Omron Corp is considering building auto parts factories in emerging markets such as Russia, eastern Europe and India, broadening its key overseas production bases from China, executive officer Yutaka Fujiwara said.
-- Mulls new auto parts plants in Russia, east Europe, India
-- Aims shares buybacks of up to 15 billion yen a year
-- Targets operating margin of 5-6 percent at auto parts unit
He also said Omron, which makes factory automation systems as well as car components, may speed up its share buybacks, aiming to buy up to 15 billion yen (135 million) of its own shares in each of the next three business years, up from an annual tally of about 10 billion yen in recent years. "Japanese automakers, who are our customers, are planning to build plants in those areas (Russia, eastern Europe and India) ... We face strong requests to make our components close to their plants," Fujiwara told Reuters in an interview.
Omron has been investing heavily in China in recent years and has set up major research and production facilities there.
"We have no intentions of putting all our eggs in one basket. Risks need to be spread out," said Fujiwara, who is in charge of Omron's corporate strategic planning.
He said Omron aimed to boost the operating profit margin at its auto components business, which makes keyless entry systems and power window switches, to 5-6 percent in two to three years by improving the profitability of its overseas operations.
That compares with an estimated operating margin of 1.3 percent at the unit for the business year ending next March. "The margin target may be low compared with that for our industrial automation business. But annual sales growth for the auto parts operations is expected to be as high as 15-16 percent," Fujiwara said.
"This can be very attractive business," he said. With vehicles increasingly dependent on microchips and other electronic parts, there is a growing market for suppliers like Omron. Omron expects the operating margin at its industrial automation business, which supplies sensing and controlling devices that help factories run smoothly, to be 18 percent this business year.
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The Kyoto-based company competes with Keyence Corp of Japan, Germany's Siemens AG and Rockwell Automation of the United States in the factory automation market. Last month it posted a 14 percent rise in operating profit to 26.6 billion yen for the April-September first half, driven by strong demand for its auto-use electronics components.
But the result missed its original forecast of 30 billion yen as a slowdown in domestic capital spending weighed on its industrial automation business, and it cut its full-year operating profit forecast by 5 percent to 71 billion yen.
That would still be up 14 percent from a year earlier and mark the sixth straight year of profit growth.
Fujiwara said the company would probably buy 10-15 billion yen of its own shares per year in the next three business years, barring any mergers and acquisitions that would require large investments. Earlier this year it bought 3 million of its own shares, or 1.2 percent of its total shares outstanding, for 8.9 billion yen.
"You might see the pace of our share buybacks picking up a bit," he said. In its liquid crystal display (LCD) components business, Omron aims to launch LCD backlights for car navigation systems in one to two years, in a step to widen its product offering, Fujiwara said.
Omron, which bought LCD backlight operations from Japan's Pioneer Corp last year, is the world's largest supplier of backlights for small LCDs used in such products as mobile phones and digital cameras.
Shortly after Fujiwara's comments, shares in Omron closed unchanged at 2,675 yen, outperforming the Nikkei average, which fell 0.7 percent.