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Q&As on the
Presentation of Financial Statements for FY2005 Third Quarter
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| Q1 |
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Were weather factors alone the cause
of your downward revising of forecasts for the Recreation business segment? Can
you please detail your plans for improving profitability next year?
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| Q2 |
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Why have inventories increased despite
the mechanisms you have put in place in recent years?
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| Q3 |
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In sound chips for mobile phones,
where do you see unit prices trending?
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| Q4 |
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We understand that the unit volume
of semiconductor sales will not change much from the third to the fourth quarter.
Could you please explain why you are forecasting that the operating income of
the Electronic Equipment and Metal Products segment will decline from ¥4.6
billion to ¥2.2 billion? In addition, thus far you have adopted a policy of
responding to the need for more sophisticated functions, including expanding the
number of polyphonic ringtones. What policy have you been implementing during
the current period?
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| Q5 |
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In the musical instruments segment,
why did operating income overshoot the target in the third quarter, even though
sales fell short of the target? Also, you have revised downward your business
targets for FY2005. Are there any repercussions for FY2006 and your medium-term
business plan?
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| Q6 |
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What particular product inventories
have increased?
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| Q7 |
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In the Lifestyle-Related Products
segment, how much are the extraordinary losses?
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| Q8 |
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In the AV/IT segment, what are conditions
in the online karaoke business?
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| Q9 |
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In FY2006, what positive impact on
profits will result from your withdrawal from the construction materials business?
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| Q10 |
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Your outlook is for an increase in
inventories from the end of FY2004 to the end of FY2005. What is the outlook beyond
April 2005?
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| Q11 |
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Do you have technological plans,
including for alliances with other companies, in semiconductor applications for
ringtone or other areas?
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| Q1: |
Were weather factors alone the cause of your downward revising of forecasts for the Recreation business segment? Can you please detail your plans for improving profitability next year?
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| A1: |
The weather was not the sole reason for the downward
revisions. Unit price declines were also a factor. Customer numbers have not been
recovering at golf course and ski facilities, and the segment is saddled with
some structural problems. Amid these conditions, unfavorable weather further eroded
profits. For example, the Haimurubushi resort operation was hindered by typhoons
weekly in autumn and ski facilities opened behind schedule due to lack of snow.
YAMAHA decided to apply the accounting for the impairment-of-asset method to evaluate
the segment business from the basis of real profit/loss conditions instead of
cash flow. In addition, the Company has switched to the declining balance method
for depreciation and stands by its goal to turn profitable in the segment in FY2007,
ending March 2007, when depreciation charges should decrease.
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| Q2: |
Why have inventories increased despite the mechanisms
you have put in place in recent years?
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| A2: |
The supply chain management system is still not
fully operable, and our bullish sales forecasts have also been a factor behind
inventory growth.
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| Q3: |
In sound chips for mobile phones, where do you
see unit prices trending?
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| A3: |
The Company does not disclose specific estimates
of sales volume or unit prices, but its forecast has been for higher sales volume
year on year. Inventory adjustments began in the second quarter, which depressed
sales volume 15% quarter on quarter in the second quarter. In the third quarter,
sales volume recovered slightly from the second quarter. The Company expects sales
volume to stay about flat in the fourth quarter. With regard to unit prices, mobile
phone manufacturers face severe earnings conditions and have been putting on stronger
pressure to reduce prices.
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| Q4: |
We understand that the unit volume of semiconductor
sales will not change much from the third to the fourth quarter. Could you please
explain why you are forecasting that the operating income of the Electronic Equipment
and Metal Products segment will decline from ¥4.6 billion to ¥2.2 billion?
In addition, thus far you have adopted a policy of responding to the need for
more sophisticated functions, including expanding the number of polyphonic ringtones.
What policy have you been implementing during the current period?
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| A4: |
In our profit planning, we are forecasting a slight
decline in volume for the fourth quarter. In addition, we are expecting lower
unit prices and reduction in production levels due to inventory adjustments. Moreover,
we plan to continue to emphasize more sophisticated features, including the development
of 128 polyphonic ringtones. As singing ringtones (Chaku-Uta) come into wider
use, we do not expect that use of melody ringtones (Chaku-Melo) will disappear.
However, one issue is how much mobile phone manufacturers will be willing to spend
on melody ringtones. Looking ahead, we believe that a range of variations will
be necessary.
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| Q5: |
In the musical instruments segment, why did operating
income overshoot the target in the third quarter, even though sales fell short
of the target? Also, you have revised downward your business targets for FY2005.
Are there any repercussions for FY2006 and your medium-term business plan?
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| A5: |
Operating income exceeded the target mainly because
expenditures were delayed. The sales shortfall was largely attributable to slight
weaknesses in the overall market in the United States and to undershooting sales
targets in Japan. In the United States, Yamaha thinks a recovery is attainable
in the fourth quarter, partially because new products have been well received
at recent musical instrument trade shows. The Company had targeted operating income
of ¥15.5 billion in the first fiscal year of the medium-term plan; however, operating
income is likely to be held at ¥14.0 billion in FY2005 due to the late restructuring
of manufacturing operations. The segment is recovering, as evidenced by organizational
changes in the piano division.
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| Q6: |
What particular product inventories have increased?
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| A6: |
Inventories have been trending higher on the whole.
Looking ahead, the Company hopes to pare down inventories as it reduces production
and books special sales.
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| Q7: |
In the Lifestyle-Related Products segment, how
much are the extraordinary losses?
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| A7: |
We anticipate extraordinary losses totaling ¥1.0
billion in FY2005.
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| Q8: |
In the AV/IT segment, what are conditions in
the online karaoke business?
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| A8: |
Conditions have not changed appreciably, and the
business remains robust.
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| Q9: |
In FY2006, what positive impact on profits will
result from your withdrawal from the construction materials business?
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| A9: |
The benefits from withdrawal are difficult to estimate,
but the Company expects operating income to turn positive in FY2006 and net income
to move into the black in FY2007.
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| Q10: |
Your outlook is for an increase in inventories
from the end of FY2004 to the end of FY2005. What is the outlook beyond April
2005?
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| A10: |
There will be differences depending on the product.
Reducing inventories will require some time, and we believe some stocks will be
carried into the next period.
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| Q11: |
Do you have technological plans, including for
alliances with other companies, in semiconductor applications for ringtone or
other areas?
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| A11: |
For example, the Company has technological prowess
in digital amplifiers and other areas for reducing energy consumption.
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