Ladies and gentlemen, thank you for waiting. We would now like to start OMRON's Long-term Group Vision, Medium-term Management Plan investor briefing. Presentation materials will be used today, which are now available on our website. Please download the presentation accordingly. Today with us from the company are President and CEO, Yoshihito Yamada.
Hello, I'm Yamada.
CFO and Senior General Manager, Global Strategy HQ, Koji Nitto.
Hello, this is Nitto.
General Manager, Corporate Planning Department, Global Strategy HQ, Seiji Takeda.
I'm Takeda.
I will be moderating the session. I am Tsutomu Igaki, Senior General Manager from the Global Investor and Brand Communications HQ. Regarding the agenda for today, first, Mr. Yamada will deliver a presentation, then we will move on to Q&A. We will first take questions from investors and analysts, followed by the press. We plan to end by 11:30 A.M. Japan time, but depending on the number of questions, we may exceed the scheduled time. Please also be reminded that today's video briefing will be available online at a later date, including the Q&A session. Now, without further ado, I would like to hand over to Mr. Yamada.
Good morning, everyone. My name is Yamada, President. Thank you very much for joining us today for this investor briefing on long-term group vision SF 2030 medium-term management plan as a first stage. Following the regular briefing format, first I deliver a presentation, followed by Q&A session. As long as time allows, we would like to take as many questions as possible from you. Thank you. First, this long-term vision has three characteristics. First, OMRON has made it clear to transform itself to solution-type company, capturing social change and customer issues, not from physical product perspective, but from service perspective. Second, we developed a business strategy with clear growth areas, primarily for IAB and HCB. Thirdly, we've incorporated both economic values and social values in our vision. Our vision is to be created together with all the stakeholders, including employees, customers, partners, investors, and local communities.
Now, let us move on to the main part of the presentation. Starting with the review for the previous long-term vision, VG 2020. Please look at page two. In 2011, we launched VG 2020 with the vision and goals shown here. Next page, please. To achieve these goals, we have been focused on five initiatives. From next page, I will review each one of them. First, improvement of profitability. Please look at the pie chart on the left-hand side. I'll explain about portfolio evolution. Through thorough portfolio management based on ROIC and concentrated investment on IAB and HCB, the composition ratio of the two businesses is expected to be 75% in FY 2021, significant increase from 54% in FY 2011. Next, key financial indicators. Please look at the right-hand side.
The GP margin, which we have been focused as indicator to show improvement of earnings power, increased from 36.8%- 45.7%, or up 8.9 points. To its right, ROIC, for it increased from 4.8% to more than 9%, or up 4.2 points. As bottom section shows, operating income amount is JPY 88 billion, growing at CAGR of 8.2%. OPM increased from 6.5%- 11.6%, or up 5.1 points. In this current year, we expected to achieve record high operating income. OMRON's earnings power had steadily enhanced over the 10 years. The second initiative is realization of self-sustaining growth. Please look at page five. This graph shows the sales trend over the latest 11 years.
As the graph shows, toward JPY 1 trillion of net sales, which is VG's goal, OMRON had been growing almost as planned up until fiscal 2017. From the second half of fiscal 2018, impacted by U.S.-China trade friction, pandemic, and changing economic environment, sales started to decline. Also, disposal of auto parts business and winding down of backlight business for optimization of business portfolio decreased sales. In fiscal 2021, sales is on a significant recovery trend, but we could not achieve JPY 1 trillion goal. We are still on the way to achieve self-sustaining growth against headwind, including a changing business environment. Please look at page six. The third initiative is demonstration of resilience to change. Please look at the left-hand side. During the VG period, in order to avoid geopolitical risk and its impact, we established a multi-location production system.
We also ensured business continuity by utilizing digital technology, including remote working amid the pandemic. During the pandemic, as the bar graph on the right-hand side shows, we could achieve operating profit increase for two consecutive years. I believe that this is because we quickly demonstrated resilience. Page seven. The first one is implementation of sustainability management. As you can see, we could also greatly evolve sustainability initiatives. I would like to talk about three examples here. First, ratio of local staff in key overseas positions. More than half of the important overseas positions used to be occupied by the Japanese, but as a result of localization, we could increase ratio of local staff in key overseas positions from 31% in 2011 to 75% in 2020. Next, percentage of employees with disability.
It improved from 2.4% in fiscal 2014 to 3% or up 0.6 points. This number is higher than the statutory employment rate of 2.2% from 2018 to February 2021. Lastly, reduction of GHG emission. By fully utilizing OMRON's energy savings technology on our sites, the emission was reduced by 50% versus fiscal year 2016, exceeding greatly the target. Please look at page eight. Lastly, practice of OMRON principles, enhancement of corporate governance, and enhancement of integrated risk management. In 2015, we revised OMRON's principles. We have been spreading empathy for OMRON principles through TOGA, as a result, OMRON principles are now implemented by employees globally. We also established the OMRON corporate governance policy and global integrated risk management, evolving the group's framework to a stronger one. As a result of these activities, OMRON has been highly evaluated externally.
Please look at page nine. Through VG period, we reinforced our sustainability initiatives in addition to financial values. We were awarded or selected for global indexes, including DJSI World, highly evaluated externally as global top-class entity. Please look at page 10. As a result, OMRON's corporate value, as you can see here, grew about fourfold over the past 11 years. During VG period, we could make great achievements, but at the same time, we are seeing some challenges. We have summarized achievements and challenges during the VG period on page 11. I have covered achievements, and on the left-hand side of the slide, we have summarized them. Please look at the right-hand side. Of course, we have some challenges, namely further improvement of resilience to change, the realization of self-sustaining growth, and further evolution of corporate management.
Earlier, I said the resilience to change has improved, but we are aware that the procurement of components is left as big challenge. Due to Russian invasion in Ukraine, the international situation is becoming even more uncertain. It is important to enhance more than ever our power to detect changes and rebuild the value chain, including supply chain. Even under very uncertain operating business environment to realize sustaining, self-sustaining growth, it is necessary that we need the growth through new value creation, grasping ever-increasing business opportunities, and some occasional growth through M&A. It is important to promote, at the same time, the corporate management which underpins such growth. At the same time, we need to promote diversity and inclusion and building of DX platform. Based on such review, we'd created long-term vision. Please look at page 12.
Here, we will explain about fundamental purpose, a changing society toward 2030, vision statement, and creating social value. In creating this long-term vision, we asked ourselves again, "What is OMRON's fundamental purpose of existence?" Looking back on our history. Since its foundation in 1933, OMRON has been solving many social issues. On this slide, we are showing some solutions and product examples which represent our history. For example, we launched traffic control system in 1964 and automated ticket gates at stations in 1967. More recently, wearable BPM, Robotic Integrated Controller had been launched. Each one of them is globally first innovation that OMRON created.
By grasping social needs before anyone does, and by solving social issues through automation, OMRON has been contributing to create safe, secure, and pleasant society. By looking back at our history, we see better fundamental purpose of existence of OMRON. Our fundamental purpose of existence is continue to contribute to society through the creation of social values. That will never change. In what way will the society change toward 2030? According to the SINIC Theory, which we use as our management compass, the next decade is positioned as a period of optimization before moving toward an autonomous society. The optimization society is an era of change to a new society and economy. The new society that will come after overcoming the conflicts and changes that occur during this transition period is an autonomous society.
The current era is in the middle of an information society between what SINIC Theory calls an industrial society and an autonomous society. We are indeed in a period of much turmoil and conflict, and we're in transition to a new society and economy based on growth through the pursuit of global sustainability. The speed of this transition is accelerating, triggered by COVID-19. The clash between old and new values has created a strain in the social and economic system, and a series of social issues have emerged one after another. In other words, there are abundant opportunities to create social needs. The next decade will be a period of great opportunity for OMRON to demonstrate its reason to exist and to achieve dramatic advances in growth. OMRON will seize this opportunity to achieve sustainable growth.
We have established a long-term vision based on OMRON's reason to exist and the changes that will take place over the next 10 years. Our new long-term vision is Shaping the Future 2030, continue to create innovation driven by social needs with automation which empowers people. This vision is based on the belief that all OMRON group employees will put our corporate philosophy into practice and work together with stakeholders to create a sustainable society through sensing & control +THINK technologies. We believe that this will maximize OMRON's corporate value as a result. What then is automation which empowers people? Please turn to the next slide. OMRON divides automation into three types according to the relationship between people and machines. First is the step at the bottom, which says replacement. This is automation in which machines take over human tasks. It's the level of so-called machine automation.
Next is collaboration, where machines work together with people. With the advent of collaborative robots that can work together with humans, this collaborative automation is now increasingly being used. Finally, the highest level, harmonization, is automation in which machines bring out human qualities. Machines adapt to people and promote autonomy. OMRON's technological icon, the table tennis robot FORPHEUS, is at this very level. Here is a video about FORPHEUS that I'd like to share with you now. Please take a look. OMRON's table tennis robot, FORPHEUS, hits the ball back by adapting to the player's skill. It's an extension of automation. It does more than just hit the ball back. It can gradually improve the player's skill and motivate them to have fun.
In the future, we intend to apply this type of automation in which a machine accompanies a person to maximize human potential to the manufacturing floor as well. We call this step of replacement, collaboration, and harmonization the expansion of automation. OMRON defines this automation that brings out the maximum potential of people as automation which empowers people and is committed to solving social issues through its use. What are the social issues that OMRON sees in creating social needs? To create social value, we have set three social challenges. The first is to contribute to achieving carbon neutrality. The second is to contribute to the realization of a digital society. The third is to contribute to the extension of healthy life expectancy. These are defined from the perspective of having a large social impact and utilizing OMRON's strength in automation, customer assets, and business assets.
To solve these three social challenges, we have established four domains. They are industrial automation, healthcare solutions, social solutions, and device and module solutions. We will continue to create social value in these four domains. One by one, we have prepared videos that we'd like to share with you. The first one is for industrial automation. In the industrial automation domain, we will contribute to the advancement of manufacturing that will support a sustainable society. OMRON has a history of bringing about innovation in manufacturing technology, easing labor shortages, and enhancing productivity in various industries by taking an innovative automation approach and creating applications through joint development with customers. Going forward, we will evolve the innovative automation approach with the aim of building a production floor that shapes a sustainable future, where both harmony with the global environment and worker satisfaction are achieved.
To this end, we will strive to achieve three things. The first is to maximize productivity and energy efficiency. The second is to develop a workplace that allows people to maximize their potential. The third is to improve operational processes and enhance operational efficiency in engineering. The next clip is regarding the healthcare solution domain. In the healthcare solution domain, we will continue to make efforts to achieve Zero Events, namely to reduce events of cardiovascular diseases to zero. So far, OMRON has helped to spread home use medical devices of professional quality globally, and developed a diagnostic and treatment process using blood pressure data measured at home in a bid to contribute to the prevention of cerebrovascular and cardiovascular diseases. From this point on, we will work to create a new platform for preventive medicine that prevents the incidence of such events.
Our goal is to re-realize a society where everyone can live a healthy and fulfilling life and access quality health care. There are three things we would like to achieve towards this society. The first is to create devices that can measure vital sign data in everyday settings. The second is to support the adoption of remote medical service, which will use algorithms to support doctors in making diagnostic and treatment decisions. Finally, the third is to develop new preventive medical services. The next clip is about the social solution domain. In the social solution domain, we aim to contribute to the spread and efficient use of renewable energy and the sustainability of infrastructure supporting a digital society. OMRON has catalyzed the spread of solar power generation and storage batteries.
Going forward, we will contribute to the further spread of renewable energy by using our advanced energy control technology to eliminate the bottleneck in stabilizing power generation systems. In the social infrastructure subdomain, on the other hand, we have applied our ample knowledge of how various equipment and facilities are operated on-site in order to support their operation and maintenance through our nationwide service network. We will, from now on, innovate the operation and maintenance process by offering a management service that supports the efficient operation of on-site systems. To realize this, we will achieve three things. The first is to provide a control system to stabilize power generation, and the second is to develop a management and service system that will support efficient use of shop floor systems. The third is to enhance the overall operational efficiency of social infrastructure.
The final clip I'd like to show you is about the device and module solutions domain. In the device and module solution domain, we will contribute to the spread of new energy and high-speed communications. OMRON has thus far supplied to customers from across the globe, high-performance quality relays and switches that connect and disconnect electrical devices, which are built into customers' products. With the ongoing introduction of energy with little environmental impact, it is expected that every device will be operated on direct current. In response to this change, OMRON will use technology to safely control discharge and to detect the timing of failures in advance in order to create a device that enhances the safety of equipment by preventing fire and electrical shock.
To contribute to the spread of high-speed communication, on the other hand, we will create a high-frequency device that enables uninterrupted connectivity by utilizing technology for enhancing noise resistance and precise processing technology for mass production, the latter of which we excel in. To realize this society, we will achieve three things. The first is to create devices which elevate equipment safety and prevents fires and electric shocks caused by direct current. The second is to create microwave-enabled devices capable of maintaining stable connectivity even in 5G and 6G environments. The third is the creation of devices that generate a low environmental burden. These are the four social values OMRON will create in the future. In order to create these social values, we will continue to evolve the way we create value itself.
The goal is to realize new value through the combination of products and services, not only products centered around components. At a turning point in society and markets when intrinsic value is reconsidered, the value generation is not limited to products. For example, consulting services, operational support services, and improvement services for i-BELT in IAB. We will also increase the speed and feasibility of implementation through co-creation with our partners without limiting ourselves to our own resources. In order to realize value through products and services and to co-create with partners, it's important to build a data platform that will serve as a base for such value creation. We will build a data platform by linking data generated by our own devices and services with those of our partners. By utilizing this data, we will develop new solutions that combine products and services.
Based on this concept, we will transform the business structure of the entire group over the medium to long term, shifting to a profit structure that includes not only products, but also a recurring service model. The recently announced capital and business alliance with JMDC is one of the first examples of this. JMDC's medical data, such as treatment billings and checkup data, together with vital data collected and accumulated by OMRON from its consumer healthcare devices such as BPMs and electrocardiographs, will be added to build a robust health data platform. Based on this data platform, we will develop a business providing solutions to improve health and prevent progression to severe conditions. By attracting many partners and creating solutions that no one has been able to do before, we plan to first solve the problems of Japanese healthcare and support its progress.
Furthermore, through this capital and business alliance, we will learn from JMDC the business concept, value development, and operations of a database service business, and accelerate the transformation of the industrial automation, IAB business and social systems business into data-driven businesses. Up to here, I have explained our reason to exist, the society of 2030, and the social values we would like to create. As I have just explained today, in the next decade, OMRON will continue to create social needs through automation that empowers people. OMRON will continue to create social value by solving the many social issues that arise in an optimization society through its businesses. This will help OMRON to grow its business, thereby increasing its economic value. By creating both social and economic value in this way, we aim to maximize OMRON's corporate value.
Please look forward to the future evolution of the OMRON Group. This concludes the explanation of the long-term vision.
Next, let me explain about our medium-term management plan. In this part, I will explain in the following order. As a first stage, strategies and policies, transformation of business, transformation of corporate management organizational capability, strengthening sustainability initiatives, and management target. Starting with the strategies and policies of the plan. Please look at page 30. We have positioned the three years from 2020 as the transformation acceleration phase to accelerate the transformation of our capability to create value and achieve sustainable growth in response to emerging social issues. By capturing growth opportunities one after another and demonstrate our competitive edge, which was accumulated during a VG period, we will realize very strong growth. At the same time, to adapt changing society, we will promote organizational capability transformation and increase growth sustainability. Please look at page 31.
Here, we are showing overall policy and group strategy of the first stage. The overall policy is taking on the challenge of value creation by accelerating transformation. There are three group strategies. Please look at the highlighted portion in light blue. First, transformation of business and transformation of corporate management organizational capability and strengthening of sustainability initiatives. Let's look at one by one, page 32. First, transformation of business. Today, I'd like to talk about evolution of four core businesses. Page 33. As I mentioned in the vision part, that we create social value through our business by developing solutions to social issues in four domains. From next page, I'd like to talk about four core businesses initiatives corresponding to four domains. Page 34. Starting with IAB. IAB, as our core business, continues to lead the group's growth in first stage. Please look at left-hand side.
As the world migrates toward a sustainable society, we have set and focus as focus domains on growth sectors such as medical and logistics sector, as well as digital, environmental, mobility, and food and household goods, where manufacturing will change. Primarily, that we are going to evolve innovative automation, OMRON's strengths, and we will reinforce internal resources and enhance co-creation of partners. I'll come back on details later on. On the right-hand side, we are showing targets. We are going to realize sales growth at 7% CAGR, mainly for focus domains. More specifically, we are going to expand our sales from JPY 430 billion- JPY 530 billion, or up JPY 100 billion over three years. We also set the number of companies who adapted innovative automation as new KPI.
We are going to target 5,000 such companies in 2024, or double the number of companies in 2021. Page 31. 35, please. SSB. As you can see on the left-hand side, we have set renewable energy control and management services, which include maintenance and operative support as focus domains. Then at the center of the slide, we have key initiatives that we introduce and expand remotely controllable storage systems and create and expand recurring services and complete restructuring of railway-related business models. We are going to accelerate storage system businesses through alliances with electric power retailers. We will also accelerate alliances with global partners. Please look at the right-hand side.
The sales that will be targeted at JPY 100 billion, and for the number of connected energy management device units, we target at 50,000 on a three-year cumulative basis. On page 33, we are going to target at 10% sales growth for the HCB. The sales for the three years will increase from JPY 134 billion to JPY 180 billion. We are going to capture the opportunity to increase the number of users of JPY 1 million, and one million, and we are going to target at 600,000 by 2024. On page 36 are the EMC.
We are going to target the recurring service creation and the storage of battery. As to the business model changes of the retail business, the railroad business will also be targeted at. We will also work on the business acceleration with the other partners, and we will target at JPY 100 billion of sales over the three years that we are going to target at the 50,000 over three years. Next, EMC. Earlier, for the long-term vision part, I said that with the digitalization of society, every device that will be operated on direct current. We respond to that trend preemptively. We will also concentrate our management resources for 5G/6G-compatible microwave devices.
Leveraging our technology prowess, we are going to create high-functional, high-quality new products and realize mid to long-term growth. We will promote co-creation with partners through early participation in new designs for leading companies and alliances with think tanks and technology ventures. In addition to sales growth, we set target for sales volume for products contributing to adoption of renewable energy and high-speed communication, namely 60 million units for product for DC equipment and 170 million units for microwave device-related products. Next page. This slide shows the focus domains of four core businesses and sales growth of those domains. Please look at the left-hand side. As I explained earlier, we set the focus domains for four core businesses to drive growth. On the right-hand side, we are showing whole company-level sales.
Our plan is to increase significantly the sales of focus domains, as shown in blue, more specifically, +45% or JPY 148 billion. In JPY 148 billion, IAB accounts for JPY 87.5 billion, or more than half. IAB will drive growth. Please look at page 39. Now, let me explain how we are going to expand sales in focus domains of IABs. We will capture investment for new growth opportunities in each of the five sectors where investment levels are high. For digital sector, we are going to grasp investment for product capability expansion of semiconductor, which is in global shortage, as well as investment for ultra-miniaturization of next-generation semiconductor.
For the environmental mobility, we will target our investment in high-efficiency production of EV products, especially secondary battery, where investment will expand as new energy, the BEV vehicle will disseminate. For food and household goods, we are going to expand investment for technological innovation for packaging and processing, where technological innovation advances to eliminate plastics. Also, in medical areas, a new growth area for IAB, we are going to target at traceability enhancement to prevent distribution of counterfeit drugs. For logistics, we are going to target that investment for operational automation due to serious operator shortage and increased logistics. As common themes for the industries, we target an investment for sustainability and manufacturing.
In this first stage, for capturing earlier mentioned growth opportunity as much as possible, we will powerfully leverage application business cycle to implement innovative automation. Please look at top right. Through co-creation with leading companies in each industry, we are going to continue to create advanced innovative application. We will mass produce packages where such innovative application are optimally combined for each manufacturing challenge. This package will be deployed to our customers widely in a speedy manner. We are going to increase global engineers 1.3x or to 2,000, and we will fully utilize 37 global Automation Centers. To leverage this deployment of values, we will be aggressive for alliances with system integrators.
By leveraging this cycle powerfully, we are going to achieve JPY 530 billion of sales in fiscal 2024. Now I'm going to explain about the model example of our innovative applications that we create. In the first stage, we will create innovative applications with manufacturing concepts of automation exceeding human capability, sophisticated human machine collaboration, and innovation in digital engineering. Already, many new applications have been released and verified. Today, this slide is showing leading applications. Today, please look at the right-hand side. I would like to show you the video of innovation in digital engineering. As you can see, Robotic Integrated Controller and digital twin technology have enabled virtual representation of the real-time movements of all the equipment on the production line. This means that the startups of global production facilities and the maintenance can be done at model factory.
This will advance digital transformation of manufacturing sites and improve productivity significantly. By creating many applications in line with manufacturing concepts in the first stage, we can create and deliver to many customers values unique only to OMRON. Thank you. Now I'd like to talk about allocation of resources on page 42. As you can see on this slide, as to SG&A expenses and R&D expenses of focus businesses, that will be increased to JPY 274 billion. Especially we will allocate focusing on IAB, which has high growth potential. Please look at the right-hand side for main IAB investment specifics, namely the product development such as new application and robots, investment in human capital, including hiring and of application engineers and improving capability, developing the foundations for expanding service business.
So far, I've been explaining about the business transformation centered around evolution of focus businesses, especially in IAB.
Next, I'd like to talk about the transformation of corporate management and organizational capabilities. Please turn to the next page. To continue creating value while adapting to changes in the business environment, we will evolve our corporate management and organizational capabilities. We have established three areas to be addressed. They are acceleration of diversity and inclusion, data-driven enterprise operations through DX, and improvement of supply chain resilience. Today, I'd like to explain in detail about accelerating diversity and inclusion. Please turn to page 45. Here is OMRON's concept of diversity and inclusion. The following page describes initiatives to accelerate our efforts going forward. Please turn to page 46. On this slide, I would especially like to highlight the three areas that are highlighted in bold letters. The first is proactive investment in individuals that are keen to grow.
The amount will be increased to JPY 6 billion, more than 3x the previous amount. The second is a job-based personnel system. We have already introduced this system for managers, and we will gradually expand it to general employees. The third is a performance-linked stock compensation plan. We will newly introduce it to all global managers. We will promote the human resources measures to increase human creativity by 7% versus fiscal year 2021. Human creativity is defined as the amount of value added divided by labor costs. It is a performance indicator of value creation through the exercise of each individual's abilities, and it's positioned as an important strategic goal. The next part is about strengthening sustainability initiatives. Please turn to page 48. First, we are working to achieve a carbon neutral society.
OMRON is committed to fulfilling its social responsibilities to the earth and society, and to transforming carbon neutrality into a competitive advantage for the company. Please refer to the graph on the left. First, in the first stage, we will reduce Scope 1 and 2 emissions from our activities by 53% compared to fiscal 2016. Next, please see the domestic initiatives on the right. Over the next three years, we will achieve zero carbon emissions for Scope 2 electricity at all 76 sites in Japan. When all of these sites achieve zero carbon, OMRON's PLCs, blood pressure monitors, and other products will have been made in zero carbon factories. In addition to performance and price, environmental value will be added to the products. In the future, customers will increasingly demand zero carbon products. OMRON's commitment to the environment will become a strength of its products.
We will engage in these efforts ahead of other companies to develop social value into economic value and achieve further growth. Scope 3 initiatives are next. Please turn to page 49. As you can see, we have also set new reduction targets for Scope 3. In fiscal 2030, we aim to achieve an 18% reduction compared to fiscal 2016. In the first stage, each business will begin working towards this goal. Please turn to the next page. The next page is about thorough respect for human rights throughout the value chain. In addition to the existing initiatives, we are launching two more new initiatives. Please refer to the right side of this page. The first is to implement human rights due diligence in alignment with UNGP, and the second is to develop a human rights remedy mechanism across the global value chain.
Please turn to page 51. The last part of this section is about management targets. This time, we have set management targets that integrate both financial and non-financial targets. We will integrate business growth and sustainability initiatives more than ever before. First are financial targets. Please turn to page 52. As you can see, we have six company-wide goals. We will strive for 7% CAGR in net sales, mainly in the focused businesses described today. Next is operating income. We will strive to achieve more than double-digit annual growth while making aggressive investments. Third, for operating cash flow, we plan to achieve JPY 250 billion over the three-year period. In addition, we will continue to target over 10% ROIC and ROE for the group while we plan for EPS growth at 12% or JPY 400 or more. Now please turn to page 53.
This slide shows a step chart comparing the operating income forecast for FY 2021 and the target for FY 2024. From left to right, the forecast for FY 2021 is JPY 88 billion, and the rightmost figure is the target of JPY 120 billion for FY 2024. As you can see, we will use the resources generated by sales growth and gross margin improvement to reinvest aggressively, mainly in the IAB business, as well as investing to strengthen our organizational capabilities. Please turn to page 54. Next are targets by segment. We will aim to achieve growth in all segments. IAB and HCB are expected to drive sales and profit growth in particular. For IAB, we aim for 7% sales growth and 20% operating margins while making aggressive investments.
In HCB, we are targeting sales growth of 10% as well and an operating margin of 15.6%. SSB and EMC are aiming to achieve an operating margin of 10% by promoting structural transformation and seizing growth opportunities. Next are non-financial targets. From the first stage, we will continue to work on the 10 + 1 or 11 non-financial targets, which will enable us to create social value as a group and gain a competitive edge. First, we will define sales from focused businesses that help solve the three social issues as Sustainability sales and aim to achieve a 45% increase over fiscal 2021 levels. We will work across the group to make a greater impact on society.
The six goals from number two-seven represent the transformation of the company's operations and organizational capabilities and the strengthening of its environmental and human rights initiatives. The three targets from eight through 10 are going to be goals set through voting of all global employees. By engaging global employees in the decision-making process, we aim to motivate and have employees take action individually, which can turn into our competitive advantage. The final plus one target is for top management in each region to declare their commitment to the community in accordance with OMRON's sustainability policy. Please turn to page 56. Next is investment plan. To achieve growth in the first stage and sustainable growth in the second stage, we will place the highest priority on IAB and aggressively invest in growth.
We currently plan to invest JPY 200 billion in growth, but will consider adding more if M&A opportunities arise. In addition to business investments in growth, R&D, and capital expenditures, we will also increase investments to achieve non-financial targets. Investments in carbon neutrality will increase significantly to JPY 20 billion, and investment in human resource development will triple to JPY 6 billion. Finally, I'd like to talk about our cash allocation and shareholder return policies. First, our cash allocation policy is to prioritize investment in growth and sustainability initiatives to create new value, while at the same time providing stable and continuous returns to shareholders. The source of investment and shareholder returns will be based on retained earnings and sustainably generated operating cash flow. Next, about our shareholder return policy.
Instead of the conventional combination of having a dividend payout ratio and DOE target, only DOE will be used as the basis. Surplus funds retained over the long term will be used to buy back shares in a flexible manner. This concludes the explanation of the medium-term plan. In concluding today's presentation, I'd like to reiterate my thoughts. Under SF2030, our vision is to continue to create social needs through human-oriented automation, and we are committed to putting our corporate philosophy into practice and working with our stakeholders to shape a sustainable society, thereby maximizing our corporate value. The next decade will be a turning point and full of opportunities to create social needs. We will continue to create value that is needed by society.
Achieve further growth through automation that empowers people. OMRON is poised to seize growth opportunities arising from social challenges. We will continue to create value by integrating business and sustainability, evolving the capabilities we have developed through VG. We will achieve strong long-term growth and continue to enhance our corporate value. We hope you look forward to the future of OMRON. That is all I have to say. Thank you very much for your kind attention.
This is the end of presentation. Now we will move on to Q&A session. Today, we will take questions from investors and analysts, and then we will answer questions from the press. The questions are from investors and analysts. If you are participating on the web, please push the Raise Your Hand button. If you are on the phone, please push asterisk and number nine.
We take questions simultaneously from the participants on the web and on the phone. When I call your name, please unmute your microphone and ask your question. We would like to entertain questions from many people, so we would like to ask you to limit the number of questions that you ask to two. If time allows, we will take some additional questions. Any questions? First question, please.
Thank you for the presentation. Can you hear me?
Yes, we can hear you.
Thank you very much for the detailed and wide-scope presentation. I have two questions. First, page 34, about IAB. The first stage, IAB SF cycle, CAGR 7%, that's the sales growth for the three years. Every cycle, will it remain as it is?
Do you expect that the sales will continue to grow? Because in the past two or three years, there are some adjustments of the cycles. Even when there is an adjustment, that you can organically grow at this level. Please elaborate on how you are looking at the sales cycle, growth cycle for coming years.
Here is Yamada answering your question.
Thank you for your question. For IAB, how we are looking at the operating environment. Basically, the manufacturing companies, our customers, are very aggressive in their investment activities. For one thing, their production sites are diversified to avoid geographical, geopolitical risks or to be closer to the consumption sites and to rebuild the value chain near the location of consumption.
To make the business more secure, that they are relocating their production sites closer to the sites of consumption, and that's a tailwind for us. During the VG period, the growth areas, for example, the secondary battery for EV, our applications, many of them were used in such areas. Because of that, I think we can expect much higher growth going forward. That said, currently this, the situation in Ukraine and the impact coming from that is, I believe, great. We need to watch closely how the investment appetite of our customers will change.
Thank you. My second question. Page 57, cash allocation and shareholders return. The cash at hand is 1-2 months of monthly sales. That's your standard. Does it change or not?
As to this JMDC alliance, as a result of that, more than JPY 100 billion of cash was used. I think now the cash level was reduced to 1.5 months' worth level. Am I right to understand that the cash cycle itself that has been reduced?
Here is Nitto answering your question.
As to cash at hand, one to two months or 1.5x , at that policy will not change. That's the level of working capital. This investment in JMDC, the current cash level will be 1.7 months of sales. Because of what is happening recently, we did borrow some money, so we are planning to increase the level to two months' worth of sales. Going forward as to share buyback, as we explained for the midterm plan, operating cash flow that should be improved. As a result, how many M&A activities will come around, though we have JPY 200 billion level of investment there, or maybe more than that, it would cost more. Depending on the investment level, that will change the share buyback scene. At this moment we cannot say whether we will share buyback or not.
Let's move on to the next question. Over to you.
Can you hear me?
Yes, we can.
Thank you for taking my question and thank you for the presentation. I have two questions. One is about top line for IAB and healthcare. For IAB top line, first of all, it may overlap with Mr. Tanaka's question that was asked before me, but on page 38 and page 39, you raise growth opportunities and five focus areas for IAB. Which area in particular is expected to contribute in sales? Can you explain a little bit more about it? Considering the remark you just made, digital environmental mobility apparently seems to be the areas where growth is going to be driven. That was my impression when I saw the numbers for IAB.
I also thought you may have good visibility into driving growth because your targets are pretty high. It's JPY 87.5 billion in growth. How much conviction do you have in achieving this growth? Which areas do you have high expectation towards?
Thank you. This is Takeda speaking, and I'd like to take your question. For the five areas that we set, in particular, we are expecting strong momentum to come from digital and environmental mobility, as you rightly said. Especially for digital, semiconductors are mainly the area that we expect high growth in. For environmental mobility, it's mainly in the area of rechargeable batteries. With our innovative applications, we are capturing demand from our customers. These are the two areas in particular, semiconductor-related and rechargeable battery related business is driving the business. In addition to that, for VG 2.0, different areas of focus will be medicine and logistics. From an absolute amount point of view, compared to digital environmental mobility, the contributions will be smaller, but we believe the growth rates are going to be high.
Whether it be enhanced traceability to prevent distribution of counterfeit drugs or for logistics, we have robots, which are mobile robots as well as collaborative robots or picking robots, that can capture the needs of the logistics industry. This is a different way we would like to capture opportunities in the logistics field compared to VG2.0.
Thank you. Hearing your response, I just have an additional question. For innovative automation, 2,500 companies have adopted i-Automation. So in new areas, is it growing in medicine and logistics, or is recognition growing across the board? And are you able to achieve double growth in a shorter period of time, reaching 5,000 companies? We are expecting to gain traction from all areas and reach 5,000 with adoption of innovative applications.
My second question is about top line as well, because it was stronger than expected, which is in the HCB area. Compared to the past five years, past ten years, CAGR used to be about 5%-8%. You're striving for 10% or more. I thought you are confident about the environmental changes underway. But can you talk about your conviction? Because I haven't really felt it yet. Changing the angle of my question, for example, for remote medical services on page 38, once again, you raised focused areas. But which area in particular is likely to grow? Is it going to be BPM or is it going to be coming from elsewhere that's going to be incremental in growing your sales? The CAGR for HCB looks high from my perspective.
Can you explain the reasons why in a quantitative manner? What kind of environmental changes are you feeling strongly? That would be a qualitative question as well.
This is Takeda. I will take your question. First of all, at this point in time, I can't give out the details, but out of total sales, about 70% is from, is centered around BPM or cardiovascular devices. In fiscal 2024, as of JPY 180 billion, the mix is expected to be pretty much the same. We are going to see ongoing demand for BPMs, and we will be attaching ECG functions as well. Cardiovascular disease patients and devices that cater to them would contribute to JPY 180 billion. That's the image we have. Regarding whether there's underlying needs for the business, first of all, for areas, we're expecting India to further grow geography-wise and also the inland areas of China, which are Tier 3, Tier 4 cities. We are expecting accelerated growth.
Another thing I would like to mention is we would like to add more value to the devices. For VG2.0, we were talking about consumer ECGs, and we will be launching this globally, including Japan in the next three years. For this product, with this product, we would like to grow our devices business for cardiovascular diseases and also for remote medical services. This will contribute to sales as well. In the next midterm plan, we believe that the penetration as well as the scale will still be midway for remote medical services. That's the progress we're anticipating.
Got it. Thank you very much.
For i-Automation!, one more thing I would like to add is 2,500 companies over six years. We're trying to double that over three years. You were asking why we believe so, right? Why we believe we can do that. For in the first six years, until we reached 2,500, the innovative applications were being developed together with the customers. So that was the phase. For the next three years, what's largely different is we already have 100-something innovative applications for rechargeable batteries or for electronic components and for other areas. They're already available, so it's just a matter of driving the adoption of these applications, and we believe we can sufficiently reach 5,000.
Thank you for that explanation. Next question. First question. As you explained in the presentation, data-driven, the carbon-free initiatives are really providing great business opportunities, I believe. I think we can hold a great deal of expectation in those areas. Based on that understanding, this data-driven business during the coming three years, how would it expand? To what extent? Do you have some quantitative data? The same question for carbon-free. The contribution to your business, taking example of IAB, how much this kind of business will contribute to sales amount of applications, and how much impact?
Thank you. For the IAB business, for example, this business called i-BELT. This is data-driven, close to recurring type of business. Along with that business, we provide consulting and after services. Those services are attached to the IAB business. The service scope is expanding as well as the number of the company clients. Now, other than the IABs, the services, including hardware. Now, we have grown to JPY 12 billion level of sales, and we'd like to expand it to JPY 50 billion level over just three years or so. We have a good feel about that because the customers want to solve their production issues, and for that, they need partners. It's not that the manufacturers providing the good components only.
Not only that, the services and the quality or the improvement of quality of productivity, they need a partner to run with them. That includes the development of engineers, and we would like to invest in that as well.
You said JPY 12 billion, based on how many companies using the your service. Let me check for i-BELT, how many companies?
50 companies or 60 companies or so.
Still the sales is already JPY 12 billion?
Yes. The service sales as a whole, including i-BELT.
With JPY 50 billion, the margin will be improved greatly.
Yes. That will make very profitable business. Thank you.
My second question is about JMDC. You announced about that deal, and Mr. Yamada made some comments at the press conference. Talking with some investors, this data-driven business, you are making shift to data-driven business. "That direction itself is understandable," said some investors. As Mr. Yamada said, integrated data platform should be built first. After that happened, it's still invisible what kind of businesses will be developed on that platform, and I agree with that opinion. Any thought on that?
Thank you for the question. If you look at the page 27, I think it was 27. As Nakano-san pointed out, this capital alliance with JMDC is not for short-term return, as I mentioned at the press conference. It's on a long-term alliance, where OMRON makes a shift to data provider, data-driven provider. To make a big jump, big leap, we have opted for this business alliance with JMDC. As you can see here, the treatment, the billings, the data platform, the medical data owned by JMDC and the data from other daily life, the vital sign data owned by OMRON, will be combined. Out there, such data platform does not exist yet, so this will be the only data platform.
After that, on top of the data platform, as shown here, that we are going to do solutions to prevent progression to severe conditions or solutions to improve health. That's what we'd like to do. We have just launched such concept. First, we will work quickly on the combination of those data assets to form a data platform to work on the solution provision.
There is a lot of people who would like to ask a question. Therefore, from here on, I would like to ask you to ask only one question each. We hope you understand. The next question.
Thank you for taking my question. I would like to ask one question. On page 34 and onward, you talk about each focus businesses and you talk about their contribution. For the focus businesses in IAB, you added medicine as well as logistics as focus areas. For these focal businesses, what kind of changes were there that led to if there's any changes in the focus areas in this long-term visions, please let us know. For EMC and so forth, there are highly profitable businesses, but for the non-focal businesses, what would be their positioning going forward? You were doing a portfolio reshuffling in the past, but what are your thoughts going forward?
This is, Takeda speaking. I will take your question. For page 38, for the four core businesses, we have identified re-identified focus domains. For IAB, we explained this earlier, and for healthcare it hasn't changed. It's an extension of VG 2.0 this time around. To that end, for social system solutions and services, we did a redefinition. We have included renewable energy control as a focus domain. For railway as well as roadways, it's not as if we are going to withdraw, but we want to change the way our business model is. After we make the equipment sales, we would like to also offer management services that offers maintenance and monitoring. For EMC switches and relays, that will be the main part of our devices business. This is going to transition to DC as...
We'll be focusing on DC equipment as well as microwave devices so as to have this business go through another growth phase. We have re-established our positioning. Those would be the major changes among our four core businesses. To answer your second question, for non-focus domains, we don't perceive it that way. It's more about foundational businesses. Apart from the focus domains, we will of course try to capture growth opportunities. However, growth rates will probably be in line with GDP growth, which is about 2%-3%. We position them as foundation businesses, but we would like to ensure that they contribute to earnings. They're not non-focus domains. They are foundational businesses that generate earnings for the company. That's all from me. Thank you.
If I may add a point, this is Yamada speaking. For IAB and the auto industry, that's a good example because for focus domains, new energy vehicles or EV is included as a focus domain under IAB. On the other hand, for ICE vehicles, this time around it has not been included as a focus domain. Having said that, for us, it has high earnings power as a business, and in the next three years, when you think about the next three years, the size of this business is still likely to be a good size. We will continue with this business, and we will harvest on this business. When you think about 10 years ahead or 15 years ahead, we do believe there's going to be a transition to new energy vehicles, which is pretty much clear.
We would like to ensure that we don't miss the business opportunities, and that's why we included new energy vehicles as a focus domain. That's all. This is the CFO speaking. We are talking about growth today, but of course, we will be focused on ROIC management, and this will be ongoing. For each of the businesses, for growth and profitability, we would like to watch where they are, and if we need to do any reshuffling, we obviously would. This effort will be ongoing. As you have been pointing out, for the electronic components business, profitability has been improving quite a lot. In a large sense, portfolio reshuffling has pretty much run its course. It's more about growing the business. From here on, various things happen. There's a possibility of various things happening.
In that case, we will be disciplined in taking action. That's all from me. Thank you.
Mr. Takeda, everyone, thank you.
Next question.
Since Mr. Yamada is here, I would like to talk, ask about the big picture. Page three, the resilience to changes, you said. Looking at your company, from outside, I think it's true that the your resilience has improved, and why? That's my question.
During the past two to three years, to grasp the end demands that you used your human resources, does it contribute a lot? Or have you changed HR the scheme? In what way you are now more capable to deal with the other changes? You said that the component procurement is still an issue. What did not go very well for the procurement of components? Thank you for the question. Resilience to changes. Compared to over the past 10 years, OMRON has now a stronger resilience to changes. During the past 10 years, there was a big earthquake and the U.S.-China trade friction conflicts and the crisis of Ukraine and the pandemic. Lots of things happened, but we have been dealing with these things in a rigorous manner.
There are three reasons why we are more resilient. IAB in particular, we are now closer to our customers with Automation Centers being built, and we deploy SEs, system engineers, so that we can solve the on-site issues with the customers. In that process, we can obtain information that we could not get before, and we could understand what is most important for our customers. We heard it from the engineers of the customer company, and we can digest that information to provide the good solutions. Also, the localization. Earlier, I said that the localization is now 75%. That 75% of the key positions in Europe, for example.
To have Japanese in the key positions, we would not be able to deal with changes happening regionally. We could obtain the people of good quality, local quality people and now, took the management overseas occupied by local personal.
The third reason, t he risk management or governance regime is now more rigorous. Internally, we say bad news first. Bad news should be reported to me, and that is the regular practice over the past 10 years. The business line and also at the headquarters, if there's any bad news, I will hear those bad news very quickly. Based on that understanding, we can concentrate our management resources to deal with problems much more quickly. That said, we are still on the way to achieve what we would like to achieve. For example, the procurement of components, we are not satisfying the demands of our customers.
There is the order backlog and also there will be more impact coming from the geopolitical risks as well in Ukraine. Thank you. As to components and the procurement of components, compared to other companies it did not work very well for you, and why? Well, the biggest reason is as follows. Toward the semiconductor manufacturers as to demand outlook, we placed order based on the smaller demand outlook compared to other companies. Usually we can add 10% or 20% additional orders based on the demands. But the semiconductor manufacturers could not even satisfy the original demands because of the various reasons, the logistics or the natural disasters.
The strong demand of our customers turned out to be stronger than we had thought. We could not have a good forecast of the shortage of semiconductors. Now logistics are disrupted and the procurement of components, the resins and all kinds of other components and molded products as well. It's not that OMRON's procurement power has declined significantly in February and in March as well. We expect it to make record high sales, so the production is working very well.
Thank you. We have passed the scheduled time, so we would like to take one more final question.
Thank you for the presentation today. For service sales, you talked about it in the presentation, and I have a question about it. In the midterm plan, against top line growth, profit growth is not expected to grow as much, and you are going to focus on reinvesting. For the service ratio, I guess the profitability improvement is not that great either. Performance-wise, how is higher services sales going to contribute to better profitability? Or is that going to be realized over the longer term, not in the next three years? Profitability contribution through higher services sales is my question.
This is Takeda speaking. I will take your question.
For the services business on a standalone basis and on a company-wide basis. I'd like to talk about the two perspectives. For added value and gross profits, it's greater than components as a business. From a company-wide point of view, investments towards the second stage and third stage is going to be underway, and also investments around carbon neutrality and digital transformation will also be conducted. Overall, the contribution and gross profitability from services is going to be offset. That's how we view it right now for company-wide performance. On a standalone basis for services and its profitability and stage one for the services business will be in the investment stage compared to component sales. Profitability for services is not expected to be substantially higher.
From these two factors, sales for services and the contribution to profitability impact-wise, it's not expected to be substantial during the first stage. That's the overall profitability impact on company-wide performance. I hope you understood my remark. Under the long-term vision, however, are you expecting it to contribute more? From the second stage onwards, we do expect more contribution to come through so that we won't be misleading. It will contribute to stage one as well, but because we're going to be making investments on a company-wide basis as well as investments into the services business as well, relative to components, the profitability is not going to be substantially higher. That was my point.
Got it. Thank you.
Now let us move on to the questions from the press. Any questions from the press? If you're participating on the web, please push the Raise Hand button. If you're on the phone, please push the asterisk mark and number nine. We will take questions simultaneously from the web and on the phone. I will call the name, so if your name is called, please unmute your microphone and ask your question. We would like to take as many questions as possible, and time is limited. We would like to limit the number of question, one question per person. Thank you.
Well, can you hear me? Question to Mr. Yamada. Thank you for the presentation today. Your thought on your sales in the long-term vision. For VG2020, JPY 1 trillion the target in 10 years. The long-term vision has no sales target. Why?
Thank you for the question. At this time, the sales target is not set for long-term vision because the direction of OMRON and how OMRON is going to change, that's what we have been focused on. The volume increase is not what we pursue. That's what we wanted to show in the long-term vision. That said, it's important to have good quantitative targets, so we have sales goals for the business segment in the midterm management plan and including non-financial targets. That's what we are going to do. Thank you.
Thank you.
Thank you. Moving on.
Thank you for taking my question. I have a question about the situation in Ukraine. The president touched upon Ukraine several times in his presentation. It's really hard to predict what's going to happen going forward. However, if the situation deteriorates, I'm sure that it will definitely have an impact on your midterm plan. In that case, you have a healthcare business and IAB business, and you conduct businesses in Russia, I presume. So what kind of implications should we expect? And at this point in time, are you already feeling the impact, if any? Thank you.
Thank you for your question. The situation in Ukraine, we are extremely concerned as a group. I do watch the news every day, and there are so many victims from this invasion. To all the people who have been affected, I would like to extend my condolences, and my heart goes out to everyone. I really hope that we will go back to peace, and I hope there is a ceasefire in the not too distant future. Going forward, as we see an increase of refugees, humanitarian assistance is probably going to be necessary. For the OMRON Group, we have offices in Europe, and they will mainly play a role in extending humanitarian assistance to the refugees. This is what we would like to consider.
EUR 1 million, or in Japanese terms, approximately JPY 120 million, is our donations we would like to make for humanitarian assistance, which will be in the form of our medical products, as well as in the form of cash. As for the impact on our business operations, currently in Russia and businesses for Ukraine, we have stopped the operations for the time being. Businesses, as a policy, will be suspended for a while towards these regions. Regarding the volume of sales, for Russia, annual sales currently is JPY 8.5 billion as of last fiscal year. To Ukraine, it was JPY 500 million last year. For healthcare, it's about JPY 5 billion. For IAB and others, it accounts for approximately the rest, which is JPY 4 billion.
Going forward, these businesses will be suspended for a while, so we will be impacted from that standpoint. However, when you consider the overall business mix for OMRON, sales is only about 1% of our total. Regarding the health of OMRON's business, we don't expect this to have a material impact. Having said that. This incident is expected to have a material impact on the global economy, especially in the area of energy. Energy prices, as well as raw material prices, as well as logistics cost, is definitely going to rise without question. It's a matter of being able to respond to such changes. We have set up a department that will respond to this emergency, and I am leading this team. We would like to take a swift action accordingly. That's all from me. Thank you.
Thank you. I have an additional question. How about, commodities from Russia and any difficulties you're expecting in procurement, that will have an impact on your procurement or, production?
At this moment, for a rare metal, I think that's what you have in mind in asking this question. For our products, we are not procuring such rare metals from Russia right now. If you go back and trace back to our suppliers, we don't have a complete grasp of it yet. We would like to ensure that we confirm and take action if necessary. That's all. Thank you.
Thank you. We have run out of time. This is going to be the last question.
Can you hear me?
Yes, we can hear you.
Thank you. For IAB, the doubling of sales and also the global engineers to be increased to 2,000. I would like to ask about the sales promotion. Are you going to increase the sales marketing using more engineers? Because that is what KEYENCE is doing, especially the outside global markets. Are you going to compete with KEYENCE that way as well?
Well, here's Takeda. As you said, KEYENCE has wonderful business model, and we are learning from them day in, day out. As you know, we have the many types of products, and we package them as an application so that that would fit different challenges of different customers. An important thing there is the frontline sales engineering personnel for the packaging. The frontline engineering sales should be reinforced. That's why we are going to increase the number of engineers to 2,000. That's the basic idea. Where? Well, globally at 37 ATC centers. We already have them to solve problems of our customers. We are going to combine software and hardware in a package using our technology.
For that purpose, we are going to increase the number of engineers to 2,000. That's the reinforcement of frontline people, the reinforcement of the capability of the implementation of our values. Thank you.
Now as time has come, we would like to conclude the Q&A session. Thank you very much, ladies and gentlemen, for participating today. After this investor briefing, we will be sending out questionnaires, so we hope you can respond. This concludes the briefing today. Thank you for your participation. Thank you, everyone. I'm sorry if I wasn't able to sufficiently answer your questions, but if you have any follow-up questions, please contact our investor relations department. Thank you once again for participating.