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Introduction & Market Context
Yamaha Corporation (TYO:7951) presented its first quarter FY2026.3 results on August 1, 2025, revealing significant challenges from US tariffs, yen appreciation, and continued weakness in key markets. The musical instrument and audio equipment manufacturer reported a substantial decline in profitability despite efforts to control costs and implement structural reforms.
The company’s stock has reflected these challenges, with shares down 4.06% to ¥971.9 in recent trading, sitting closer to its 52-week low of ¥934 than its high of ¥1,281.
Quarterly Performance Highlights
Yamaha reported a steep 49.2% year-over-year decline in core operating profit for Q1 FY2026.3, falling to ¥4.7 billion from ¥9.2 billion in the same period last year. Revenue decreased by 7.4% to ¥103.9 billion, while net profit plummeted 74.7% to ¥2.4 billion. The operating profit margin contracted significantly to 4.5% from 8.2% a year earlier.
As shown in the following summary of quarterly results:
The company attributed the revenue decline to several factors, including a slowdown in audio equipment sales, slow recovery in musical instruments, and the appreciation of the Japanese yen. Excluding the impact of exchange rates, the revenue decrease would have been a more modest 2.8%.
A detailed breakdown of factors affecting core operating profit reveals the significant impact of external challenges:
The waterfall chart clearly illustrates how US tariffs (-¥1.8 billion) and unfavorable exchange rates (-¥1.1 billion) contributed substantially to the profit decline. The largest negative factor was the decrease in sales/production/model mix (-¥2.7 billion), partially offset by cost control measures in SG&A expenses (+¥0.7 billion) and benefits from previous structural reforms (+¥0.6 billion).
Segment Analysis
Yamaha’s business segments all faced challenges during the quarter, with both Musical Instruments and Audio Equipment reporting significant declines in revenue and profitability.
The Musical Instruments segment, which accounts for approximately 64% of total revenue, saw sales decrease from ¥71.4 billion to ¥66.5 billion, while core operating profit halved from ¥4.2 billion to ¥2.1 billion. The company noted that while guitar sales showed growth, piano sales declined, particularly in China.
The segment breakdown shows the following performance:
In the Audio Equipment segment, which represents about 32% of revenue, sales declined from ¥36.5 billion to ¥33.0 billion, with core operating profit falling from ¥4.7 billion to ¥2.3 billion. The company explained that growth in audio equipment for professional and mobility use has leveled off, with sales for mobility use declining in China as previously expected.
The detailed performance of the Audio Equipment segment is illustrated here:
The "Others" segment, which includes automobile interior wood components and FA equipment, was the only area to show revenue growth, increasing from ¥4.2 billion to ¥4.4 billion, though operating profit still declined slightly from ¥0.4 billion to ¥0.3 billion.
Forward-Looking Statements
Despite the challenging start to the fiscal year, Yamaha provided a full-year outlook that projects some recovery, though still below previous expectations. The company has revised its earnings forecasts downward to reflect the impact of additional US tariffs.
For the full fiscal year ending March 31, 2026, Yamaha now projects:
- Revenue of ¥452.0 billion, down 2.2% year-over-year
- Core operating profit of ¥32.0 billion, down 12.9%
- Net profit of ¥22.5 billion, up 68.5% (likely due to one-time factors in the previous year)
The factors affecting the revised outlook are clearly illustrated in this analysis:
The chart shows that US tariffs are expected to have an ¥11.2 billion negative impact on full-year profits compared to the previous year, and an ¥8.6 billion impact versus previous projections. This is partially offset by expected increases in sales and product mix (+¥7.0 billion year-over-year).
In terms of shareholder returns, Yamaha maintains its commitment to providing stable returns despite the challenging environment:
The company projects ROE of 5.0% and ROIC of 4.9% for the full year, reflecting the pressure on profitability.
Strategic Initiatives
Yamaha outlined its medium-term management plan focused on three key themes: rebuilding a strong business foundation, evolving to create the future, and setting sustainability as a source of value. These initiatives aim to address current challenges while positioning the company for long-term growth.
The company has also implemented changes to its corporate governance structure, with new appointments to strengthen management oversight:
The new management structure features a diverse board with members possessing expertise across various domains, including corporate management, legal affairs, finance, and technology. This governance enhancement is part of Yamaha’s strategy to navigate the current challenging business environment.
As Yamaha faces significant headwinds from US tariffs, currency fluctuations, and market weakness in China, the company’s ability to execute on its strategic initiatives and cost control measures will be crucial in determining whether it can meet its revised financial targets for the fiscal year.
Full presentation:
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