Q1: Performance of pianos and other instruments in China was favorable. Could you please explain conditions in China during the first quarter? Also, what is the outlook going forward?
A1: Our inventories of pianos, which were excessively high in the latter half of the previous period, have declined. In addition, along with the expansion in the sales network in China, sales in regional areas outside the major cities are increasing in the second-tier and third-tier cities. These are main factors accounting for favorable performance.
The outlook going forward is for us to work hard to secure market share. Since the rapid growth rates of 20% year on year experienced two or three years ago will not return, we have shifted from a growth strategy to a competitive strategy.
Q2: Please explain the status of the musical instruments and the audio equipment businesses in Europe. Since the yen is appreciating, how sensitive will your results be to foreign currency factors?
A2: Musical Instruments
Conditions were tough in the piano business during the first quarter, but sales of digital pianos held firm. Looking forward, in Europe, we will concentrate promotional activities and focus on increasing sales of our popular high-end portable keyboards. By region, conditions in the southern part of Europe are recovering, and sales in the United Kingdom are favorable. The key to performance will be trends in central Europe, including Germany.
Conditions continue to be challenging in the AV products business. Looking forward, we will concentrate on launching new products. Also, an important factor will be what measures we will take to strengthen our sales network.
PA equipment got off to a good start. In Europe, the introduction of our new digital mixer is ahead of other areas, and they have established a good reputation in the market, enjoying favorable sales.
Regarding sensitivity to foreign currency changes, a ¥1 movement against the euro will result in a change of ¥360 million in operating income.
Q3: In your explanation today, you mentioned PA equipment installation business. In which region does this refer to? Please explain the status of these business activities.
A3: PA equipment installation business refers mainly to installing equipment in theaters, concert halls, and other similar public places. This is a business in Japan.
In part because there is some time interval from the time orders are received to installation work and recognition of sales, since orders were weak two periods ago, conditions for sales during the previous period were difficult.
Since orders recovered substantially in the latter half of the previous period, we are expecting an increase in sales during the current fiscal year.
Q4: Please explain your pricing strategy in China in more detail.
A4: Under our policies, we are not aiming for growth simply through direct price competition, but are also seeking to grow by providing products that are well suited to and accepted by the market and by offering superior products.
Q5: Please describe the current status of music schools in China and the positioning of this business there.
A5: The number of pupils enrolled in our music schools in China is steadily expanding, and it has exceeded 10,000. We plan to expand the enrollment of pupils and expand this business by shifting from mainly music schools that are directly managed by Yamaha to schools operated by dealers.
At present, the principal objective of the music school business is not so much to generate profits from this business per se as it is to expand the number of people who can play musical instruments and increase demand for instruments.
Q6: If the sales of the electronic devices segment decline to ¥3.2 billion in the second quarter, won’t the operating loss be more than ¥300 million?
A6: In the electronic devices business, market conditions are undergoing change and it is difficult to forecast trends, but since profitability can be changed by reducing fixed costs and by changing the mix of models, taking these factors into consideration, we believe at this time that ¥300 million in an operating loss is appropriate.
Q7: How has the outlook for the effects on operating income of new consolidations resulted in changes in the forecast compared with last time?
A7: We think the effect on operating income of new consolidations is minus ¥2.3 billion annually. In part because sales of new products of Line 6 were slightly weaker than we had expected in our previous forecast, we revised the forecast downward.
Q8: Have you solved the parts procurement problems in the AV products business?
A8: We have solved issues related to production, however production of some items lagged between two and three months from spring onward. Nevertheless, if your question is whether we can catch up 100% from the delays in April, I would say that is an issue we will have to address.
Q9: In connection with the impact of foreign currency fluctuations, what will be your pricing policy? Will you reflect the positive effects of foreign currency movements in local sales prices and then expand the unit volume of sales?
A9: As foreign exchange rates continue to fluctuate, Yamaha is aware of the importance of maintaining the trust of customers by following a stable pricing policy. However, depending on products, markets, and competitive relationships, we reflect these circumstances in our prices.