Yamaha 2007 Annual Report Download - page 29

55 Yamaha Annual Report 2007 56
Performance Forecasts by Business Segment
Musical Instruments
The aim is to establish a highly profitable structure for these opera-
tions, which form the core business in “The Sound Company” busi-
ness domain. Amid polarization of the musical instruments market
between high-value-added and inexpensive products and an ongo-
ing reorganization of the distribution sector in which chains of large
retailers and volume discounters continue to gain market share,
Yamaha plans to focus on expanding and upgrading its customer-
oriented lineup of products while reinforcing cost competitiveness at
manufacturing bases in China and other measures. Yamaha also
plans to target higher sales in fast-growing markets such as China,
Russia and Eastern Europe.
Management forecasts segment sales in fiscal 2008 of ¥338.0
billion, equal to growth of ¥12.0 billion, or 3.7% compared with the
figure of ¥326.0 billion recorded in fiscal 2007. Segment operating
income is forecast to reach ¥24.0 billion in fiscal 2008, up ¥2.0 billion
from ¥22.0 billion in fiscal 2007.
AV/IT
Yamaha is working to build up the AV equipment business in line with
market trends. In home theater systems, besides reinforcing estab-
lished business areas, plans call for expanding the range of surround-
sound speaker products and developing the range of Hi-Fi products,
particularly in the mid-range and higher price brackets. Yamaha is also
actively engaged in developing products to position in new genres.
Other areas of focus include IP conferencing systems, which were
launched in fiscal 2007.
Management expects AV/IT segment sales to reach ¥79.0 billion in
fiscal 2008, representing growth of ¥6.2 billion, or 8.5%, over the fiscal
2007 figure of ¥72.8 billion. Segment operating income is forecast at
¥2.5 billion, up ¥0.4 billion from ¥2.1 billion in fiscal 2007.
Electronic Equipment and Metal Products
Reflecting the transfer of the electronic metal products business,
Yamaha expects fiscal 2008 sales in this segment to decline in year-
on-year terms by 16.1%, or ¥8.8 billion, to ¥46.0 billion, compared
with ¥54.8 billion in fiscal 2007. Segment operating income is fore-
cast at ¥1.0 billion, down ¥2.1 billion from ¥3.1 billion in fiscal 2007.
In the semiconductor business, the main aim is to engineer a turn-
around in profitability amid an ongoing decline in demand for LSI sound
chips used in mobile phones. Yamaha is also focused on expanding
sales of new devices.
Also, preparations are progressing toward a smooth transfer of the
electronic metal products business.
Lifestyle-Related Products
Yamaha plans to continue pursuing the growth strategy focused on
system kitchens. In the system bathroom business, where competition
continues to intensify, Yamaha is targeting growth through a differentia-
tion strategy involving products such as bath tubs made from artificial
marble and “Sound Shower
TM
” that allow users to listen to music while
taking a bath. Yamaha also aims to make steady progress in establish-
ing a presence in the home remodeling sector, an area where demand
is expected to grow. Management forecasts fiscal 2008 segment sales
at ¥49.0 billion, up 5.2% or ¥2.4 billion relative to the fiscal 2007 figure
of ¥46.6 billion. Segment operating income is forecast at ¥1.5 billion, up
¥0.3 billion from ¥1.2 billion in fiscal 2007.
Recreation
The aims in the recreation segment are to complete the smooth trans-
fer of the facilities scheduled for sale and to develop the infrastructure at
the remaining two resorts to re-establish these operations as a prof-
itable business. In line with the planned transfer of four resorts, man-
agement expects fiscal 2008 sales in this segment to decline in
year-on-year terms by ¥7.8 billion or 43.8%, to ¥10.0 billion, compared
with ¥17.8 billion in fiscal 2007. The segment is forecast to record an
operating loss of ¥0.5 billion in fiscal 2008, representing an improve-
ment of ¥1.0 billion from the loss of ¥1.5 billion posted in fiscal 2007.
Others
Yamaha aims to raise profits by boosting production yields and by
developing production systems to enable a more flexible response
capability to changes in customer orders, both in magnesium parts and
other areas of the metallic molds and components business and in the
automobile interior wood components business. In addition, in the golf
products business, Yamaha aims to achieve higher sales due to
improved brand awareness as the result of advertising campaigns and
other initiatives. Management forecasts sales in this segment of ¥29.0
billion in fiscal 2008, equivalent to a fall of ¥3.4 billion, or 10.5% com-
pared with the fiscal 2007 figure of ¥32.4 billion. Segment operating
income is expected roughly to double, increasing from ¥0.8 billion in fis-
cal 2007 to ¥1.5 billion in fiscal 2008.
Capital Spending Projections
Management projects total capital expenditures of ¥26.0 billion in fiscal
2008, up ¥0.8 billion from the fiscal 2007 figure of ¥25.2 billion. Capital
investment in the semiconductor business is expected to decline now
that miniaturization is complete. In the musical instruments segment,
capital expenditures are forecast to increase in fiscal 2008 by ¥2.5 bil-
lion to ¥17.3 billion, compared with ¥14.8 billion in fiscal 2007. Major
items contributing to growth in capital spending include the ongoing
refurbishment of the Ginza Building, which is due to open in the spring
of 2009, and expansion of Hangzhou Yamaha Musical Instruments
Co., Ltd. in China.
Depreciation and amortization expense is forecast to increase by
¥1.5 billion in fiscal 2008 to ¥21.5 billion, compared with ¥20.0 billion in
fiscal 2007. This includes a projected impact of ¥2.3 billion due to a
change in depreciation accounting standards.
New Medium-Term Business Plan
Following the “YSD50” medium-term business plan that ended in fiscal
2007, Yamaha formulated a new medium-term business plan
“Yamaha Growth Plan 2010 (YGP2010),” which covers the three-year
period from fiscal 2008 to fiscal 2010.
Under the new medium-term business plan, the current business
domains have been redefined into two major areas, “The Sound
Company” and the “Diversification” business domains. Yamaha has
positioned “The Sound Company” business domain as a growth area
and will actively invest management resources in this domain with the
aims of further strengthening the core musical instrument business and
targeting expansion of the sound, audio, and network businesses. At
the same time, the businesses in the “Diversification” business domain
will work to consolidate industry positions and to substantially increase
earnings power with the aim of contributing to the corporate value of
the Yamaha Group through sound business management.
For fiscal 2010, the plan’s final year, Yamaha has established
consolidated performance targets of ¥590.0 billion in net sales, ¥45.0
billion in operating income and 10% ROE.
Profit Distribution Policy (Dividend Forecast)
Based on the presumed aim of boosting return on consolidated share-
holders’ equity, Yamaha’s basic policy is to distribute profits in line with
the level of consolidated net income while, based on prospective levels
of medium-term consolidated earnings, also setting aside an appropri-
ate amount of retained earnings to strengthen the business base,
including investments in R&D and capital expenditures to drive corpo-
rate growth. Specifically, Yamaha aims to maintain consistent and sta-
ble dividend payments and is working to increase profit distribution
toward a target consolidated dividend payout ratio of 40%. Based on
this policy, Yamaha expects to pay dividends per share of ordinary
stock in fiscal 2008 of ¥30 (including an interim dividend of ¥15).
Moreover, in connection with the sale of part of the stake in
Yamaha Motor Co., Ltd., in addition to the aforementioned ordinary
stock dividend Yamaha has decided to pay a special dividend of ¥20
(including a special interim dividend of ¥10) in each of the three years
starting in fiscal 2008. In addition, in line with this move, Yamaha plans
to undertake share buybacks totaling ¥18.0 billion over the next three
years from the standpoint of boosting financial leverage.
New Accounting Standards
In line with changes to depreciation accounting methods introduced as
part of Japanese tax reforms passed in the fiscal year ending March
2008, effective fiscal 2008 Yamaha will begin depreciating the residual
values of any assets already at least 95% depreciated in equal
amounts over a five-year period. In addition, a newly established 250%
declining-balance method will be applied to any depreciable assets
acquired from April 2007 onward.