices of appreciation from the children, which is very much motivating the employees working on this initiative. This initiative is not solely to redress the education gap in rural cities in China. We believe that this is how we, OMRON, can route ourselves down into these areas, building a close and friendly partnership with the local communities. As I have explained, the activities to reaching the nonfinancial target is showing solid progress. We will continue to accelerate these initiatives to maximize the company value. That is it with my part of the presentation. I would like to hand over the microphone to Tomita-san to talk about human creativity. Thank you.

Thank you very much, Ms. Liu. Next, myself, Tomita, will explain about the improvement of human creativity. As we have been explaining so far, OMRON is creating values through its business operations toward realization of the society envisioned in SF2030. At OMRON, we believe that the key to achieving this value creation lies in diversity and inclusion. We have repeatedly discussed what diversity and inclusion means at OMRON. First, we define diversity as attracting diverse people who will take on the challenge of the creation of a better society and inclusion as unleashing the passion and ability of each individual, creating innovation by bringing our diverse personalities together and sharing the fruits of our labor. How well are we practicing this concept of accelerating diversity and inclusion to powerfully promote value creation. This is measured by human creativity as a metric. I will explain from the next page. OMRON has positioned human creativity as an important strategic goal and a separate target of improving it by 7% in fiscal 2024 compared to fiscal 2021. This slide shows the formula for calculating human creativity. The numerator is the amount of added value or the scale of value OMRON created and provided to the market, and the denominator is the total labor cost or the scale of investments in human resources that create value. What we want to accomplish is value creation. There is significance in growing both the denominator and numerator of this formula. By investing in human resources, the denominator, we will create more value, the numerator, than the denominator. Specifically, by increasing investment in human resources by 15%, we will increase added value by 22%, resulting in a 7% increase in human creativity. In fiscal 2022, because of the labor cost of global countries, we have suffered, but we have been able to increase the human creativity on global value by 102%. So we have been able to increase the human creativity. The next slide, please. There are 3 key elements to elevate human creativity. The first is the optimal placement of human resources by assigning the right people to the right place in growth business. We can improve employee performance and increase added value. The second is to acquire and strengthen the capabilities of human resources that will lead to business growth. It's about acquiring necessary skills to execute on value creation plans or business strategy as well as preparing educational programs and providing opportunities to build up experience for realizing them. The third is to fully capitalize on employees' talent. We believe it is important to create an environment that allows employees to fully leverage their diverse talent. I will now share with you the examples of how these efforts are actually resulting in value creation at OMRON from the 2 perspectives of acquiring capabilities of human resources and capitalize on employees' talent. First, we'd like to introduce OMRON SINIC X as an example of acquiring human resources capabilities. OMRON SINIC X was born in 2018 as a company that aims to solve social issues and create innovative technologies. Leading researchers have gathered from cutting-edge fields such as AI and robotics technologies. Why have we attracted that outstanding talent? There are 3 reasons. The first is OMRON SINIC X' mission, which is develop innovative technologies needed for society of the near future and create the concrete architecture required for its realization. It resonates with many of our researchers, as it leads to the motivation of these excellent researchers to work. We'll have the ambition to change the world by implementing the technologies that they create in society rather than merely developing technologies. The second is the working environment. It has its own unique employment system and rules different from those of OMRON designed to allow researchers to devote themselves to their research with freewheeling ideas. Lastly, the co-creation with external parties. Based in Hongo, Tokyo, where many AI companies and R&D institutes are located, it is engaged in open innovation with other companies' research institutes and universities. Many R&D themes that have a significant impact on society have been born from Hongo. More than 40 themes have been adopted and high rated at major international conferences. The diverse and multitalented researchers who have gathered on OMRON SINIC X are creating a great deal of value that will shoulder the future of OMRON. Next is an example of capitalizing on employees' talents. We would like to introduce an Employee Engagement Survey, VOICE, an initiative in which the senior management team listens to the voices of individual employees, recognize issues and take actions to resolve them. The response rate to this year's VOICE survey was 91%, with 38,000 free comments received from employees. The number of free comments, given the number of respondents, is surprisingly high compared to other companies, even to the company that conducted the survey. This attests to the fact that employees expect the senior management to improve the company by making their voices heard. We feel that the trust relationship between the management and employees has become more solid. Mr. Yamada and I read through all the comments from employees. It takes time and effort. But it is a lot of fun because we always come away with new insights and discover new issues. So we're looking forward to that. Through VOICE, I feel that we are constantly upgrading OMRON. Please take a look at the right-hand side. These are actual examples of initiatives launched based on the comments that we received. For example, we have initiated a variety of improvement themes through VOICE such as global and cross-business theme of revamping corporate system and the streamlining of business processes in the Healthcare Business. While VOICE has led to many group-wide improvements, we have also received many requests and proposals for improvements related to the delegation of authorities and simplification of business processes. Although this is not an easy theme, senior management team itself will take action, which will lead to improvements and reforms. We will continue to utilize VOICE as a mechanism to connect management and the frontline to create an environment in which employees can fully leverage their talent. Today, I shared with you some examples of concrete initiatives to improve human creativity. Implementing diversity and inclusion and improving human creativity is not an easy task. In most cases, it takes a combination of many initiatives like the ones shown on the screen to make it happen. I believe that it takes time for human resources investment initiatives to lead to value-added improvements and to produce results. That's why it is important to evaluate each measure from a medium-term perspective while pursuing them diligently. We will continue to make steady progress with the action plans formulated so that OMRON will continue to be a group of diverse human resources with specialties and where each individual can take the initiative in demonstrating his or her abilities. Now I'd like to hand microphone back to Mr. Yamada.

Tomita-san, thank you very much. Before we close the presentation, I would like to say a few words. As you are all aware, I will be stepping down from my CEO role as of end of this March. Thank you so much for the great support you have all given me over the 12 years. As I reflect back, since I took the CEO role in 2011, I have always managed the business aiming to create a strong OMRON. And when I say strong OMRON, to us, a strong company is a company that has growth power, profit power and power to adapt to change. However, the true goal is not to just be a strong company. The reason for OMRON's existence is to contribute to the development of society through creating social value through our business. So what I continue to aspire the company to be was OMRON, a strong company that is full of OMRON principles. We continue to evolve every year. But OMRON still is midway. We are still on path for further development. The OMRON story for further development continues into the new long-term vision as of SF2030. It has just begun, but we were able to mark a good start in 2022. And the story for the future I will hand over to the new management team. From April, the overall group's management structure will change under the new CEO, Tsujinaga-san. The company heads of all 4 business units will be newly appointed. I have absolutely no worries for these changes. We have growing great talent in our management team in which we can relay the future of OMRON to. With the new management team, a total of over 20 management members have been promoted. Their passion, the drive for growth, their new ideas will surely give powerful and new power to OMRON's future. So please do look forward to the passionate new management team, the next generation of Team OMRON. As for myself, I will become Chairman of the Board to look over this new management team and work to strengthen the corporate governance as Chair of the Board to contribute to OMRON's corporate value improvement. Lastly, I would really like to express my sincere gratitude to the investors and stakeholders here today. Through all the conversations and communications I have had with you, it has been an amazing 12 years of learning and growth for me. Thank you very much. I would like to kindly request you to please continue to support Team OMRON going forward. And now with this, I would like to close the presentation. Thank you very much for your participation and attention.

Let's just go into question-and-answer session. Today, we're going to ask investors and analysts to ask questions in that sequence. First, we'd like to open the floor for questions for those who are in the venue physically and then answer questions from the participants on the Web. Those of you who are participating on Zoom, you can actually start raising your hands by pushing the raise hand button. So I would like to take as many questions as possible. So please limit the number of questions to 2 per person. Now within this venue, if there are any questions from investors and analysts, please raise your hand, and we will bring the microphone over to you.

Thank you very much for this press opportunity and this opportunity to ask questions. I am Maekawa from Nomura Securities. I have 2 questions. So looking back the past 12 years, there have been various events, especially in recent years, COVID-19, U.S.-China friction and the demonstration of ability to respond to changes. So looking back, the breakthrough and decision-making points and some automotive business sale. So where did you see the breakpoints and breakthrough and demonstration of the ability to respond? How were you able to establish the foundation? If you can look back and share with us, that will be appreciated.

Well, as I said in my presentation today, as for gross profit margin, for the whole company and for each of the business, the targets have been set. And ROIC 10% or more is the hurdle that is set for the whole company. And earning capability, profit generated capability should be improved in order to exceed the 10% on ROIC. That was the driving force or trigger for growth. So in any organization, this is a fate. But sometimes you are trapped inside the organization and there is a poor relation between the sales and manufacturing or development and manufacturing. But if you set the goal of providing added value to the customers, each of the organizations have to work together to realize that. The development has to consider the production, and the production has to consider the sales team. And what's more important was that sales forces have started to look the GP and added value as a whole, and they are now given the responsibility to take care of that. And that was the major breakthrough. And this has increased the consolidation and profitability, and we're able to make investment. And we're able to establish the virtuous cycle through that. We're still lacking in the ability to respond to changes, and we can also improve our growth further. But each of the employees, by playing their own roles, they are now aware that they can contribute to study and there are many new offices that have been promoted to the management team, and it will accelerate the value creation further.

And the second question is about corporate principal revision and the world animal spirit was quite impressive. And in recent years in OMRON, how have you been able to foster this animal spirit within the organization?

Well, originally, Kazuma Tateisi, the founder, has started up this as a startup company. With new solutions and technology, we would like to contribute to study, that has been always there. But with the size increase of the company, it has been diluted, and that was the sense of crisis that I got when I took office in 2011. So getting back to the basics, and we made our company position as a mission. Well, we still are along the way and -- in the middle of the way. But there are opportunities where each of the employees to express their own ideas like in Tonga, and there is also internal public search station for positions. So there is a mechanism where you can choose your position or you can choose your superiors. So through these activities, we are now placing the system where people can have their voices heard. And there is a system where people can do whatever they want to do. And then the industry first, the world's first product and services have been provided, and we have been able to be awarded with price that will be given to the most innovative company for consecutive years. Thank you.

We will move on to the next question. Thank you, to the person in the back.

My name is Ishino from Tokai Tokyo Research Center. I have 2 questions. This past 12 years, as you have served as CEO, are there areas where you feel like, oh, this was still insufficient or not enough? And I'm sure you will relay that to the next CEO. But how would you pass the baton on what kind of things do you think would carry -- pass it on to the next CEO? That's the first question. The second question is new business model. We've been talking about hearing recurring, but you've been investing in GMDC. And I feel like it is time that we'll be seeing kind of a new direction for OMRON 2. So as much as you can disclose, can you share us what kind of vision you have for the new direction for OMRON?

Thank you for your question. Things that I was not fully able to achieve or was insufficient, there's a lot that I still want to achieve. But what we talk about right now is high cycle management. OMRON is still very slow, meaning in terms of decision-making, the feedback and further execution that cycle -- and I'm not talking about the speed, but the quicker cycle, not just the speed, but I want to be a quicker cycle. So it could be a smaller challenge, but it's a quicker cycle, which can lead to bigger challenges. And that's kind of the structure or system that we want to embed in OMRON, and Tsujinaga-san is saying that, too. And I'm sure we can hear more in detail from the new management. But the direction that we want to aim for or the vision that we want to head to, we have that, but to execute we need a quicker pace of running through our cycle, and we need that kind of culture embedded into OMRON. And I am sure that Tsujinaga-san will be able to embed that into the company. And you mentioned about the business model. So OMRON has been product-centric to solutions, and we have been working on also solution as well. And solution style business has been growing more every year, and it's growing to about 30% service -- the solution service. And so therefore, that's become a higher ratio of sales and our technology has been increasing. And that ratio, we probably need to increase as well, too. And as for the JMDC partnership, there are 7 businesses that we are working on together right now. But on March 10, the day after tomorrow, there will be 8 companies, including the 2 companies to create a health-related alliance. It will be announced on the 10th. So if you can keep your eyes open for this announcement, that is to happen. Health related business. So meaning that the company will step into the health of the employees and the company. And for us, of course, we want to link that to a business -- our business as well. It's not just GMDC and OMRON, but we want to ask for more companies to participate in this activity. And I will be there myself to do this press conference. This will be the day after tomorrow. Thank you.

Now moving on to the next question. Yes, the gentleman in the front row, please.

I am Nakanomyo from Jefferies Securities. There are 2 questions. Firstly, toward the end, CEO Yamada said that it's not just creating a strong OMRON, but corporate value and contribution to society is the focus, and that tells everything. It's a very primitive question. But in the case of OMRON, if you would like to pursue straightforward profit generation, if you can save some of those businesses, you may be able to get more profit. So in terms of corporate value, especially improvement of corporate value has now sunk in, in your business operation. So are there any conflicts that may have arisen? And how have you felt that? And how have you responded to that and addressed to that?

Well, probably, in the short term the bottom operating income could be increased. If you are to do that, there could have been many other ways. More specifically, the workmen cost could be reduced or SG&A expenses could have been reduced. However, what we are fully always aware is to have mid- to long-term perspective, and that is most important for the top management, and business owner. And so 5 years, 10 years and 20 years ahead, what would be the investments that we need to do now, what will be necessary for the future down the road. And that is how I have been running the business. So the balance is really important there. Of course, stakeholders, there are so many stakeholders, not just employees and shareholders, but those who are involved in the businesses of OMRON, there are so many. So in the right balance, you have to improve the value and allocate the value and what would be the right balance, that is something that I have been always mindful of. What's important is that in 10 years' time or 20 years' time, we have to stay being a company that can create value. So the issue of balance is and will always be a challenge for the top management, but mid- to long-term perspective, is going to be there for OMRON, and I'm quite sure that, that will be the case.

So that will be -- the balance is also important and incorporated in the on-site and frontline KPIs. Is that the case?