Yamaha 2008 Annual Report Download - page 54

52 Yamaha Corporation
Management’s Discussion and Analysis
Business Environment
In the first half of fiscal 2008, the year ended March 31, 2008,
the Japanese economy experienced moderate recovery against
a backdrop of global economic expansion, supported by favor-
able corporate revenues and robust capital expenditures. Uncer-
tainty increased in the second half of the fiscal year due to such
factors as a fall in housing investment, a steep increase in prices
for crude oil and raw materials, the appreciation of the yen, and
a decline in stock prices.
Overseas, the U.S. market showed increasing signs of a
slowdown in economic expansion resulting from a major drop in
housing investment and the effect of the subprime mortgage
crisis. The European market performed steadily for the most part
throughout the period, led by domestic demand.
In other regions, resource-exporting nations benefited from the
most favorable business conditions ever, with China and India also
maintaining high growth. In the second half of the fiscal year,
however, concern regarding the future arose amid uncertainty
about the effect of weak U.S. economic performance.
Under these circumstances, Yamaha actively implemented its
growth strategy under its medium-term management plan “Yamaha
Growth Plan 2010 (YGP2010),” established at the beginning of the
period under review. In the core “The Sound Company” business
domain, Yamaha worked to create new technologies and promote
development of new high-value-added products through thorough-
going marketing activities. In parallel with these activities, Yamaha
strengthened and expanded its production plants in China and
Indonesia while also implementing measures to bolster its sales
network in emerging markets. The latter activities included estab-
lishing subsidiaries in Russia and India. In order to strengthen its
presence in the global, premium-quality piano market, Yamaha
acquired Austrian piano manufacturer L. Bösendorfer Klavierfabrik
GmbH (Bösendorfer). In the commercial audio equipment business,
Yamaha expanded its product lineup and strengthened its sales
capabilities, promoting the expansion of its business domain
through operating alliances and M&A. Moreover, to increase its
presence in music entertainment businesses, Yamaha established
Yamaha Music Entertainment Holdings, Inc., and reorganized and
integrated its activities in the music entertainment field.
In addition, to further enhance profitability, Yamaha stream-
lined its manufacturing, including the consolidation of its piano
manufacturing bases, and improved supply chain management
(SCM) systems and business processes.
In the “Diversification” business domain, Yamaha continued to
further enhance profitability through selection and concentration.
Following the sale of four resort facilities in the recreation segment,
the Company also transferred its electronic metal products busi-
ness at the end of November 2007. Meanwhile, Yamaha endeav-
ored to strengthen individual product lines while improving the
efficiency of operations.
In addition, to increase the comprehensive strength of the
Yamaha Group, Yamaha reinforced its internal control system
throughout the Group and improved its environmental measures.
As a result of pursuing such initiatives, net sales for the year
ended March 2008 declined 0.3% year on year to ¥548.8 billion,
while operating income recorded a second consecutive period of
year-on-year increase at ¥32.8 billion (up 18.6%). Net income
during the period under review was ¥39.6 billion (up 42.0%)
primarily as a result of extraordinary income generated by the
sale of a portion of the Company’s equity holdings in Yamaha
Motor Co., Ltd.
Net Sales
Net Sales by Business Segment
Net sales in fiscal 2008 decreased by ¥1,607 million, or 0.3% in
year-on-year terms, to ¥548,754 million. Although sales in the
musical instruments segment and the others segment, including
golf products and magnesium parts, rose compared to the previ-
ous fiscal year, sales in the electronic equipment and metal prod-
ucts segment and the recreation segment fell as a result of the
transfer of certain businesses. Sales in the AV/IT segment and
the lifestyle-related products segment also decreased.
Musical Instruments
In fiscal 2008 sales in the musical instruments segment rose
¥14,032 million, or 4.3% year on year, to ¥340,021 million,
which includes the ¥4.8 billion increase in sales deriving from
currency exchange gain. Without this exchange gain, the effec-
tive increase was ¥9.2 billion, or 2.8%.
By product category, although sales of pianos declined year on
year as a result of the general drop in demand in the Japanese
market and worsening conditions in the North American market,
performance was strong in European and Asian markets, includ-
ing China. Worldwide, piano unit sales increased by 2,700 over
the previous year to 95,300 units. Sales of digital musical instru-
ments rose, led by digital pianos in overseas markets. Sales of
professional audio equipment also rose, principally for digital
mixers. Sales of wind instruments were generally smooth, and
digital drums performed well, with the new DTXTREMETM III prod-
uct earning a favorable reception. In music schools, child student
enrollment numbers began to stop declining, while adult enroll-
ment continued to increase steadily.
■ Net sales in fiscal 2008 declined 0.3% year on year, to ¥548.8 billion, partially due to the transfer of certain
businesses. Operating income rose 18.6% year on year to ¥32.8 billion, while net income expanded 42.0%, to
¥39.6 billion, primarily as a result of extraordinary income from the sale of a portion of Yamaha’s equity holdings
in Yamaha Motor Co., Ltd.
■ Cash and cash equivalents at the end of fiscal 2008 increased by ¥57.4 billion compared with the previous fiscal
year to ¥103.4 billion, as a result of the sale of a portion of shares held in Yamaha Motor Co., Ltd. Going forward,
Yamaha will use the cash acquired for business growth investment and for returns to shareholders in order to
improve capital efficiency.