A1: While how any reciprocal tariffs might play out is uncertain, we implement cost-cutting, reduced investment, and other measures to manage risks that could hinder our ability to achieve the ROE target. We are firmly dedicated to promoting the plan to deliver ROE above the cost of capital.
Q&A on the New Medium-Term Management Plan(Held on May 8, 2025)
Q1: Please describe your level of commitment to the plan’s ROE target given the prospects of a direct impact from U.S. tariffs, an indirect impact from global economic deterioration, and other risks?
Q2: The Company seems eager to raise the top line. Will your efforts include M&A or other actions?
A2: We plan to reach the sales target mainly through organic growth driven by higher volume and unit prices.
Q3: What do you see as the main contributor that will raise core operating profit to ¥70 billion in the plan’s final year?
A3: The biggest factor will be improved profitability in the musical instruments business, where we will increase the core operating profit ratio from 7.5% last year to 14%. This will come from increasing production volume as revenue grows, benefits from the structural reforms in acoustic piano production, optimized pricing for digital musical instruments and other products, and a stronger focus on mid- to high-end guitars.
Q4: Slide 12 places guitars in the structural reform section. Can you please describe the status of profits in the guitar business and the measures that will be taken to improve profitability?
A4: The core operating profit of the guitar business declined mainly because the Yamaha Guitar Group (YGG), which provides Line 6, Ampeg, Cordoba, Guild, and other brands, has been slow to introduce new products and thus has not yet recovered the development costs, and because sales of the Cordoba Music Group turned sluggish from a fallback in stay-at-home demand after we acquired the group. YGG will reform its structure so it can be profitable even if sales are capped at a certain level. We are also planning manufacturing reform and other steps to improve the profit margin of Yamaha brand guitars.
Q5: Another revenue decline was expected this year in the home audio (HA) business, which is scaling down, but sales forecast of audio equipment for consumer use was actually essentially flat. Given these circumstances, is there a way to improve HA’s business profitability?
A5: We have two segments in audio equipment for consumer use, content sharing and communication (CS&C) and HA, which are both part of the creator & consumer audio (CCA) business. Within the CCA business, we are actively reorganizing our model mix and aiming to boost sales, with a focus on the growing market for CS&C. HA’s business revenue has been declining as we concentrate its sales regions and incorporate more high value-added models into product lineups. Our plan is to improve the gross profit margin by reducing the cost ratio.
Q6: How do you plan to achieve the target for a significant 25% cut in HA business costs?
A6: The HA business’s cost ratio has remained high because of the sharp decline in manufacturing activity and lower capacity utilization rate during the previous medium-term plan along with high prices for components due to the difficulties in semiconductor procurement. We will normalize this situation. We will also reorient our product lineup to mid- to high-end products and lower fixed costs by engaging ODMs and OEMs.
Q7: What outcomes do you expect from the structural changes shown on slide 20?
A7: Following the reorganization implemented in April, the production, business, and sales units went from being separate functions to being aligned to each business, so the units can work more closely with each business. The main goals were first to accelerate business execution, and second to adapt the operations to the distinct characteristics of the musical instruments and audio equipment businesses, which are quite different. Our operational structure has been centered on the musical instrument business, which generates large sales volume, but this has not always been a good fit for the audio equipment business. We expect modifying our production and sales activities to better suit each business to support further business growth, especially for the audio equipment business.