Yamaha Motor Co. may beat its profit forecasts if emerging markets hold up better than expected, according to Chief Executive Officer Hiroyuki Yanagi, speaking ahead of Wednesday’s interest rate hike in the United States.
The motorcycle and boat manufacturer may achieve an operating profit margin of 10 percent in the next three years, exceeding the official 9 percent target, if emerging markets turn out to be more resilient, Yanagi said in an interview on Tuesday, after releasing the company’s mid-term plan. Asian markets outside Japan were Yamaha’s biggest contributor to revenue for the 2014 fiscal year.
The Federal Reserve’s first interest rate increase since 2006 occurred Wednesday, marking what some economists expect will be the beginning of the end for the unprecedented era of easy monetary policy. The move could coincide with a commodity slump, causing the market for high-yield bonds to gyrate, sending tremors through financial condition indexes and spreading unease across trading desks.
A gauge of 20 emerging-market currencies tracked by Bloomberg has lost 15 percent this year, the most since the 2008 financial crisis. An economic slowdown in China, slumping commodity prices and a rally in the dollar as investors brace for higher interest rates also are dragging on sentiment. Market pricing for federal funds futures implies two interest rate increases next year.
Yamaha’s motorcycle business may reach 7 percent in operating margin, versus the official 5.7 percent target, if markets such as Indonesia recover from the slowest economic growth in six years, Yanagi said. The segment now accounts for 65 percent of revenue for the company.
The manufacturer plans to expand its dealer network in India to increase sales and introduce higher-specification models in Indonesia to tap the pricier end of the market, Yanagi said.
Yamaha’s shares erased gains in Tokyo trading Tuesday after it put out the plan and official profit targets. The company is banking on a weaker yen and improving U.S. economy to drive profitability at its motorcycle and marine businesses.
Yanagi said he expects the profit margin for its marine business to remain at about 20 percent through 2018. It stands a chance of beating that target if the dollar trades higher than the company’s forecast of ¥115 in the next three years, he said.
In terms of investment, Yamaha will spend 130 billion yen in business areas that could support future growth, including 70 billion on research and development, according to Yanagi. The company also could spend about ¥60 billion to buy two or three companies specializing in technology to improve the safety and stability of its motorcycles, he said.
Yamaha’s dividend payout ratio will reach 30 percent as early as the next fiscal year, from 20 percent last year, Yanagi said.