President Message

Message from the management of Yamaha Motor

Regarding the FY 2016 First Half-year Business Results
President, Chief Executive Officer and Representative Director Hiroyuki Yanagi

Dear Employees

We have announced the first half-year business results (January - June) for FY 2016. The consolidated management accounts were net sales of 778.3 billion yen (a decrease of 42.8 billion yen from the previous year and 97.6 billion below budget), and operating income of 65.4 billion yen (a decrease of 8.0 billion yen from the previous year and on level with budget). The headquarter unit accounts were net sales of 311.4 billion yen (a decrease of 29.2 billion yen from the previous year and 30.6 billion yen below budget), and operating income of 12.7 billion yen (a decrease of 11.3 billion yen from the previous year and 8.8 billion yen below budget). Foreign currencies in developed markets saw a continuation of the appreciating yen, with the U.S. dollar trading at 112 yen and the euro at 125 yen, an appreciation of 5 yen and 2 yen respectively. The currencies of emerging markets continued to depreciate, such as in Indonesia and Brazil. Regarding consolidated business results for the year, taking the forecast foreign exchange effects of the US dollar trading at 100 yen, and the euro at 110 yen into consideration, we have announced revised targets for net sales of 1500.0 billion yen, operating income of 105.0 billion yen, and a total dividend for the year of 60 yen.

The breakdown of the 8.0 billion yen reduction on the previous year's consolidated operating income is as follows: -8.2 billion yen for foreign exchange effects in developed markets, -10.0 billion yen for foreign exchange effects in emerging markets, +17.1 billion yen for profitability improvements in the main emerging countries, -3.2 billion yen for increase market customer return expenses, and -3.7 billion yen for increased growth strategy development expenses. Amidst dramatic exchange rate fluctuations and demand slumps in some markets, development methods such as for platform and global models and manufacturing methods such as for theoretical-value-based production have led to a genuine sense of profitability improvement progressing steadily in each market. I firmly believe that this sense of improvement is a very valuable experience for me also. However, there has been an increase in customer return costs, which is a major issue to consider. The origin of many of these problems is found in not performing the necessary evaluations and work, not noticing any changes in specific markets and products, and not understanding how customers actually use products. It is important to respond to problems that arise swiftly and correctly, and it is also important to turn the lessons learned from such failures into company-wide expertise in order to prevent them from happening again.

The status of each of our main businesses is as follows. Bracketed figures indicate comparisons to the previous year.

Emerging Markets Motorcycle Business Segment

Sales increased (121% compared to previous year) in the healthy markets of Vietnam, Thailand, the Philippines, and Taiwan; India also showed a healthy market, recording increased sales (143%). Recovery remains delayed in the Indonesian market with a sales decrease (78%); Brazilian and Chinese market slumps also continued with sales decreases. Steady profitability improvements progressed in each market within the ASEAN region thanks to platform and global model effects, a reduction of the break-even point was seen in India, and initiatives toward structural reforms are progressing in Brazil and China.

Developed Markets Motorcycle Business Segment

The market overall is stable, with retail showing a similar stability (105%). A greater brand presence has been achieved with an enhanced line-up allied to our unique model brands. This is especially evident in the reduction of inventories and expansion of the finance business in the U.S., as well as in the progression of initiatives toward various structural reforms in other countries.

Marine Products Business Segment

The North American and European markets are in good shape, led by continued sales increases (105%) of larger engines. While maintaining an operating income ratio that exceeds 20% due to the effort placed on minimizing the effects of the appreciating yen, initiatives are progressing toward the creation of a business model aimed at becoming a system supplier.

Recreational Vehicles Business Segment

While the North American recreational off-highway vehicle (ROV) market is a little slow, it remains stable with significant growth (141%) achieved in retail thanks to new product launches in the sports category. However, an ambitious sales target has now been revised accordingly. With the start of our alliance with Yanmar Co., Ltd for product development and OEM supply from the second half of this fiscal year, we will use the opportunity to grow our business in the U.S agricultural utility field.

IM Business Segment

Surface mounter sales decreased due to the effects of the slump in the Chinese market, however robot sales have increased. Our technological development initiatives to date have been progressing, and sales have started of the world's highest-capacity mounter (with a mounting speed of 200,000 chips/hour). Furthermore, we have announced the industry's first and only integrated control model robot system. Our initiatives toward the creation of a solution business model to broaden our customer base continue to progress.

SPV Business Segment

Sales have increased considerably (132%) on a drive unit basis in the healthy domestic and European markets. In particular, on top of the stable senior and steadily increasing family sectors, the domestic market has recently seen a significant increase in demand from high-school students. In addition, the new endeavor of the road sports model is selling well. Our initiatives toward broadening our customer base continue to progress.

Power Products Business Segment

Sales of golf cars and generators were on par with the previous year. Our technological development initiatives to date have been progressing, and we have announced a low-noise model golf car, and a general-purpose engine targeted to the full-scale OEM market. Our initiatives toward product creation for broadening our customer bases continue to progress.

CS (Customer Service) Business Segment

Our roll-out of time commitment services (30-minute service guarantee) in emerging markets is progressing, with the introduction already complete in 1,000 stores, and preparations underway for the next 400 stores to follow. In developed markets, the roll-out of a system to be used for marketing and product development is underway based on customer vehicle maintenance information being obtained and analyzed from the sales store. The introduction is already complete in 300 stores in the U.S., with preparations underway for introduction into Europe. This is all working toward creating value through points of customer contact.

AM, Overseas Market Development, Unmanned Systems, Pool Business Segment

Unit sales in the AM business have decreased due to the effects of trend changes in the U.S. Right now we are working on preparations for the upcoming production of additional models which our engines will be fitted to. For overseas market development, motorcycle sales in Africa have decreased due to the effects of lower crude oil prices and weaker currencies, however we have seen a healthy trend in outboard motors. In terms of unmanned systems business, in addition to a FAA aviation permit in the U.S., we have obtained a pesticide spraying permit for the State of California, and our preparations for business in the Californian winery market are underway. For the pool business segment, we were able to reach budget for the first half of the fiscal year, with our focus for the next half-year being placed on increasing our market share and in cost reduction.

I expect that the second half of this year to be a continuation of the first, with similar market and business environments. Given this environment, our first goal remains to reach our targets, and then progress with our initiatives toward further profitability and growth in the medium and long term. I would like to ask you all to make every effort to convert any negative experiences into positive expertise to help us all become a better company capable of higher quality work. We want each Yamaha staff member to be able to say "I am Yamaha," and I deliver high-quality products and services to our customers across the globe.

Hiroyuki Yanagi

IM :Intelligent Machinery
SPV:Smart Power Vehicle
OEM:Original Equipment Manufacturer
AM :Automotive