Yamaha Corp

TSE:7951

Earnings Call Transcript 2022-Q1

[Satoshi Yamahata, executive]

I'll make a presentation using the presentation file for this briefing. Page 1 describes the results of the first quarter 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 JPY 13.4 billion from a loss recorded in the same period previous year. The outlook remains uncertain, because of COVID-19 resurgence, and 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 JPY 102.5 billion; core operating profit, JPY 13.4 billion; core operating profit ratio, 13.1%; and net profit, JPY 13.4 billion. Both revenue and profit grew significantly.

Page 4, we've analyzed how core operating profit increased from JPY 1.1 billion to JPY 13.4 billion. The largest contributor was an increase in sales and production, an addition of JPY 11.4 billion, but an increase in SG&A, following the return of our business activities, pushed down the profit by JPY 2.4 billion. Other contributors included exchange gains and the strong IMC Business, which added JPY 2 billion to the profit. Taken all together, core operating profit came to JPY 13.4 billion.

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 saw core operating profit ratios soar to 15.1%, showing a significant improvement.

Page 6, our full year outlook is exactly the same numbers at the previous time. As is written in upper right in fine letters, we stick to full year projections from the previous announcement. Our forecast for revenue is JPY 400 billion. Core operating profit, JPY 47 billion. Core operating profit ratio, 11.8%. Net profit, JPY 41 billion.

The chart in Page 7 shows how we will increase core operating profit from JPY 40.7 billion to JPY 47 billion. The largest contributor is an increase in sales and production. We expect a rise in SG&A. Other positive factors include IMC business.

Page 8, our full year outlook by business segment is also unchanged. Musical Instruments is expected to post JPY 258 billion in revenue, JPY 36.5 billion in core operating profit and the core operating profit ratio of 14.1%. Audio Equipment, JPY 108 billion in revenue, JPY 8 billion in profit, and profit ratio of 7.4%. The IMC Business and Others, JPY 34 billion in revenue, JPY 2.5 billion in profit, and a profit ratio of 7.4%.

Page 10 and the several pages after that will give you our segment overview.

Page 10, Musical Instruments. In the first quarter, we were able to achieve a double-digit revenue growth in 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 winds 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 first quarter, and the Yamaha Music School operation remained 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 semiconductor procurement. All regions are expected to recover. 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 first quarter. In the first quarter, revenue of Piano grew by 72%, Digital Musical Instruments by 27%, Winds, Strings, Percussions by 29%, Guitars by 18%. Revenue in all the categories topped those in the previous year.

Full year revenue forecast for Pianos, year-on-year growth of 5%, a 10% growth for Digital Musical Instruments and Winds, Strings and Percussions, and 11% growth for Guitars. The previous forecast by product category still stands.

Page 12 shows Musical Instrument sales by region. In the first quarter, 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 first quarter, AV audio visual 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 remaining 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 first quarter was a quite tough quarter for AV product. 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%. And ICT Equipment by 13%.

Page 15 shows Audio Equipment revenue by region. In the first quarter, revenue in Japan grew by a 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 Others. In the first quarter, 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 first quarter. Total assets were JPY 576.9 billion. Total equity was JPY 416 billion. The numbers show a healthy balance sheet. The far right column shows projections for March 31, 2022.

Page 19 shows capital expenditure and R&D expenses. We have not changed these figures. Capital expenditure for full year is expected to be JPY 18.2 billion. R&D expenses, JPY 25.3 billion.

This concludes my presentation. Thank you so much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]