Yamaha Stock

My name is Shomon, and I will now present the financial results for the first quarter of the fiscal year ending March 2027. First, please turn to Page 1. This page summarizes the key points of our earnings announcement regarding the overview. Revenue increased due to a recovery in musical instrument sales and a weakening yen. Despite higher procurement costs, core operating profit increased, driven by an improved product mix resulting from growth in digital musical instruments, price optimization and favorable exchange rates.

Regarding our full year earnings outlook, while uncertainties remain, such as rising procurement costs and the situation in the Middle East, we are maintaining our previous forecast for May 2026 for revenue and core operating profit, supported by further price optimization efforts and a weaker yen. However, we are revising our net profit forecast upward from the previous estimate following the refund of U.S. tariffs. Please turn to the next page.

The performance summary is next. Please turn to the next page, Page 3. This is the business performance summary. Revenue was JPY 116.3 billion, an increase of JPY 12.4 billion from the previous year, representing a 12% rise. Excluding the impact of exchange rates, revenue increased by 2.9% from the previous year. Core operating profit was JPY 9.3 billion, an increase of JPY 4.6 billion from the previous year or 97.7%.

Net profit was JPY 10.7 billion. This includes JPY 4.3 billion in other income representing U.S. tariff refunds that have already been completed or finalized, resulting in an increase of JPY 8.3 billion from the previous year, a 348.8% rise or approximately 4.5x the previous year's figure.

Please turn to the next page. This is a waterfall chart showing the factors contributing to the change in core operating profit. Core operating profit for the first quarter of the previous fiscal year was JPY 4.7 billion, as shown on the far left. For the first quarter of the current fiscal year, core operating profit stood at JPY 9.3 billion.

This was the result of several factors: an increase of JPY 3.0 billion due to exchange rates, a decrease of JPY 1.2 billion due to rising costs, particularly for memory chips, an increase of JPY 4.0 billion from higher revenue and production driven by new products and price optimization, an increase of JPY 0.6 billion from structural reforms, a decrease of JPY 1.4 billion due to higher SG&A expenses and a decrease of JPY 0.4 billion from other business segments.

We are currently promoting price optimization to reflect rising procurement costs. Based on price levels as of the end of June, we anticipate that the price adjustment range for the full year will be 1.3% for the Musical Instruments business and 1.7% for the audio equipment business. However, since we have implemented or are scheduled to implement full-scale price optimization from July onwards and since we will continue to reflect future increases in procurement costs and our prices, we expect this price adjustment range to widen. Please turn to the next page, Page 5.

This page shows our performance by business segment. Revenue for the Musical Instruments business was JPY 77.7 billion, an increase of JPY 11.1 billion from the previous year. This increase held true even after excluding the positive impact of exchange rates of JPY 6.6 billion. Core operating profit was JPY 6.5 billion, an increase of JPY 4.4 billion from the previous year. This increase also held true even after excluding the positive impact of exchange rates of JPY 2.3 billion.

Revenue for the Audio Equipment business was JPY 35.0 billion, an increase of JPY 2.0 billion from the previous year. Core operating profit was JPY 2.8 billion, an increase of JPY 0.5 billion from the previous year. However, excluding the positive impact of exchange rates, revenue and core operating profit both declined slightly. Revenue from other businesses was JPY 3.7 billion, a decrease of JPY 0.7 billion from the previous year. Core operating profit was JPY 0 billion, a decrease of JPY 0.3 billion from the previous year.

Moving on to the next page, Page 6. This slide shows our progress for the first quarter. Firstly, in terms of sales performance in the first quarter, as I mentioned earlier, sales increased by 12% year-over-year and by 2.9% when the impact of foreign exchange rates was excluded. This indicates steady progress in line with our plan. We believe this is due not only to the timely launch of new products as planned, but also to the growing impact of our price optimization efforts.

Starting in July, we plan to further accelerate our price optimization efforts further. The bottom section of the slide showcases our new products from the first quarter. revenue from major new products centered on these models exceeded JPY 6 billion in the first quarter. The B Series Upright pianos launched in January 2026 have got off to a strong start as expected and now account for 16% of our Upright piano revenue.

We have also launched many new digital musical instruments. In the Electone, we launched the new ELS03 series in February 2026, which has been very well received, and we are receiving orders from many customers. We are also expanding our portable keyboard lineup, including models designed specifically for the Indian market and are experiencing significant sales growth in Asia and South America.

Furthermore, we launched the YDP-166 YDP-146 digital pianos in June, and revenue from these models accounts for 17% of our digital musical instruments. In the audio equipment for consumer use, we also launched the RX300 AV receiver in June. In the audio equipment for professional use, we launched series such as the DXR mk3 PA speaker series in June. These products have been well received and account for a significant share of revenue within their respective categories.

Thus, regarding our first quarter results, we believe that new product launches, particularly pianos and digital musical instruments in the musical instruments business and for professional use in the audio equipment business had a significant impact. Furthermore, starting in the second quarter, we plan to introduce 31 new musical instrument models to the market, and we expect them to contribute to sales growth. We also have high hopes for new mixer models in the audio equipment segment.

Please turn to the next page, Page 7. Next, we'll cover our earnings forecast. As previously explained, we are maintaining our revenue and core operating profit forecast from our previous forecast in May 2026 without change. However, we are revising our net profit forecast upwards to reflect JPY 4.3 billion in the U.S. tariff refunds that have already been completed or finalized.

We have also updated our ROE and ROIC forecasts accordingly. In our previous forecast, we projected cost increases of JPY 7.7 billion. Of that amount, JPY 7.0 billion was attributed to higher procurement costs for memory chips, nonferrous metals, resins and other materials. Currently, we anticipate an additional JPY 3.5 billion in procurement cost increases, bringing the total projected cost increase to JPY 10.5 billion.

Additionally, we expect to absorb factors that will reduce profits. such as an extra JPY 400 million due to higher U.S. tariff rates and an extra JPY 1 billion due to rising logistics costs through further price optimization and the continued launch of new products. The first quarter got off to a solid start. And while we are on track to achieve our full year earnings forecast, we remain committed to firmly achieving an annual core operating profit of JPY 38 billion. However, should we determine that it is necessary to revise the full year earnings forecast, we will notify you promptly.

Please turn to the next page, Page 8. This shows our earnings forecast by business segment. As these forecasts are the same as our previous projections, I will not provide any further explanation. The next page, Page 9, begins with an overview by business segment. Please turn to the next page, Page 10. Firstly, the Musical Instruments business. Revenue increased across all product categories in the first quarter. Revenue for pianos increased as regions outside of China recovered. Revenue increased for digital musical instruments, thanks to new products, with growth seen in all regions.

Revenue increased for wind, strings and percussion instruments as demand remains strong. Revenue for guitars increased as double-digit growth continued in North America, Europe and other regions. Regarding our full year outlook, there are no changes to our revenue growth forecast for any product category or region. For pianos, sales are expected to increase with the launch of a new Upright series. For digital musical instruments, we expect to maintain our leading market share. For winds, strings and percussion instruments, we anticipate continued strong demand, and we forecast further growth for guitars.

Please turn to the next page, Page 11. This page shows the sales performance of our major products. I will not go into detail here, but revenue has increased in all categories, even when excluding the impact of exchange rates. Please turn to the next page, Page 12. This shows sales performance by region. Excluding the impact of exchange rates, revenue in China decreased due to a pullback from the strong guitar sales of the previous year. However, revenue increased in other regions outside China with other regions posting particularly strong double-digit growth.

Please turn to the next page, Page 13. Next, we'll cover the audio equipment business. In the first quarter, both audio equipment for consumer use and audio equipment for professional use performed weakly. Revenue for audio equipment for consumer use decreased due to sluggish home audio sales. Although there was an increase in speaker sales for professional use, revenue decreased due to poor performance in Europe and China.

Conversely, audio equipment for mobility use experienced growth in regions outside China, which offset the decline in China, resulting in double-digit revenue growth even after adjusting for the impact of exchange rates. Regarding our full year outlook, our forecast remains unchanged. We expect to return to a growth trajectory and achieve revenue growth. Please turn to the next page, Page 14. This page shows the sales performance of our major products. As I have already explained this, I will omit further details here.

Next, please turn to Page 15. This page shows sales performance by region. Excluding the impact of exchange rates, revenue increased in Japan, North America and other regions. However, due in part to economic downturns, revenue decreased in Europe and China when excluding the impact of exchange rates.

The next page is 16. Now we'll look at other businesses. In the first quarter, revenue decreased for both automobile interior wood components and factory automation equipment. However, regarding the full year forecast, while FA equipment is expected to grow, there has been no change to the forecast of a revenue decline due to the discontinuation of the Golf Products business. Please turn to Page 17. I will now explain the other financial figures, starting on the next page.

Please turn to Page 18. This is the balance sheet. The figures shown are compared with those at end of the previous fiscal year. Total assets amounted to JPY 638.9 billion, which is an increase of JPY 21.4 billion since the end of March 2026. By account category, on the asset side, cash and cash equivalents increased by JPY 12.0 billion to reach JPY 120.9 billion due to the collection of trade receivables. Trade and other receivables totaled JPY 78.9 billion as other receivables decreased by JPY 8.8 billion due to seasonal fluctuations.

Other financial assets increased by JPY 1.8 billion to reach JPY 6.0 billion, primarily due to time deposits. Inventories rose by JPY 8.8 billion to reach JPY 161.0 billion, driven by new product inventory and exchange rate fluctuations. Other current assets remained unchanged at JPY 11.8 billion. Noncurrent assets increased by JPY 7.7 billion to reach JPY 260.3 billion, primarily due to changes in the market value of held stocks and pension assets.

On the liabilities and equity side, current liabilities increased by JPY 4.8 billion to JPY 102.8 billion, primarily due to short-term interest-bearing debt secured to ensure liquidity. Noncurrent liabilities increased by JPY 1.7 billion to JPY 41.6 billion, mainly due to deferred tax liabilities resulting from changes in the market value of held shares. Total equity increased by JPY 14.8 billion to JPY 494.5 billion, driven by net profit and foreign currency translation adjustments.

Please turn to the next page, Page 19. This page shows the forecast for ROE and ROIC in FY 2027 as well as the shareholder returns and the status of cross holdings. Due to the upward revision of the net profit forecast, the ROE forecast for FY 2027 has increased from 5.7% to 6.3%, while the ROIC forecast has decreased from 5.4% to 5.3%.

Please turn to the next page, Page 20. This page shows our cash allocation and strategic investments. There are 4 bar charts on the left. The 2 outer bars represent the cash allocation plan outlined in our midterm management plan, rebuild and evolve for fiscal years 2026 through 2028, which we announced in May 2025. The leftmost bar represents cash inflows and the rightmost bar represents cash outflows. The 2 inner bar charts show the actual results for the first year, fiscal year 2026. The left-hand chart represents cash inflows and the right-hand chart represents cash outflows.

Cash inflows for fiscal year 2026 totaled JPY 42.1 billion, consisting of core operating profit of JPY 23.7 billion, proceeds from the sale of cross shareholdings of JPY 4.3 billion and depreciation expenses of JPY 14.1 billion. We allocated JPY 4.6 billion to strategic investments, JPY 26.8 billion to shareholder returns through dividends and share buybacks and JPY 11.4 billion to regular investments. This resulted in total cash outflows of JPY 42.8 billion, giving a total return ratio of 112% regular investments remained below the level of depreciation, progressing as expected.

However, as you can see, we recognize that one of our major challenges is the proactive execution of strategic investments. To accelerate strategic investments, we are, therefore, working with a sense of urgency to establish governance frameworks, such as an investment committee for strategic investments, centrally manage project lists and set investment limits and evaluation criteria.

As a result of these efforts, we intend to move forward at an early stage with initiatives such as market expansion in India and the ASEAN region, accelerating growth in the audio equipment business, expanding our presence in the audio equipment sector and new business areas, venture investments to realize challenges that create the future and ESG investments in areas such as sustainability and human capital.

Furthermore, in pursuing strategic investments, we anticipate utilizing debt capacity as necessary. However, we will use the net debt-to-equity ratio, equity ratio, net interest-bearing debt and EBITDA multiple as KPIs for financial soundness, and we will maintain an A credit rating as a prerequisite. Please turn to the next page, Page 21. This slide shows the first quarter results and the full year forecast for capital expenditure, depreciation and research and development expenses. The first quarter results were in line with the plan, and the full year forecast remains unchanged.

Please turn to the next page, Page 22. We'll then cover some key topics. Please turn to the next page, Page 23. Here, I would like to discuss the status of the key themes in our midterm management plan. Firstly, with regard to rebuilding a strong business foundation, as I explained earlier, we have successfully launched highly anticipated new products and services that pursue intrinsic product value derived from the combination of technology and sensibilities. We have also made progress on price optimization as planned.

We will continue these efforts in the second quarter and beyond. Regarding evolving to create the future, specifically our efforts to create new value, we are once again presenting new value propositions based on proprietary technologies this fiscal year. These include sound XR Core in professional audio, music AI for lighting in mobility audio and a smartphone-based receiver in new business development.

Additionally, Yamaha Music Innovations, YMI based in Silicon Valley, has begun a strategic collaboration with the International Society for Music Education, taking advantage of the growing popularity of Yamaha Creator Pass, an integrated platform for creators, we have announced that we will jointly host the Global Student Creator Challenge, an international contest for student creators utilizing Yamaha Creator Pass.

In terms of setting sustainability as a source of value, we are continuing to expand our initiatives to promote music education in emerging countries. Since July 2026, we have been running a pilot program introducing music education using recorders in public elementary schools in India. The following photo shows a teacher training session held in conjunction with the pilot program.

Finally, please turn to the next page, Page 24. With regard to corporate governance, I am pleased to report that the company is now being guided by the Board of Directors under its new leadership, including Ms. Kerrie Waring, who was appointed at the shareholders' meeting in June. That concludes my presentation.

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.]