Earnings Call: Q1 2022

Aug 5, 2021

I'll make a presentation using the presentation file for this briefing. Page 1 describes the results of the Q1 of fiscal year ending on March 31, 2022. Despite disrupted logistics and semiconductor shortages, revenue and profit both increased year on year supported by firm demand. Net profit returned to a profit of 13,400,000,000 yen from a loss recorded in the same period previous year. The outlook remains uncertain because of COVID-nineteen resurgence end cost semiconductor and other supply shortages despite firm demand. So we will stick to previous projections we announced in May 2021. Page 3. Let's take a look at our performance by the numbers for the April June period. Revenue was 100 and 2,500,000,000 yen core operating profit, 13,400,000,000 yen core operating profit ratio 13.1 percent and net profit 13,400,000,000 yen. Both revenue and profit grew significantly. Page 4, we've analyzed how core operating profit increased from 1,100,000,000 yen to 13,400,000,000 yen. The largest contributor was an increase in sales and production, an addition of 11,400,000,000 yen but an increase in SG and A following the return of our business activities pushed down the profit by 2,400,000,000 yen Other contributors included exchange gains and the strong IMC business, which added 2,000,000,000 yen to the profit. Taken altogether, core operating profit came to 13 point 4,000,000,000 yen. Page 5 shows performance by business segment. All the 3 segments saw increased revenue and core operating profit. Audio Equipment and IMC or Industrial Machinery and Components, which recorded losses in the previous year, have returned to profitability. Musical Instruments' core operating profit ratio soared to 15.1%, showing a significant improvement. Page 6, our full year outlook is exactly the same numbers as the previous time. As is written upper right in fine letters, fiscal year projections from the previous announcement. Our focus for revenue is 400,000,000,000 yen core operating profit, 47,000,000,000 yen core operating profit ratio, 11.8 percent net profit, 41,000,000,000 yen the chart in Page 7 shows how we will increase core operating profit from 40,700,000,000 yen to 47,000,000,000 yen the largest contributor is an increase in sales and production. We expect a rise in SG and A. Other positive factors include IMC Business. Page 8. Our full year outlook by business segment is also unchanged. Musical Instrument is expected to post JPY 258,000,000,000 in revenue, JPY36,500,000,000 in core operating profit and the core operating profit ratio of 14.1 percent. Audio Equipment, 108,000,000,000 yen in revenue, 8,000,000,000 yen in profit and profit ratio of 7.4%. IMC Business and Others, 34,000,000,000 yen in revenue, 2,500,000,000 yen in profit and a profit ratio of 7.4%. Page 10 and the several pages after that will give you a segment overview. Page 10, Musical Instruments. In the Q1, we were able to achieve a double digit revenue growth in all product categories, particularly sales of pianos, digital musical instruments and guitars outperformed those in the fiscal year ending in March 2020 before the pandemic started. They were supported by strong demand despite continued supply shortages. Sales of wind were around 80% of pre pandemic levels. Market conditions improved in all regions. Sales rebounded to the pre pandemic levels everywhere, but Japan. This is because Japan has a sizable share of wind instruments, particularly in the Q1 and the Yamaha Music School operation remains erratic. Revenue and the profit are expected to increase on all categories due to the ongoing recovery in market conditions despite uncertainty involving the pandemic and the semiconductor procurement. All regions are expected to recover. Fiscal 2020. We have plotted the numbers that I explained and developed this chart. Page 11 takes a look at revenue by major product category. The bottom numbers on the right bars for each product category represents the results of the Q1. In the Q1, revenue of Piano grew by 72%, Digital Musical Instruments by 27%, wind strings, Percussions by 29%, Guitars by 18%. Revenue in all the categories top those in the previous year. Full year revenue forecast for pianos, a year on year growth of 5%, a 10% growth for digital musical instruments and wins, strings and the percussions and 11% growth for guitars. The previous forecast by product category still stands. Page 12 shows musical instruments sales by region. In the Q1, sales in Japan grew by 58%, North America by 23%, Europe by 26%, China by 37% and other regions by 52%. The growth in Japan stands out because the country saw a much deeper drop the same period last year than other regions. Full year forecast for revenue growth is 7% for Japan, 9% for North America, 9% for Europe, 8% for China and 9% for other regions. Page 13, audio equipment. In the Q1, AV audiovisual product sales declined, but the PA Equipment market is on a recovery trend. Sales of AV products dropped due to semiconductor shortages. The business environment for PA Equipment remains challenging, but we are seeing a recovery in live performances in Europe and America. Sales of ICT equipment remained robust, particularly in Japan. In North America, there was a firm recovery in PA equipment sales, but AV Products struggled due to supply shortages. For full year forecast, we expect recovery of PA and continued ICT growth despite supply shortages. Semiconductor supply shortages risks on AV products remain our concern despite expected growth in sound bars and earphones. PA equipment is bound to recover on the prospects of a recovery in the commercial audio equipment market. ICT equipment is expected to see continued high demand for conference systems and network equipment. Page 14 shows audio equipment revenue by main product category. The Q1 was a quite tough quarter for AV Products. Revenue shrunk by 5% year on year. PA equipment revenue increased by 42%, showing a sign of recovery. ICT equipment revenue grew by 70% as shown in the blue number. Full year forecast. AV product is expected to manage just 1% year on year growth. PA equipment is expected to increase by 9% end ICT equipment by 13%. Page 15 shows audio equipment revenue by region. In the Q1, revenue in Japan grew by respectable 17%, thanks in part by strong ICT business. Revenue in North America contracted by 6% year on year due to shrinking AV product sales. Europe grew by 32%, China by 26%, emerging economies and other regions by 48%. Next full year forecast. Revenue in Japan is expected to shrink by 2% due to weak AV sales and the delays in PA Installation Services. North America will see year on year growth of 6% Europe, a growth of 6% China, a growth of 1% other regions, a growth of 17%. Page 16 shows revenue and profit for IMC Business and the others. In the Q1, sales of electronic devices, Automobile Interior Components and Factory Automation Equipment all increased, thanks to recovery in market conditions. Full year forecast. We expect to expand sales of Yamaha Brand Audio Systems. We also expect continued strong demand for automobile interior components. Lastly, I will touch upon other financial figures. Take a look at the middle column of the balance sheet as of the end of the Q1. Total assets were 576,900,000,000 yen Total equity was 416,000,000,000 yen the numbers show a healthy balance sheet. The far right column shows projections for March 31, 2022. Page 19 shows capital expenditure and R and D expenses. We have not changed these figures. Capital expenditure for full year is expected to be 18,200,000,000 yen R and D expenses 25,300,000,000 yen this concludes my presentation. Thank you so much.