Yamaha sees Asean push lifting margins as demand wanes in Indonesia

Tokyo

YAMAHA Motor Co, which sold a third of its motorcycles in Indonesia last year, plans to make up for a slump in the market by boosting sales to the rest of Southeast Asia with new models and almost double profit margin in the region.

The operating profit ratio for the two-wheeler business in the Asean region may reach 10 per cent as soon as this year, compared with 5.7 per cent in 2015, CEO Hiroyuki Yanagi said in an interview on Tuesday. That's at least a year ahead of projections by Koichi Sugimoto, an analyst at Mitsubishi UFJ Morgan Stanley.

Indonesia's economy is feeling the effects of a slowdown in China (its top export market) and slumping commodity prices, weighing on a motorcycle market Yamaha counts on for sales. The manufacturer has introduced models built on common platforms such as the M-SLAZ sports model and the NMAX scooter to reduce costs and boost profitability in Southeast Asian markets Vietnam, Thailand and the Philippines.

"As they upgrade the model lineup, the margins will greatly improve," Mr Sugimoto said by phone. "The new models have much better margins."

Yamaha shares have jumped 23 per cent since July 12, when Nikkei Inc said the company will replace Sharp Corp on the Nikkei 225 Stock Average from Aug 1. The benchmark index has gained 4 per cent in the same period.

Yamaha last week cut its full-year net income forecast by 25 per cent to 60 billion yen (S$794 million), as the yen strengthens and sales in Indonesia are estimated to plunge about 40 per cent from 2014 levels. Indonesia's market may recover next year, Mr Yanagi said.

The operating profit margin for the company's two-wheeler business in the Asean region widened to 7.8 per cent in the first half, according to Mr Yanagi.

In India - the largest motorcycle market in the world - Yamaha forecasts sales will rise 35 per cent this year to 806,000 units, as the company expands its dealer network in rural areas. India will become another "pillar" of Yamaha's motorcycle business, after Indonesia and other markets in Southeast Asia, Mr Yanagi said. "The growth will mainly come from more expensive segments in Asian markets including India," said Mr Yanagi, who sees buyers upgrading from cheaper scooters to higher-spec models. Bloomberg