Yamaha Motors Co., Ltd. (Ticker: YAMHF) has reported an increase in both sales and profit for the first quarter of fiscal year 2024. During an earnings call led by Director Motofumi Shitara, the company outlined its financial performance and provided updates on its various business segments.
Yamaha Motors highlighted the successful application of international financial reporting standards (IFRS) in its reporting and a record high in sales, operating income, and net income for the quarter. The company also detailed its strategies in the face of global economic challenges, including monetary tightening and competition, while benefiting from lower ocean freight and raw material costs.
Key Takeaways
- Yamaha Motors reported an increase in Q1 sales and profit year-on-year.
- The company has begun applying IFRS to its financial reporting.
- Premium motorcycle models in emerging countries contributed to the sales boost.
- Marine business faced decreased outboard motor shipments in developed countries.
- Robotics business remained unchanged in China, with sales and profit reduction.
- The company is managing inventory levels to align with market demand.
- Yamaha Motors received an 'A' score from CDP for leadership in transparency and climate change.
- A technical partnership with Lola for Formula E powertrain development was announced.
Company Outlook
- Yamaha anticipates continued monetary tightening and economic uncertainty.
- The company is seeing improved supply situations and reduced costs for ocean freight and raw materials.
- Yamaha is focusing on brand and product appeal to avoid price wars and provide higher value.
Bearish Highlights
- Concerns over economic decline have led to lower demand and shipments for outboard motors in developed countries.
- Inventory levels are above optimal in some markets, necessitating adjustments.
- The Robotics business faces a potential recession in Europe and unchanged conditions in China.
Bullish Highlights
- The Motorcycle business in India, Brazil, and Indonesia is driving sales with a steady supply of premium models.
- Marine business demand remains steady in emerging countries, with large models trending in developed countries.
- The company's premium strategy is expected to enhance revenue further.
Misses
- ATV and ROV demand is slowing, with increased competition.
- The SPV business is undergoing inventory adjustments due to a challenging market.
- Robotics sales and profit are down, with increased SG&A costs affecting the OI ratio.
Q&A Highlights
- The Q&A session provided further insights into Yamaha's strategies and responses to market conditions.
- There was no additional information provided from the Q&A session in the summary.
In conclusion, Yamaha Motors has navigated a complex economic landscape to deliver strong first-quarter results. The company remains focused on strategic initiatives to maintain its growth trajectory, including inventory management and enhancing its product offerings. Yamaha's commitment to innovation and sustainability is also evidenced by its high CDP score and its partnership for electric powertrain development. With a cautious but proactive approach, Yamaha Motors continues to adapt to the evolving market demands.
Full transcript - None (YAMHF) Q1 2024:
Yuuko Kurabe: Good afternoon. Thank you very much for coming to the Fiscal Year 2024 First Quarter Earnings Presentation for Yamaha Motors. I'll be serving as the MC today. I am from Corporate Communication Division. My name is Kurabe. Before going on into the presentation, I would like to introduce the presenter. Our Director, Motofumi Shitara. Today, Shitara will make the presentation. And after that, for the media and analysts, we will have a Q&A session on Zoom (NASDAQ:ZM). The reference material could be accessed from Yamaha Motor's web page. So now we would like to move on into the presentation.
Motofumi Shitara: I am Shitara from Yamaha Motors. Thank you very much for attending the Yamaha Motors earnings presentation despite your very busy schedules. I would also like to take this opportunity to thank you all for your understanding and support to our operations on a daily basis. And now, I'd like to move on to my presentation of the outline of our earnings and starting from first quarter of fiscal year 2024, our company has started applying international financial reporting standards, IFRS. From the next page onward, for last year and for this year as well, the material has all been made based on IFRS. First, the first quarter major points. Please refer to Page 4. In the first quarter, the actuals on a year-on-year basis, we have seen an increase in sales and profit. For motorcycles, in the emerging countries the premium model production and shipments have gone up, which led to an increase in sales and profit and the operating income ratio has improved. In the Marine business, in the developed countries outboard motors shipment was down. In Robotics business, there was no change in the Chinese market and thus a reduction in sales and profit. Future outlook. Looking at the external factors, in many countries, monetary tightening is ongoing and economic situation remains uncertain. And looking at each segment including Yamaha, the supply situation has improved and tough competition is continuing. On the other hand, ocean freight and raw material costs has continued to go down. In our business, in the Motorcycle business in India, Brazil, Indonesia these has been the drivers and right now the premium model supply for emerging countries are steady and this has served as a tailwind. In Marine business, outboard motors demand in emerging countries remain steady and in developed countries the 300 horsepower plus large models are trending steadily. Activities to attain optimum level of inventory is showing effect and we will continue to keep a close watch over demand and sales to continue to adjust our inventory. Looking at market trends, the changes are becoming apparent and we will continue to control expenses and improve production efficiency to strengthen our profitability. Also, in the premium strategy, including premium strategy, we will continue to focus on brand and product appeal to stand above price wars, so that we can provide higher value through our products. Looking at the shipped units and inventory, please look at Page 5. Left, looks at by major products, the sales units compared with the actual of 2023. Strong demand continues in India and Brazil and the premium model supply has stabilized in Indonesia and especially in these countries we have seen an increase in shipments. Outboard motors in developed countries, there were concerns of economic decline which led to a decline in demand and shipment also declined. ATV, ROV, demand is slowing down and competition is becoming intense. SPV, in the bicycle industry as a whole, inventory adjustments are continuing and therefore for these reasons we are seeing a decrease. Surface mounters in Europe, the shipment amount is decreasing. Looking at the right hand graph, this is comparing the market stock with optimum level of stocks. Gray is last year as of the end of December, blue is this year as of the end of March 2024. The finance regulation is becoming stricter and Thailand demand is lowering, but excluding that inventory is above appropriate level with motorcycles in Vietnam and outboard motors in developed countries and therefore we are trying to reduce inventory towards an appropriate level. Looking at business results overall, please refer to Page 6. In the first quarter, revenue compared to previous year 106%, JPY642.1 billion operating income 103% against the previous year JPY78 billion Operating income ratio minus 0.4 points compared to the previous year 12.1%. Net income attributable to owners of parent was 113% against the previous year, JPY56 billion, EPS compared to the previous year 116%, JPY56.6. Improved semiconductor supply situation in premium model sales in emerging countries have increased in motorcycles and this was a driver for increased revenue. Also for Motorcycles, we have seen -- we were controlling expenses and positive effect of weaker yen led to increase in profit. For the first quarter, we have a record high sales operating income and net income. The currency rate used was JPY149 against a dollar and JPY161 million against the euro. Next, for 2024 first quarter, some factors affecting operating income. Please refer to Page 7. As you can see, sales effect had a negative impact of JPY16.7 billion. However, if you look at the breakdown, financial services plus JPY3.7 billion, our pricing which includes pricing increase in rebates was a plus JPY2.4 billion, unrealized profits negative JPY200 million, scale effects negative JPY78 billion and others negative JPY14.8 billion. The net cost impact was a positive JPY2.4 billion breakdown is cost reduction positive JPY4.3 billion, cost raises negative JPY1.6 billion and growth strategy expense has increased negative JPY1.9 billion, SG&A increased negative JPY2.8 billion, others positive JPY1.1 billion, foreign exchange impact was a positive JPY19.7 billion. Next, looking at the mid to long-term measures and the progress. Please refer to Page 8. Our leadership in transparency and climate change area and performance has been recognized in CDP 2023 we have received the highest score A. For us, this is the first time to receive an A score. The CDP score is broadly utilized in decision making for investments for sustainable and flexible net zero economy and also for purchasing decisions. Next looking at the bottom, the British racing car development company, Lola, together with them, we have concluded a technical partnership contract to develop and supply high performance powertrain for Formula E. We will develop cutting edge electric technology in order to raise the overall Yamaha's expertise in electrification. Next, we will go over details by business segment. I will start with the first quarter revenue operating income by business. So please refer to Page 10. For Land Mobility Motorcycles Financial Services, there was increased revenue and profit. The RV, SPV and Marine, Robotics were lower revenue, lower OI, and other segments ended up with higher revenue, lower OI. Now I'll go through the details in order, so please refer to Page 11. Starting with our core business. On the left, we are showing Motorcycles. The graph is showing revenue by region. With the developed countries, we saw a slight decrease. There was increased demand in India and Brazil. We had increased revenue in all regions by improving the supply of premium models. Our OI ratio also improved. For emerging countries Motorcycle premium strategy, we will be explaining the situation in our key markets later. Looking to the right for our Marine products business, the graph is showing our revenue by product. For our outboard models in emerging countries, we are continuing to see strong demand. In the West, 300 plus HP (NYSE:HPQ) large models are enjoying high demand. The smaller models are in decline. This year, we announced the 350 HP new model. This has been very well received. However, overall, the demand decrease has had a major impact. Our first quarter ended with lower revenue, lower OI. We're also doing inventory adjustments by reducing production, so our OI ratio has worsened. Now we will look at our Motorcycle business, looking at some topics on Page 12. In the Indian market, we are pursuing a premium strategy. As part of our branding activities, we are reinforcing our customer engagement. This photo is from an overnight tour event. Compared to developed countries, in India, multi-day touring events are not well known. In 2023, we held the first such event. Since then, many users have been able to experience this wonderful event. As another activity of reinforcing our brand, dealerships are hosting riding clubs blue streaks and offering circuit racing experiences. We are doing more than a 1,000 events a year that have garnered 20,000 plus participants. By providing new experiences to our customers, we want to promote the attractive qualities of motorcycles, not merely as a transportation device to create core fans. Our motorcycle premium strategy in the emerging markets. Here, we will focus on key markets. Please refer to Page 13. On the top row, we're looking at Indonesia and India, our actuals from 2019 to our forecast in 2024, looking at the transition of total demand. In 2020, we saw a huge decline due to the pandemic, but now the recovery is very steady. Bottom left is our premium strategy in Indonesia. In Indonesia, the Nmax and MAX Z series is a part of our focus in the 155cc class scooters. From 2022, FAZZIO, Grand Filano and other Class C series products have been launched in the market as the second pillar after MAX Z. These have been very well received. In the graph, we are showing the number of shipped units for these two categories. From 2021, there has been a shortage of semiconductors, despite strong demand, we have not been able to keep up with our supply. This has been very frustrating but now our supply has stabilized. On the right, for India, the 155cc class sports type segment is our focus. With the growing young population in India, we want to entice the Generation Z to have them grow their affinity for Yamaha brand, stylish, sporty and excitement. These are the perceptions now associated with Yamaha. On the graph, we're showing the sports category number of units shipped. You can see that we're showing a very steady increase. From 2020 to 2024, our CAGR in total demand is plus 6%, but the premium category number of units shipped is 23% plus in Indonesia and plus 16% in India. We continue to expect growth. In the emerging markets, we want the customers to understand the values that are unique to Yamaha. We will realize our premium strategy to enhance our revenue further. Next, we will look at our RV business and financial services. Please refer to Page 14. On the left, we are showing our recreational vehicles. The overheated demand has normalized. Companies now have improved supply situations and that has added inventory to the market. The price war has intensified. We have also had an increase in our SGA cost and fewer units shipped, so that's lower revenue and lower profit. On financial services, in North America and Brazil, we have increased our receivables due to higher units sold. The higher interest income and improved spreads has also led to increased revenue and profits. Lastly, we will look at our growth businesses of SPV and Robotics. This is on Page 15. On the left is our SPV business. There has been ongoing global market inventory adjustments that have made this difficult market for us. Yamaha has continued to adjust its inventory and we are looking to reduce inventory levels. We have fewer units sold, therefore, lower revenue and lower profit. We believe that, the trend will continue, so our inventory adjustments will continue. On the right, we have our Robotics for the surface mounters, there's no major change in the China situation. In Europe, there is a concern over a likely recession and less capital expenditure. We have received more inquiries for generative AI on semiconductor assembly devices, so this is in production full time. Overall, for mounters and industrial robots, we had lower revenue and lower profit. Our OI ratio also worsened due to increased SGA cost. Although we cannot afford to be optimistic, we have been getting more interest from China. We are getting ready for a recovery in demand by readying our production readiness. This concludes our explanation for quarter one of the fiscal term 2024. Thank you very much.
Yuuko Kurabe: With this, we would like to end our earnings presentation for the first quarter of fiscal year 2024. Thank you very much for watching the YouTube Live. For the media, after this, we will have a Q&A session. Please wait a while and please stay tuned.
End of Q&A:
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