Earnings Call: Q1 2021

May 14, 2021

So this is Okao speaking. Thank you very much for attending the online earnings report of Yamaha Motors. First of all, I would like to offer the gratitude to people who are fighting at the frontline against the pandemic. Let me start about expanding the Q1 results. Please go to Page 4. This shows the wholesale and the inventory as of end of March in a major products and compare that between 2020 2019 results. First of all, about wholesale. For March 2020, The impact of the lockdown due to COVID-nineteen started to appear. However, as you can see, excluding Indonesia, All the regions has been able to exceed last year. In Indonesia, the wholesale has been over our expectations. Even compared to 2019, in the pre pandemic days, in most of the markets, sales has recovered. On the other hand, if you go to inventory, there's still the impact from shipment delays due to the lack of containers, and supply has not yet being able to catch up with the sharp recovery in demand. Overall, inventory is low. Please go to Page 5. This is about the overall financial figures. On the slide from the left, this is 2019, which is a benchmark year In 2020, which the impact of coronavirus have become relevant and the results of the Q1 of 2021. On the right, we show the comparison between 2019 2020. For 2021, sales was year over year 112 percent at 444,100,000,000 yen Operating income was 190% year over year at 48,300,000,000 yen. The outcome income ratio was +4.5 points@10.9 percent. Ordering income was 197% year over year at 52,900,000,000 yen Net income attributable to parent company shareholders It was 4 35% year over year at 41,800,000,000 yen From the second half onwards from last Here, the recovery has continued. So not only against the 20 21st quarter, against the Q1 of 2019, each of the In each of the profit lines, as of Q1, We have been able to see a record high level. In terms of the actual exchange rate, U. S. Dollar was 106 yen Euro was 128 yen In terms of the emerging market currencies, the Indonesian rupiah was 14,108 against the dollar and Brazil real was 5.5 against the dollar. Please turn to Page 6. This is a change of the operating income in the Q1 comparing 20202021. We show the change of each businesses and the growth strategy expenses and the impact of the exchange rate. In each of the businesses, profit has increased, specifically a large contribution coming from the emerging market motorcycles at +9,600,000,000. This is due to the sales increase in major markets excluding Indonesia and the improvement of the model mix. Please turn to Page 7. This is the comparison against the Q1 of 2019, which is the actual benchmark of our performance. As you can see, at the most businesses, it has been over 2019. And the land mobility business, both for the developed countries and emerging markets, Has improved strongly. For the non mobility business overall, it was +12,900,000,000. The breakdown is for the developed countries motorcycles due to the reduction of sales promotion and advertisement costs plus 4,600,000,000 yen. For the emerging market motorcycles, through the increase of the high end models, plus 7,200,000,000 yen, RV was +1,100,000,000 for SPV, Electrically Powered Assisted Bicycle, plusminus0. For the Marine Products business, 2019, specifically, the wholesale has been large. And for 2021, This has been a shipment delay due to lack of containers. It was minus 1,100,000,000 yen For the Votex business, From the second half of twenty nineteen, we have consolidated our Yamaha Robotics Holdings due to this impact of +008 1000000000. For the financial services business, plus 3,100,000,000 yen for the others business, plus 3,300,000,000 yen. Besides this, where the gross strategy expense was plusminus0. The exchange rate impact was minus 3,600,000,000. Please turn to Page 8. Based on the continuing strength of each of the businesses in the developed countries and the more than expected The recovery of the emerging market motorcycle business, inflecting the impact of exchange rates and the effects of structural improvement mainly through fixed cost reduction, We will revise our full year outlook for 2021 upwards. Sales 2% up, 1,735,000,000,000. Operating income, 18% up, 130,000,000,000 yen Operating income ratio, the improvement of 1 point to 7.5 percent. Ordering income, 23 percent up to JPY 135,000,000,000 net income attributable to the parent shareholders, 25% up, To the parent shareholders, 25 percent up, JPY 90,000,000,000. For the full year exchange rate, it will be adjusted to the Q1 actual figures, €128 to the euro. Please turn to Page 9. I would like to explain about the forecast and the assumptions we are using for our upward revision. The assumptions for the exchange rate is as I have explained in the previous page. In terms of the external environment, in countries such as India, The coronavirus is spreading again. But overall, we assume the economic activity will continue to normalize. We are not assuming a global lockdown due to the spread of variance of COVID-nineteen. As for factors such as the tight logistics status represented by the lack of containers and confusion at the ports, supply shortage of parts such as semiconductors And the sharp rise of raw material prices as in rhodium and aluminum, we have reflected that an increased cost and impact and under a reasonable estimation under the current situation. However, the The status is changing day by day, so we will continue to observe the situation closely. As for the business environment, for the developed Countries business. With the land vehicle and the marine products business, the outdoor leisure demand is continuing. And for the emerging market motorcycle business, the demand is recovering. In the robotics business, overall In the world, the CapEx demand is expanding, and the demand for semiconductors is increasing. We think that the positive environment will continue for us. In terms of initiatives to improve our profitability, By focusing our managerial resources to the premium models, we want to improve our marginal profit ratio. At the same time, we are determined to reduce of fixed cost. Please turn to Page 10. This is the progress of our mid- to long term initiatives. First, let me explain about a connected strategy. We are conducting our activity toward objective of making all of our products connected by 2,030 in order to offer new value. By 2,030 in order to offer new value. Under this initiative, we introduced 2 models in the market. And MAX is a global model in which we have started sales in Indonesia. IRocks is a model that we have launched in the SM market from this year. Preparing for carbon neutrality is a very important managerial issue. Currently, we are setting new targets and milestones. We are planning to conduct a presentation about our activities as early as possible. As for initiatives towards electrification, we are participating in the swappable battery consortium for electric motorcycles in Japan and Europe, and things are progressing. Last month, we announced receiving orders for the development of a prototype for electric motor units for hyper electric vehicles. Since we made this announcement in February 2020, we have received many inquiries on a global level. Please turn to Page 11. This is a marine case strategy. This strategy aims to change the marine life of our customers that is a more secure and comfortable experience by utilizing cutting edge technology. Under connected, we will aim to realize connected boats, which offer peace of mind. In the U. S. Market, we have introduced Helm Link, which enables early detection of quality issues, prevention of problems and improved service. We have also invested in a U. S. Company, CYREN Marine, which is strong in the connected area and started to conduct technological development. In the autonomous shared electric domains, we are conducting initiatives shown on this slide. Next, I would like to explain the situation by each business. Please turn to Page 13. The by business sales operating income is what I want to explain. The graph is in 2019, 2020 and 2021, We show 3 years' worth. Excluding the financial service business, all of the business Saw the increased sales and increased profit against 2020. From the next page onwards, I would like to explain about the major segments in detail. Please turn to Page 14. On the left is the land mobility, within that, the developed country's motorcycle business. For 2021, in North America and Oceania, Strong demand continued for outdoor and family leisure. With this trend, sales volume increased, leading to increased sales. In Europe, although demand was strong due to the delay of supply from container shortages, sales volume declined. As a result, sales increased slightly from 58,700,000,000 yen to 59,200,000,000 yen However, as we have reduced SG and A, operating income ratio improved from minus 5.4% to minus 1.2%. On the right is the emerging market motorcycle business. In 2021, The ASEAN and Indian market recovered more than we have expected. More specifically, sales volume increased in India, Thailand, China, Taiwan and the Philippines. Sales increased from 173,500,000,000 yen to 195,900,000,000 yen Profit increased due to the strong sales of the high end MAX series such as X MAX in Thailand and N MAX in ASEAN. As a result, operating income ratio improved from 6.4% to 9.3%. Please turn to Page 15. On the left is the RV business. Similar to the motorcycle business, outdoor and family leisure demand continued to be strong for 2021 And sales volume increased. As a result, sales increased from 16,500,000,000 to 21,700,000,000 yen Operating margin turned positive from minus 5.8 percent to 0.8%. On the other hand, there are issues surrounding parts supply and lack of containers. We will respond to these issues and strive to answer the expectations of our customers. On the right is the SPV business. For 2021, sales of domestic completed Units and e Kits for Europe continue to be strong. Sales increased from 11,700,000,000 yen to 13,700,000,000 yen Profit wise, the model mix improved as sales of e Kits for Europe improved and operating margin went up from 13 point It was sent to 15.6%. Please turn to Page 16. On the left is the Marine Products business. Robust demand is continuing in the North American and European markets. At the beginning of the year, we were severely impacted to the delay of shipments due to shortage of containers. But as we have enhanced our supply by bringing up Our production to full capacity sales volume increased. Sales of boats in North America and Europe and parts trended strongly. As a result, sales increased from 90,800,000,000 yen to 97,500,000,000 yen Operating margin improved from 17.1% to 19.8%. Going forward, to respond to the increased demand mainly in the developed markets, We will enhance the supply by operating under full capacity. On the right is our robotics business. Strong demand is continuing in China, Taiwan and Korea. At the same time, demand from the U. S. And Europe has started to recover. With this, sales volume of service monitors increased. Sales at Yamaha Robotics Holdings was strong. Post merger integration centering on structural reform has progressed, Leading to a reduction of losses. As a result, sales increased from 17,900,000,000 yen to 27,100,000,000 yen Operating margin improved dramatically from 1.4% to 11.4%. Operating margin excluding Yamaha Robotics Holdings is 16.2%. Please turn to page 17. Lastly, this is about the Financial Services business. On the graph on the left hand side, we show the balance of the receivables and the breakdown by each region. On the right hand side, we show the sales and the operating profit margin. For the March end 2021 receivable balance, due to the strong retail And delay of the product supply, the market inventory went down substantially. As a result, receivables towards wholesales has gone down And the receivable stood as 3.73,000,000,000 yen Due to this, for 2021 sales, this will be the interest income It's JPY11.3 billion. This is a slight decline year over year. But in terms of the profit, there has been a decrease of the allowance for doubtful accounts And the retail finance profit has gone up. So this led to increase of profit and operating income ratio has gone up to 42.2%. This has been the result for the Q1. We'll continue to observe the impact of COVID-nineteen going forward. Our basic stance that we continue to proactively manage our company under the assumption that we will be able to recover more than our initial expectations. Thank you very much for your attention.