Yamaha Motor Co., Ltd.

Explanation of our Earnings and also the New Medium Term Management Plan. I'm your moderator today. I'm from Corporate Communications. My name is Kurabe. Thank you very much. Before going into the explanations, let me introduce today's participants. President, CEO and Representative Director, Watanabe Katsuaki. Executive Vice President and Representative Director, Shitara Motofumi. Today, we'd like to give you an outline of our business results, then explain our new medium-term management plan. After the presentations, we will take questions from the media, and then there will be time for photographs. We plan to end at 16.45. And today's materials can be found on the Yamaha Motor corporate site. Now let's begin the earnings presentation. Mr. Watanabe, please. I'm from Yamaha Motor. My name is Watanabe. Thank you for taking time out of your busy schedule to attend Yamaha Motor's explanation meeting today. And I'd also like to thank you for your constant understanding and support of our business activities. Thank you. Now, please let me give you an overview of our business results. First, the key points of our business results. Please turn to page 4. Our 2024 business results, year on year, we saw increased revenues, lower profits. Compared to the revised forecast we announced on November 6th at our third quarter business results announcement, we saw lower revenues and profits. Revenue, thanks to higher unit shipments in motorcycles and the weaker yen, increased from the previous year. Profits fell approximately ¥62 billion from last year. Approximately ¥50 billion of this is transient impact such as expenses incurred from reviewing unprofitable business structures, impairment losses on fixed assets, and quality-related provisions related to recalls. In addition, We saw lower sales accompanied by decreased production and higher SG&A expenses which had a major impact. This time, compared to the revised forecast announced in November, the one-off expenses I just touched on and marine products and motorcycle sales not growing as expected led to lower revenues and profits. However, In our core motorcycle business, with continued steady demand, our company's sales are also expected to be favourable. In the marine business, in demand, we expect a gradual recovery, with outboard motor inventory levels improving. From production to sales, the flow is expected to normalise. Regarding the environment surrounding our group, with the global economy remaining uncertain, the unclear situation is expected to continue. And in sluggish markets, business recovery is expected to be gradual. In addition, raw material prices and labour costs are on a rising trend, so the tough situation is expected to continue. This being the situation... In our core motorcycle business, by promoting premium strategies and in the marine business, watching market trends, we will expand our production and sales. In robotics, generative AI-related demand will continue to be strong. Regarding our main product, mounters, from the second half, we expect the China market to recover. In our RV and SPV businesses, business structure reviews will reduce our deficits. But unless the market environment shows major improvement, the tough situation is expected to continue. and our RV business from fiscal 2025 will be integrated with our golf car business, formerly part of other businesses, to become the Outdoor Land Vehicle Business, or OLV. This business integration will aim to make operations efficient and by function we will engage in business structure reform. In this way, through management focusing on the break-even point while reducing costs and enhancing productivity, we will promote development and investments for the future and in 2025. Our plans are for revenue of 2.7 trillion yen and operating income of 230 billion yen, that's higher revenue and higher operating income. Regarding shareholder returns, annual dividend of 50 yen per share and share buybacks of 10 billion yen. With a total payout ratio of above 40% in mind, we plan for stable and continuous returns. Next, unit sales and inventory levels. Please turn to page 5. On the left, unit sales by main products compared to 2023 actuals. There was outstanding growth in Brazil and India, where we saw growth in unit sales. And, our premium model supply was stable in Indonesia, where unit sales also increased. In Outboard Motors, demand blunted off. For appropriate inventory levels, there were production adjustments, leading to a decline in unit sales. In ATV ROV, demand decelerated and competitors' aggressive pricing led to unit sales decreasing. In SPV, In the bicycle market overall, excess inventories continue and our company's unit sales are also down. In mounters, for the Asian markets, unit sales increased, doing better than the previous year. The graph on the right shows market inventory levels compared to appropriate levels. Demand continues to decline in Thailand and China and ATV ROV. Due to continued production adjustments steadily, inventories are decreasing. In India, inventories have switched to a slight increasing trend, but there is strong demand and should quickly return to appropriate levels. And in Vietnam, targeting the Lunar New Year Tet holidays in late January, inventories increased. Regarding outboard motors, steadily we have been decreasing inventories. Targeting next season, in the fourth quarter we promoted shipments, but demand did not recover as expected with inventories increasing slightly. Next, our 2024 business results overall. Please turn to page 6. Regarding our 2024 business results, revenue was 107% versus the previous year at ¥2,576.2 billion. Operating income was 74% versus the previous year at ¥181.5 billion. The operating income ratio was down 3.1 points from the previous year at 7%. Net income attributable to owners of the parent was 68% of the previous year at ¥108.1 billion. EPS was 70% versus the previous year at 110.12 yen. Regarding our revenues and operating income, as I explained at the beginning, revenues increased while profits declined. Our net income, due to lower operating income, declined. The prevailing exchange rates were 152 yen to the dollar and 164 yen to the euro. Next, factors affecting our operating income by factor. Please turn to page 7. Regarding the lower profit, approximately 50 billion yen is due to one-off factors. On this slide, you can see the breakdown. Business structure review-related inventory write-downs and production compensation costs came to approximately 23 billion yen. In the RV and SPV businesses, partial fixed asset impairment came to approximately 6.5 billion yen due to recalls. Quality-related costs came to approximately 23 billion yen. In 2025, these one-off factors should have a positive impact. That's the plan. And regarding factors affecting operating income, the main factor is sales effects, negative 49.3 billion yen. And the breakdown is selling price increase, positive 7.7 billion yen, unrealized profits, positive 57.5 billion yen, financial services, positive 8.1 billion yen, scale effects, positive 0.2 billion yen, and others, negative 122.7 billion yen. Net cost impact, ¥1.2 billion, of which cost reductions positive ¥14.6 billion, cost raises ¥15.8 billion. And growth strategy expenses increasing ¥7 billion, SG&A expenses increasing ¥42.2 billion, others including... Equity in earnings losses of affiliates, negative 3.8 billion yen. Exchange effects came to positive 41.1 billion yen. Next, 2025 forecast. Please turn to page 8. In addition to reaction to last year's one-off factors, higher sales in core businesses, our premium strategy, and loss-making businesses improving profitability will lead to revenue and profits doing better than the previous year. 2.7 trillion yen Operating income 230 billion yen Operating income ratio 8.5% Net income attributable to owners of the parent 140 billion yen EPS 143.21 yen That is the forecast. We used foreign exchange rates of 145 yen to the dollar and 155 yen to the euro. Next, our 2025 Factors Affecting Operating Income. Please turn to page 9. As you can see, we forecast sales effects of positive 59.2 billion yen. The breakdown is price increase. Positive 12.7 billion yen. Unrealized profits, positive 10.4 billion yen. Financial services, positive 1.1 billion yen. Scale effects, positive 62.2 billion yen. Others, negative 27.2 billion yen. That's the forecast. Net cost impact, negative 10.9 billion yen. The breakdown is cost reductions, positive 19.5 billion yen. Cost raises, negative 30.4 billion yen. plus SG&A decreasing positive 15.8 billion yen, others including equity in earnings losses of affiliates, positive 9.5 billion yen, exchange effects, negative 25.1 billion yen. That is the forecast. Next, I'd like to explain our returns to our shareholders. Please turn to page 10. In 2024, as we announced, we plan on annual dividends of ¥50 per share. This means, from 2022 to 2024, our total payout ratio, 3-year cumulative figure, is 46.9%. Therefore, the target we declared in our previous MTP has been achieved. In our new MTP, our shareholder return policy will be explained later in the new MTP presentation in 2025. Annual dividends of 50 yen per share and share buybacks of 10 billion yen are planned. We will continue to strive for stable and continuous returns for our shareholders.

Next, I will explain the details by business segment. Here are the fiscal 2024 revenue and operating profit by business. Please refer to page 12. In land mobility business, motorcycle and financial services business had higher revenue and profits. Marine business had the revenue on par with the previous year and lower operating profit. And robotics and other business had higher revenues, but their operating profit declined. RV and SPV businesses had lower revenues and operating losses. Next, fiscal 2025 forecast on revenue and operating income by business segment. Please refer to page 13. Starting from fiscal 2025, there will be some changes in the segments. As I explained it in the beginning, RV will be integrated with the golf car business included in other businesses to establish outdoor land vehicle business or RLB business. The MC business in mobility business was called two beavers business in Japanese, but it's renamed as motorcycle or MC business. The forecast for fiscal 2025, we expect to see higher revenues and income for MC, marine robotics, financial services businesses. OLV business is expected to have higher revenue but operating loss. There will continue to be businesses that are expected to have operating losses but the deficit will be narrowed. And here are the details by business segment. Please take a look at page 14 and onward. Firstly, the core business, motorcycle business. The chart on the left shows the total demand of 2024 in major regions compared to fiscal 2025 forecast. The chart on the right shows the revenues of the past two years and fiscal 2025 forecast. In 2024, the sales volume increased in mainland Brazil and India, where demand was strong, leading to higher revenue. On the other hand, operating income was on par with the previous year due to the increase in personal costs and SG&A expenses. In the fourth quarter, significant amount of quantity-related cost was incurred and lowered operating income ratio compared to the previous year. In fiscal 2025, with the premiumization of products in emerging markets, demand increase in India and the Philippines, and the launch of the new model of Aerox in Indonesia, we plan to increase revenues and income. On the other hand, profitability is expected to be on par with the previous year due to higher raw material costs and the increase in investment for the future. Now I would like to introduce to you the new motorcycle model and here the slide shows the New model called Aerox Alpha, which was launched in Indonesia in December 2024. And it adapts the same new transmission with another recently launched model of NMAX. It realizes the powerful acceleration to allow riders sporty driving and enthusiasm that is unique to Yamaha. With the launch of the new model, we will continue to promote the MC business, so please stay tuned. Next is Marine Business. The chart on the left top shows the year-on-year outboard motor detail registrations in the United States. The chart on the right top shows the revenue of each product. In 2024, with the demand decline, our sales was also lowered. As a result of the production reduction due to the inventory adjustment, as well as an increase in SG&A expenses, we have lower revenue and profits. In 2025, the demand in the United States, the main market of our outboard motors, is expected to be slightly lower than the level in fiscal 2023. It's expected to recover gradually. In addition to the demand recovery, inventory improvement will help to gradually normalize the flow from production to sales. Based on that, we plan to make higher revenue and profits. We also plan to expand the sales of F-350 that was launched last year. On the other hand, we plan to expand our investment for sustainable growth, such as development to enhance product lineup to meet market demand and strengthening of production capacity for larger models. Therefore, profitability is expected to be on par with the previous year. Next, SPB business and robotics business. Please take a look at page 17. On the left-hand side, SBB Businesses explained, in 2024, the sales volume of the e-bikes in Japan exceeded that of the previous year. On the other hand, the prolonged demand stagnation in its main market in Europe pushed down the overseas sales volume of e-kits, and their production volume was far lower than that of the previous year. Furthermore, the expenses to withdraw from the complete SPV market in the North America and the impairment of fixed assets were incurred and we had lower revenue and profits. In 2025, the demand is expected to recover. The market conditions will continue to be difficult. By focusing more on our strength in e-kits and domestic finished vehicle market, we aim to improve our profitability. Next on the right hand side, robotics business. In 2024, sales growth of generative AI applications and the semiconductor back-end equipment helped to mark higher revenue. On the other hand, due to the increase in the cost of manufacturing and development and SG&A expenses, we had operating loss. In 2025, The demand for generative AI-related products will remain strong. The demand for mounters in its main market, China, is expected to recover in the latter half of the fiscal year and beyond to mark higher revenue and profit. Lastly, OLB business and financial services business. Please look at page 18. On the left-hand side, OLB business. In 2024, LSM Business increased its sales volume due to the increase in demand in North America. On the other hand, RB Business so reduced sales due to higher market inventory and ensuing intensified competition. Furthermore, deterioration of model mix, higher SG&A expenses, and impairment of fixed assets were incurred to result in decreased revenue and profits. In fiscal 2025 and onward, we expect to see severe competitive conditions in the market for RV business, but through business integrations and efficiency enhancement, we will improve profitability. Next, on the right-hand side, financial services business. In 2024, with an increase in receivables due to higher sales volume and the impact of valuation gains of interest rate swaps, we had higher revenue and profits. In 2025, we will maintain profit ratio by appropriately managing business risks such as funding rates and allowance for bad debts, and we expect to see increased revenue and profit from greater retail receivables by selling more units. And that concludes the explanation on the business results for the full fiscal year ending December 31, 2024.

Next, before moving into the explanation of our new medium-term management plan, we would like to have Watanabe explain to you about a change in management. Yes, Shitara Motofumi, as of March 25th, will be our next President and CEO. At the Board of Directors meeting today, we have decided on this and we wanted to announce this to you. From myself, I'd like to explain why Shitara and why at this point in time. Regarding these two points, I'd like to explain. First, why Shitara? And there are mainly two points. First... He has broad business experience. And second, Shtara himself is an avid Yamaha fan. Those are the two points. And Shtara, since joining our company, he started out in domestic motorcycle route sales, and then he took charge of motorcycle product planning. Customizing your bike was the market trend at the time. and he incorporated this in his promotion activities. Through a TV drama, our TW200 took the world by storm and he was the one who started it all. After that, in our company-wide brand promotion division, then in marine engines, in product planning and business planning, he has served in our backbone businesses while experiencing such diverse business. He gained what's one of our company's action guidelines, persistence. And from 2018, for four years, at one of our key sites, our India Group Company, he served as the Chief Executive Officer. And earlier on in our earnings presentation, I just explained our motorcycle premium strategy. And during this time, he pushed this strategy forward, building the foundations of today's India motorcycle business for our company. And the second reason we have chosen Shtara is, Shtara himself enjoys Yamaha's products, enjoying them as his hobby. In his private life, he enjoys motorcycling. Our corporate mission is Kando creation. And he himself leads a life that enjoys this. He is... An avid Yamaha fan, second to no one else. He has outstanding energy and drive. His achievements in penetrating the market with our company's values and his collaborative abilities led to his selection as President and CEO. Next, I'd like to explain why this timing. Last year, as of September 30th, when our previous president, Hidaka Yoshihiro, suddenly resigned to secure business continuity, for the time being, myself, who was representative director, also assumed the position of president, and Shitara, who was in charge of the corporate side, became executive vice president. After that, our outside directors and myself At our Executive Personnel Committee, we utilized, for example, third-party assessments, held discussions from an objective point of view, and decided to propose Executive Vice President Sitara as our next President, putting it to the Board of Directors. This time, personally, at the March General Meeting of Shareholders, After making a summary report of our most recent business year, I'd like to hand on the baton to our new president, Shtara, leaving it to him to execute our new medium-term management plan. That's all from myself. And next, from Shtara, he would like to say a few words to you all.