OMRON Announces Consolidated Financial Results for the First Quarter of Fiscal Year 2007.

TOKYO -- OMRON Corporation (TOKYO:6645; ADR:OMRNY; 'Omron') has reported earnings for the first quarter of fiscal 2007, ending March 31, 2008. The Group's net sales for the first quarter increased 15.1 percent compared with the same period of the previous fiscal year to JPY 176,127 million. This increase was due in part to the effects of the weaker yen on currency translation and business acquisitions made in the previous fiscal year. As for income for the period, the Omron Group made vigorous investments for future growth while efficiently managing selling, general and administrative (SG&A) expenses. As a result, operating income was JPY 9,669 million, an increase of 4.1 percent compared with the same period of the previous fiscal year. Income from continuing operations before income taxes totaled JPY 11,992 million, a decrease of 10.3 percent compared with the same period of the previous fiscal year due to gain on sale of investment securities and other factors. Moreover, the Omron Group recorded a gain on the establishment of a retirement benefit trust and a loss on the sale of the land and buildings of its Tokyo Head Office in the same period of the previous fiscal year. Net income for the first quarter was JPY 9,716 million, an increase of 41.7 percent compared with the same period of the previous fiscal year due to factors including a gain on the transfer of a business.

(1) Sales and Income

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Results by Business Segment

Industrial Automation Business (IAB)

Operations in Japan were impacted by a slowdown in expansion of capital investment among some customers in the automotive and semiconductor industries in comparison with the first quarter of the previous fiscal year, and a decrease in capital investment in the flat panel display (FPD) industry. In addition, a reaction from the increase in demand in the fourth quarter of the previous fiscal year had a negative impact on first-quarter sales. However, starting this fiscal year, the Omron Group has been reinforcing its sales infrastructure in order to expand its applications business, which focuses on quality and safety, and this is resulting in an increase in the number of business negotiations. Overseas, sales in North America expanded on the back of continued strong sales of control equipment to oil and gas-related companies. In Europe, demand increased for products such as programmable controllers and motion controllers, reflecting solid economic expansion. In China, the Omron Group focused on strengthening its sales force, boosting productivity and introducing new products, resulting in strong sales of products including programmable controllers and programmable displays.

In addition, OMRON Scientific Technologies Incorporated, a North American safety equipment manufacturer that became a consolidated subsidiary in September 2006, contributed to sales. As a result, segment sales for the first quarter totaled JPY 77,855 million, an increase of 8.4 percent compared with the same period of the previous fiscal year.

Electronic Components Business (ECB)

In Japan, segment sales increased compared with the same period of the previous fiscal year, reflecting steady conditions in the electronic components industry. Overseas, sales of relays (a core product) for large household appliances and sales of jog switches and flexible printed circuit (FPC) connectors for mobile devices (a target industry) continued to expand steadily in China. In Southeast Asia, robust demand for air-conditioning equipment for the European market fueled strong sales centered on relays.

In addition, the small backlight business of OMRON PRECISION TECHNOLOGY Co., Ltd., which became a consolidated subsidiary in August 2006, contributed to sales. Segment sales for the first quarter totaled JPY 38,175 million, an increase of 41.7 percent compared with the same period of the previous fiscal year.

Automotive Electronic Components Business (AEC)

Global automobile production volume was generally stable, and the need is increasing for car electronics for automobile safety and environmental friendliness. Against this backdrop, sales in this segment were strong. By area, sales in Japan were firm overall. In North America, while segment sales were affected by slumping business among the top three U.S. auto makers, which are major customers, and strengthening of the Canadian dollar, sales of new products such as wireless control devices and power window switches increased. In Europe and Asia, including China, sales of both new and existing products showed solid growth.

As a result, segment sales for the first quarter were JPY 27,344 million, an increase of 27.3 percent compared with the same period of the previous fiscal year.

Social Systems Business (SSB)

In the public transportation systems business, sales declined sharply because large-scale investments related to common IC cards among different railway companies, in the Tokyo metropolitan area and Kyoto-Osaka-Kobe area, were completed in the previous fiscal year. In the traffic and road management systems business and the ID management solutions business, which is centered on security and electronic money related devices, sales increased steadily. In related maintenance businesses, sales decreased due to a decline in on-site service requests in the IT service business. Software business sales increased substantially due to brisk expansion of investment in electronic money in the retail industry.

As a result, segment sales for the first quarter were JPY 13,824 million, a decrease of 0.8 percent compared with the same period of the previous fiscal year.

Healthcare Business (HCB)

In Japan, sales of digital thermometers, body composition analyzers and pedometers were solid, but sales of mainstay digital blood pressure monitors and devices for medical institutions slowed following an increase in demand in the fourth quarter of the preceding fiscal year. Overseas, weak sales in North America, mainly of digital blood pressure monitors, reflected market stagnation, but sales in Europe were generally firm, led by the digital blood pressure monitor business in Eastern Europe, although demand varied from country to country. In Asia, sales increased strongly in China and Taiwan, where consumption was brisk.

As a result, segment sales for the first quarter were JPY 14,837 million, a decrease of 1.5 percent compared with the same period of the previous fiscal year.

Others

The "Others" segment consists mainly of new businesses being explored and developed by the Business Development Group and development and expansion of other businesses that are not covered by internal companies.

The Business Development Group is focusing on three themes: computer peripherals; radio frequency identification (RFID) equipment; and energy management. Sales of computer peripherals and RFID equipment were at the level of the same period in the previous fiscal year. However, in energy management, the electricity usage monitor business, which employs wireless sensing technology as part of Omron's environmental business, achieved a substantial increase in sales.

As a result, segment sales were JPY 4,092 million, an increase of 9.5 percent compared with the same period of the previous fiscal year.

(2) Consolidated Financial Position

Total assets as of June 30, 2007 increased JPY 1,427 million compared with the end of the previous fiscal year to JPY 631,764 million. Shareholders' equity increased JPY 21,727 million compared with the end of the previous fiscal year to JPY 404,549 million. As a result, the net worth ratio increased to 64.0 percent from 60.7 percent at the end of the previous fiscal year.

Net cash provided by operating activities in the first quarter was JPY 14,087 million (an increase of JPY 7,396 million compared with the same period of the previous fiscal year) mainly as a result of net income of JPY 9,716 million and a decrease in trade notes and accounts receivable. Net cash used in investing activities was JPY 7,507 million (an increase in cash used of JPY 9,831 million compared with the same period of the previous fiscal year). While the transfer of businesses generated cash, Omron used cash to purchase businesses. Net cash used in financing activities was JPY 6,506 million (an increase in cash used of JPY 2,876 million compared with the same period of the previous fiscal year), mainly for dividends paid by the Company.

As a result, the balance of cash and cash equivalents at June 30, 2007 increased JPY 1,638 million from the end of the previous fiscal year to JPY 44,633 million.

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(3) Projected Results for the Fiscal Year Ending March 31, 2008 (April 1, 2007 - March 31, 2008)

The economic for the second quarter of fiscal 2007 (ending March 31, 2008) and thereafter is for continued moderate growth. Elements of uncertainty regarding the outlook remain, including high crude oil prices, concerns about a slowdown in the U.S. economy and trends in exchange rates, but solid consumer spending and a high level of corporate capital investment are expected.

In markets related to the Omron Group, we expect that the market for factory automation control systems will remain firm despite lingering concerns about a slowdown in capital investment in the automotive and FPD industries. Sales of consumer and commerce components for IT and digital related products are also expected to maintain upward momentum.

For the interim period and the full fiscal year ending March 31, 2008, Omron will implement measures to reinforce its sales infrastructure along with further sales expansion in the second quarter and beyond, while working even harder on efficient management of SG&A expenses, based on its fiscal year policy "Prioritizing profits to achieve GD2010 2nd stage goals" (GD2010, or Grand Design 2010, is a vision that sets out the basic policies for management of the Omron Group for the 10 years from fiscal 2001 to fiscal 2010). As a result, the performance forecast released on April 26, 2007 is unchanged. The assumed exchange rates in the interim and full fiscal year performance outlook from the second quarter are US$1 = JPY 115 and 1 Euro = JPY 155.

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Notes:

1. All amounts are rounded to the nearest million yen.

2. The numerical figures in the quarterly financial results have not been reviewed by auditors.

3. The number of consolidated subsidiaries is 163, and the number of companies accounted for by the equity method is 23.

4. In accordance with U.S. GAAP, return on equity, net assets, net worth ratio and net assets per share are calculated using total shareholders' equity.

5. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the figures of the year ended March 31, 2007 and the three months ended June 30, 2006 have been reclassified in relation to operations discontinued during the three months ended June 30, 2007.

6. This information has been translated from Japanese as a guide for non-Japanese investors and contains forward-looking statements that are based on management's estimates, assumptions and projections at the time of publication. A number of factors could cause actual results to differ materially from expectations.