Yamaha 2005 Annual Report Download - page 47

Yamaha Annual Report 2005 45
of higher capital investment in China and other markets. Sales of metallic molds and compo-
nents business declined as handset makers conducted inventory adjustments for magne-
sium components for mobile phones and shifted toward components made from cheaper
materials to lower production costs. Overall segment sales declined by ¥2.5 billion, or 9.6%,
compared with the previous year to ¥23.6 billion.
Sales by Geographic Area
Sales of musical instruments rose on a year-on-year basis in Japan, reflecting the successful
launch of STAGEATM, but sales of other consumer-oriented products and services declined,
notably in the lifestyle-related products segment and recreation segment. Sales of LSI sound
chips for mobile phones and other semiconductors dropped significantly. Total sales in
Japan declined 2.5% year-on-year to ¥312.9 billion.
Sales in North America totaled ¥86.7 billion, a slight increase over the previous year. The
effect of generally strong growth in sales of musical instruments and AV products was partial-
ly affected by the yen’s appreciation against the dollar.
Despite a decline in local currency terms, sales in Europe advanced 1.2% on a year-on-
year basis to ¥84.5 billion as a result of yen depreciation against the euro.
In other regions, higher sales of musical instruments in South Korea and the Middle East
contributed to growth of 2.9% in sales to ¥50.0 billion. Sales rose in China, although growth
was below expectations. Products driving growth in this country included pianos, wind
instruments and professional audio equipment.
Cost of Sales and SG&A Expenses
Cost-reduction efforts helped to offset sharply higher material costs. The overall cost of sales
declined by ¥2.4 billion compared with the previous year. Gross profit fell by ¥3.1 billion to
¥198.6 billion, reflecting the ¥5.4 billion year-on-year decline in sales. The gross profit margin
fell 0.2 points, from 37.4% to 37.2%.
Selling, general and administrative (SG&A) expenses increased by ¥6.3 billion compared
with the previous year to ¥162.9 billion. This reflected more advertising and promotional
spending, including television commercials in Japan, as well as increased overseas distribu-
tion costs due to higher oil prices, and changes in the rebate system at certain European
subsidiaries from sales rebates to strategic sales promotions. The ratio of SG&A expenses to
sales increased 1.5 points, rising from 29.0% to 30.5%.
Operating Income
Operating income fell by ¥9.4 billion on a year-on-year basis to ¥35.7 billion.
By business segment, operating income in the musical instruments business increased
by ¥3.7 billion to ¥14.2 billion. This reflected a combination of higher sales, reduced manu-
facturing costs and cuts in personnel expenses and other fixed costs.
Operating income declined in the AV/IT segment by ¥0.7 billion to ¥3.7 billion. Lower
prices in home theater systems caused by fierce competition were partially offset by currency
gains and lower manufacturing costs.
Price competition mainly in the mass market was also severe in the lifestyle-related prod-
ucts segment, leading to a fall in gross profit margins. Combined with lower sales, this result-
[1]: Japan [2]: North America [3]: Europe
[4]: Asia, Oceania and Other Areas
312,906
86,717
84,483
49,971
Fiscal 2004 Fiscal 2005
[1] [2] [3] [4]
Operating Income (Loss) by Business Segment
(Millions of Yen)
[1]: Musical Instruments
[2]: AV/IT
[3]: Lifestyle-Related Products
[4]:
Electronic Equipment and Metal Products
[5]: Recreation
[6]: Others
14,183
3,651
(24)
19,970
168
(2,253)
Fiscal 2004 Fiscal 2005
[1] [2] [3] [4] [5] [6]
Net Sales by Geographical Area
(Millions of Yen)