Yamaha Motor Co Unsp/Adr

This is Hidaka. Thank you very much for viewing the online business results briefing of Yamaha Motor Company Limited. First, I'd like to express my deep apologies for having kept many dealers and customers waiting due to part shortages and lockdown in Shanghai. All the employees around the world are making utmost effort to deliver products on the earliest possible date.

I would like to ask for your understanding. Now I will start the presentation.

Please turn to page 4. Let me explain the key points in the first half. In the first half, sales grew but profit fell. And they were in line with forecast. By business segment, In motorcycle business, sales increased due to continued recovery, but due to cost increase, operating income was almost flat year on year. In marine products business, demand remained robust and logistics issues improved. As a result, unit sales of outboard motors increased and both sales and profit increased. In robotics business, due to Shanghai lockdown and a semiconductor supply shortage, production units decreased, and that led to lower sales and profit. In the three months of the second quarter, despite the headwind of Shanghai lockdown impact, we were benefited by tailwind of depreciation of yen, and profit increased slightly earlier, but it was not able to offset the decrease in the first quarter. As for the FY 2022 forecast, we revise at the forecast of sales to 2 trillion 200 billion yen and operating income to 200 billion yen. In the second half, we project that the cost for raw materials, parts and ocean freight fees will remain high, though cost increase is calming down. Semiconductor supply is on the improvement trend, but it will be difficult to return to normalcy by the end of the year, and we will be able to secure the necessary volume in the next year and onward. Supply chain disruption in the U.S. still continues, and it also will take some time to return to normalcy. Weekend works in our favor, and it will continue to serve as a tailwind in the second half. As for the market, the condition varies by country and region, but overall demand across businesses and regions will remain strong. We closely monitor the economic slowdown and inflation in respective countries as risks, but we have not observed impact as of today. Finally, as for enhancement of profitability, we maintain our break-even point management by controlling expenses and strive to mitigate cost increase through cost reduction measures and passing cost on to prices. Please turn to page 5. This slide shows unit sales by product in comparison with 2021 and 2019 in percentage. And inventories as of the end of June are compared with those as of the end of March. Regarding motorcycles, shipment was affected by the production constraint, but by focusing on the allocations and sales of producible models, we maximized the sales. Inventories of motorcycles decreased further from the end of March. We are struggling in the premium segment model production, which were heavily affected by semiconductor shortage, and inventories in premium segment model are in short. Regarding the outboard motors, production volume increased, and with the progress in shipping the inventory, which were piled up in the export ports in Japan, unit sales increased. Paths and surface monitors unit sales decreased due to Shanghai lockdown and production volume decreased due to pot shortage including semiconductors. Please turn to page 6. I'll explain the business results figures. Table shows from left, benchmark year of 2019, 2021 and 2022, the first half. On the right, comparison versus 2019 and 2021 are shown. As for 2022, net sales were 1,068.9 billion, 116% of the previous year. Operating income was 102.4 billion, 94% of the previous year, and operating income ratio was 9.6%, down 2.3 points year-on-year. Ordinary income was ¥115.4 billion, 100% of the previous year, and net income attributable to owners of the parent was ¥83 billion, and EPS was ¥241.58. Sales increased due to the strong demand in all businesses and the depreciation of yen, And the record high first half sales were posted and they exceeded 1 trillion yen for the first time. Operating income slightly decreased, but 9% of the operating income ratio which was committed in the mid-term business plan was secured. And actual foreign exchange rates are listed at the bottom of the table. Please turn to page 7. This slide shows the first half operating income comparison of 2021 and 2022. Variance in each business, growth strategy expenses, and exchange effects are shown. In addition to the cost increase and the parts shortage, which have been continuing since the second half of the previous year, due to the external impact, including Shanghai lockdown, which happened in the second quarter, except exchange effect, profit declined in all businesses. In marine product business, due to the increased inventories caused by the longer logistic lead time for the U.S., unrealized profit increase. Let me elaborate more in detail by factor on the next page. Please turn to page 8. Sales increase was plus 9.3 billion yen, and its breakdown is scale increase 11.9 billion yen, price raises and others plus 13.7 billion yen. Unrealized profit due to increased inventory was minus 11.4 billion yen, and increase in logistic cost was minus 4.9 billion yen. Cost reduction was plus 10.3 billion yen. While cost increase including that of raw materials and procured parts was minus 32.4 billion yen, gross strategy expense increases minus 2.3 billion yen. Increasing SG&A expenses including variable costs in line with volume growth was minus 18.8 billion yen and including exchange effects plus 27.1 billion yen. Operating income was 102.4 billion yen. Against the cost increase and ocean freight fees increase, we worked on to reduce costs and pass on to the price to absorb negative impacts. Furthermore, for labor cost surge and increasing SG&A expenses, including logistic costs, along with the sales recovery, depreciation of the yen worked, but profit decreased slightly year-on-year. Please turn to page 9. This slide shows a FY 2022 forecast of unique sales by major product, and the left part is versus 2021, and the right part is versus 2019. We expect the continued steady demand in each business and region and improvement in semiconductor procurement year on year. And by securing production volume, sales are expected to increase. Pass and surface monitors which were affected by Shanghai lockdown in the first half will increase sales in the second half. Please turn to page 10. Based on the unit sales assumption shown on the previous slide, we revise up the forecast. Net sales are 2 trillion 200 billion yen, 121% of the previous year. Operating income is 200 billion yen, 110% of the previous year. Operating income ratio is 9.1%, down 1.0 points year-on-year. Ordinary income is 210 billion yen, 111% of the previous year. And net income attributable to owners of parent is 145 billion yen, 93% of the previous year. And we aim to achieve the record high sales and operating income. Annual foreign exchange rates are revised as shown here. We expect the high cost in raw material parts and ocean freight fees and issues in parts procurement, including semiconductors, will not be solved in the second half, but through measures of cost reduction, pass-on to price, and switch over to the alternative products in semiconductor. We will ensure thorough implementation of break-even point management style. Please turn to page 11. This slide shows the operating income variance analysis by segment of the revised forecast 2022 compared to 2021 results. Prolonged parts shortage, including semiconductors, and further cost increase and sustained high cost are expected. Therefore, excluding exchange effects, except robotics business, in all businesses, profit will decrease year on year. In particular, land mobility business will be heavily affected by those factors also in the second half. Let me explain the specific factor on the next slide.

This slide shows the operating income variance by factor.

Sales increase is plus 61.7 billion yen and its breakdown is scale increase plus 35.6 billion yen. Price raises and others is plus 55.1 billion yen. Unrealized profit is minus 14.6 billion yen and increase in logistic cost is minus 14.3 billion yen. Cost reduction is plus 15.6 billion yen, and cost increases is minus 71.7 billion yen. Growth strategy expense increases are minus 8.9 billion yen. Increasing SG&A expenses is minus 38.9 billion yen, and including the exchange effects plus 59.9 billion yen, we plan the operating income of 200 billion yen. As for the cost increase of 71.7 billion, it will be absorbed by cost reductions and price hikes, and SG&A expenses are up, but sales activity expenses including sales promotion cost and advertisement and promotion cost will be properly controlled. Please turn to page 13. I'll explain the progress in medium to long-term measures. As for the measure for carbon neutrality, we expedite the carbon neutrality goals for the company factories to 2035. We reduce 92% of CO2 emissions compared to 2010 from production operations, and remaining emissions will be offset by internationally recognized method. To achieve the goals in Environmental Plan 2050, we set up Yamaha Motors Sustainability Fund. We take social requests to solve environmental resource issues as a new market opportunity, and we'll explore the domain where we can build competitive advantage through investment. Thus, we aim to build a new business which will lead to carbon-negative In new business domain, we made the third investment in Tier 4, the company to develop autonomous driving technology, following 2017 and 2019. Through this, we will promote the business of automated material handling solution and aim to increase production of small EVs dedicated to logistics in facilities and to deploy full-fledged commercial service in Japan and abroad. and we concluded collaborative agreement with Japan Automobile Federation on low-speed mobility. This aims to provide sustainable mobility services by enabling the introduction of low-speed mobility vehicles and after-sales services in areas with insufficient access or lacking the public transportation.

This is the STANA. Next, I will present the details by business segment.

Please turn to page 15. This slide shows the net sales and operating income by business. And the chart shows those of 2019, 21 and 22. As for the result in 2022, net sales in land mobility business were 688.7 billion yen, operating income was 36.7 billion yen, marking sales increase and profit decrease. Net sales in marine products business were 255.9 billion yen, and operating income was 49.6 billion yen, marking increase both in sales and profit. Net sales in robotics business were 57.8 billion yen and operating income was 8.1 billion yen, marking decrease in sales and profit. Net sales in finance services business were 28 billion yen. Operating income was 9.3 billion yen, marking sales increase and profit decrease. And net sales in other product business were 38.5 billion yen. Operating income was minus 1.4 billion yen, marking sales increase and profit decrease. Let me elaborate the details by business according to the business portfolio classification in the mid-term business plan. Please turn to page 16. First, this shows core business, motorcycle business and land mobility business. The chart on the left shows breakdown by region. In 2022, we were affected by part shortage, including semiconductors and supply chain disruption caused by Shanghai lockdown. In developed markets, unit sales decreased except North America, but due to foreign exchange impact and the mix improvement in Europe, sales increased. In emerging market, unit sales increased in Indonesia, India, China and Brazil, among others. Despite the model, due to foreign exchange tailwind, sales increased. As for the operating income of the entire motorcycle business, besides the sales increase impact, despite the worsening model mix and cost increase, they were absolved by cost reduction and pass-throughs, and profit was almost flat year-on-year. Please turn to page 17. Marine Product Business Staycation demand continued after COVID, and the robust demand is expected to remain. As for outboard mortar, due to the improvement in delay in shipping caused by container ship and ship space, unit sales increased and sales grew.

As for water vehicle end boards,

Supply chain destruction affected the production in the U.S. factories, but water vehicles suffered production delay last year as well due to the raw material procurement issues caused by cold wave, so unit sales were slightly down year-on-year. On the other hand, as unit sales of high-end sports board increased, sales increased year-on-year. As for operating income of the entire marine product business, unrealized profit increased due to the inventory increase caused by the stagnated logistics and profitability worsened, but due to the depreciation of yen, profit increased. Please turn to page 18, RV business. Amid the robust demand, due to supply chain disruption in the U.S., market supply has not been able to catch up with demand. Yamaha Motor increased sales by focusing resources on ROVs and sales increased. We gained shares in ATV and ROV as well. On the other hand, operating income decreased due to fixed cost increase in the U.S. production base along with the lower utilization and raw materials cost and labor cost surge. As for the supply front, we have identified bottlenecks and started to take specific countermeasures. And we continue to carry out improvements to normalize production operations. Please turn to page 19. Financial services business to support core business. Receivables increased in the U.S. and Brazil and net sales increased. Even excluding foreign exchange impact, both receivables balance and the sales went up. As for the operating income, in the previous year, allowance for doubtful accounts decreased, which served as one-off benefit on profit. And because of this, profit decreased year on year this year. But high operating income ratio is still sustained. Please turn to page 20. Growth business, SPV business. Due to Shanghai lockdown in addition to the tight supply of bicycle parts and electronic parts shortages, production delays occurred. Unit series of electrically power-assisted bicycle and e-kit decreased and sales decreased. As for the operating income, due to decreased sales and one-off quality-related expenses that was recorded in the first quarter, operating income ratio fell to 4.5%. In the second quarter alone, it recovered to 10.3%. We expect that electronic parts procurement issue will continue and are advancing measures to enhance procurement, Supply chain impact by Shanghai lockdown is partially remaining, but we plan to recover production in the second half and plan to increase unit sales substantially, centering on e-kit in the second half of the year. Please turn to page 21. Robotics business. As for surface monitors, sales for developed market have been robust. But sales for China decreased due to unit sales decrease caused by Shanghai lockdown and short supply of semiconductors. As for Yamaha Robotics Holdings, investment in advanced semiconductors and automobile semiconductor equipment market was sustained, and the company were able to capture the demand, and that led to sales increase. Net sales of the entire robotics business decreased, and operating income decreased due to sales decline and SG&A cost increase, including labor cost and material cost and parts cost surge. Bottleneck parts procurement will improve toward the second half, and activities are ongoing to boost production capacity, including the shift to semi-line production from cell-based production and the introduction of theoretical value-based production. We plan to improve supply capacity and to turn to sales expansion in the fourth quarter and onward. This concludes my presentation. Thank you for your attention.