7951.T7951.TJPX
Loading
Jun Nishimura: Hello, everyone. My name is Nishimura. I would like to present to you the financial results for the first quarter of the fiscal year ending March 2026. Please turn to the first page titled Q1 highlights. First, an overview of the financial results. These are the results for the first quarter of the fiscal year ending March 2026. While the slowdown in audio equipment was as expected, the recovery pace for musical instruments particularly panels was slow. Additionally, the appreciation of the yen contributed to a decline in revenue. Although we work to contain SG&A, profit declined due to factors such as the yen appreciation, the impact of additional U.S. tariffs and a deterioration in the product mix caused by a decline in sales of audio equipment for professional use. Regarding the full year forecast, we have revised our full year earnings forecast downward to reflect the impact of the additional U.S. tariffs currently anticipated, along with our planned countermeasures. Going forward, we will continue to take all possible actions to mitigate the effects of these tariffs. Next, I would like to explain about the performance summary. Please turn to Page 3, titled Q1 Summary. These figures represent the actual performance for the first quarter. The revenue was JPY 103.9 billion. The core operating profit was JPY 4.7 billion, resulting in an OP ratio of 4.5%. The net profit for the quarter was JPY 2.4 billion. The exchange rates for the first quarter are as shown here on the slide. Net profit was minus JPY 7 billion year-on-year. As for the revenue, it declined 7.4% year- on-year, but when excluding the impact of exchange rate, the decline was 2.8%. Next, please refer to Page 4, a waterfall chart, which illustrates the factors behind the changes in core operating profit. This chart compares to results with the previous fiscal year. In Q1 of fiscal year ending in March 2025, the core operating profit was JPY 9.2 billion. From there, we saw a negative impact of JPY 1.1 billion due to exchange rates. Next, the impact of additional tariffs, which we've incorporated into this quarter's results amounted to a negative JPY 1.8 billion year-on-year. The following section decrease in sales, production and model mix, et cetera, shows a negative JPY 2.7 billion overall. This portion includes some countermeasures taken to offset the impact of tariffs. However, in total, these factors led to a JPY 2.7 billion decrease in profit compared to the previous year. A key factor here is that in the first quarter of the previous year, we saw a significant increase in shipments of entertainment PA equipment, including the backlog orders. By contrast, this year shows a marked decline from the high baseline. In terms of model mix, we also saw a decrease in high-margin entertainment PA products. Regionally, there was a notable decline in sales in Europe. These elements contributed significantly to the overall negative impact. In addition, regarding the structural reforms in piano manufacturing that we have been implementing, the positive impact from these efforts amounted to JPY 600 million in Q1. Together with the containment of SG&A expenses, we landed at JPY 4.7 billion in core operating profit for the quarter. Please turn to Slide 5 showing results by business segment. In the musical instruments business, revenue totaled to JPY 66.5 billion with operating profit of JPY 2.1 billion, resulting in an OP ratio of 3.1%. In the audio equipment business, revenue was JPY 33 billion and operating profit came to JPY 2.3 billion with a profit ratio of 7.0%. For others, please refer to the figures shown on the slide. Next, please refer to Slide 6, which outlines our business performance outlook. For the fiscal year ending March 2026, we forecast a revenue of JPY 452 billion, representing a decrease of JPY 10.1 billion year-on- year. Core operating profit is expected to be JPY 32 billion, a decrease of JPY 4.7 billion compared to the previous year. The OP ratio is projected at 7.1%. Net profit is forecasted to be JPY 22.5 billion, which represents an increase of JPY 9.1 billion year-on-year. As for the exchange rate assumptions, please refer to the rates shown on the slide. Next, please refer to Slide 7. This slide presents the factors behind the changes in our full year forecast using a waterfall chart. The top section compares the current forecast with the previous fiscal year. Starting from the previous year's actual core operating profit of JPY 36.7 billion, we expect a negative impact in exchange rates of JPY 3.1 billion over the full year. In addition, the impact of tariffs is projected to be a negative JPY 11.2 billion. Regarding the impact of tariffs, in addition to the reciprocal tariffs announced on April 2, there is also the previously imposed 20% tariff on shipments from China. The combined effect of these tariffs resulted in a negative impact of JPY 11.2 billion as shown here. Within this, the positive contribution from increase in sales, production and model mix amounts to JPY 7 billion, included in the figure is a JPY 6.2 billion element, reflecting countermeasures implemented to mitigate the tariff increases. Additionally, the effects of the structural reforms in piano manufacturing carried out in the previous fiscal year is expected to contribute a positive JPY 2 billion for the full year. This aligns with the results we previously presented. Furthermore, there were onetime processing expenses last year, including the year-end impairment of parts and materials. These expenses are not expected to occur this fiscal year and thus have a positive impact on the current forecast. The SG&A is expected to be minus JPY 1.3 billion, which means that there is an increase in cost. However, this increase reflects strategic investments in growth areas such as new business development, music connect and audio equipment for professional use, all of which are key focus areas for driving future growth. At the same time, we continue to exercise discipline by controlling expenses in other areas, including IT costs. on profitable businesses and segments where revenue is expected to decline. We remain committed to maintaining a balanced and focused approach. Next is the chart comparison versus previous projections. The prior forecast projected operating profit of JPY 40 billion, but the impact of tariffs has now been revised to a negative JPY 8.6 billion. The difference between the JPY 11.2 billion negative impact shown in the upper chart and the JPY 8.6 billion in the lower chart is attributable to the 20% tariff on shipments from China that was implemented prior to April 2. Next to that, the increase in sales, production and model mix, et cetera, there is a positive JPY 0.4 billion. Included in the figure is a JPY 3.6 billion element, reflecting countermeasures taken to offset the impact of tariffs. However, this positive figure is partly offset by other negative factors, including declines in revenue from the musical instruments segment, reductions in production volume and challenges in achieving targeted price adjustments. As a result, the net impact is presented as a positive JPY 0.4 billion. Regarding SG&A, there is a positive factor of JPY 0.8 billion, resulting from expense containment efforts. This reflects further cost reductions compared to the previous forecast, leading to an operating profit forecast of JPY 32 billion. Next, please turn to Slide 8, which presents the performance forecast by business segment. For the musical instruments business, revenue is projected at JPY 293 billion with an operating profit of JPY 20.5 billion, representing a profit ratio of 7.0%. For the audio equipment business, revenue is forecast at JPY 139 billion with operating profit of JPY 11 billion and a profit ratio of 7.9%. The figures for other businesses are shown on the slide. Next is the overview by business segment. Please refer to Slide 10. First, the musical instruments business. In the top right corner, we show the Q1 performance as well as the full year projection. For the first quarter, guitar sales continued to grow, while piano sales remained sluggish, resulting in a decline in revenue. In the China market, we are seeing a halt in the downward trend. However, piano sales primarily in China and other regions remain weak, leading to a significant revenue decline. In the digital musical instruments, digital pianos continue to recover, but due to the impact of tariffs, growth in North America has slowed, and we expect revenue to remain roughly flat year-on-year. Sales of wind, strings, percussion instruments and guitars performed well, contributing to increased revenue in those categories. Regarding the full year projection, although we expect a decline in North America due to the impact of tariffs, recovering markets outside China is anticipated to drive overall revenue growth. Piano sales are expected to decline, reflecting weak demand in both the U.S. and China. In contrast, the digital musical instruments are projected to see revenue growth supported by recovery in Europe and other regions. Sales of wind, strings percussion instruments and guitars are expected to remain strong with increase in sales. Next, please refer to Slide 11. This slide shows the full year projection by major product category. Excluding the impact of the exchange rates, we forecast the following year-on-year revenue changes, pianos, 97%, digital musical instruments, 102%, wind, strings and percussion instruments, 103%, guitars are double-digit growth at 111%. Next, please turn to Slide 12, which shows revenue by region. In Europe, we forecast 105% year-on-year growth. From the second quarter onward, we will implement various recovery measures targeting different markets, and these efforts are factored into the 105% forecast. For China, we anticipate continued decline in panel sales compared to the previous year, resulting in a forecast of 96%. In other markets, including emerging countries, we expect growth of 107%, reflecting our planned performance. Next, please turn to Slide 13, which covers the audio equipment business. Starting with Q1 in the audio equipment for professional use formerly referred to as the B2B product, and the audio equipment for mobility use previously called the automotive product. The revenue growth has temporarily plateaued. In the audio equipment for consumer use, which was formerly known as the B2C product the home audio business scaled down. This slowdown reflects a strategic focus on narrowing sales regions and product lineups to better target the hobbyist market from last fiscal year. Now audio equipment for professional use exceeded the plan but fell short of the strong results achieved in the previous year, mainly in Europe. Sales of audio equipment for mobility use decline as previously expected in China. As for the full year projection, revenue from audio equipment for professional use is expected to level off and revenue is expected to decrease temporarily due to a decline in sales of automotive sound systems in China. Next, please refer to Slide 14. This slide shows the sales performance for each of the 3 segments, each compared against the previous fiscal year. The audio equipment for consumer use is projected at 99%, for professional use at 100% and for mobility use at 85%. Next, please turn to Slide 15, which represents revenue by region. Sales in Japan showed significant growth, driven primarily by the expansion of audio equipment for mobility as well as growth in network equipment. In North America, revenue is projected at 99% year-on-year. In Europe, revenue is projected at 94%, reflecting a temporary adjustment phase following the peak demand for entertainment PA systems. Sales in China declined sharply to 59%, primarily due to the decrease in sales of audio equipment for mobility use in the China market. Other regions experienced slight growth as indicated here. Next, regarding other businesses. In the first quarter, revenue increased for both the automobile interior wood components and factory automation, FA equipment. For the full year projection, we anticipate continued recovery in these areas with revenue growth expected for both automobile interior wood components and FA equipment. Next, please turn to Slide 18 for other financial figures. First, regarding the balance sheet as of the end of Q1. Cash and cash equivalents increased by JPY 3.3 billion. On the other hand, a significant change was seen in trade and other receivables, which decreased by JPY 9.8 billion. This is primarily attributable to seasonal fluctuations between the end of March and the end of June. Regarding liabilities and equity. Current liabilities decreased by JPY 4.4 billion, primarily due to the settlement of outstanding payments resulting in a reduction of liabilities. As for the forecast as of the end of March 2026, cash and cash equivalents are projected to be JPY 96 billion, mainly impacted by the decline in net profit for the period. Inventory is expected to be JPY 142 billion, down JPY 8 billion from JPY 150 billion at the end of March in the previous fiscal year. Next, please refer to Slide 19, which covers ROE, ROIC and shareholder returns. First, regarding ROE. Due to the impact of tariffs and other factors, the initial target of 6.3% has been revised downward to 5.0%. The cost of shareholders' equity has been calculated at 6.9%, as shown at the top of the slide. As of May 8, this figure was 7.4%, so it has decreased by approximately 0.5 percentage points. The main factor behind this change is a reduction in the beta value. Similarly, the WACC used for ROIC has decreased from the previous 7.2% to 6.6%. Our forecasted ROIC remains at a challenging 4.9%. Regarding shareholder returns, the annual dividend per share is set at JPY 26, as indicated in the lower part of the slide. Stock splits conducted in the second half of last year are combined with the first half and shown after the splits. Compared to the previous dividend of JPY 25.3, this represents a dividend increase and there has been no change to the dividend forecast for this fiscal year. Regarding cross shareholdings, the value has fluctuated, resulting in the ratio falling below 10% to 9.7%. Finally, please turn to Slide 22, which highlights the key topics from Q1. As part of the reconstruction of a strong business foundation, we have launched new products that pursue intrinsic product value refined through technology and sensitivity. These products include digital panels, electronic drums, routers for corporate use and condenser microphones. Below that on this slide regarding Yamaha music innovations, our new base established in Silicon Valley. Discussions have begun with other companies aimed at driving digital transformation and improving productivity. In the middle section of the slide, regarding evolving to create the future, we have created the OMOTENASHI GUIDE for biz to realize universal design of awards and sounds and the adoption of it is expanding. It has started to be used at the Expo 2025 pavilions and being introduced to JR East. Additionally, as we deepen collaboration with other companies, technologies and external resources, we are creating a new musical experience. One example is the proof-of-concept experiment for GPAP over MoQ. We have also highlighted here the technology that enhances production efficiency and flexibility of virtual production. Regarding setting sustainability as a source of value, just recently, we announced the launch of a public private partnership with the Ministry of Education, Culture, Sports, Science and Technology and JICA to expand music education initiatives in the Philippines. With this, I would like to conclude my presentation.