Earnings call: Yamaha Corporation reports mixed FY March 2024 results

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Earnings call: Yamaha Corporation reports mixed FY March 2024 results
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Yamaha Corporation (TYO: 7951) has reported mixed results for the fiscal year ended March 2024, with overall revenue increasing due to strong B2B sales of audio equipment and favorable foreign exchange rates, despite a decline in the musical instruments segment, primarily influenced by a slow recovery in digital pianos and a downturn in the Chinese market. Core operating profit and net profit both saw a decrease, attributed to lower musical instrument sales and one-time expenses including a ¥4.3 billion charge for structural reforms. Looking ahead to the fiscal year ending March 2025, Yamaha projects flat revenue but an increase in profit, banking on improved model mix and the effects of structural reforms.

Key Takeaways

  • Overall revenue increased year-on-year to ¥462.9 billion, up by 2.5 percentage points, but declined excluding foreign exchange impacts.
  • Core operating profit fell to ¥33.7 billion, with a notable one-time expense of ¥4.4 billion.
  • Net profit decreased in line with lower core operating profit and structural reform costs.
  • The forecast for the fiscal year ending March 2025 predicts flat revenue but increased profit, expecting an improvement in model mix and structural reform benefits.
  • The musical instruments segment faced a decline, particularly in China, while B2B audio equipment sales showed strength.
  • Inventory levels were high due to a semiconductor supply shortage but are expected to be reduced in the coming fiscal year.

Company Outlook

  • Revenue for FY ending March 2025 is forecasted to be ¥465 billion, with a slight increase expected.
  • Core operating profit is anticipated to rise to ¥45 billion, an increase of ¥11.3 billion from the previous year.
  • Net profit is projected to grow to ¥34 billion, up by ¥4.4 billion.

Bearish Highlights

  • The musical instruments segment suffered from sluggish digital piano sales and a downturn in the Chinese market.
  • The net profit was impacted by a low core operating profit and structural reform expenses.

Bullish Highlights

  • Strong B2B sales in the audio equipment segment bolstered overall revenue.
  • Positive effects from foreign exchange rates contributed to the financial performance.
  • The company expects an improvement in model mix and ongoing structural reforms to boost profitability in the next fiscal year.


  • Core operating profit missed the forecast by a slight margin, coming in at ¥33.7 billion against the projected ¥34 billion.

Q&A Highlights

  • In the Q&A session, analysts sought clarification on the company's strategies to improve profitability and manage inventory levels.

Yamaha Corporation's financial year has been a tale of contrasts, as the company navigated through market downturns and supply chain challenges. The company's resilience in the face of a tough Chinese market and the slow recovery of digital piano sales is notable, as it managed to offset these challenges with strong B2B audio equipment sales and favorable currency exchange conditions. As the company moves forward, it has set its sights on improving its product mix and reaping the benefits of its structural reforms to ensure a more profitable future. Yamaha's commitment to reducing inventory levels and capitalizing on the robust demand in the audio equipment segment underlines its strategic focus on efficiency and market responsiveness. With the fiscal year ending March 2025 on the horizon, Yamaha Corporation remains cautiously optimistic, aiming to maintain revenue levels while improving profitability.

Full transcript - None (YAMCF) Q1 2024:

Operator: I am Atsushi Yamaura, who took office as the President and Representative Executive Officer of Yamaha Corporation on April 1. I'm pleased to see you all. Allow me to start a briefing on the results of the Fiscal Year Ended March 2024. Let's start by highlighting the results of FY March 2024. Due to the slow recovery in the digital pianos market and the protracted downturn in the Chinese market, the musical instruments revenue declined in real terms. However, due to the strong B2B sales of audio equipment and the impact of foreign exchange rates, the overall revenue increased year-on-year. The core operating profit decreased due to factors including lower sales of musical instruments, production, adjustments to reduce inventories, and one-time expenses. The net profit decreased due to the low core operating profit and the structural reforms related expenses of ¥4.3 billion, including the impairment loss on piano manufacturing processes. As for the full year forecast of FY ending March 2025, I missed a continuous uncertain outlook for the global economy and the economic downturn in China, the revenue is projected to be flat year-on-year, yet the profit is expected to increase due to the improvement of model mix, the effects of structural reforms, and other factors. Now, I'd like to give you more details of the FY March 2024 results. First, the revenue was ¥462.9 billion, which was 2.5 percentage points higher than the previous year. However, as shown below the table, excluding the impact of exchange rates, it was a decrease year-on-year. The core operating profit was ¥33.7 billion, which was much lower than the previous year. The net profit also declined accordingly. Here is the core operating profit analysis in a year-on-year comparison. In the previous year, the profit was ¥45.9 billion. Although we enjoyed positive impacts of exchange rates and ocean freight charges, the increase of labor cost and the decrease in sales, production and model mix, which was ¥9.5 billion, were substantial. Moreover, as I mentioned earlier, we booked a one-time expense that amounted to ¥4.4 billion. Therefore, the overall core operating profit dropped to ¥33.7 billion. The SG&A expenses also increased due to the recovery of some business activities that were suspended during the pandemic, and the profit of Industrial Machinery Components, IMC business and others decreased due to the drop of gold products that enjoyed a special demand in the previous year. A comparison against the previous projection is shown in the bottom half. While we forecasted the profit to be ¥34 billion, the actual profit turned out to be ¥33.7 billion, which was almost in-line with expectation. Here are the results of each business segment, the musical instruments revenue was ¥305.2 billion, which seems like a year-over-year increase by ¥2.5 billion, but excluding the exchange rate impact, which gave a big boost, that revenue was lower than the previous year. The older equipment's revenue was ¥121.1 billion, especially due to the remarkable sales of B2B products, it increased year-on-year. As for the IMC business and others, due to the lack of special demand for the golf products which I mentioned earlier, the revenue declined year-on-year. The next slide shows the full year forecast of the FY March 2025. The revenue is expected to be ¥465 billion, which is an increase by ¥2.1 billion. We have been struggling very much in China with the pianos business and it seems to take another while until the demand hits the bottom. Moreover, the winds instruments business, which had enjoyed a good tailwind in the US, may lose the momentum with the end of the support program for elementary and middle schools this year. Therefore, we can only expect a slight increase of revenue this year. The core operating profit is expected to be ¥45 billion, which is an increase by ¥11.3 billion from the previous year. The details of the breakdown will be explained in the following slide. The net profit is expected to be ¥34 billion, which is an increase by ¥4.4 billion from the previous year. The exchange rates used as an assumption for the forecast are described in the table below. Here is the core operating profit analysis in an year-over-year comparison. While the previous year's profit was ¥33.7 billion, we expect it to rise to ¥45 billion this year. The positive factors are the favorable exchange rates, increase in sales, production and model mix, and the one-time expense incurred in the previous year, which are respectively contributing to the profit by ¥4 billion to ¥5 billion. Here is the full year forecast of each business segment. The musical instruments revenue is expected to be ¥305 billion, which is almost the same as the previous year. The core operating profit is expected to be ¥31.5 billion, which is a ¥6.2 billion increase. As I said earlier, there are negative factors such as slow recovery of the piano business in China and the termination of the wind instrument support program in the US, so we made a conservative forecast for the revenue growth. As for the audio equipment business, we are projecting the revenue to be ¥122 billion, which is an increase by ¥0.9 billion. The core operating profit is also expected to increase by ¥4.6 billion. The IMC business and others is also expected to achieve increase in both the revenue and profit as shown here. Now I'd like to explain the details of each business segment. First, regarding the musical instruments segment, the revenue in FY March 2024 decreased year-on-year due to the lower sales of the pianos and the digital pianos. The sales of pianos decreased due to the downturn. In China, our core market, the sales of digital musical instruments decreased due to the sole cells recovery of the digital pianos. Meanwhile, the sales of wind, strings and percussion instruments increased due to the robust demand, and the sales of guitars increased due to strong sales of electric guitars and addition of Cordoba Music Group, which we acquired. As for the forecast of FY March 2025, we're expecting higher sales in Europe, other regions, but the overall revenue is projected to remain flat year-on-year. The sales of pianos are likely to decrease due to the continued downturn in the Chinese market. On the other hand, the sales of digital musical instruments are expected to recover due to the market inventory levels becoming lower. The sales of wind, strings and percussion instruments are likely to decline with the termination of the financial subsidies, in the US. The sales of guitars are expected to increase in all the regions. As shown in the chart below, the core operating profit margin, which dropped to 8.3% in FY March 2024, is expected to recover by two points to 10.3% this fiscal year. This slide shows the sales of each product category. The pianos and the wind, strings and percussion instrument sales are projected to decline year-over-year. The sales of the digital musical instruments and the guitars are expected to increase. Per region, the sales in Japan, North America, and Europe are expected to be almost the same as the previous year, while it is likely to decrease further in China and increase 6% in the other regions. Moving on to the audio equipment segment, in FY March 2024, the revenue increased year-over-year due to the strong B2B product sales. Although the consumer product sales decreased due to the downturn in the market, the B2B product sales increased significantly due to the robust demand and the release of new products. In FY March 2025, we expect the revenue from both the consumer and B2B products to increase. Among the consumer products, the home audio products focused on the mid and high-end market may see the downsizing, but the music production and audio streaming products are likely to drive the category sales growth. The B2B products enjoyed a very robust demand in the previous year and we expect this to continue, so the sales are forecasted to increase. As shown below, the core operating profit margin, which was 5.3% in the previous fiscal year, is expected to rise by nearly four points to 9.0% this fiscal year. Here is the breakdown by product categories. The sales of consumer products are expected to rise a little. The B2B products, which achieved a remarkable growth in the previous year, cannot retain the same level of growth. So we are expecting a small increase per region. We're expecting a flat or slight increase in all the regions. Next, regarding the IMC business and the others segment, in FY March 2024, with the increased adoption of automotive sound systems by automakers, the sales of electronic devices increased, meanwhile, the sales of automobile interior wood components and factory automation equipment decreased and the golf product sales dropped significantly. In FY March 2025, with the continued expansion of automotive sound systems, we forecast the revenue to increase. Now let me talk about the other financial figures. Here is the balance sheet summary as of the end of March 2024, the inventories rose to a noteworthy level. This is especially due to the inventory of parts staying at the high level to cope with the semiconductor supply shortage triggered by the pandemic. We raised the level of the stock at hand with the front loaded order placements, but then the sales volume declined so we were left with the extra pile of inventories. As of the end of September 2023, the inventory was as high as ¥176.8 billion, but we lowered it by a little over ¥10 billion by the March end. Throughout this fiscal year, we would like to lower the inventory level further down to ¥142 billion as described here. Here are the KPI's such as ROE, ROIC and others. Due to the worsening revenue and profit, the ROE dropped to 6.1%, which was lower than the cost of shareholders equity. By improving the revenue and profit and steadily working to provide shareholder returns, we will strive to achieve an ROE that exceeds the cost of shareholders equity. The next slide is about the capital expenditure and R&D expenses. The capital expenditure in EFI March 2024 increased significantly because this includes the construction cost of the headquarters office building and the Minato Mirai office, which are almost completed this fiscal year, the CapEx is expected to return to the level of FY March 2023. The R&D expenses will be about the same as the previous year and we will stick to the stable use of expenses. Finally, I'd like to refer to some of the topics. Here is a summary of the progress of the non financial targets in our midterm management plan. As non financial targets to enhance the sustainable growth capability in the new society, we have set forth various KPI's and worked on initiatives as you see here, including the support for instrumental music education and the percentage of FEMA managers which overachieved the targets ahead of schedule, all the initiatives are generally making good progress as planned. There are a couple of those behind the schedule, but we are determined to catch up while making sure that the core objectives will be achieved. The slides here on are about our efforts to further strengthen the business foundation. I will not read out everything, but let me just touch on the highlights. In developing closer ties with the customers, we are trying to create customer interactions that deliver an added experience value. During the previous fiscal year, we renovated our store in London and this fiscal year we're going to open new stores in Yokohama and Shibuya to enhance the customer experiences. Through the efforts to expand the business domain, our automotive sound systems were successfully adopted by many more car models. In creating new value, we utilized AI technology in a way unique to Yamaha and offered a new service called the Joyful Piano, which enabled physically disabled individuals to play Beethoven's 9 Symphony (NS: SYMP ) on the piano and attracted a great attention last year. Moreover, in offering new ways to enjoy audio and music, we're providing services through Yamaha Music Connect Accelerating external partnerships. This slide shows the products with distinctive individuality that we launched during the previous fiscal year. I will not explain each one of these, but we will continue to develop and launch such unique products to set sustainability as a source of value. First, in building a value chain that supports the future of the earth and society, we're trying to reduce carbon dioxide emissions. The conversion to renewable energy has been especially implemented in our manufacturing sites proactively. Moreover, to create sustainable musical instruments, we are now promoting the utilization of unused wood and thinned timber as the materials for musical instruments. Third, to expand the market through the promotion and development of music culture, we're enhancing the instrumental music education initiatives in emerging countries, as shown in the middle. In India, we started the Japanese music education using recorders in public elementary schools for the first time to enable Yamaha colleagues to be more valued, more engaged, and more committed, we are working on various initiatives as shown here. I will not mention each one of them, but please check them out when you have time later. Here are the financial indicators of the midterm management plan. As I mentioned earlier, the current level of ROE and ROIC are far behind the midterm target. By tackling the issues at hand one by one, we would like to make every effort to catch up with the plan. As for the external evaluation, Yamaha was selected for all the six ESG indices for Japanese equities adopted by the GPIF. In terms of branding, Yamaha ranked the 26 in the best Japan brands, with two ranks up from the previous year. We also won an award of Excellence at Nikkei Integrated Report Award 2023. As such, our efforts have been appreciated by various external organizations. Pages hereon are the appendix. There is nothing to highlight particularly, but please use them for your reference later. With that, I'd like to conclude my presentation. Thank you very much.


Q - Unidentified Analyst:

Unidentified Company Representative:

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