A1: Yamaha established Make Waves as the brand promise of our pledge to our customers, reflecting our desire to be a company that inspires its customers. When customers think of the Yamaha brand, Yamaha wants them to appreciate how exciting we are as a company and to desire to be connected with us for many years. We gave Yamaha’s new medium-term management plan (the new medium-term plan) a name that would put this brand promise into action in the title, the "1.0" in the title, which indicates the first stage in fulfilling our brand promise.
Q&As on the Presentation on the New Medium-Term Management Plan Make Waves 1.0
Q1: What meanings have you included in the title of Yamaha’s new medium-term management plan Make Waves 1.0?
Q2: Could you please give us President Nakata’s views related to the outlook for the macro-economy?
A2: The outlook for the immediate future is expected to be challenging. Many economic and social events are taking place, but performance is generally holding firm. However, since we may be influenced after lags following these events, we think we would like to proceed with the plan without reducing our determination to implement it to the very end.
Q3: Sales growth on a Companywide basis looks relatively high, even compared with the outlook in the previous medium-term plan. Please provide us with the background for this.
A3: In the musical instruments business, China will remain at a high level with some slippage in demand, Europe will show recovery, and the increasing weight in sales in emerging economies will contribute to Companywide performance.
In the audio equipment business, sales will be driven by the sales rise due to the active introduction of new products going forward and the recovery in PA equipment for musical instruments.
Q4: What are your views of the slowing of growth in China?
A4: Even in the previous medium-term plan, we were expecting sales expansion of 25%, but performance exceeded this level. We are planning for performance at the levels of the previous plan, after taking macro-economic and general economic conditions into account.
Q5: What are the measures responsible for the recovery in Europe?
A5: A review of sales conditions during the previous medium-term plan shows sales began to settle down in the most recent fourth quarter to the level expected. Our view is that we are gradually benefiting from the fruits of measures enacted thus far.
Q6: Please provide us with information on products you expect to drive growth going forward and marketing measures in the emerging economies, including India.
A6: We expect that the digital musical instruments will grow centered around portable keyboards with a focus on the local models and that capturing demand in the growing guitar market will also drive growth. In addition, we want to use the digital marketing skillfully.
Q7: The growth in the guitar sales of 4.5 billion yen looks conservative in terms of market size and latent demand. Could you tell us about measures you will be employing going forward for growth and profitability?
A7: In China, we have been successful in branding. In our principal competitive market in the United States, we have begun operations at our guitar company in that country, and we are making progress in working in collaboration with our major dealers. Critical issues for next phase are increasing price ranges across the board, and we believe that branding investments will be needed to do this. Since marginal profitability of guitars is high as with other musical instruments, profit in the guitar business will increase along with the sales growth.
Q8: Amid changes in the AV product market, what are your views on the outlooks for this business going forward?
A8: In the AV product market, we are focusing on revising our product portfolios and moving forward with strengthening the appeal of our brands. Changes in the AV products market are presenting new opportunities and we are switching to connected audio products. In Europe, we are working for steady expansion in the AV product business through expanding the exposure of our products along with pursuit of more branding opportunities.
Q9: While Yamaha is aiming for a core operating income ratio of 20% as a goal, setting a core operating income ratio of 13.8% in three years it appears that the speed of your progress is slowing. Please explain the reasons for this.
A9: We will make progress in improving profitability as in the previous medium-term plan. Under our long-term goal of attaining core operating income ratio of 20%, in order to take the next step upward in profitability, we will make strategic usage of expenditures in the new medium-term plan. In general, to raise the profit ratio by 3 percentage points under the new medium-term plan, we will require expenditure of one percentage point in strategic expenses. As a result, we will raise our core operating income ratio by roughly 2 percentage points.
Q10: What are your views on optimizing sales prices to appropriate levels going forward?
A10: In any pricing models, we want to be sure that prices are based on value. Customer satisfaction is not just a functional aspect but also has a lot to do with emotional value. We want to reflect it in the measures we take, including the realization of emotional value.
Q11: Could you please comment on how the content of core operating income and order of presentation in the statements of income has changed following the introduction of IFRS.
A11: Compared to the Japanese accounting standards, sales discounts included in non-operating income (loss) have been deducted in sales and gross income. The order of disclosure is sales; gross income; selling, general and administration expenses; core operating income; extraordinary income (loss); and operating income.
Q12: Please explain how you have applied B/S related measures, including those related to improvement in inventory control.
A12: We understand that inventory control is a management issue. Yamaha made some adjustments due to reductions in production in the fourth quarter of the fiscal year ended March 2019. It is our intention to improve the quarterly inventory balance by increasing accuracy of inventory control, and further boost profitability over the full fiscal year. We are currently making plans for a new SCM system for this purpose.
Q13: Please explain the content of strategic investments and the scope of these investments, including expansion in production capacity.
A13: We have no clear-cut definitions for the field of investments, but, provided the investments contribute to growth, they are considered investments. There is a strong possibility that audio equipment related expenditures will be included, but other areas are under consideration. Production capacity will be gradually expanded in a stepwise manner to match the progress of sales.