Yamaha Corporation (7951) Earnings Call Transcript & Summary

Good morning. In accordance with the articles of the corporation and the resolutions of the Board of Directors, I would like to serve as the Chair of this meeting. My name is sushi Atsushi Yamaura, the President and CEO. Effective April 1 of this year, I succeeded Takuya Nakata as President and CEO. I will do my best to contribute to the development of the company and deeply appreciate your continued support. Now, we would like to hold the 200th Annual Meeting of Shareholders of Yamaha Corporation. We will now proceed with the agenda. We would like to thank all of our shareholders for your cooperation. The agenda for this general meeting will begin with explanations of matters to be reported and all the matters to be resolved. Next, we would like to receive all the questions and comments on the matters to be reported and the matters to be resolved from the shareholders present at this meeting. And then only the resolutions will be voted on. In addition, in order to be able to adequately answer the questions of all our shareholders, our directors and the executive officers and the auditors will be attending the meeting. Thank you for your understanding. First of all, the Audit Committee is here to present the audit report. In addition, I would like to ask the Audit Committee to report on the result of the audit of the consolidated financial statements. As for the audit result by the accounting firm on the consolidated financial statements, please refer to Pages 76 to 78 of the notice of convocation. As stated in the certified copy of the audit report of the accounting auditor, we have received reports that the financial position of the corporate group, the status of its profit and loss are correctly presented. The Audit Committee would like to present the audit report.

My name is Mikio Fujitsuka, Chairman of the Audit Committee. I would like to present a report on the audit results on behalf of the Audit Committee. The Audit Committee of the company consists of 3 members, including myself, [ Yoshizawa ] and [ Ebata ]. We audited the overall execution of duties by the directors and executive officers during the 200th business year. The methods and the result of the Audit Committee's audits or return in the Independent Accounting Auditor's report on Pages 82 and 83 of your notice of [ convocation ]. We acknowledge that the business report and the attached statements correctly present the condition of the company in conformity with laws and regulations and the Articles of Incorporation. In addition, we did not find any misconduct or any material fact in violation of laws and regulations or the Articles of Incorporation in connection with the execution of duties by the directors and executive officers. With respect to the nonconsolidated financial statements, the attached statements and the consolidated financial statements, the methods and the results of the audit conducted by the Accounting Auditor are appropriate, and there are no matters to be pointed out, Thank you.

Thank you very much for your report. We would now like to continue to report on the business report and the consolidated financial statement and nonconsolidated financial statements of the 200th term. Sales revenue for the 200th fiscal year was affected by the delayed recovery in demand for digital pianos. Sales of musical instruments have been sluggish due to the prolonged slump in Chinese market. In addition to favorable sales of audio equipment for the corporate use, the weak yen also had an impact. Net income increased year-on-year, and production adjustments to reduced inventory led to a decrease in operating profit. The company also recorded restructuring costs, including an impairment loss on its piano manufacturing process. As a result, profits decreased year-on-year. The content of the business report, consolidated financial statements and nonconsolidated financial statements are shown in the notice of convocation in your hand on Pages 17 through 75. In order for you to further deepen the understanding, we will be showing a video report. Please take a look. Please note that the lights in the venue will be turned off during the screening.

We would like to present the main points of the business report, consolidated financial statements and nonconsolidated financial statements for the 200th fiscal year. Looking back at the business environment during the consolidated fiscal year, while COVID-19 became Category 5 infectious disease and the global economy, although gradually recovering, continues to face an uncertain future due to the demand decline, the backlash from remote work, stagnant Chinese economy and the global price hikes caused by soaring energy and raw material prices; in this environment, the group has positioned its medium-term management plan, Make Waves 2.0. That's a 3-year period to enhance sustainable growth in the new post-COVID-19 society with the aim of realizing well-being of people around the world and has been implementing various measures under the 3 policies, further strengthening the business foundation, set sustainability as a source of value and enable Yamaha colleagues to be more valued, more engaged and more committed. The Chairman will give an update on the progress of Make Waves 2.0 later in the meeting. We would now like to report on the overall business situation for the 200th fiscal year. Consolidated sales revenue for the fiscal year increased by 2.5% year-on-year to JPY 462.866 billion due to favorable sales of the audio equipment business for the business use and the impact of yen depreciation, despite delay of the recovery of demand for digital piano and prolonged stagnant Chinese market. Core operating income declined 26.6% year-on-year to JPY 33.653 billion, partly due to the revenue decline in musical instruments business and production adjustments to reduce inventory level. Net income attributable to owners of the parent company declined 22.4% to JPY 29.624 billion, mainly due to JPY 4.329 billion of expenditure for structural reforms, including JPY 3.168 billion of impairment of assets for piano manufacturing processes in Indonesia. Now, we report on the status of each business segment. First, musical instruments business. Sales of acoustic pianos declined due to the slow sales in China. Sales of digital musical instruments declined due to demand decline of digital piano and slow shipments because of the large market inventory. Sales of wind, strings, percussion instruments increased significantly due to a strong demand. Guitar sales increased dramatically due to strong sales of electric guitars as well as the acquisition of Cordoba. As a result, net sales in this segment increased 0.8% year-on-year to JPY 305.195 billion despite the actual decline contributed by yen depreciation. Core operating income decreased 30.1% to JPY 25.317 billion due to the actual decline in sales and production adjustment to reduce the inventory level. Next is the audio equipment business. Sales of audio equipment for consumer use declined due to the continued stagnancy in the market. Sales of professional audio equipment increased significantly due to high demand for business use and the effect of new products. The sales of this business is up 12.5% year-on-year to JPY 121.18 billion. Core operating profit is up 84.9% to JPY 6.49 billion. Next is industrial machinery components business and others. Sales of electronic devices increased, contributed by increasing adoption of our automotive sound systems, while sales of gold products significantly declined. As a result, net sales in this segment declined 11.1% year-on-year to JPY 36.562 billion. Core operating income declined 68.9% to JPY 1.926 billion. Next is a report on the consolidated financial statements. First statement of financial position as of March 31, 2024, current assets increased JPY 22.661 billion year-on-year to JPY 369.346 billion. Noncurrent assets increased JPY 49.967 billion to JPY 297.491 billion. As a result, total assets increased by JPY 72.628 billion year-on-year to JPY 666.837 billion. Total liabilities increased JPY 18.762 billion to JPY 155.027 billion, and total equity increased JPY 53.866 billion to JPY 511.810 billion. The consolidated statement of income is explained in the General Business Conditions section at the beginning of this report. Total capital investment for the current consolidated fiscal year increased 32% from the previous year to JPY 27.118 billion. The breakdown is shown here. A [ scenery ] of the nonconsolidated financial results is provided in the convocation notice of the 200th Ordinary General Meeting of Shareholders and on the company's website. This was an overview of the content of the business report, consolidated financial statements and nonconsolidated financial statements for the 200th fiscal year.

Now, I would like to explain issues to be addressed, challenges of our group, going forward. On Pages 20 to 25 of the notice, you can see the medium-term management plan, Make Waves 2.0, the 3-year plan that ends in March 2025. Our group aims to contribute to well-being of people around the world through our business activities. For that, our corporate philosophy is sharing passion and performance. That is the basic principle of our activities. And under the management vision of becoming an indispensable, brilliantly individual company, we have enhanced our corporate value in each stage of the medium-term management plan. In the current medium-term management plan, Make Waves 2.0, for further enhancement of the corporate value, we established the basic policy of enhanced sustainable growth capability in the new society. Based on this basic policy, we set up 3 key policies of further strengthen the business foundation, sustainability as a source of value and enable Yamaha colleagues to be more valued, more engaged and more committed. And under each key policy, we set up 3 key themes. Today, I would like to explain each of them with some videos. On Page 17 and Page 18 of the notice of the convocation, you can find the progress of the themes under 3 key policies. First, I will explain the first one, further strengthen the business foundation. As for developing closer ties with customers, we decided to merge our domestic wholesale subsidiary and retail sales sub subsidiary. Our authorized dealers, directly managed stores and the music schools come together to create demand and promote our brand value. Overseas, we have established a sales subsidiary in the Philippines, where growth is expected. We will expand our sales network and directly promote value, which will lead to sales growth. In the industrial machinery components business, it has been decided that following Mitsubishi Motors Corporation, Toyota Motor Corporation's top-of-the-line model, new Century adapt our car audio system. Our customer base is expanding to new domains as well. In create new value, we held a concert using AI-assisted piano with automatic music accompaniment function to perform the Joyful Piano. You can play the piano with only one finger regardless of experience, disability or age. Enthusiastic pianists want to play the Bethoven's 9th Symphony, and we contributed to their dreams. As you can see on the slide, we also launched a lot of unique new products by which we were able to propose various new values to customers with our advanced technology and [ rich ] sensitivity. To make users music life more enjoyable and creative, we have Yamaha Music Connect. For the launch of the service, we defined 3 music experiences, music edutainment, creative discovery and music connection as business areas to provide new ways to enjoy sound and music. Under the theme of being flexible and resilient, we decided to merge a domestic manufacturing subsidiary to integrate the head offices strategic functions with the production site. This will help rebuild Japan's manufacturing base and the sustainable production system that drives global manufacturing. In addition, in order to ensure stable procurement of semiconductors, we have established a semiconductor procurement subsidiary in Malaysia. Learning from the disruption of supply chains that affected us in many ways, we are enhancing manufacturing resilience to quickly address rapid changes in the environment. Now please enjoy a video of the AI-assisted Piano that placed the Joyful Piano. [Presentation]

Next is the second key policy, set sustainability as a source of value. Under build a value chain that supports the future of the earth society, at the head office and 13 production sites in Japan and overseas, we introduced a power monitoring system to visualize electricity consumption and expanded solar power generation capacity at Suzhou factory in China and Kakegawa factory to promote energy savings. In terms of the climate change-related information disclosure, we were recognized as a CDP A List company, the highest ranking. To our 2050 carbon neutrality, we have a lot of initiatives to reduce CO2 emission. Under the theme of enhanced brand and competitiveness by contributing to comfortable lives, Tokaido Shinkansen train introduced intercommunication system using Omotenashi Guide for easy communication with their crew. Also, at Tokyo Metro stations, they introduced announcements in your language as a pilot to show announcements as text on customers' smartphones. Our sound and music technologies have contributed to comfortable lives of the people in those examples. In expand market through promotion and development of music culture, we have the school project to promote musical instrument education in emerging countries. One of them is in Colombia, which was selected by the MEXT, Ministry of Education as the 2021 EDU-Port Japan project. Our target reach in the school project is 2.3 million people altogether. And we already reached 3 million in the second year, well beyond the plan. The last one is the third policy, enable Yamaha colleagues to be more valued, more engaged and more committed. Under the theme of increased job satisfaction, we introduced talent management system to organize jobs and skills so that all employees can autonomously build up their carriers. We also started internal job application system and a new system for employees with sidelines to support diverse and flexible work styles. Under promote respect for human rights and DE&I, we increased the support to foster women leaders and expanded cross-border assignments for global human resources for diverse talents be more active. We also received Gold award in Pride Index 2023 5 times in a row. We will continue our effort to create a workplace that is friendly to LGBTQ+ people and promote a culture to value uniqueness of each individual employee. Under fostering open organizational culture where people can proactively take on challenges, each department continuously develop ideas to increase various opportunities for communication. At the same time, we conduct active listening training to listen carefully to others to increase psychological safety and foster a comfortable working environment. We were also selected as a Health & Productivity Management Outstanding Organization, White 500. As a company that practices excellent health management, we're recognized as a company that positions the maintenance and improvement of employees physical and mental health as an important theme. These were the issues to be addressed. This concludes my report on the content of the business report, consolidated financial statements and nonconsolidated financial statements. We would like to ask for continued support and encouragement of our shareholders. Thank you very much.