Yamaha 2003 Annual Report Download - page 26

24 YAMAHA CORPORATION
0 100 200 300 400 500 600 700
’03
’02
’01
’00
’99
Musical
instruments
and AV/IT
Others Storage
heads
Net Sales by Business Segment
(Billions of Yen)
0 100 200 300 400 500 600 700
’03
’02
’01
’00
’99
Net Sales by Geographical Segment
(Billions of Yen)
Japan North Europe Others
America
-5 0 510 15 20 25 30 35
’03
’02
’01
’00
’99
Operating Income (Loss) and Operating Margin
(Billions of Yen, %)
Operating Operating
income (loss) margin
6.1
–0.0
1.5
4.4
2.2
MANAGEMENT’S DISCUSSION AND ANALYSIS
INCOME ANALYSIS
Net Sales
In fiscal 2003, net sales grew 4.0% from the previous year, to ¥524.8 billion,
the first increase since fiscal 1998, when net sales reached a record ¥609.0 bil-
lion. This was largely due to a sizeable increase in the sale of semiconduc-
tors, particularly sound chips for mobile phones, which grew 88.0%, to
¥21.5 billion. Excluding currency exchange gains, semiconductor sales
increased 3.1%, to ¥15.8 billion.
Domestic sales amounted to ¥312.1 billion, a 7.6%, or ¥22.2 billion,
increase compared with the previous year. In addition to semiconductors,
sales of electronic metals, golf clubs, magnesium parts, and other products
increased. However, due to the decline in sales of pianos, Electones™, and
digital musical instruments, overall sales of musical instruments fell 2.0%
compared with the previous year. In addition, sales from the ringing melody
distribution service decreased, reflecting intensified competition and falter-
ing growth in the number of new subscribers to this service in Japan.
Overseas, increased musical instrument sales were offset by a drop in
sales of CDR/RW drives, resulting in overall sales overseas of ¥212.6 bil-
lion, a 0.8%, or ¥1.8 billion, decrease from the previous year. Overseas
sales excluding currency exchange gains fell 2.9%, or ¥6.3 billion, to
¥208.1 billion. Calculated based on local currencies, sales of musical
instruments, particularly digital keyboards, rose 7.0% in North America
and approximately 5.0% in Europe.
Sales in other regions increased only slightly despite considerable rises
in China and South Korea. Sales of AV/IT products were lower than antici-
pated due to decreased sales of CDR/RW drives and intensified competi-
tion in the U.S. market for home theater-related products.
Cost of Sales and Other Expenses
While net sales increased, the cost of sales decreased ¥2.1 billion, to
¥338.3 billion. As a result, the cost of sales ratio improved 3.0 percentage
points compared with the previous year, to 64.5%. The improvement is
attributable to the fall in the cost of sales being countered by the increase
in sales of semiconductors, which have a high marginal profit ratio.
Depreciation expenses as a portion of cost of sales decreased ¥0.8 billion
from the previous year. In addition, personnel expenses increased only
¥1.9 billion, despite a ¥1.5 billion increase in expenses associated with
pension obligations, reflecting a decrease in the discount rate, from 3.5%
to 2.5%, and a fall in the burden of depreciation for differential losses on
annual interest.
Selling, general, and administrative (SG&A) expenses increased ¥1.5 bil-
lion from the previous year, to ¥154.4 billion. This was mainly due to the
aforementioned increase in expenses associated with pension obligations.
The ratio of SG&A expenses to net sales edged down 0.9 percentage point,
to 29.4%. The cost of sales and SG&A expenses associated with currency
exchange, particularly with regard to the weakness of the yen against the euro,
decreased approximately ¥4.9 billion compared with the previous year.
Operating Income and Net Income
Both operating income and net income broke records set in fiscal 1997.
Operating income amounted to ¥32.0 billion, reflecting not only higher
semiconductor sales and income, but also higher income from the sale of
musical instruments.