advertisement

Americans buying big boats has Yamaha targeting 30% margins

TOKYO - Yamaha Motor is forecasting profit margins at its marine business to almost double to 30 percent in the next few years as rich Americans buy bigger boats and outboard engines.

The Japanese company aims to hit the operating margin target before 2018, up from 17 percent last year, said Hirofumi Usui, head of the marine unit. Sales are also growing in Japan, where Prime Minister Shinzo Abe's economic policies have boosted stock prices and corporate profits.

"The marine business has benefited from the strong U.S. economy as rich people purchase big boats," Usui said last week in an interview near Tokyo. "Even if the sales growth slows down, we expect profits will still have nice gains thanks to higher margins."

Better known for its motorcycles, Yamaha gets more than half its profit from the marine unit. The business, which accounts for about a fifth of the company's revenue, is also benefiting from a weaker yen and from rising demand in Japan, where Yamaha's sales of boats priced at more than 10 million yen ($82,000) has gained about 10 percent since the second half of last year, Usui said.

Yamaha rose as much as 1.8 percent to 2,724 yen in Tokyo, the first gain for the stock in six trading days. The shares have climbed 9.8 percent this year, trailing the 16 percent advance by Japan's benchmark Topix index.

The company is forecasting net income for the current fiscal year will rise 11 percent to 76 billion yen on higher sales and a weak yen.

Demand for large outboard motors will be one of the biggest drivers of profitability, even as overall revenue growth is expected to slow, Usui said. While sales of boats go up and down with the economy, the outboard motor business is more stable thanks to replacement demand, he said.

U.S. demand for outboard motors has been recovering since 2012, reaching 207,000 units last year, according to Yamaha. Industrywide sales peaked at 262,000 units in 2007, the year before the global financial crisis sent them into decline, according to data provided by the company. Yamaha's marine unit gets more than half of its sales from North America, while Japan contributes about 10 percent of sales.

Article Comments
Guidelines: Keep it civil and on topic; no profanity, vulgarity, slurs or personal attacks. People who harass others or joke about tragedies will be blocked. If a comment violates these standards or our terms of service, click the "flag" link in the lower-right corner of the comment box. To find our more, read our FAQ.