Q&As on the presentation

Q&As on the Presentation of Financial Statements for the First Quarter of FY2010.3 (April 1, 2009 to June 30, 2009) of FY2010.3

Q1:We understand that the environment for piano sales in Europe is harsh, but could you please provide us with information on the status of piano sales in the German market?

  • A1: Sales of pianos in Germany are relatively firmer than in other European countries, but, at present, the situation has been adversely affected by the temporary effects of price increases we instituted in April and the consumer psychology resulting from the deceleration in the economy. We believe that this situation will recover little by little going forward, but the pace of recovery will be slow.

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Q2:How long do you think the effects of increases in prices, which have caused customers to restrain their purchases, will continue?

  • A2: These price increases in the European market were already completed as of April 15. Currently, we are preparing to implement various sales promotions as we move toward the end of the year. In piano stores that are in a weak financial condition, we are providing them with financing and other assistance measures and moving forward with initiatives to encourage them to hold inventories.

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Q3:The low point for piano sales was in the first quarter, but are you suggesting that the momentum of recovery in sales in the second and later quarters may not be strong?

  • A3: We believe that a rapid recovery in piano sales will be difficult.

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Q4:Could you please explain the factors accounting for the increases and decreases in the first quarter in operating income compared with the same period of the previous year? Please explain these factors for overall operating income and for operating income of the musical instruments segment separately.

  • A4: Overall, operating income decreased ¥5.4 billion from the same period of the previous fiscal year. The impact of various factors was as follows: Foreign currency factors had a negative effect of ¥3.8 billion; the investment loss on retirement benefit obligations was ¥0.9 billion; the decline in real sales resulted in a decrease of ¥6.0 billion; lower raw materials costs had a positive impact of ¥0.6 billion; consolidation of additional subsidiaries had a negative effect of ¥0.4 billion; and the decrease in selling, general and administrative expenses resulted in a positive contribution of ¥5.1 billion. In the musical instruments segment, operating income decreased ¥4.4 billion compared with the same period of the previous year. The impact of various factors was as follows: Foreign currency factors produced a negative effect of ¥3.0 billion; the investment loss on retirement benefit obligations was ¥0.6 billion; the decline in real sales resulted in a decrease of ¥3.4 billion; lower raw materials costs had a positive impact of ¥0.3 billion; consolidation of additional subsidiaries had a negative effect of ¥0.4 billion; and the reduction in selling, general and administrative expenses had a positive effect of ¥2.7 billion.

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Q5:The reductions in selling, general and administrative expenses appear to be large. Which expenses did you reduce?

  • A5: Major reductions included a cut in advertising and promotional expenses of ¥1.8 billion, a reduction in personnel costs of ¥1.9 billion, and a cut in transportation costs of ¥1.0 billion.

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Q6:In your explanation of measures adopted in the musical instruments segment you indicated that you returned a portion of the positive effects of price increases and adopted sales terms and conditions closely tailored to customer needs. Please explain this point more specifically.

  • A6: In the European market, we implemented price increases as we gave consideration to market trends and to the likely acceptance of higher prices by individual product. However, in the case of digital pianos and portable keyboards in the mass market price range, where competition with some other companies is intense, beginning in August, we are planning to undertake a review of prices as we move toward the end of the calendar year. In addition, to increase piano sales, we are implementing trade-in campaigns to encourage current piano owners to purchase new instruments. Among other measures, we are providing support to leading retailers by lengthening terms for payment and using this support as leverage to encourage retailers to hold inventories.

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Q7:Could you please explain how you review and revise your prices? Do you mean you returned to the prices charged before the price increases?

  • A7: No, we did not return to the prices charged before the price increases, but for certain items, we reviewed and revised prices with an eye to competitive conditions.

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Q8:Was the decrease in depreciation for the semiconductor business of ¥1.7 billion in connection with the recognition of impairment losses in the previous period a decrease for the full fiscal year?

  • A8: The decline in depreciation for the full year will be ¥1.7 billion.

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