Yamaha 2010 Annual Report Download - page 38

Management’s Discussion and Analysis
● Sales and earnings in fiscal 2010 declined year on year
The Company posted a net loss for the second consecutive year, due in part to extraordinary losses
accompanying business structural reforms
● The impact of the worldwide recession and the strong yen pulled sales down lower than the previous
year in every segment
● Operating income improved year on year in every segment except musical instruments
● Inventories at the end of the fiscal year under review were down by approximately ¥11.2 billion from
March 31, 2009, close to proper levels
Overview
Economic Environment
In fiscal 2010, ended March 31, 2010, the serious global recession
triggered by the financial crisis that erupted in fiscal 2009 persisted.
Although China and some emerging economies achieved a relatively
early economic recovery, the United States, Europe, and other devel-
oped nations experienced a prolonged economic slowdown.
In Japan, the economy failed to achieve a full recovery, with corpo-
rate earnings and capital expenditures down due to the strong yen.
Consumer spending was also lackluster.
Business Environment for the Yamaha Group
Impacted by an adverse macroeconomic environment and the yen’s
appreciation, sales of mainstay musical instruments and AV products
in Europe, the United States and Japan were sluggish for the full year.
Furthermore, at the same time as customers became increasingly
price driven, there were also signs that they were holding off on invest-
ments, resulting in lower professional audio equipment sales to the
commercial audio equipment market and wind instruments to the
school rental market.
In the parts business for corporate customers, the completion of
inventory adjustments by finished product manufacturers led to
increased orders for interior wood components for luxury cars, mag-
nesium molded parts and certain other products.
Fiscal 2010 also saw a fall in prices for copper, nickel, steel, plastic
and other raw materials used in manufacturing musical instruments.
Key Currency Exchange Rates
(Yen)
200
2007.4
0
2008.4 2009.4 2010.32006.42005.4
150
100
50
–
U.S. dollar
–
Euro
–
Canadian dollar
–
Australian dollar
Although this contributed to earnings, prices began to creep back up
in the second half of the year, and in fiscal 2011 these higher prices
are expected to weigh down earnings.
Business Performance Summary
Faced with a harsh business environment in fiscal 2010, the Yamaha
Group engaged in technological development, implemented initiatives
to enhance quality, and launched high-value-added products including
new models of hybrid pianos. In addition, in order to build demand,
the Group enhanced and actively marketed its lineup of moderately
priced products, responding to the increasingly price-oriented market.
In emerging markets, the Group opened Yamaha Music School
Shanghai Center, one of the largest music schools in the world, and
worked to bolster the sales network in preparation for further growth.
In Russia and India as well, Yamaha worked to build a sales network.
In terms of manufacturing reforms, Yamaha proceeded to integrate
manufacturing bases in Japan, and strengthened manufacturing
capabilities in Chinese and Indonesian factories with a view to enhanc-
ing manufacturing efficiency. In response to the stagnant global econ-
omy, the entire Group continued efforts to reduce costs, review
investments and events, and reduce inventory in order to improve
profitability. To this end, it selectively focused on businesses from a
medium- to long-term perspective, withdrawing from the magnesium
molded parts business and transferring a subsidiary engaged in the
lifestyle-related products business to a limited investment partnership
and other investors.
Actual GDP Growth Rate of Major Countries
(%)
15.0
2006
–10.0
2007 2008 200920052004
10.0
5.0
0
–5.0
–
Japan
–
United States
–
Europe
–
China
Source: Cabinet of Japan “Overseas Economic Data” (May 2010), Datastream, etc.
36 Yamaha Corporation