Rating Action: Moody's changes Yamaha's outlook to stable from negative; affirms Baa1 ratingGlobal Credit Research - 12 Apr 2021Tokyo, April 12, 2021 -- Moody's Japan K.K. has affirmed Yamaha Motor Company Limited's Baa1 issuer rating.At the same time, Moody's has changed the outlook to stable from negative."The change in Yamaha's outlook to stable reflects our expectation that the company's profitability will continue to rise with the recovery in its unit sales from the trough during the pandemic," says Mariko Semetko, Moody's Vice President and Senior Credit Officer."We expect leverage will remain elevated this year, but the company has ample cash on hand and will reduce leverage in 2022," adds Semetko.RATINGS RATIONALEThe affirmation of Yamaha's Baa1 issuer rating reflects the company's (1) brand strength in the motorcycle business, with a focus on premium models; (2) business diversification provided by its high-margin marine segment, with a strong market position in North America; and (3) excellent liquidity, which provides the company flexibility should the coronavirus-induced downturn in the global motorcycle and boat markets be prolonged.Profitability recovered in 2020 faster than Moody's had anticipated, leading to a consolidated EBITA margin of 6.2% for the year. The company's margin has ranged around 6%-8% historically, a level that has been strong compared with other rated original equipment manufacturers. Unit sales for motorcycles in Southeast Asia, including Indonesia, one of Yamaha's largest markets, are still recovering from the pandemic. Moody's expects that ongoing recovery in Southeast Asia will push Yamaha's margin toward 7% over the next 18 months.Yamaha's highly profitable marine segment, which provides business diversification, experienced significant demand during the pandemic. Moody's expects consumers' interest in social distancing will support demand for outdoor leisure activities.Yamaha does not disclose separate financials for its financial services segment. As a result, Moody's uses financial metrics that are based on consolidated figures. Excluding the financial services segment's profit and debt, Moody's estimates that Yamaha's debt/EBITDA would be 1.5x to 2.0x lower than the consolidated leverage.Moody's expects that Yamaha's consolidated leverage will remain elevated at around 4x through 2021 until the company starts paying down the loans it had secured to support its liquidity through the pandemic and returns to baseline capital expenditures of around JPY 50 billion to 60 billion after increasing to JPY 76 billion in 2021. By the end of 2022, however, Moody's anticipates leverage returning to the 2x-3x range.Yamaha has a sizeable cash balance, in part from the pandemic-related loans, which bolsters the company's liquidity.The stable outlook reflects Moody's expectation that unit sales will continue to grow as the pandemic eases, and that Yamaha's EBITA margin will recover toward 7% and its debt/EBITDA will fall toward 2.5x.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGYamaha's motorcycle business in developed countries turning profitable and demand recovery in emerging markets will improve the company's credit profile. Moody's will consider an upgrade if the company's credit metrics improve, including consolidated EBITA margin sustained at above 8% and debt/EBITDA around 2x.Moody's could downgrade Yamaha's rating if (1) its liquidity erodes, (2) its balance sheet deteriorates such that the company is unable to lower its debt so that, for example, debt/EBITDA does not decline toward 2.5x through year-end 2022, or (3) its consolidated EBITA margin is sustained below 6%.The methodologies used in this rating were Automobile Manufacturer Industry (Japanese) published in July 2017 and available at https://ift.tt/3vsyRtE, and Captive Finance Subsidiaries of Nonfinancial Corporations (Japanese) published in August 2019 and available at https://ift.tt/3bSE5XJ. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.Headquartered in Shizuoka, Japan, Yamaha Motor Company Limited is one of the leading motorcycle manufacturers in the world.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://ift.tt/3r4KzHE ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ift.tt/349xDIr disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ift.tt/3cvzJX4 Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Mariko Semetko VP - Senior Credit Officer Corporate Finance Group Moody's Japan K.K. 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The Link LonkApril 12, 2021 at 10:40AM
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Yamaha Motor Company Limited -- Moody's changes Yamaha's outlook to stable from negative; affirms Baa1 rating - Yahoo Finance
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Yamaha
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