Yamaha Aktie

Now I will explain the financial results for FY 2026.3.

First, here is an overview of the results. Although the Chinese market remains sluggish and strong demand for audio equipment for professional use in Europe and the U.S. had declined, revenue remained on par with the previous year due to a recovery in sales in the musical instruments business and the continued depreciation of the yen.

However, while we advance structural reforms and challenging businesses and price optimization, core operating profit declined due to the impact of additional U.S. tariffs, soaring costs for parts and raw materials and a deterioration in the product mix resulting from lower sales of digital mixers.

For the fiscal year ending March 2027, we expect revenue to return to a growth trajectory and increase across all regions, although the external environment remains uncertain.

Furthermore, while making growth investments from a medium-term perspective, we expect core operating profit to increase by offsetting external factors such as rising procurement costs through the implementation of structural reforms and price optimization.

Next are the full year results for the fiscal year ended March 2026. Revenue was JPY 465.3 billion, core operating profit was JPY 31.9 billion, core operating profit ratio was 6.9%, and net profit was JPY 23.7 billion. Exchange rates are as shown here.

I will now explain the factors contributing to the change in core operating profit.

Starting from the previous fiscal year's figure of JPY 36.7 billion, while we benefited from favorable exchange rates and the structural reforms implemented last fiscal year contributed to an increase in profit.

However, the impact of additional U.S. tariffs soaring prices for raw materials and components and a deterioration in the product mix due to declining sales of digital mixers were major factors contributing to the decline. As a result, core operating profit settled at JPY 31.9 billion.

Furthermore, compared to our previous forecast, the actual result fell short due to higher-than-expected SG&A expenses. This was primarily because fourth quarter revenue in North America significantly exceeded expectations, leading to an increase in revenue-linked variable costs.

Regarding performance by business segment, please refer to the materials provided.

The FY 2026.3 period marks the first year of our midterm management plan, Rebuild & Evolve.

Although results fell short of our targets due to the impact of external factors such as the slump in the Chinese market, tariffs and rising costs, structural reforms in challenging businesses and the creation of new businesses are progressing as planned.

One challenge was that our efforts to offset various cost increases were. insufficient.

For the fiscal year ending March 2027, we aim to return to a growth trajectory by responding swiftly to changes in the external environment and overcoming rising costs. We will also improve the core operating profit of our existing businesses and accelerate investments in the creation of new businesses.

Next, here are our full year earnings forecast for the fiscal year ending March 2027. We anticipate revenue of JPY 490 billion, core operating profit of JPY 38 billion, core operating profit ratio of 7.8%, and net profit of JPY 28 billion. We are assuming exchange rates of JPY 155 to the U.S. dollar and JPY 180 to the euro. The impact of a JPY 1 fluctuation in exchange rates is shown in the lower right corner of the page.

Regarding the factors affecting core operating profit for the fiscal year ending March 2027, starting from the JPY 31.9 billion recorded in the fiscal year ended March 2026. We anticipate a decrease of JPY 7.7 billion due to rising costs and a decrease of JPY 5.6 billion due to increased SG&A expenses. On the other hand, we expect an increase of JPY 2.7 billion from the impact of exchange rates, an increase of JPY 13.7 billion from higher revenue, increased production and model mix, an increase of JPY 1.8 billion from the effects of production structural reforms and an increase of JPY 1.2 billion from other business, resulting in a projected core operating profit of JPY 38.0 billion.

Regarding the earnings forecast by business segment, as mentioned earlier, please refer to the materials provided.

Next, here is an overview by business segment. First, the musical instruments business. For the fiscal year ended March 2026, revenue increased in all categories except pianos.

For Pianos, although revenue in China turned positive in the second half, overall revenue decreased due to weak demand for high-end products.

For digital musical instruments, revenue increased as various new products were well received.

For wind, strings and percussion instruments, revenue increased due to steady demand.

For guitars, revenue grew by double digits as we steadily expanded our market share in North America and emerging markets.

For the fiscal year ending March 2027, we forecast revenue growth across all product categories and regions.

For pianos, we expect sales to increase with the launch of a new upright piano series.

For digital musical instruments, we will maintain our top market share.

For wind, strings and percussion instruments, we anticipate continued strong demand.

And for guitars, we expect further growth from the previous fiscal year.

Here is the revenue performance for our major products.

Regarding pianos, which had been experiencing a decline in revenue due to the contraction of the Chinese market, revenue turned positive year-over-year in the fourth quarter of the fiscal year ended March 2026.

For other items, please refer to the contents of the materials.

Please also refer to the materials for details on sales performance by region.

Next, the audio equipment business. For the fiscal year ended March 2026, revenue decreased due to a lull in demand for audio equipment for professional use and audio equipment for mobility use.

In the audio equipment for consumer use, structural reforms in home audio products progressed.

In the audio equipment for professional use, while demand in Europe and the U.S. leveled off from the previous year's high levels, emerging markets showed steady growth.

Additionally, while revenue from audio equipment for mobility use declined in China, business in Japan expanded as planned.

For the fiscal year ending March 2027, we expect to return to a growth trajectory and anticipate increased revenue. We forecast revenue growth in audio equipment for consumer use through the expansion of products for creators, in audio equipment for professional use through increased sales of digital mixers and speakers and in audio equipment for mobility use through the expansion of new adoptions.

Please refer to the materials for details on sales performance by major product and by region.

Regarding other business for the fiscal year ended March 2026, revenue increased from automobile interior wood components and FA equipment, while we have decided to discontinue the golf products business.

For the fiscal year ending March 2027, we anticipate growth in FA equipment. However, we expect overall revenue to decrease slightly due to the discontinuation of the golf products business.

Next, here are the other financial figures. This is the balance sheet summary. Cash and cash equivalents increased by JPY 9.1 billion from the end of the previous fiscal year to JPY 109.0 billion. This increase is attributable to profit before income taxes, a decrease resulting from the repurchase of treasury stock and other factors.

Inventories increased by JPY 1.8 billion from the end of the previous fiscal year to JPY 152.3 billion. However, excluding the JPY 11.6 billion impact of exchange rates, finished products, work in progress and raw materials all decreased. We will continue to work on reducing inventory, and we anticipate it will be JPY 146.0 billion as of the end of March 2027.

For other details, please refer to the materials provided.

ROE for the fiscal year ended March 2026 was 5.1%, an increase of approximately 2.3 percentage points from the previous year. We project ROE of 5.7% for the fiscal year ending March 2027, which will still remain below the cost of shareholders' equity of 6.5%.

We will steadily implement measures to improve earnings and return value to shareholders with the initial goal of achieving an ROE that exceeds the cost of shareholders' equity.

The dividend forecast for the fiscal year ending March 2027 is JPY 26.

Additionally, our cross-holdings were reduced from 10.1% at the end of March 2025 to 8.6% at the end of March 2026. We will continue to further reduce these holdings over the medium term.

Please refer to the materials for details regarding capital expenditures, depreciation and R&D expenses.

Next, I will briefly introduce the highlights of the previous fiscal year. Last fiscal year marked the first year of our new midterm management plan, Rebuild & Evolve. Here, we summarized our progress toward the financial and nonfinancial management targets set out in the plan.

For each figure, the number on the left side of the slide represents the figure as of the end of last fiscal year. While the number on the right side represents the target figure for the end of the third year of the plan.

While revenue growth rate and ROE fell short of our targets due to external factors, progress toward our other goals is generally on track.

Regarding Yamaha Music ID, 1 of our initiatives to build connections with customers, we are steadily advancing efforts to enhance its effectiveness as a customer base. We are also making steady progress in other areas such as promoting the sustainable use of timber and expanding music education through our school projects.

Last fiscal year, we devoted significant energy to the first pillar of our midterm management plan, rebuilding a strong business foundation.

In the piano business, the transfer of model production following the closure of our Indonesian manufacturing facility proceeded at a rapid pace and was completed as planned.

In the guitar business, we made significant progress in reducing fixed costs and production costs through manufacturing process reforms as well as expanding sales of mid-range and high-end products, leading to an improvement in profitability ahead of schedule.

Additionally, in the Chinese market, we are strengthening our approach to casual musicians and entertainment segments.

Regarding the second pillar of our midterm management plan, Evolving to create the future, our open innovation initiatives and new business development are advancing rapidly. The newly launched business contest, the Transpose Innovation Challenge, received over 300 business ideas from as many as 63 countries.

Furthermore, in March of this year, we launched Yamaha Creator Pass, a subscription service that provides a wide range of services from numerous partners through a single platform. We are making progress in rapid business development utilizing external resources.

This slide summarizes some of the new products and services we released last fiscal year. We launched many new products that provide musical experiences such as performance, creation, learning and connection, either a stand-alone hardware or in conjunction with software and services.

Regarding strengthening the management foundation. We are steadily implementing portfolio management to ensure swift action on challenging businesses and proactive investment in growth businesses.

Regarding our sustainability initiatives. The Otonomori project has begun full-scale rosewood resource conservation efforts in India, and preparations are underway for pilot school projects in India, the Philippines and Egypt.

Finally, we have summarized external evaluations. Please review the details at your convenience.

That concludes my presentation. Thank you very much.

Now I will explain the details of the third quarter financial results. Please refer to the slides for briefing on third quarter.

First, let's look at the key points of the financial results on Page 1. Regarding the earnings overview, 9 months results for the third quarter showed that revenue declined due to the sluggish market conditions in China and the absence of last year's high demand of audio equipment for professional use in Europe and the U.S.

Core operating profit declined due to the sluggish market conditions in China, reduced sales of high-margin audio equipment for professional use and the impact of additional U.S. tariffs.

Now the full year forecast. We are revising our revenue forecast upward due to the weakening yen. However, we are maintaining our previous core operating profit forecast.

Now please turn to Page 3. This slide shows the 9 months results for the third quarter. Revenue reached JPY 341.0 billion. Core operating profit was JPY 25.1 billion. The core operating profit ratio was 7.4% and net profit was JPY 20.2 billion.

The year-on-year comparison is shown on the right, which includes the impact of exchange rates. Excluding the impact of exchange rates, revenue decreased by JPY 7.9 billion year-on-year, and core operating profit decreased by JPY 7.4 billion year-on-year for the cumulative results of the third quarter.

Please turn to Page 4. The waterfall chart shows the comparison of 9 months core operating profit for the third quarter against the previous year. Cumulative core operating profit for the third quarter of the previous fiscal year was JPY 31.9 billion, while this fiscal year ended at JPY 25.1 billion. In the middle of the waterfall chart, there are 2 bars, tariff impact and tariff countermeasure.

The tariff impact reflects payments made, while countermeasures represent gains achieved through price optimization and other countermeasures against tariffs. Net of these, the impact was negative JPY 2.6 billion. Other positive factors shown here include the effects of structural reforms implemented last fiscal year, primarily focused on acoustic pianos and control of SG&A expenses.

However, on the left side, the decrease in sales, production and model mix are shown as a negative JPY 7.8 billion, representing the major negative factor.

Regarding decrease in sales, approximately half of the JPY 7.8 billion decrease stems from reduced revenue. This is primarily due to the factors mentioned earlier. The cycle of high demand in the professional audio equipment market has run its course and the slump in piano demand.

Other factors include a deterioration in the model mix due to reduced sales of high value, high-margin products like digital mixers and Grand Pianos. Of course, this figure also incorporates the effects of regular price optimization and productivity improvements, including productivity gains separate from the effects of last fiscal year's structural reforms. However, the negative factors are substantial, resulting in the loss of JPY 7.8 billion.

Now please turn to Page 5. This slide shows performance by business segment. For the Musical Instruments business, revenue was JPY 223.3 billion. Core operating profit was JPY 16.4 billion, and the core operating profit ratio was 7.3%. Excluding the impact of foreign exchange rates as before, revenue decreased by JPY 0.3 billion and core operating profit decreased by JPY 2.7 billion.

Moving on to the Audio Equipment business. Revenue was JPY 104.6 billion. Core operating profit was JPY 8.5 billion, and the core operating profit ratio was 8.1%. Similarly, excluding the impact of foreign exchange rates, revenue decreased by JPY 7.8 billion and core operating profit decreased by JPY 5.1 billion.

The results for others business are as shown. Please turn to Page 6. This page shows our full year outlook. For revenue, we project JPY 462 billion year-on-year and the changes from the previous forecast are shown on the right side.

Core operating profit is forecast to be at JPY 33 billion, which we maintain at the previous forecast level. Net profit is projected at JPY 24 billion, an increase of JPY 1 billion from the previous forecast.

Please note that the structural reforms associated with our recent termination of Golf Products business, as announced in our press release, are included within this net profit of JPY 24 billion. These costs are recognized as an estimate for the fourth quarter.

Regarding exchange rates, please refer to the information below. The exchange rate assumptions for the fourth quarter are JPY 155 to the U.S. dollar and JPY 180 to the euro, reflecting a weaker yen compared to the assumptions used in our previous second quarter results.

Now please turn to Page 7. The factors affecting core operating profit are shown in the upper section as a comparison with the previous period and in the lower section as a comparison with the previous forecast.

First, comparing with JPY 36.7 billion in the previous period, we project full year core operating profit of JPY 33.0 billion, a decrease of JPY 3.7 billion.

Looking at the details, we can see the tariff impacts and tariff countermeasures in the middle section. These factors combined to result in a decrease of JPY 3.7 billion. This is the first negative factor.

Other positive factors compared to the previous period include the positive effect of structural reforms implemented last fiscal year, amounting to JPY 2.0 billion and the absence of JPY 2.3 billion in onetime expenses incurred at the end of the previous fiscal year.

However, as mentioned earlier, the negative factors of decrease in sales, production and model mix amount to a negative JPY 4.2 billion. The negative factors are the decrease in sales mentioned earlier and the worsening of model mix. On the other hand, productivity improvements and normal price optimization are positive factors.

Overall, the net result is a negative impact of JPY 4.2 billion. Other factors include a JPY 0.2 billion decrease in others business operations and JPY 0.7 billion decrease in SG&A expenses. While this represents JPY 0.7 billion increase in expenses compared to the previous year, as explained earlier, this SG&A increase reflects upfront investments in growth areas, primarily focused on audio equipment for professional use.

Regarding the comparison with the previous forecast, the target remains unchanged at JPY 33.0 billion. However, with the effect of exchange rates pushing up the profit by JPY 2.0 billion, factors such as decrease in sales, production and model mix, primarily in the fourth quarter as well as the deterioration in others business, particularly the termination of the Golf Products business, have led to a worse outlook compared to the previous forecast. Therefore, assuming the exchange rate remains unchanged, we expect to achieve a profit of JPY 33.0 billion.

Now please turn to Page 8. This shows the outlook by business segment. For the Musical Instruments business, revenue is projected at JPY 303 billion, core operating profit at JPY 22.5 billion, and the core operating profit ratio is 7.4%.

For audio equipment, revenue is projected at JPY 141 billion, core operating profit at JPY 10.5 billion, and the core operating profit ratio is also 7.4%. Please refer to the slide for others business.

Excluding the impact of foreign exchange rates, the forecast for the Musical Instruments business revenue is up by JPY 5.4 billion and core operating profit down JPY 1.4 billion. For Audio Equipment, revenue is projected to fall by JPY 7.8 billion and core operating profit down JPY 4.2 billion.

Please turn to Page 9. Here, similarly, we present outlook by business segment in comparison with the previous forecast. For the Musical Instruments business, excluding the impact of foreign exchange rates, as mentioned earlier, we project revenue to decrease by JPY 3.2 billion and core operating profit to decrease by JPY 0.6 billion.

For the Audio Equipment business, we project revenue to decrease by JPY 1.0 billion and core operating profit to decrease by JPY 0.7 billion. For others business, the decrease is more significant. We project revenue to decrease by JPY 2.3 billion and core operating profit to decrease by JPY 0.7 billion.

Now I will explain the overview by business segment. First, please turn to Page 11. This slide shows the status of the Musical Instruments business. For the 9 months results for the third quarter, sales were solid, excluding pianos. Looking at China specifically for the third quarter, sales turned to positive.

For pianos, while sales of China increased in the third quarter, other markets remained weak, leading to a decrease in revenue. For digital musical instruments, we have mitigated the tariff impact through price optimization and maintained revenue at the previous year's level. Wind, strings and percussion instruments and guitars continued to perform well, achieving increased revenue.

Full year outlook. Recovery and revenue growth are expected across all product categories, except pianos. Pianos is expected to see revenue decrease due to weak demand in China and other regions. Digital musical instruments are projected to recover and grow in all regions except China. Wind, strings and percussion instruments are forecast to remain steady and guitars are projected to achieve double-digit growth.

Now let's look at the quarterly trends on Page 12. This slide shows the sales status of major product category. First, the second column from the left shows digital musical instruments, where we anticipate to grow by 4% year-on-year for the full year. The third quarter is shown at negative 1% year-on-year, which includes the factor of delayed shipments of some best-selling products shifting to the fourth quarter. Wind, strings and percussion instruments showed steady growth by 6% in Q3, while guitar is positive 9% in Q3.

Next, please turn to Page 13. This shows the regional breakdown of the musical instruments business also by quarter. First, looking at Europe in the middle, marked in green, we project full year sales at positive 7% compared to the previous year. The fourth quarter shows a particularly strong performance.

As previously explained, the prior year saw significant declines in both shipments and orders due to core system installation issues. This quarter reflects recovery from that situation, coupled with increased sales of digital pianos and wind instruments in Q4, leading to strong forecast.

Regarding China, mentioned earlier, Q3 sales were positive 1%. Looking at this on a quarterly basis, it marks the first time in a while that quarterly revenue has exceeded the previous year's level. As additional information regarding the revenue situation for the current 2-month period from December to January, revenue in China, particularly for musical instruments such as keyboards, is trending steadily. This steady performance includes acoustic pianos leading to a reduction in piano distribution inventory.

Moving on to Page 14, the audio equipment business. For the 9 months results for the third quarter, audio equipment for professional use and audio equipment for mobility use saw a pause in revenue growth. In audio equipment for consumer use, home audio business scaled down. Audio equipment for professional use performed well in emerging markets, but revenue declined in Europe and the U.S. as the high demand from the previous year leaved off. Audio equipment for mobility use grew in Japan, but declined as expected in China. Overall audio equipment revenue decreased.

The full year outlook is as shown below. Now please turn to Page 15. Regarding audio equipment for professional use in the middle section, we are forecasting negative 5% for the full year. Previously, we had projected negative 3%, but some investment delays occurred in the North America between Q3 and Q4, leading to the revision in full year forecast.

For audio equipment for mobility use, we are forecasting negative 11% for the full year compared to the previous forecast of negative 15%. For the current period, we anticipated a temporary decline, but the actual performance has exceeded the expectations. That is the third quarter outperformed the previous year's figure by positive 19%.

Next, please turn to Page 16 for the regional breakdown of audio equipment. The Japanese market grew by positive 12% year-on-year. As explained previously, this growth stems from increased sales of network equipment and automotive sound systems distributed in Japan.

Regarding Europe, which is shown in the middle section, we have revised the figure from the previously reported negative 14% to 17%. This adjustment reflects a slight slowdown in investment for corporate installation of audio equipment.

Now please turn to Page 17. This covers the status of others business. For the third quarter results, the strong performance of automobile interior wood components continued. Looking ahead to the full year, we expect increased revenue for automobile interior wood components and also for FA equipment. However, golf products is facing challenges. Therefore, overall for this segment, we anticipate results to be on par with the previous year.

Next, please turn to Page 19. This is the balance sheet summary. Firstly, the status of inventory. At the end of March 2025, inventory stood at JPY 150.5 billion. For the current fiscal year-end, we forecast JPY 152.0 billion, an increase of JPY 1.5 billion. Excluding foreign exchange effects, inventory is projected to be JPY 144.5 billion, a decrease of JPY 6.0 billion compared to the previous year's actual results. Equity also increased from the previous fiscal year-end, primarily due to foreign exchange translation differences.

Please turn to Page 20. I will now explain ROE, ROIC and shareholder returns. For ROE, we forecast 5.3%. This represents an increase of 0.2% from the previously stated 5.1%. For ROIC, the previous forecast was 5%, but it has now decreased to 4.8%. While the denominator portion has increased for both metrics this time, ROE has improved slightly due to an increase in net profit of JPY 1.0 billion for the current period.

That said, ROE is still projected to remain below the cost of shareholders' equity. We will continue to strive to achieve an ROE that exceeds the cost of shareholders' equity through ongoing profit improvement and the steady execution of shareholder returns.

Now regarding shareholder returns. The annual dividend remains unchanged at JPY 26 per share. The payout ratio will be 48.8%.

Finally, we present the topics for the third quarter. This is on Page 23. First, on the left side, under rebuilding a strong business foundation, we highlight new products that pursue intrinsic product value, specifically those expected to contribute to revenue starting in the fourth quarter and beyond.

At the very bottom, under music production tools, we feature the MGX Series, URX series and CC1. These were announced at the U.S. trade show NAMM 026, which took place in January and at the ISE Professional Audio Show, which is currently taking place in Spain. We are strengthening PR efforts to target these customers as we have high expectations for their future performance.

Next, as part of evolving to create the future and explore new businesses, we've highlighted topics from Yamaha Music Innovations. Our Yamaha Music Innovations leaders were selected for Billboards inaugural Finance 50, the top 50 investors.

Regarding our future new business development, we will be holding an event in March. We would be delighted if you could join us. That concludes my presentation. Thank you for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good afternoon, everyone. I am Yamaura. Thank you for gathering on your busy schedule. I would now like to explain the results for the second quarter of FY 2026.3. I'd like to start by presenting the highlights of the first half of fiscal year ending in March 2026. Regarding the financial results summary for the first half of the fiscal year ending March 2026, revenue decreased due to sluggish market conditions in China, the absence of high demand for audio equipment for professional use and delayed recovery in European markets.

Core operating profit decreased due to the impact of additional U.S. tariffs and a worsening product mix resulting from lower sales of high-margin audio equipment for professional use. Regarding the earnings forecast for the full fiscal year ending March 2026, we anticipate that revenue decrease due to the end of high demand for audio equipment for professional use and the sluggish market conditions in China. We also expect a decrease in operating profit due to the impact of U.S. tariffs and a deterioration in the product and regional mix.

Next, I will explain the overview of the financial results. Here are the actual results for the first half. For the fiscal year ending March 2026, revenue was JPY 216.4 billion. Core operating profit was JPY 12.8 billion, a core operating profit ratio of 5.9% and net profit was JPY 9.8 billion. The exchange rates for the first half are shown on this slide. Revenue decreased by 5.2% compared to the previous period, but excluding the impact of exchange rates, the decrease was 2.9%.

Next, this slide shows the factors contributing to the increase or decrease in core operating profit using a waterfall chart. In the first half of the previous fiscal year, core operating profit was JPY 20.4 billion. The decrease in sales, production and model mix, et cetera, amounted to JPY 6.5 billion attributed to factors such as entertainment PA equipment, which saw substantial revenue growth in the previous period, including the resolution of backlog orders and Europe, where high value-added models accounted for a high proportion.

The impact of tariffs factored in this time amounted to a negative JPY 5.2 billion year-on-year. Approximately half of this, JPY 2.7 billion was covered through price increases and other measures. Other factors include the JPY 1.2 billion positive effect from the structural reforms we are implementing in piano manufacturing, resulting in a final core operating profit of JPY 12.8 billion.

Next, here are the results by business segment. For the Musical Instruments business, revenue was JPY 140.4 billion. Core operating profit was JPY 7.7 billion, and the core operating profit ratio was 5.5%. For the Audio Equipment business, revenue was JPY 67.7 billion. Core operating profit was JPY 5.4 billion, and the core operating profit ratio was 7.9%. Others business performed as shown here.

Next, let's look at our full year earnings forecast. For the fiscal year ending March 2026, our current forecast is revenue of JPY 458.0 billion, a decrease of JPY 4.1 billion compared to the previous year. Compared to the previous forecast, this represents an increase of JPY 6.0 billion. Core operating profit is forecast at JPY 33.0 billion with a core operating profit ratio of 7.2%. Compared to the previous fiscal year, this is a decrease of JPY 3.7 billion, but compared to the previous forecast, it is an increase of JPY 1.0 billion. Net profit is forecast at JPY 23.0 billion, an increase of JPY 9.6 billion compared to the previous fiscal year and an increase of JPY 0.5 billion compared to the previous forecast.

The exchange rate assumptions are as shown here. This waterfall chart shows the factors affecting the change in core operating profit in the full year forecast. First, the upper section compares with the previous fiscal year. From the previous year's actual result of JPY 36.7 billion, factors, including a decrease in sales, production and model mix, et cetera, resulted in a decrease of JPY 2.9 billion. As mentioned earlier, the decline in sales of entertainment PA equipment was a major factor here. This is offset by tariff impacts of JPY 10.1 billion, offset by JPY 6.2 billion in countermeasures.

The effect of structural reforms from the previous period of positive JPY 2.0 billion and a positive JPY 2.3 billion from onetime expenses recorded in the previous period. This results in a full year forecast of JPY 33.0 billion. Next, looking at the lower section, comparing with the previous forecast, impact of exchange rates added JPY 3.0 billion, while a decrease in sales, production and model mix, et cetera, primarily due to lower European revenue will push down the profit by JPY 3.7 billion, including a JPY 0.6 billion reduction in SG&A expenses from the previous forecast, the core operating profit is projected to be JPY 1.0 billion higher than the previous forecast of JPY 32.0 billion.

Next, here the overview by business segment. This is the Musical Instruments business. For the full year forecast, revenue is projected to be JPY 299.0 billion; core operating profit, JPY 21.5 billion and the core operating profit ratio is forecast to be 7.2%. For the Audio Equipment business, revenue is projected to be JPY 139.0 billion; core operating profit, JPY 11 billion, and the core operating profit ratio is forecast to be 7.9%. For Others business, forecast is as shown here. Compared to the previous forecast, excluding the impact of exchange rates, the projection of the Musical Instruments business shows increased revenue.

Next, let's go through the business segment overview. First, the Musical Instruments business. The upper right summarizes the first half results and full year outlook. For the first half, hardware product sales for musical instruments, excluding pianos, shifted to growth. Piano decreased due to sluggishness in China and delayed recovery in European markets. However, digital musical instruments revenue increased, driven by steady digital piano sales and a recovery in portable keyboards. Wind, strings and percussion instruments continued strong performance in Japan, leading to increased revenue. Gitar revenue increased, primarily driven by continued strong performance in acoustic guitars.

Moving to the full year outlook. We maintain our forecast for revenue with recovery expected across all product categories, except pianos. Piano sales are expected to decline due to continued in China. Digital musical instrument sales are projected to increase as all regions except China recover. Wind, strings and percussion instruments as well as guitar sales are also expected to be solid, leading to increased sales.

This shows the sales status and outlook by major product category. Excluding the impact of exchange rates, pianos are projected to decrease by 5% year-on-year. Digital musical instruments to grow by 5%, wind, strings and percussion instruments by positive 2% and guitars by positive 11%.

Next, the sales status and outlook by region. Europe stands out with 6% growth compared to the previous period, but this is due to the impact of revenue declines caused by issues during the core system replacement in the fourth quarter of the previous period. North America and other regions are showing growth on a real basis, while China is projected at negative 5% compared to the previous period.

Next, regarding the audio equipment business. For the first half, growth in audio equipment for professional use and mobility use has leveled off. Consumer use saw a decline in home audio. Audio equipment for professional use performed well in emerging markets, but Europe, which had high demand last year, saw a significant decrease. Audio equipment for mobility use doubled in Japan, but as expected, sales to China decreased.

For the full year outlook, we anticipate that revenue to decrease in audio equipment for professional use in Europe and the U.S. coupled with a decline in automotive sound system sales in China, leading to a full year revenue decrease. Here is the sales outlook for these 3 categories. Audio equipment for consumer use and professional use are projected at negative 3% of the previous year, while mobility use is projected at negative 15%.

Next, the sales situation and outlook by region. Japan is projected to show significant growth at 11%, driven by strong growth in audio equipment for mobility use for the Japanese market and robust performance in network equipment. Conversely, Europe is forecast to show a significant year-on-year decline due to reduced entertainment PA sales, while outlook for China also shows a significant year-on-year decline due to reduced sales of mobility audio to Chinese manufacturers. Regarding others business, automobile interior wood components continued to perform well, and we anticipate increased revenue from factory automation equipment in the second half.

Next, other financial figures. First, the balance sheet. Changes at the end of the first half show cash and cash equivalents increased by JPY 7.7 billion. Other items, such as trade and other receivable and inventory show relatively large fluctuations, but these are largely due to seasonality of our business. Current liabilities decreased by JPY 5.3 billion, primarily due to progress in settling unpaid liabilities. For the forecast at the end of March 2026, cash and cash equivalents is projected at JPY 94.0 billion and inventory at JPY 147.0 billion, representing a slight decrease from the previous fiscal year-end.

This slide summarizes ROE, ROIC and shareholder returns. First, ROE. We initially planned for 6.3%. But due to tariff impacts, the forecast now stands at 5.1%. There remains a gap to the cost of shareholders' equity of 6.8%. We will continue to pursue earnings improvement and the steady execution of shareholder returns. The ROIC forecast is 5.0%. Regarding shareholder returns, we are presenting an annual dividend of JPY 26 per share.

Additionally, at today's Board of Directors meeting, we resolved matters concerning the acquisition of treasury shares. The acquisition period, total acquisition amount and other details are as shown on this slide. This treasury shares acquisition aims to enhance shareholder returns and capital efficiency. We plan to cancel all acquired treasury shares. Capital expenditures, depreciation and R&D expenses are as shown on this slide.

Moving on to topics. I would like to introduce several initiatives we are pursuing as key themes of our midterm management plan. First, as part of rebuilding a strong business foundation, we are advancing efforts such as developing new products and enhancing intrinsic product value. As introduced here, we have launched new products that refine intrinsic product value in synthesizers, guitar amplifiers, effects processors, music production tools, network equipment and more.

Next, I'd like to briefly introduce our challenges for evolving to create the future. First, we aim for revenue growth through proactive investment in key markets, particularly emerging markets. We have high expectations for India and the Philippines and have been advancing investments in each market. Additionally, as a challenge to create new businesses, we announced the launch of the Global Business Contest, the TRANSPOSE Innovation Challenge. Regarding our initiatives to set sustainability as a source of value, we are expanding our efforts to promote music education in emerging markets, as shown in the center. We present examples from Egypt, India and Vietnam here. Furthermore, we are steadily progressing our midterm plans, key themes, including strengthening the management foundation. The following is supplementary material. This concludes my presentation. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello, everyone. My name is Nishimura. I would like to present to you the financial results for the first quarter of the fiscal year ending March 2026. Please turn to the first page titled Q1 highlights.

First, an overview of the financial results. These are the results for the first quarter of the fiscal year ending March 2026. While the slowdown in audio equipment was as expected, the recovery pace for musical instruments particularly panels was slow. Additionally, the appreciation of the yen contributed to a decline in revenue. Although we work to contain SG&A, profit declined due to factors such as the yen appreciation, the impact of additional U.S. tariffs and a deterioration in the product mix caused by a decline in sales of audio equipment for professional use. Regarding the full year forecast, we have revised our full year earnings forecast downward to reflect the impact of the additional U.S. tariffs currently anticipated, along with our planned countermeasures. Going forward, we will continue to take all possible actions to mitigate the effects of these tariffs. Next, I would like to explain about the performance summary. Please turn to Page 3, titled Q1 Summary.

These figures represent the actual performance for the first quarter. The revenue was JPY 103.9 billion. The core operating profit was JPY 4.7 billion, resulting in an OP ratio of 4.5%. The net profit for the quarter was JPY 2.4 billion. The exchange rates for the first quarter are as shown here on the slide. Net profit was minus JPY 7 billion year-on-year. As for the revenue, it declined 7.4% year-on-year, but when excluding the impact of exchange rate, the decline was 2.8%. Next, please refer to Page 4, a waterfall chart, which illustrates the factors behind the changes in core operating profit.

This chart compares to results with the previous fiscal year. In Q1 of fiscal year ending in March 2025, the core operating profit was JPY 9.2 billion. From there, we saw a negative impact of JPY 1.1 billion due to exchange rates. Next, the impact of additional tariffs, which we've incorporated into this quarter's results amounted to a negative JPY 1.8 billion year-on-year. The following section decrease in sales, production and model mix, et cetera, shows a negative JPY 2.7 billion overall. This portion includes some countermeasures taken to offset the impact of tariffs. However, in total, these factors led to a JPY 2.7 billion decrease in profit compared to the previous year. A key factor here is that in the first quarter of the previous year, we saw a significant increase in shipments of entertainment PA equipment, including the backlog orders. By contrast, this year shows a marked decline from the high baseline.

In terms of model mix, we also saw a decrease in high-margin entertainment PA products. Regionally, there was a notable decline in sales in Europe. These elements contributed significantly to the overall negative impact. In addition, regarding the structural reforms in piano manufacturing that we have been implementing, the positive impact from these efforts amounted to JPY 600 million in Q1. Together with the containment of SG&A expenses, we landed at JPY 4.7 billion in core operating profit for the quarter. Please turn to Slide 5 showing results by business segment.

In the musical instruments business, revenue totaled to JPY 66.5 billion with operating profit of JPY 2.1 billion, resulting in an OP ratio of 3.1%. In the audio equipment business, revenue was JPY 33 billion and operating profit came to JPY 2.3 billion with a profit ratio of 7.0%. For others, please refer to the figures shown on the slide. Next, please refer to Slide 6, which outlines our business performance outlook.

For the fiscal year ending March 2026, we forecast a revenue of JPY 452 billion, representing a decrease of JPY 10.1 billion year-on-year. Core operating profit is expected to be JPY 32 billion, a decrease of JPY 4.7 billion compared to the previous year. The OP ratio is projected at 7.1%. Net profit is forecasted to be JPY 22.5 billion, which represents an increase of JPY 9.1 billion year-on-year. As for the exchange rate assumptions, please refer to the rates shown on the slide. Next, please refer to Slide 7.

This slide presents the factors behind the changes in our full year forecast using a waterfall chart. The top section compares the current forecast with the previous fiscal year. Starting from the previous year's actual core operating profit of JPY 36.7 billion, we expect a negative impact in exchange rates of JPY 3.1 billion over the full year. In addition, the impact of tariffs is projected to be a negative JPY 11.2 billion.

Regarding the impact of tariffs, in addition to the reciprocal tariffs announced on April 2, there is also the previously imposed 20% tariff on shipments from China. The combined effect of these tariffs resulted in a negative impact of JPY 11.2 billion as shown here. Within this, the positive contribution from increase in sales, production and model mix amounts to JPY 7 billion, included in the figure is a JPY 6.2 billion element, reflecting countermeasures implemented to mitigate the tariff increases. Additionally, the effects of the structural reforms in piano manufacturing carried out in the previous fiscal year is expected to contribute a positive JPY 2 billion for the full year. This aligns with the results we previously presented.

Furthermore, there were onetime processing expenses last year, including the year-end impairment of parts and materials. These expenses are not expected to occur this fiscal year and thus have a positive impact on the current forecast. The SG&A is expected to be minus JPY 1.3 billion, which means that there is an increase in cost. However, this increase reflects strategic investments in growth areas such as new business development, music connect and audio equipment for professional use, all of which are key focus areas for driving future growth. At the same time, we continue to exercise discipline by controlling expenses in other areas, including IT costs. on profitable businesses and segments where revenue is expected to decline. We remain committed to maintaining a balanced and focused approach.

Next is the chart comparison versus previous projections. The prior forecast projected operating profit of JPY 40 billion, but the impact of tariffs has now been revised to a negative JPY 8.6 billion. The difference between the JPY 11.2 billion negative impact shown in the upper chart and the JPY 8.6 billion in the lower chart is attributable to the 20% tariff on shipments from China that was implemented prior to April 2.

Next to that, the increase in sales, production and model mix, et cetera, there is a positive JPY 0.4 billion. Included in the figure is a JPY 3.6 billion element, reflecting countermeasures taken to offset the impact of tariffs. However, this positive figure is partly offset by other negative factors, including declines in revenue from the musical instruments segment, reductions in production volume and challenges in achieving targeted price adjustments. As a result, the net impact is presented as a positive JPY 0.4 billion. Regarding SG&A, there is a positive factor of JPY 0.8 billion, resulting from expense containment efforts. This reflects further cost reductions compared to the previous forecast, leading to an operating profit forecast of JPY 32 billion. Next, please turn to Slide 8, which presents the performance forecast by business segment.

For the musical instruments business, revenue is projected at JPY 293 billion with an operating profit of JPY 20.5 billion, representing a profit ratio of 7.0%. For the audio equipment business, revenue is forecast at JPY 139 billion with operating profit of JPY 11 billion and a profit ratio of 7.9%. The figures for other businesses are shown on the slide. Next is the overview by business segment. Please refer to Slide 10.

First, the musical instruments business. In the top right corner, we show the Q1 performance as well as the full year projection. For the first quarter, guitar sales continued to grow, while piano sales remained sluggish, resulting in a decline in revenue. In the China market, we are seeing a halt in the downward trend. However, piano sales primarily in China and other regions remain weak, leading to a significant revenue decline. In the digital musical instruments, digital pianos continue to recover, but due to the impact of tariffs, growth in North America has slowed, and we expect revenue to remain roughly flat year-on-year.

Sales of wind, strings, percussion instruments and guitars performed well, contributing to increased revenue in those categories. Regarding the full year projection, although we expect a decline in North America due to the impact of tariffs, recovering markets outside China is anticipated to drive overall revenue growth. Piano sales are expected to decline, reflecting weak demand in both the U.S. and China. In contrast, the digital musical instruments are projected to see revenue growth supported by recovery in Europe and other regions. Sales of wind, strings percussion instruments and guitars are expected to remain strong with increase in sales. Next, please refer to Slide 11.

This slide shows the full year projection by major product category. Excluding the impact of the exchange rates, we forecast the following year-on-year revenue changes, pianos, 97%, digital musical instruments, 102%, wind, strings and percussion instruments, 103%, guitars are double-digit growth at 111%. Next, please turn to Slide 12, which shows revenue by region.

In Europe, we forecast 105% year-on-year growth. From the second quarter onward, we will implement various recovery measures targeting different markets, and these efforts are factored into the 105% forecast. For China, we anticipate continued decline in panel sales compared to the previous year, resulting in a forecast of 96%. In other markets, including emerging countries, we expect growth of 107%, reflecting our planned performance. Next, please turn to Slide 13, which covers the audio equipment business.

Starting with Q1 in the audio equipment for professional use formerly referred to as the B2B product, and the audio equipment for mobility use previously called the automotive product. The revenue growth has temporarily plateaued. In the audio equipment for consumer use, which was formerly known as the B2C product the home audio business scaled down. This slowdown reflects a strategic focus on narrowing sales regions and product lineups to better target the hobbyist market from last fiscal year.

Now audio equipment for professional use exceeded the plan but fell short of the strong results achieved in the previous year, mainly in Europe. Sales of audio equipment for mobility use decline as previously expected in China. As for the full year projection, revenue from audio equipment for professional use is expected to level off and revenue is expected to decrease temporarily due to a decline in sales of automotive sound systems in China. Next, please refer to Slide 14.

This slide shows the sales performance for each of the 3 segments, each compared against the previous fiscal year. The audio equipment for consumer use is projected at 99%, for professional use at 100% and for mobility use at 85%. Next, please turn to Slide 15, which represents revenue by region.

Sales in Japan showed significant growth, driven primarily by the expansion of audio equipment for mobility as well as growth in network equipment. In North America, revenue is projected at 99% year-on-year. In Europe, revenue is projected at 94%, reflecting a temporary adjustment phase following the peak demand for entertainment PA systems. Sales in China declined sharply to 59%, primarily due to the decrease in sales of audio equipment for mobility use in the China market. Other regions experienced slight growth as indicated here. Next, regarding other businesses. In the first quarter, revenue increased for both the automobile interior wood components and factory automation, FA equipment. For the full year projection, we anticipate continued recovery in these areas with revenue growth expected for both automobile interior wood components and FA equipment. Next, please turn to Slide 18 for other financial figures.

First, regarding the balance sheet as of the end of Q1. Cash and cash equivalents increased by JPY 3.3 billion. On the other hand, a significant change was seen in trade and other receivables, which decreased by JPY 9.8 billion. This is primarily attributable to seasonal fluctuations between the end of March and the end of June. Regarding liabilities and equity. Current liabilities decreased by JPY 4.4 billion, primarily due to the settlement of outstanding payments resulting in a reduction of liabilities. As for the forecast as of the end of March 2026, cash and cash equivalents are projected to be JPY 96 billion, mainly impacted by the decline in net profit for the period. Inventory is expected to be JPY 142 billion, down JPY 8 billion from JPY 150 billion at the end of March in the previous fiscal year. Next, please refer to Slide 19, which covers ROE, ROIC and shareholder returns.

First, regarding ROE. Due to the impact of tariffs and other factors, the initial target of 6.3% has been revised downward to 5.0%. The cost of shareholders' equity has been calculated at 6.9%, as shown at the top of the slide. As of May 8, this figure was 7.4%, so it has decreased by approximately 0.5 percentage points. The main factor behind this change is a reduction in the beta value. Similarly, the WACC used for ROIC has decreased from the previous 7.2% to 6.6%. Our forecasted ROIC remains at a challenging 4.9%. Regarding shareholder returns, the annual dividend per share is set at JPY 26, as indicated in the lower part of the slide. Stock splits conducted in the second half of last year are combined with the first half and shown after the splits. Compared to the previous dividend of JPY 25.3, this represents a dividend increase and there has been no change to the dividend forecast for this fiscal year. Regarding cross shareholdings, the value has fluctuated, resulting in the ratio falling below 10% to 9.7%. Finally, please turn to Slide 22, which highlights the key topics from Q1.

As part of the reconstruction of a strong business foundation, we have launched new products that pursue intrinsic product value refined through technology and sensitivity. These products include digital panels, electronic drums, routers for corporate use and condenser microphones. Below that on this slide regarding Yamaha music innovations, our new base established in Silicon Valley. Discussions have begun with other companies aimed at driving digital transformation and improving productivity. In the middle section of the slide, regarding evolving to create the future, we have created the OMOTENASHI GUIDE for biz to realize universal design of awards and sounds and the adoption of it is expanding. It has started to be used at the Expo 2025 pavilions and being introduced to JR East.

Additionally, as we deepen collaboration with other companies, technologies and external resources, we are creating a new musical experience. One example is the proof-of-concept experiment for GPAP over MoQ. We have also highlighted here the technology that enhances production efficiency and flexibility of virtual production. Regarding setting sustainability as a source of value, just recently, we announced the launch of a public private partnership with the Ministry of Education, Culture, Sports, Science and Technology and JICA to expand music education initiatives in the Philippines.

With this, I would like to conclude my presentation.