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.