Yamaha Corporation (7951.T) has presented its financial results for the second quarter of the fiscal year ending in March 2025, revealing mixed performance across its segments. Despite a notable increase in core operating profit, the company has revised its full-year revenue and profit forecasts downward, citing a further deceleration in the Chinese market. Yamaha also announced an impairment loss of JPY7.8 billion for its piano production facilities in China and Indonesia, reflecting the challenges in the Chinese piano market.
Key Takeaways
- Core operating profit increased by 33% to JPY20.4 billion, boosted by audio equipment sales and favorable foreign exchange rates.
- Revenue for the first half rose by 3.9% to JPY228.1 billion, but without the foreign exchange impact, it actually saw a decrease of 1.8%.
- The decelerating Chinese market led to a downward revision in full-year revenue and profit forecasts, with a significant impairment loss on piano factories.
- Despite the sluggish performance in musical instruments, audio equipment and IMC Business segments showed growth.
- The year-end dividend per share is expected to remain at JPY13, translating to JPY39 for the year-end and JPY76 annually before the stock split.
Company Outlook
- Full-year revenue projection: JPY460 billion, a decrease from the previous year.
- Core operating profit expected to reach JPY37 billion, an increase from the previous year.
- Net profit forecasted at JPY18 billion, significantly down from the previous year and previous projections.
Bearish Highlights
- The sluggish Chinese market has significantly impacted the musical instruments segment, especially piano sales.
- Full-year revenue for musical instruments is expected to decline, with no anticipated recovery in the Chinese market for the fiscal year.
Bullish Highlights
- Audio equipment sales are expected to grow for the full year, driven by strong B2B sales.
- IMC Business and others are projected to increase in revenue and core operating profit on a constant currency basis.
Misses
- Net profit has decreased due to the impairment loss on piano production facilities and a downward adjustment in the long-term sales outlook from the Chinese market.
Q&A Highlights
- The Q&A session provided insights into Yamaha's strategic initiatives, including strengthening business foundations, setting sustainability as a source of value, and enhancing employee engagement.
Yamaha Corporation faces a challenging market environment, particularly in China, which has compelled the company to adjust its financial outlook. However, the strength in audio equipment sales and strategic initiatives aimed at sustainability and innovation suggest a balanced approach to navigating the current economic landscape. Yamaha's commitment to shareholder returns, as evidenced by the stable dividend forecast, indicates a focus on maintaining financial stability amidst market headwinds.
Full transcript - None (YAMCF) Q2 2025:
Atsushi Yamaura: I am Yamaura. Thank you very much for joining. I'd like to present the financial results of the second quarter for the fiscal year ending in March of 2025. I'd like to start by presenting the highlights of the first half of fiscal year ending in March of 2025. Despite the strong performance of B2B sales of audio equipment and the impact of yen depreciation, revenue decreased year-over-year in real terms due to weak sales of musical instruments caused by a prolonged sluggish market in China. Core operating profit increased due to a major rise in audio equipment and the impact of foreign exchange rates, more than offsetting the profit decrease of musical instruments. Given the further deceleration in the Chinese piano market, we have recognized an impairment loss of JPY7.8 billion for piano production facilities in China and Indonesia. The full-year revenue and profit forecasts were revised downward due to the further deceleration of the Chinese market. Our forecast for the year-end dividend per share remains unchanged at JPY13. As you can see in the footnotes, this translates to a year-end dividend of JPY39 and an annual dividend of JPY76 before the stock split. Next (LON:NXT), let's look at our financial results in more detail. Revenue for the first half of this fiscal year stood at JPY228.1 billion, up JPY8.5 billion, or an increase of 3.9%. As you can see in the footnotes, if the impact of foreign exchange rates is excluded, revenue actually decreased by 1.8%. Core operating profit came to JPY20.4 billion, up JPY5.1 billion year-over-year, or an increase of 33%. Net profit came to JPY5.3 billion, down JPY9.7 billion year-over-year. This significant decrease is due to the downward adjustment of our long-term sales outlook from the Chinese market and the write-down of our piano factories in Hangzhou, China and Jakarta. This page shows the core operating profit analysis versus the previous year. Core operating profit in the first half of last fiscal year was JPY15.3 billion. The impact of exchange rates was positive JPY6.8 billion. After considering several small negative factors included in the graph, this year's core operating profit came to JPY20.4 billion. Next, let's look at our performance by segment. The revenue of musical instruments stood at JPY145.2 billion, down JPY3 billion year-over-year. Excluding the favorable impact of exchange rates of JPY7.9 billion, revenue actually decreased by JPY10.9 billion. The revenue of audio equipment came to JPY64 billion, a significant increase of JPY11.3 billion year-over-year, even after considering the impact of foreign exchange rates. IMC Business and others recorded JPY18.9 billion in revenue, up JPY200 million year-over-year. However, this includes the favorable impact of exchange rates of JPY1.1 billion. If this is excluded, revenue actually decreased by JPY900 million compared to the previous year. Please refer to the slide for core operating profit numbers. Next, I will present our full-year outlook for the fiscal year ending in March of 2025. Revenue is projected at JPY460 billion, down JPY2.9 billion year-over-year. We have revised our forecast down by JPY15 billion compared to the previous estimation owing to the further deceleration of the Chinese market. Core operating profit is expected to reach JPY37 billion, up JPY3.3 billion year-over-year. I will discuss more about this when we get to the Next slide. Net profit is projected at JPY18 billion. As I mentioned earlier, this is primarily due to write-down of our piano factories in Hangzhou, China and Jakarta. Net profit is significantly down JPY11.6 billion versus the previous year and JPY17.5 billion versus previous projections for this year. Foreign exchange rates are shown at the bottom of the slide. This page shows year-over-year changes in core operating profit. Last year's core operating profit was JPY33.7 billion. The impact of exchange rates in the absence of one-time expenses are positive JPY8 billion and JPY4.4 billion, respectively. However, lower sales of musical instruments and decreased production are negative JPY5.3 billion, considering other negative factors such as the increasing raw material costs, ocean freight charges, and SG&A, including IT costs, this year's core operating profit is projected at ocean JPY37 billion. Compared to the previous projections, the biggest factor behind the change is lower sales of musical instruments and decreased production, which is negative JPY8.3 billion. Moving on to our outlook by business segment. Musical instruments are expected to be unfavorable for the full year. We do not anticipate any recovery in Chinese market during this fiscal year. Our revenue outlook for this segment is JPY292 billion down JPY13.2 billion year-over-year. The main reason behind the significant drop in both revenue and profit is the decrease in production. By contrast, audio equipment revenue and profit are expected to reach JPY129 billion and JPY13 billion, respectively. Revenue and profit of IMC business and others are expected to increase on a constant currency basis with revenue reaching JPY39 billion and core operating profit reaching JPY3 billion. I'll walk you through the details of each segment. Starting with musical instruments. In the first half, revenue decreased primarily due to the sluggish Chinese market. Sales of pianos decreased due to lower demand in China. Sales of digital musical instruments were also poor in China. Demand for wind, string, and percussion instruments remained strong, but sales remained flat year-over-year due to the discontinuation of US Subsidies. Demand for guitars was strong in China and Japan, but sales decreased due to continued weakness in other markets. Full-year revenue is projected to decline due to further deceleration in China. Sales of pianos are projected to decrease due to market downturn primarily in China. Sales of digital musical instruments are projected to recover last year's level through our efforts to increase our market share despite the difficult market conditions. Sales of wind, string, and percussion instruments are projected to decrease as US Subsidies have expired. Guitar sales are projected to increase as electric guitars are performing well. This slide provides revenue by major product category. Sales of digital musical instruments and guitars are expected to grow year-over-year. Sales of wind, string, and percussion instruments are expected to be flattish. Piano sales are projected to decrease significantly year-over-year. In terms of revenue by region, there is no major change to trends in Japan, Europe, and other regions compared to the previous year. North America is slightly down, and China is significantly down year-over-year. Moving on to audio equipment. In the first half, revenue increased due to strong B2B sales. Consumer product sales declined due to shrinking home audio business despite strong sales of music production software. B2B product sales increased substantially due to continued robust demand. For the full year, audio equipment sales are expected to grow, driven by strong B2B sales. Consumer sales are expected to decrease due to shrinking home audio business despite strong demand for music production software. B2B sales are projected to achieve high growth, driven by continued strong demand. Next, revenue projections by major product category. Consumer products are expected to decline because the market is shrinking. By contrast, B2B products remain strong. Our new digital mixer is getting great feedback about it from the market, and we are aiming to achieve 16% growth year-over-year. Moving on to revenue by region, in Europe and other regions, B2B audio equipment grew significantly driven by numerous live events. B2B business is driving the entire audio equipment performance. As for IMC business and others, in the first half, sales of electronic devices increased, driven by automotive sound systems. By contrast, sales of automobile interior wood components, FA, and golf products decreased. Full-year revenue is projected to increase, driven by automotive sound systems. As you can see from the slide, the core operating margin is expected to increase from last year's 5.3% to 7.7%. Let's look at other financial figures. This is our balance sheet. As of the end of last fiscal year, the level of inventories was extremely high at JPY164.1 billion. We will continue to normalize the level of product and part inventories. By the end of this year, inventories are expected to go down by JPY24.1 billion to JPY140 billion. Consequently, cash and cash equivalents are expected to slightly increase. Let's turn to indicators such as ROE and ROIC. As I mentioned before, in the first half of this fiscal year, we made a downward adjustment of our long-term sales outlook from the Chinese market and recognized an impairment loss on our piano factories in Hangzhou, China and Jakarta. As a result, our net profit is expected to decrease year-over-year, and the ROE for the fiscal year, ending in March of 2025, is projected to be 3.6%, which is far below the cost of shareholders' equity. We aim for an ROE that exceeds the cost of equity by improving revenue and profit and steadily providing returns to shareholders. On September 9, we announced the partial sale of Yamaha Motor shares. Please refer to this slide for the number of shares sold. We also announced our plan to buy back up to 18 million of our shares. This corresponds to 3.7% of the outstanding shares of Yamaha Corporation, which will be fully cancelled after the acquisition. Next, let me share the details on capital expenditure, depreciation, and R&D expenses. Capital expenditure was high last year due to the construction of office buildings in the head office area in Minato Mirai. It is expected to go back down this year to the level before last fiscal year, and the progress is good. R&D expenses for this year have remained steady in line with last year's level. Finally, I will share some recent news. The current midterm plan has three priorities. Further strengthen our business foundation, set sustainability as a source of value, and enable Yamaha colleagues to be more valued, more engaged, and more committed. We have been implementing various measures based on these three pillars, some of which are shown in the next few slides, including this one. Firstly, to further strengthen the business foundation, we believe we need to develop closer ties with customers to expand our business domain. One area which is expanding, as you can see on the slide, is our automotive sound systems. We also need to create new value through continuing to develop products with individuality, building partnerships, and accelerating collaborations with new third-parties. Next, let me share two initiatives for setting sustainability as a source of value. First, to enhance our brand and competitiveness by contributing to comfortable lives, we aim to develop universal designs for sound applications in public institutions. Omotenashi Guide is a service for converting audio announcements at public institutions into texts in multiple languages. The service is being introduced at all Tokyo Metro Stations. Second, to promote music culture, we have been working to expand music education in emerging countries. Our program to support the introduction of Japanese-style music education in India and Kenya was selected as a project for the Edu-Port Nippon Support Project of MEXT of the Japanese government and is steadily expanding. Finally, in order to enable Yamaha colleagues to be more valued, more engaged, and more committed, we are working to foster an open organizational culture where people can proactively take on challenges. In October, we organized an internal event called Yamaha Day, where participants reflected on our brand. Also, the company joined a group called Health Management Alliance to create a workplace environment where people can work enthusiastically. The rest of the presentation slides are for your reference. I will not go through them now, so please take a look at them at your earliest convenience. This brings us to the end of my presentation. Thank you very much for your attention.
End of Q&A:
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