Yamaha Corp

Good afternoon, everyone. I am Yamara. Thank you for gathering on your busy schedule. I would now like to explain the results for the second quarter of FY2026.3. I'd like to start by presenting the highlights of the first half of fiscal year ending in March 2026. Regarding the financial results summary for the first half of the fiscal year ending March 2026, revenue decreased due to sluggish market conditions in China, the absence of high demand for audio equipment for professional use, and delayed recovery in European markets. Core operating profit decreased due to the impact of additional U.S. tariffs and a worsening product mix resulting from lower sales of high-margin audio equipment for professional use. Regarding the earnings forecast for the full fiscal year ending March 2026, we anticipate that revenue decrease due to the end of high demand for audio equipment for professional use and the sluggish market conditions in China. We also expect a decrease in operating profit due to the impact of U.S. tariffs and a deterioration in the product and regional mix. Next, I will explain the overview of the financial results. Here are the actual results for the first half. For the fiscal year ending March 2026, revenue was 216.4 billion yen, core operating profit was 12.8 billion yen, a core operating profit ratio of 5.9%, and net profit was 9.8 billion yen. The exchange rates for the first half are shown on this slide. Revenue decreased by 5.2% compared to the previous period, but excluding the impact of exchange rates, the decrease was 2.9%. Next, this slide shows the factors contributing to the increase or decrease in core operating profit using a waterfall chart. In the first half of the previous fiscal year, core operating profit was 20.4 billion yen, the decrease in sales, production and model mix, etc., amounted to 6.5 billion yen, attributed to factors such as entertainment PA equipment which saw substantial revenue growth in the previous period, including the resolution of backlog orders, and Europe. where high value-added models accounted for a high proportion. The impact of tariffs factored in this time amounted to a negative 5.2 billion yen year-on-year. Approximately half of this, 2.7 billion yen, was covered through price increases and other measures. Other factors include the 1.2 billion yen positive effect from the structural reforms we are implementing in piano manufacturing, resulting in a final core operating profit of 12.8 billion yen. Next, here are the results by business segment. For the musical instruments business, revenue was 140.4 billion yen, core operating profit was 7.7 billion yen, and the core operating profit ratio was 5.5%. For the audio equipment business, revenue was 67.7 billion yen, core operating profit was 5.4 billion yen, and the core operating profit ratio was 7.9%. Others business performed as shown here. Next, let's look at our full year earnings forecast. For the fiscal year ending March 2026, our current forecast is revenue of 458.0 billion yen, a decrease of 4.1 billion yen compared to the previous year. Compared to the previous forecast, this represents an increase of 6.0 billion yen. Core operating profit is forecast at 33.0 billion yen, with a core operating profit ratio of 7.2%. Compared to the previous fiscal year, this is a decrease of 3.7 billion yen, but compared to the previous forecast, it is an increase of 1.0 billion yen. Net profit is forecast at 23.0 billion yen, an increase of 9.6 billion yen compared to the previous fiscal year. and an increase of 0.5 billion yen compared to the previous forecast. The exchange rate assumptions are as shown here. This waterfall chart shows the factors affecting the change in core operating profit in the full year forecast. First, the upper section compares with the previous fiscal year. From the previous year's actual result of 36.7 billion yen, factors including a decrease in sales, production and model mix, etc., resulted in a decrease of 2.9 billion yen. As mentioned earlier, the decline in sales of entertainment PA equipment was a major factor here. This is offset by tariff impacts of 10.1 billion yen, offset by 6.2 billion yen in countermeasures, the effect of structural reforms from the previous period of positive 2.0 billion yen, and a positive 2.3 billion yen from one-time expenses recorded in the previous period. This results in a full-year forecast of 33.0 billion yen. Next, looking at the lower section, comparing with the previous forecast, Impact of exchange rates added 3.0 billion yen, while a decrease in sales, production and model mix, etc., primarily due to lower European revenue, will push down the profit by 3.7 billion yen, including a 0.6 billion yen reduction in SG&A expenses from the previous forecast. The core operating profit is projected to be 1.0 billion yen higher than the previous forecast of 32.0 billion yen. Next, hear the overview by business segment. This is the musical instruments business. For the full year forecast, revenue is projected to be 299.0 billion yen, core operating profit 21.5 billion yen, and the core operating profit ratio is forecast to be 7.2%. For the audio equipment business, revenue is projected to be 139.0 billion yen, core operating profit 11 billion yen, and the core operating profit ratio is forecast to be 7.9%. For others business, forecast is as shown here. Compared to the previous forecast, excluding the impact of exchange rates, the projection of the musical instruments business shows increased revenue. Next, let's go through the business segment overview. First, the musical instruments business. The upper right summarizes the first-half results and full-year outlook. For the first half, hardware product sales for musical instruments excluding pianos shifted to growth. Piano decreased due to sluggishness in China and delayed recovery in European markets. However, digital musical instruments revenue increased, driven by steady digital piano sales and a recovery in portable keyboards. Wind, strings, and percussion instruments continued strong performance in Japan, leading to increased revenue. Guitar revenue increased, primarily driven by continued strong performance in acoustic guitars. Moving to the full-year outlook, we maintain our forecast for revenue with recovery expected across all product categories except pianos. Piano sales are expected to decline due to continued in China. Digital musical instrument sales are projected to increase as all regions except China recover. Wind, strings and percussion instruments, as well as guitar sales, are also expected to be solid leading to increased sales. This shows the sales status and outlook by major product category. Excluding the impact of exchange rates, pianos are projected to decrease by 5% year-on-year, digital musical instruments to grow by 5%, wind, strings, and percussion instruments by positive 2%, and guitars by positive 11%. Next, the sales status and outlook by region. Europe stands out with 6% growth compared to the previous period, but this is due to the impact of revenue declines caused by issues during the core system replacement in the fourth quarter of the previous period. North America and other regions are showing growth on a real basis, while China is projected at negative 5% compared to the previous period. Next, regarding the audio equipment business, for the first half, growth in audio equipment for professional use and mobility use has leveled off. Consumer use saw a decline in home audio. Audio equipment for professional use performed well in emerging markets, but Europe which had high demand last year saw a significant decrease. Audio equipment for mobility use doubled in Japan, but as expected, sales to China decreased. For the full-year outlook, we anticipate that revenue to decrease in audio equipment for professional use in Europe and the US, coupled with a decline in automotive sound system sales in China, leading to a full-year revenue decrease. Here is the sales outlook for these three categories. Audio equipment for consumer use and professional use are projected at negative 3% of the previous year, while mobility use is projected at negative 15%. Next, the sales situation and outlook by region. Japan is projected to show significant growth at 11%, driven by strong growth in audio equipment for mobility use for the Japanese market and robust performance in network equipment. Conversely, Europe is forecast to show a significant year-on-year decline due to reduced entertainment PA sales, while Outlook for China also shows a significant year-on-year decline due to reduced sales of mobility audio to Chinese manufacturers. Regarding others' business, automobile interior wood components continue to perform well, and we anticipate increased revenue from factory automation equipment in the second half. Next, other financial figures. First, the balance sheet. Changes at the end of the first half show cash and cash equivalents increased by 7.7 billion yen. Other items, such as trade and other receivable and inventory, show relatively large fluctuations, but these are largely due to seasonality of our business. Current liabilities decreased by 5.3 billion yen, primarily due to progress in settling unpaid liabilities. For the forecast at the end of March 2026, cash and cash equivalents is projected at 94.0 billion yen, and inventory, at 147.0 billion yen, representing a slight decrease from the previous fiscal year-end. This slide summarizes ROE, ROIC, and shareholder returns. First, ROE. We initially planned for 6.3%, but due to tariff impacts, the forecast now stands at 5.1%. There remains a gap to the cost of shareholders' equity of 6.8%. We will continue to pursue earnings improvement and the steady execution of shareholder returns. The ROIC forecast is 5.0%. Regarding shareholder returns, we are presenting an annual dividend of 26 yen per share. Additionally, at today's Board of Directors meeting, we resolved matters concerning the acquisition of treasury shares. The acquisition period, total acquisition amount, and other details are as shown on this slide. This treasury shares acquisition aims to enhance shareholder returns and capital efficiency. We plan to cancel all acquired treasury shares. Capital expenditures, depreciation, and R&D expenses are as shown on this slide. Moving on to topics. I would like to introduce several initiatives we are pursuing as key themes of our midterm management plan. First, as part of rebuilding a strong business foundation, we are advancing efforts such as developing new products and enhancing intrinsic product value. As introduced here, we have launched new products that refine intrinsic product value in synthesizers, guitar amplifiers, effects processors, music production tools, network equipment, and more. Next, I'd like to briefly introduce our challenges for evolving to create the future. First, we aim for revenue growth through proactive investment in key markets, particularly emerging markets. We have high expectations for India and the Philippines, and have been advancing investments in each market. Additionally, as a challenge to create new businesses, we announced the launch of the global business contest, the Transpose Innovation Challenge. Regarding our initiatives to set sustainability as a source of value, we are expanding our efforts to promote music education in emerging markets, as shown in the center. We present examples from Egypt, India, and Vietnam here. Furthermore, we are steadily progressing our midterm plan's key themes, including strengthening the management foundation. The following is supplementary material. This concludes my presentation. Thank you.