Q&A on the Presentation of Performance Results for
the First Quarter of the Fiscal Year Ending March 31, 2025 (FY2025.3) (Held on July 31, 2024)

A1: Recovery from the reactionary downturn of stay-at-home demand is slower than expected. Acoustic pianos in China are particularly stagnant. In digital pianos (DP), we have seen a decline in market share in addition to the sluggish market. However, we are working to regain market share and are gradually seeing positive results. We intend to make a solid recovery by launching new mainstay products this summer.

A2: Demand for pianos is yet to recover. We maintain the view that it will take about two years for market inventories to normalize. We had assumed a gradual recovery of demand during the period of inventory adjustments, but since there is no sign of a recovery, we are now of the opinion that sales will stay at the current bottom level throughout this fiscal year.

A3: Some products, electric guitars for example, are performing well, but the recovery of digital pianos in addition to acoustic pianos has been slow, and we expect this trend to continue in the current fiscal year.

A4: For pianos, there are many customers with ties to China in North America, and the trend is somewhat similar to that in China. Market conditions are dull for guitars as well. Overall, recovery is slow as of 1Q. However, the 1Q results outside of China were almost in line with forecast and there was no significant discrepancy from the initial forecast. With the start of the new school season, we expect market inventories of keyboard instruments, guitars, and other instruments to decrease as demand grows, and sell-in will increase accordingly.

A5: We believe that market inventories peaked in 1Q. In North America, inventory is steadily decreasing at e-commerce and major musical instrument chains, and purchasing has been very active. Europe, on the other hand, is a little behind, but we expect inventories to decrease as we get closer to the upcoming new school season.

A6: Our measures vary depending on the competitive situation in each country and region, but we have been setting prices strategically and actively promoting with a focus on entry-level digital pianos, with the aim of regaining market share. We will continue these efforts in the 2Q and beyond.

A7: The event market for music and sports is thriving, leading to growing capital investment in broadcasting equipment, concert halls, stadiums, and other facilities. In Europe, a seasonal peak occurred in the first half of the fiscal year, and the Olympics and other events are also contributing to the strong performance.

A8: Growth in the European market is particularly strong in the first and second quarters and this momentum will be moderate in the third and fourth quarters, but we expect the global market to remain brisk.

A9: Our analysis is twofold: the event market has been revitalized by the resumption of social activities after COVID-19, and consumer preference has shifted toward experience-based consumption, attracting more audiences to concerts and sporting events.

A10: In audio equipment, sales of B2B products have exceeded the initial forecast, especially for high-margin products such as digital mixers, speakers and amplifiers for stage use. In the industrial machinery/components and others business, automotive sound systems grew more than expected. They also contributed to profits.

A11: Although volume will shrink as we narrow down our product lineup, profit margins will improve as we will have fewer products to be sold with discount.

A12: Reflecting the decline in sales in China, the forecast for piano production is reduced by about 12% from the previous forecast. There is no particular change in musical instruments other than pianos, and the forecast for the production of audio equipment in B2B products, which is performing well, is increased by about 9% compared to our previous plan. The total output does not change much, with the negative impact of pianos offset by the positive impact of B2B audio equipment.

A13: In the previous fiscal year, we reduced the number of temporary staffs by 2,000 not only at Chinese plants but globally, and now we are soliciting voluntary retirement of regular employees at our piano plants in China. In terms of scale, we expect to reduce the workforce by 400 employees and post an extraordinary loss of approximately ¥1 billion. The effect is expected to be ¥0.3 billion in the current fiscal year, and ¥0.4 billion per year in the next fiscal year and thereafter.

A14: The annual effect of structural reforms is about ¥2 billion, about a quarter of which is recorded in 1Q. In terms of model mix, digital pianos are recovering, and there are elements of improvement in the mix, especially with the high-margin audio equipment in B2B products. In contrast, decline in revenue and production cuts are included as negative factors.

A15: Ocean freight rates have been rising in general. In addition to some spot allocation of vessels, we have to allow leeway to include the outcome of the negotiations that inevitably arise when market conditions fluctuate widely, even though annual contractual conditions were set beforehand.