A1 : The factors that caused the decrease in the outlook for the fourth quarter are not expected to continue to have a significant effect next fiscal year.
Q&As on the Presentation of Performance Results for the Third Quarter (Ended December 31, 2013) of FY2014.3 (Held on February 6, 2014)
Q1 : It was mentioned that the outlook for the fourth quarter has been lowered due to such factors as a delay in emerging market recovery. Are these factors expected to continue affecting business in the first quarter of next year?
Q2 : Have there been any changes to next year's measures for emerging countries? Will China's sumptuary law have any effect on results?
A2 : We are expecting the growth rate of the Chinese market to slow down.
While we are concerned that the law will affect such businesses as our professional audio equipment due to a restriction in public demand, we are aware that personal consumption will grow solidly; so, we expect that our plan will contain prospects for reasonable growth.
Q3 : It has been predicted that the increase in the national consumption tax in Japan will occur in two stages. Are the effects of this expected to continue next year?
Which products have been affected? Are such measures as promotions being taken in stores?
A3 : At the time of our last announcement, we mentioned that no notable effects from the consumption tax increase had been seen, but orders for pianos have shown an upturn since the year-end period of high demand, with back orders also increasing.
As these are high-priced products, we are expecting to see a degree of negative effect to rush orders in the first quarter of next fiscal year.
Such products as wind instruments have also been affected, but pianos have shown the most marked change.
Regarding stores, Yamaha has not devised any policies for pre-tax-increase promotions.
Q4 : It was mentioned that the operating income for audio equipment in the third quarter was ¥800 million higher than the previous projection. How much of this is due to a delay in the occurrence of R&D expenses?
A4 : A ¥300 million increase occurred due to a delay in the occurrence of R&D expenses, a ¥100 million increase occurred due to the impact of exchange rates, and a ¥400 million increase occurred due to such factors as a decrease in SG&A expenses.
A ¥300 million increase due to a delay in the occurrence of R&D expenses and a ¥200 million increase due to a delay in the occurrence of SG&A expenses are expected to occur in the fourth quarter.
The decrease in production expected to occur in the fourth quarter will have an impact of approximately ¥200 million.
Q5 : Could you please provide a breakdown of the actual decrease in sales and production in the operating income for the fourth quarter compared to the previous year and previous projections?
A5 : The figures compared to the previous fiscal year are +¥200 million for musical instruments, -¥900 million for audio equipment, -¥800 million for electronic devices, and +¥200 million for others, making a total of -¥1.3 billion for the Company as a whole.
The figures compared to the previous projections are -¥400 million for musical instruments, -¥600 million for audio equipment, -¥400 million for electronic devices, and -¥800 million for others, making a total of -¥2.2 billion for the Company as a whole.
Q6 : It was mentioned that operating income was ¥1.8 billion higher than projected in the third quarter, and the projection for the fourth quarter has decreased by ¥1.8 billion. Does this mean that the figures for the fourth quarter have been predicted from the operating income of ¥22 billion forecast for the full year?
A6 : This prediction takes into account such factors as the deferment of development costs to the fourth quarter, operating losses at the semiconductor production subsidiary, and a decrease in gross profits for such products as AV products, despite benefits provided by exchange rates.
Despite such factors as a delay in the recovery of overseas markets, we are determined to make a minimum of ¥22 billion.
Q7 : Can we assume that the increase in production costs (-¥2.7 billion), the impact of guitar production (-¥800 million), and the operating losses for electronic devices (-¥500 million) in the full year operating income compared to the previous year are due to special causes that will only apply this year, that these factors will improve next year, and that this amount will be added to next year's operating income?
A7 : The main reason for the increase in production costs was an increase in labor costs at our overseas production bases. This is expected to continue occurring next year, although the margin of increase is expected to settle down somewhat.
The other factors are special causes that will only apply this year. We, therefore, consider that they do not need to be projected for next year.
Q8 : Did the sales of AV products fail to meet expectations during the year-end period of high demand because of overall market conditions or due to competition?
A8 : We believe that both of these factors had an impact.
Sales of our AV receivers and Soundbar products, our leading AV products, were sluggish due to tougher offensive pricing measures by our competitors than last year.
Meanwhile, markets as a whole are slowing down in emerging countries (particularly China), which has also had an impact.
Q9 : What is your outlook for the next fiscal year?
A9 : Specific targets in terms of specific time frames have not yet been decided for next fiscal year, as these will be deliberated in future discussions, such as budget compilations.
However, it seems likely that we can expect a recovery in advanced countries (the United States, Europe, and Japan) compared to the plan for this fiscal year.
Q10 : What was your reasoning when deciding on the increase in dividends?
A10 : There has been no change to our policy that "the Company endeavors to return profits on a basis of continuous and steady cash dividends, with a target consolidated payout ratio of 30% or higher."
We revised our outlook for cash dividends at this time in response to the earnings forecast for this fiscal year as a step to enable us to reach our target payout ratio as soon as possible.