Yamaha Motor Co Ltd

TSE:7272

Earnings Call Transcript 2019-Q1

[Tatsumi Okawa, executive]

My name is Okawa. I'd like to take you through the financial results for the first quarter of fiscal year 2019.

Please turn to Page 3 of the handout material. I'd like to explain the business results. The table shows from left 2018 first quarter results, 2019 first quarter results, comparison with the previous year and 2019 annual forecast.

2019 first quarter results were net sales 106% versus previous year, JPY 429.3 billion; operating income 87% versus previous year, JPY 35.9 billion; operating income ratio down 1.8 points year-on-year, 8.4%; ordinary income 94% versus previous year, JPY 37.5 billion; and net income 87% versus previous year, JPY 28.3 billion. Exchange rates were JPY 110 to the dollar and JPY 125 to the euro. Emerging country exchange rates were IDR 14,077 to the dollar and BRL 3.8 to the dollar.

During the first quarter, due to the impact of emerging country currencies as well as the euro, we had a positive sales growth and negative profit growth. However, the results were within our expectations. Despite the ongoing exchange rate, we will make sure to achieve the full year targets while carefully monitoring the economic trends.

Moving on to Page 4. Factors impacting operating income will be explained. Year-on-year, from Q1 2018 to Q1 2019, OP decreased from JPY 41.2 billion to JPY 35.9 billion. As you can see on the chart, positive factors include sales increase or sales volume increase of JPY 2.6 billion, which is the net increase after offsetting sales decreases. Profitability improvement of JPY 1.2 billion, raw material price fluctuation of JPY 0.2 billion. These were the positive factors. On the other hand, negative factors include increasing SG&A expenses of JPY 3.9 billion, increasing depreciation expenses of JPY 1.1 billion, increasing development costs, including expenses for growth strategies of JPY 1.1 billion. Effects of foreign exchange of JPY 3.1 billion. These were factors behind JPY 35.9 billion.

Please turn to Page 5. I'd like to explain net sales and operating income by business segment. The Land Mobility business saw an increase in net sales in all of the products, but the business saw a decrease in operating income in all of the products except for electrically power-assisted bicycles. Net sales were JPY 275.9 billion, and OP was JPY 9.4 billion, representing an increase in sales and decrease in profit for the entire business.

The Marine business saw an increase in the sales volume of large onboard motors, supported by increased production. Net sales were JPY 103 billion and operating income JPY 21.5 billion, representing an increase in both sales and profit. The Robotics business was negatively affected by the slowdown in capital expenditures in China. Net sales were JPY 15.3 billion and operating income JPY 2.4 billion, representing a decrease both in sales and profit.

The Finance Services business saw a steady increase in receivables balance. Net sales were JPY 10.1 billion and operating income JPY 2 billion, an increase both in sales and profit.

The Others business saw increased sales volumes of golf cars and general-purpose engines. Net sales were JPY 25.1 billion and operating income JPY 0.7 billion, representing an increase in sales while the operating income was flat year-on-year. The details of each business are shown on later pages.

Please turn to Page 6. This Page shows the details of the Land Mobility businesses, motorcycles in developed countries and emerging countries. Motorcycles in developed markets, shown on the left, saw an increase in sales volumes in Europe. Net sales increased year-on-year from JPY 55.3 billion to JPY 59.2 billion. However, operating income was negatively affected by the yen/euro exchange rate as well as increased expenses related to growth strategies. Operating income ratio declined from negative 6.3% to negative 10.1%.

Motorcycles in the emerging market, shown to the right, saw a steady increase in sales volumes of high-end products in Indonesia and a steady sales trend in the Philippines. Net sales grew year-on-year from JPY 181.8 billion to JPY 185.5 billion. On the other hand, due to the decreased sales volumes in Taiwan, Vietnam and Argentina as well as negative impact of foreign exchange in emerging countries, operating income ratio declined year-on-year from 9.6% to 7.5%.

Please turn to Page 7 for the details of the Marine business and the Robotics business. The Marine business saw an increase in sales volume supported by the full-fledged production expansion of large outboard motors. Net sales increased from JPY 90.1 billion to JPY 103 billion. On the profit front, the absolute value of operating income increased. However, due to the increase in the promotion expenses of water vehicles and the impact of European currencies, operating income ratio fell slightly from 21.8% to 20.8%.

The Robotics business, shown to the right, was affected by the slower capital expenditures in China. Net sales fell from JPY 17.4 billion to JPY 15.3 billion. The decline in sales was accompanied by decline in profit, which was caused by decreased sales as well as the increase in R&D expenses designed to secure future growth. Operating income ratio also fell from 24.6% to 15.7%.

Please turn to Page 8. I'd like to give you the detailed explanation about the Financial Services business, which was made an independent segment starting this year. The chart to the left shows receivables balance as of the end of Q1 FY '19, and the chart on the right shows the net sales and operating income ratio.

As shown by the left chart, there was a steady growth in receivables balance in all of the regions, leading to an increase in net sales from JPY 8.6 billion to JPY 10.1 billion. Operating income ratio also grew from 19.4% to 20%.

In addition, we have established a French subsidiary in March this year. Full-fledged business operation is yet to be started, but this is part of our initiative to expand our business globally.

Lastly, Page 9 shows recent activities under the medium- to long-term growth strategies, titled ART for Human Possibilities. First, as shown on the left, for the purpose of promoting electric motorcycles on April 4, 4 domestic motorcycle manufacturers, including us, announced the establishment of a consortium for replaceable batteries. This is to join hands with other manufacturers to cope with the upcoming EBera. The photo to the right shows the electric small and a low-speed public personal mobility, which complies with the new hydrogen fuel standards. We have announced the start of a public road demonstration in Wajima City Ishikawa Prefecture. The demonstration should allow the vehicle to travel a longer distance than in the past. We will continue to take on challenges to tackle social issues where Yamaha can contribute. Other initiatives are also listed. They are linked to investments and growth strategies-related expenses executed during Q1. The long list for Q1 alone should demonstrate how proactive we are in implementing our growth strategies. To ensure a sustainable growth of the company, we will continue to co-create value with business partners and help solving social issues.

This concludes our presentation today. Overall, we had an increase in sales and decrease in profit. It was mainly due to the impact of FX rates as well as the proactive implementation of growth strategies. All in all, results were in line with our expectations. That's our perception. Thank you very much for your kind attention.