Analyst and Investor Briefing on the First Half of the Fiscal Year Ending March 31, 2006 (April 1, 2005 to September 30, 2005) November 1, 2005 YAMAHA CORPORATION Overview of Performance in the First Half First Half Results Net sales and operating income were lower than both the previous year and initial projections on April 28. Net sales declined ¥11.4 billion compared to the first half of last year. Electronic equipment and metal products decreased ¥10.1 billion. Net sales were ¥4.3 billion lower than initial projections. Lifestyle-related products reported net sales was ¥1.6 billion higher than projected, while musical instruments and AV/IT were ¥3.2 billion and ¥2.5 billion lower, respectively. Operating income decreased ¥9.8 billion from the first half of the previous year. Lifestyle-related products increased ¥1.1 billion, while electronic equipment and metal products dropped ¥8.1 billion. Operating income was ¥0.6 billion lower than initial projections, with lifestyle-related products exceeding forecasts by ¥1.0 billion and musical instruments falling short by ¥1.9 billion. Net income came in higher than initial projections owing to increased equity method income. Inventories at the end of the first half increased ¥1.3 billion over the first half of the previous year, primarily for musical instruments and AV products (increase of ¥9.7 billion over initial projections). 2Q Results 2Q net sales and operating income declined compared to the second quarter of the previous year. Net sales decreased ¥2.6 billion from the second quarter of a year ago as electronic equipment and metal products fell ¥2.7 billion. Operating income declined ¥1.7 billion from the second quarter of a year ago. Lifestyle-related products increased ¥0.7 billion, but electronic equipment and metal products decreased ¥3.0 billion. Inventory adjustments were made by cutting production, etc., but this has not led to reduced inventories because of substantial sales declines in the musical instruments and AV/IT businesses. Business Performance in First Half FY March 2006 ¾Net sales and operating income declined from the first half of the previous year and were lower than initial projections. (Billions of yen) FY Mar 05 (1H) 268.6 Net Sales FY Mar 06 (1H) 257.2 14.4 Change from FY Mar 05 (1H) FY Mar 06 (1H) Projections Change from Projections 2Q Results (4.2%) 261.5 (1.6%) 133.1 ( 40.6%) 15.0 (4.0%) 7.5 ( 24.6%) 18.0 +18.3% 9.7 12.0 +37.5% 6.7 Operating Income (Operating Income Ratio) 24.2 Recurring Profit (Recurring Profit Ratio) 28.3 Net Income (Net Income Ratio) (6.1) (6.4%) 5.6 8.5 5.6 US$ EUR 110 133 110 136 105 134 US$ EUR 110 132 110 134 105 134 Equity Method Income (5.6%) 21.3 (8.3%) 16.5 - Currency Exchange Rate Net Sales Operating Income 3.2 Performance by Business Segment in First Half FY March 2006 Net Sales Recreation & Others LifestyleRelated Products Electronic Equipment and Metal Products AV/IT 268.6 21.0 257.2 (-4.2%) 261.5 (-1.6%) 20.0 (-4.8) 22.6 (+6.6) 20.5 21.0 38.4 28.3 (-26.3) 28.0 (+1.1) 36.8 35.5 (-3.5) 38.0 (-6.6) 21.2 Operating Income ( -2.4) (+7.6) (Billions of yen) 24.2 13.2 14.4 1.0 Musical Instruments 151.2 150.8 (-0.3) 154.0 2.4 (-2.1) Figures in parentheses represent change from the same period of the previous year or initial projections FY Mar 06 (1H) FY Mar 06 (1H) (Initial Projections) Year-on-year after translation adjustments: up ¥1.5 billion (musical instruments up ¥1.2 billion, AV/IT up ¥0.3 billion) Verses initial projections after translation adjustments: up ¥3.3 billion (musical instruments up ¥2.5 billion, AV/IT up ¥0.8 billion) 0 4.5 1.0 0.7 LifestyleRelated Products FY Mar 05 (1H) 5.1 15.0 Recreation & Other 9.9 -0.１ 8.1 -1.3 -0.6 FY Mar 05 (1H) FY Mar 06 (1H) 10.0 Lifestyle-Related Products Electronic Equipment and Metal Products AV/IT Musical Instruments -0.5 FY Mar 06 (1H) (Initial Projections) Year-on-year after translation adjustments: up ¥0.7 billion (musical instruments up ¥0.6 billion, AV/IT up ¥0.1 billion) Verses initial projections after translation adjustments: up ¥0.1 billion (musical instruments up ¥0.7 billion, AV/IT down ¥0.5 billion, electronic equipment and metal products down ¥0.1 billion) Forecast for Business Performance in FY March 2006 (Full Year) ¾Downward revision of full year net sales and operating income (Billions of yen) 1H 2H Total 1H 2H Total Change from (Initial Previous Projections) Fiscal Year 268.6 265.5 534.1 257.2 279.3 536.5 +0.4% (546.0) 24.2 11.5 35.7 14.4 18.1 32.5 28.3 13.0 21.3 20.2 -6.1 25.8 16.5 12.5 (5.4%) 5.6 3.5 8.5 5.2 13.7 FY Mar 05 Actual Net Sales Operating Income (Operating Income Ratio) Recurring Profit (Recurring Profit Ratio) Net Income (Net Income Ratio) Equity Method Income FY Mar 06 Projections (6.7%) 41.3 (7.7%) 19.7 (3.7%) 9.1 (6.1%) 41.5 (7.7%) 29.0 -9.0% (37.0) +0.5% (42.5) +47.2% (29.0) Currency Exchange Rate Net Sales US$ EUR 110 133 105 137 108 135 110 136 105 134 107 135 105 134 Operating US$ EUR 110 132 106 134 108 133 110 134 105 134 108 134 105 134 Income Forecast for Performance by Segment in FY March 2006 (Full Year) Net Sales Recreation & Others LifestyleRelated Products Electronic Equipment and Metal Products 534.1 (-1.7%) 536.5 (+0.4%) 546.0 41.9 42.5 (+1.4) 42.8 43.0 (+0.5) 69.0 57.5 (-16.7) 77.7 ＡV/IT 83.5 (+7.5) Operating Income (Billions of yen) (-3.4) 44.0 41.5 (+3.6) 58.5 (-1.7) 89.0 (-6.2) 35.7 0 32.5 0 1.0 20.0 37.0 Recreation 0.5 0 10.0 9.0 5.0 4.0 302.6 Musical Instruments 310.0 (+2.4) 313.0 (-1.0) & Others Lifestyle-Related Products Electronic Equipment and Metal Products AV/IT 3.7 Recreation & Others 14.2 18.5 21.5 Musical Instruments -2.1 FY Mar 05 Figures in parentheses represent year-onyear change FY Mar 06 (New Projections) FY Mar 06 (Initial Projections) Year-on-year after translation adjustments: up ¥0.5 billion (musical instruments up ¥0.6 billion, AV/IT down ¥0.1 billion) Verses initial projections after translation adjustments: up ¥3.6 billion (musical instruments up ¥2.7 billion, AV/IT up ¥0.9 billion) FY Mar 05 FY Mar 06 FY Mar 06 (New Projections) (Initial Projections) Year-on-year after translation adjustments: up ¥0.8 billion (musical instruments up ¥0.5 billion, AV/IT up ¥0.3 billion) Verses initial projections after translation adjustments: up ¥0.2 billion (musical instruments up ¥0.8 billion, AV/IT down ¥0.5 billion, electronic equipment and metal products down ¥0.1 billion) Musical Instruments Full Year Overview and 2H Priorities 1H Overview •Lower sales and income than year-ago 1H and initial projections •Real sales after translation adjustment decreased 1.1% year-onyear. The major factor was substantially lower Electone™ sales (¥8.9 bn to ¥4.9 bn) as demand ran its course. •Real sales fell 3.7% against initial projections. Electone™ sales in Japan and electronic musical instrument sales in Europe and the U.S. fell short of projections. •South Korea remained strong while Central and South America were steady. •Operating income was down year-on-year and lower than projections due in part to lower gross profit caused by changes in the makeup of sales and higher distribution costs. •Inventories at end-1H were higher than year-ago 1H and initial projections due to not achieving the sales plan. •Continued high inventory level especially in the U.S. 149.1 151.2 150.8 154.0 Other YAMAHA Musical Instruments 44.2 45.1 46.2 44.6 104.9 106.1 104.6 109.4 9.7 9.9 8.1 •Projections for full year performance revised downward: Plan net sales at ¥310.0 billion and operating income at ¥18.5 billion. •Steadily introduce new products to the market timed with the year-end sales rush in Europe and the U.S. •Highly functional keyboard Tyros2 and digital mixer M7CL •Further expand CA business centering on Europe and the U.S. •March shipments planned for STAGEA™ entry model •Optimize inventory levels •Speed up manufacturing structure reforms •Promote policies for the Chinese market (Billions of yen) Initial Projections 91.2 93.2 91.1 203.2 211.4 216.8 221.9 90.2 Net Sales 10.0 FY Mar FY M ar FY M ar FY M ar 04 05 06 06 313.0 (Billions of yen) 293.4 302.6 310.0 10.5 Operating Income 14.2 18.5 21.5 FY Mar FY M ar FY M ar FY M ar 04 05 06 06 New Projections Initial Projections Toward Medium-Term Growth and Improved Profitability 1. Laying Groundwork for Growth Markets Chinese Market • Yamaha music schools November grand opening – 100 sites and 20,000 pupils by 2010 • Continue developing piano sales network Plan to prepare 60 sites by term-end • Move forward on increasing production at Hangzhou Yamaha Targeting production of 8,000 pianos and 45,000 guitars in fiscal year to March 2006 Central and Eastern European Markets • Representative office established in Moscow in September • Develop system for direct sales in expanded EU market (Czech Republic, Slovakia, Hungary, Slovenia) 2. Strengthening CA Business • Business alliance with France’s NEXO in June Intend to develop system solutions and launch full-fledged commercial speaker business • Established European Support Center in April Toward Medium-Term Growth and Improved Profitability 3. Stimulating the Domestic Market Music School Enrollment Children • Increase enrollment at music schools Children increased year-on-year for the first time in 15 years. Adults topped 100 thousand. Estimating 80 “Core 100” urban schools for adults by March 31, 2006; medium-term target of 100 sites. Estimating 60 “UniStyle” suburban-type concept schools; medium-term target of 200 sites. Adults 510 489 471 84 85 88 2000 2001 4. Reducing Costs, Increasing Productivity 2002 419 417 422 91 94 100 2004 2005 2003 (Enrollment as of June 30; Thousands) • Effects of promoting measures to increase productivity gradually materializing. Develop TPS activities, shorten production lead times (piano three months, other instruments two months) Start considering production site consolidation and restructuring Train core personnel (pass on skills) Improve business processes (implement SAP/R3), start inventory reduction project AV/IT Full Year Overview and 2H Priorities 1H Overview •Lower sales and income than year-ago 1H and initial projections •Full year sales projections revised downward by ¥5.5 billion to ¥83.5 billion. Operating income also •Real sales after translation adjustment decreased revised downward to ¥4.0 billion. 4.3% year-on-year. Home theater sales decreased •Expect shipments to exceed 100,000 units on a full primarily in Japanese, Chinese and Asian markets. year basis for “YSP” 2 models, which was launched in September. •Operating income was lower than initial projections due to lower sales and translation losses caused by a •Initiatives to shorten shipment schedules for AV weak yen. products (from 90 days this term to 56 days next •Solid shipments of YSP speakers, a product for which term) expectations are high (23,000 units shipped in first •Revitalize router business by enhancing lineup and half) strengthening solution proposals •Develop sales network in Asian markets, including •Router sales were lower than year-ago 1H and initial China projections due to heightened competition. 34.0 Routers AV 2.8 31.2 1.4 36.8 3.5 33.3 35.5 3.1 32.4 38.0 4.0 (Billions of yen) 34.0 Net Sales 2.4 0.7 1.0 FY Mar FY M ar FY M ar FY M ar 04 05 06 06 Initial Projections 78.3 6.4 7.1 71.9 4.4 Operating Income 77.7 70.6 3.7 83.5 89.0 7.9 8.7 75.6 80.3 4.0 (Billions of yen) 5.0 FY Mar FY M ar FY M ar FY M ar 04 05 06 06 New Projections Initial Projections Electronic Equipment and Metal Products Full Year Overview and 2H Priorities 1H Overview •Year-on-year decline in sales and income due to lower demand for LSI sound chips for mobile phones and falling unit prices. But both sales and income higher than initial projections. •Solid shipment levels of new LSI sound products for mobile phones launched in June •Downward revision of full year results projections •Secure market share by increasing sales of new LSI sound products for mobile phones •Increase sales of existing LSI chips for applications other than mobile phones like chips for pachinko •Develop and market new devices •Decrease in shipments of sound LSI chips for Chinese mobile phone manufacturers •Continue investment in 0.18μprocesses at semiconductor plants. Results expected starting in 2007. •Starting to see recovery in electronic metals since summer •For electronic metal materials, continue efforts to reduce costs and ramp up production for copper connectors 36.4 Electronic Metals Semiconduct ors 6.6 29.8 14.2 76.9 38.4 (Billions of yen) 7.0 28.3 28.0 5.9 6.1 Net Sales 64.0 22.4 21.9 30.0 13.2 FY Mar 05 FY Mar 06 (Billions of yen) 69.0 12.3 31.4 5.1 FY Mar 04 12.9 4.5 FY Mar 06 Initial Projections Operating Income FY Mar 04 56.7 20.0 FY Mar 05 57.5 58.5 12.3 12.7 45.2 45.8 9.0 FY Mar 06 New Projections 10.0 FY Mar 06 Initial Projections Lifestyle-Related Products Full Year Overview and 2H Priorities 1H Overview •Higher sales and income than year-ago 1H and initial projections. •2H net sales and operating income right at initial projections •Considerable year-on-year sales growth due to recovery in market share for system kitchens •Steadily market new products including the “double-heating” system bathroom launched in October. •Posted ¥1.0 billion in operating income due to higher sales, decreased personnel costs and other fixed expenditures, and effects of rationalization measures. •Strengthen remodeling business by enhancing showrooms, etc. •Solid sales to Air Water Emoto - Reduce costs by further promoting manufacturing reforms (Billions of yen) 23.2 Installation, 3.4 etc. 8.6 Kitchens 1.1 22.6 3.0 3.1 11.2 Bathrooms 21.2 44.8 21.0 9.6 7.7 10.7 10.0 10.3 -1 1.0 42.8 6.7 43.0 6.2 5.4 17.2 16.5 18.0 16.0 20.9 20.1 19.6 19.6 3.0 7.4 0 FY M ar FY M ar FY Mar FY M ar 04 05 06 06 Initial Projections Net Sales Operating Income (Billions of yen) 1.5 0 1.0 41.5 5.9 0 FY Mar FY M ar FY M ar FY M ar 04 05 06 06 Initial New ProjectionsProjections Recreation Full Year Overview and 2H Priorities 1H Overview •Lodging was generally solid owing in part to more rooms at Haimurubushi™, but sales overall were lower than both year-ago 1H levels and initial projections due to fewer day trips and weddings. •Operating income improved substantially year-on-year thanks to lower depreciation and streamlining administrative costs, but the loss was larger than initial projections. •Downward revision of full year results projections. •Aim to improve income by developing measures to attract lodging and day-trip guests for each facility and by further improving operating efficiency. (Billions of yen) (Billions of yen) 10.3 -0.5 9.4 -1.2 8.9 -0.7 9.5 -0.5 FY Mar 04 FY Mar 05 FY Mar 06 FY Mar 06 Initial Projections Net Sales Operating Income 20.1 -1.1 18.3 -2.3 18.5 -1.0 20.0 -0.5 FY Mar 04 FY Mar 05 FY Mar 06 FY Mar 06 Initial New ProjectionsProjections Others Full Year Overview and 2H Priorities 1H Overview •Lower sales than year-ago 1H for the segment overall, but higher than initial projections. •Full year forecast has not changed from initial projections. •Sales of automobile interior wood components and golf clubs maintained the same level as the previous year, but sales of metallic molds and components decreased. •For automobile interior wood components, continue to reduce manufacturing costs and establish optimal production methods •Operating income returned to the black thanks to lower manufacturing costs for automobile interior wood components and factory automations, etc. 26.1 13.3 Other Businesses of 6.9 YFT Golf clubs 1.2 Automobile Interior Wood 5.2 Components 0.5 •Develop new customers for magnesium molds and components in sectors such as mobile phones and digital cameras, and secure production capacity by increasing production. 11.6 11.1 (Billions of yen) 11.0 13.0 23.6 24.0 24.0 11.3 10.6 10.1 5.5 5.0 4.7 1.2 1.2 1.0 2.2 2.1 2.8 2.7 10.2 10.6 4.9 10.9 11.2 5.3 4.9 0.1 -0.1 0 FY Mar FY M ar FY M ar FY M ar 04 05 06 06 Initial Projections Net Sales Operating Income 1.0 -0.2 (Billions of yen) 1.0 0.2 FY Mar FY Mar FY Mar FY Mar 04 05 06 06 Initial New Projections Projections 2H Priority Products - 1 zTyros2 Shipments commenced in October primarily to Europe (November for North America)。The Tyros2 is the successor to Tyros™, which sold 25,000 units after put on the market in September 2002. New MEGA VOICE added to previous model, which was particularly well-received by semiprofessionals in Europe. Tones increased from 10 to 19 and more realistic tones like guitar strings added. In terms of function, storage capacity and play capacity were raised thanks to the hard drive-based recorder/player. Plans call for sales in Europe of 6,000 units. Current Market Price: 3,599 euro zDigital Mixer M7CL Targets analog mixer customers in the mid-size sound recording market (small concert venues, etc.) due to easy operation enabled by Centralogic and more compact size. Made a major impact on markets immediately after launch in October. Expect sales of 1,350 units in the second half. M7CL-48: Current Market Price (with tax): ¥2.9 million M7CL-32: Current Market Price (with tax): ¥2.4 million 2H Priority Products - 2 zDigital Sound Producers YSP800 and YSP1000 32-inch compatible YSP800 and 42-inch compatible YSP1000, the successor to the YSP1, both launched on market in September. Plan to ship approximately 90,000 units domestically and to overseas. YSP800: Current Market Price $799 YSP1000: Current Market Price $1499 zAudioEngine (MA-7) AudioEngine™, a 128 note LSI chip for mobile phones, is comprised of a proprietary hybrid synthesizer, high quality sound processor, low power class-D amp, etc. It provides high sound quality and functionality for all sound generated by mobile phones, including ring tone melodies. z“Double-Heating” System Bathroom New type of system bathroom that heats both the bathtub and the bathroom and helps maintain the heat of the water in the bathtub over a long period. Launched in October Inventories Inventories at the end of the first half were higher than the previous year and initial projections. We will work to reduce inventories ahead of the term-end. (Billions of yen) 1H-End 89.4 Goods in Process /Materials 90.7 81.0 30.6 78.4 28.7 27.0 12.5 ＡＶ/ＩＴ Term-End 69.4 25.2 25.4 8.0 7.7 27.3 13.8 11.9 69.9 10.1 46.3 48.2 42.1 41.0 36.7 36.3 FY Mar 05 FY Mar 06 FY Mar 06 FY Mar 05 FY Mar 06 FY Mar 06 (New Projections) (Initial Projections) Musical Instruments (Initial Projections) Appendix Non-Operating Income/Loss & Extraordinary Income/Loss for First Half FY March 2006 FY Mar 05 (1H) FY Mar 06 (1H) FY Mar 06 (1H) (Initial Projections) Non-Operating Income (Loss) Equity method income Net financial income (loss) Other Total (Billions of yen) 5.6 0.1 (1.6) + 4.1 8.5 0 (1.6) + 6.9 5.6 (0.2) (2.4) + 3.0 (0.4) (32.5) 0.3 0.5 (0.1) 0.3 (0.4) (32.6) + 0.8 (0.5) 5.3 0.3 5.6 5.3 0.2 5.5 Extraordinary Income (Loss) Income from (loss on) disposal of fixed assets Impairment loss Other Total Corporate Income Tax and Other Expenses Corporate income tax, etc. Minority interests in consolidated subsidiaries Total 1.4 0.4 1.8 Full Year Non-Operating Income/Loss, Extraordinary Income/Loss for FY March 2006 FY Mar 05 FY Mar 06 New Projections Non-Operating Income (Loss) Equity method income Net financial income (loss) Other Total FY Mar 06 Initial Projections (Billions of yen) 9.1 (0.3) (3.2) + 5.6 13.7 (0.6) (4.1) + 9.0 11.0 (0.6) (4.9) +5.5 (1.1) (6.7) 0 0 (0.4) (0.6) 0 (1.0) 12.1 0.4 12.5 12.1 0.4 12.5 Extraordinary Income (Loss) Income from (loss on) disposal of fixed assets Other •Gain on return of substitutional portion: 19.9 •Gain on asset disposal : 6.5 •Impairment loss: -32.7 Total (7.8) Corporate Income Tax and Other Expenses Corporate income tax, etc. Minority interests in consolidated subsidiaries, etc. Total 13.4 0.4 13.8 Capital Expenditure/Depreciation/R&D Expenses Capital Expenditure/Depreciation (Billions of yen) 1H Full Year 24.0 22.7 14.5 11.1 Others Electronic Equipment and Metal Products AV/IT Musical Instruments 2.3 (9.5) 3.0 0.6 5.2 FY Mar 05 9.8 1.7 (9.2) 2.2 0.6 5.3 FY Mar 06 2.4 4.7 (9.7) 1.0 FY Mar 06 11.7 11.3 11.5 1.1 2.2 2.5 1.3 2.5 2.6 Musical Instruments 5.7 5.7 5.3 FY Mar 06 5.8 (19.5) (19.9) 5.6 5.0 1.1 1.4 1.7 11.3 12.3 11.9 FY Mar 05 (Initial Projections) Others Electronic Equipment and Metal Products AV/IT FY Mar 05 (19.0) 4.8 6.4 R&D Expenditures 1.1 2.0 2.5 4.5 5.3 24.0 FY Mar 06 (Initial Projections) FY Mar 06 (New Projections) FY Mar 06 (Initial Projections) 23.0 23.0 23.0 2.2 2.2 2.4 4.5 4.2 4.9 5.1 5.2 5.0 11.2 11.4 10.7 FY Mar 05 FY Mar 06 (New Projections) FY Mar 06 (Initial Projections) Interest-Bearing Liabilities (Actual Balance) (Billions of yen) 29.1 25.1 Free Cash Flows - 2.4 FY Mar 05 1H - 18.0 FY Mar 05 2H FY Mar 06 1H FY Mar 06 2H (New Projections) Interest-Bearing Liabilities 23.1 Long-and shortterm borrowings, less cash and deposits ＊Not included in above Balance of resort security deposits 16.8 15.5 - 6.7 -4.6 As of Mar. 31, 04 As of Sept. 30, 04 30.8 29.6 As of Mar. 31, 05 28.9 As of Sept. 30, 05 As of Mar. 31, 06 (New Projections) 28.0 27.2 Balance Sheet Summary (¥100 million) As of March 31, 2004 Cash and Bank Deposits Accounts and Notes Receivable Inventories Other Current Assets Fixed Assets Total Assets Accounts and Notes Payable Short- and LongTerm Borrowings Other Liabilities Shareholders’ Equity Total Liabilities and Shareholders’ Equity 32.1 78.7 72.1 18.8 307.0 508.7 39.9 48.9 160.2 259.7 508.7 As of Sept. 30, 2004 42.5 85.8 89.4 24.8 282.2 524.7 47.1 65.7 158.3 253.6 524.7 As of March 31, 2005 51.2 71.6 78.4 24.4 280.0 505.6 37.7 46.6 146.1 275.2 505.6 *Other liabilities includes minority interests in consolidated subsidiaries As of Sept. 30, 2005 31.3 81.4 90.7 24.6 293.8 521.8 41.8 46.8 134.7 298.5 521.8 As of March 31, 2006 33.0 72.0 69.9 22.3 301.5 498.7 38.6 26.3 129.8 304.0 498.7 YAMAHA Musical Instrument Sales in the Japanese Market Sales in the first half were 95% of the same period the previous year as shipments of the Electone™ STAGEA™ ran their course. Other products were about the same as the previous year. Enrollment in music schools increased for the first time in 15 years and this should produce an impact going forward. 1,394 1,402 1,367 1,428 (98%) 1,344 (96%) (104%) (98%) 1500 (¥100 million) 1000 752 731 705 737 Music schools, etc. 702 (97%) (96%) (105%) (95%) 500 592 310 0 304 296 (98%) (97%) 322 282 (109%) (88%) 559 547 Yamaha musical 517 569 (94%) (92%) (110%) (96%) instruments FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar 02 03 04 05 06 02 03 04 05 06 (Projection) First Half Full Year Figures in parentheses are year-on-year comparisons YAMAHA Musical Instrument Sales in the U.S. Market Piano sales in the first half recovered to 110% of the same period the previous year. Professional audio equipment, especially digital mixers, performed well, with sales coming in at 120% of the same period the previous year. Portable keyboards encountered tough conditions due to heightened competition. Guitars also fell considerably short of expectations. Expectations are high for year-end sales of NEXO speakers and the new digital mixer M7CL. 600 585 Wholesale Amount (Millions of U.S. Dollars) 551 501 470 500 532 (106%) (103%) (106%) (107%) 400 241 300 219 (110%) 241 249 257 (100%) (103%) (103%) 200 100 0 FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar 02 03 04 05 06 02 03 04 05 06 (Projection) First Half Full Year Figures in parentheses are year-on-year comparisons YAMAHA Musical Instrument Sales in the German Market Retail conditions overall were slow. Sales of products other than pianos stagnated. Large drop-off in portable keyboards. Launched Tyros2, an electronic instrument for which expectations are high, for the year-end sales rush. Its sound quality has earned praise. 250 Wholesale Amount (Millions of Euro) 194 190 200 (102%) 188 (97%) 200 (106%) 189 (95%) 150 95 100 92 (103%) 94 (99%) 87 85 (92%) (98%) 50 0 FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar FY Mar 02 03 04 05 06 02 03 04 05 06 (Projection) First Half Full Year Figures in parentheses are year-on-year comparisons YAMAHA Musical Instrument Sales in the U.K. Market Musical instruments faced difficult market conditions, as pianos, electronic instruments, and wind instruments fell short of the levels posted in the first half last year. Professional audio equipment performed well though, with sales amounting to 110% of the previous year. A recovery is expected at the year-end with a large volume of orders for the new mixer M7CL. Wholesale Amount (Millions of Pounds) 80 65 63 60 40 28 26 28 (107%) (100%) 30 (107%) 62 (102%) (103%) FY Mar 02 FY Mar 03 FY Mar 04 66 (101%) FY Mar 05 65 (98%) 27 (90%) 20 0 FY Mar 02 FY Mar 03 FY Mar 04 FY Mar 05 First Half FY Mar 06 FY Mar 06 (Projection) Full Year Figures in parentheses are year-on-year comparisons YAMAHA Musical Instrument Sales in the Chinese Market Although shipments of pianos increased owing to ramped up production of Hangzhoumade pianos, inventory made and distributed by Chinese manufactures increased and unit prices fell. In the area of professional audio equipment, products were exhibited at a broadcast equipment exhibition at the end of August in Beijing, which contributed to a strong performance from digital mixers. Music schools will open in Shanghai in November. 800 Wholesale Amount (Millions of Chinese Yuan) 617 540 600 514 456 (114%) (118%) (89%) 400 285 259 242 314 (110%) (118%) (93%) 200 0 FY Mar 03 FY Mar 04 FY Mar 05 FY Mar 06 FY Mar 03 FY Mar 04 FY Mar 05 FY Mar 06 (Projection) First Half Full Year Figures in parentheses are year-on-year comparisons Scale of Home Theater Market (Home theater systems, amplifiers and receivers) Home Theater Systems AV Amplifiers and Receivers •N. America: Rapid decline in growth rates for both HTiB and home theater systems with DVD •Europe: Shrinking more than the last year’s forecasts in Germany, a principal market •Japan: Progress in flat-panel compatibility as popularity of flatpanel televisions grows •Other: Chinese-made products are growing substantially in 1,327 Asia and Central and Eastern Europe 1,214 •N. America: Forecast approx. 10% decrease on a volume basis •Europe: Market contracting •Japan: Declining market share recovered in AprilJune period (31%) •Asia, China: Market expanding, package sales increasing. 1,264 Volume (Ten Thousand Units) Other 966 Japan Europe 629 351 325 305 297 284 Other N. America Japan Europe N. America 02 03 04 05 06 (Projection) (Projection) 02 03 04 06 (Projection) (Projection) 05 AV Market Share Japan Home Theater Systems: Share of Total Sales Amount (GfKJ) 20% AV Amplifiers: Share of Total Sales Amount (GfKJ) 40% 30% 10% 14％ 39％ 20% 11％ 10％ 14％ 13％ 10% 0% 35％ 33％ 23％ 31％ 0% ’01 ’02 ’03 ’04 ’05(Jan.-Aug.) ’01 U.S. ’03 ’04 ’05(Jan.-Aug.) AV Receivers: Share of Total Sales Amount (INTELECT) Home Theater Systems: Share of Total Sales Amount (INTELECT) 10% ’02 40% 30% 20% 5% 7％ 5％ 0% ’01 ’02 6％ ’03 8％ 8％ ’04 ’05(Jan.-Aug.) 10% 0% 25％ ’01 24％ ’02 27％ ’03 34％ 34％ ’04 ’05(Jan.-Aug.) In this report, the figures forecast for the Company’s future performance have been calculated on the basis of information currently available to YAMAHA and the YAMAHA Group. Forecasts are, therefore, subject to risks and uncertainties. Accordingly, actual performance may differ greatly from our predictions depending on changes in our operating and economic conditions, demand trends, and the value of key currencies, such as the U.S. dollar and EURO.