豐田汽車 (TM) 2015 Q2 法說會逐字稿

Hello, everyone. Welcome to the financial results conference call for the fiscal year 2015 second quarter. I am [Nokas Takano], from the Accounting Division of Toyota Motor Corporation. Today, we have Mr. Tetsuya Otake, Managing Officer in charge of the Accounting Group of Toyota Motor Corporation, and Ms. [Itsuko Sakai], our interpreter, with us.

The agenda of today's conference call is as follows. First, Mr. Otake will briefly discuss the highlights of Toyota's earnings results, and then Ms. Sakai will take over the rest of the presentation. This will take about 10 minutes. After the presentation, you are welcome to ask questions.

Please note that the presentation contains forward-looking statements that reflect our plans and expectations and our actual results may be materially different from these statements. A complete cautionary statement concerning forward-looking statements is included on page 2 of today's presentation material and a complete cautionary statement concerning insider trading is included on page 3. Both of the statements can be downloaded from our Internet home pages.

Now, I'd like to turn the call over to Mr. Otake.

Hello, everyone. Thank you for joining us today. I am Tetsuya Otake. It's my pleasure to discuss Toyota's financial results for the first six months of the fiscal year ending March 2015.

Let me start with slide 5. Our consolidated vehicle sales for the first half of this fiscal year increased by 9,000 units to 4,477,000 units compared to the same period last year, thanks to increased sales in North America, Europe and the Middle East, despite declining sales in Japan and Asia.

Please see slide 6. Our consolidated financial performance for the first half of the current fiscal year resulted in net revenues of JPY12,945.5 billion, operating income of JPY1,351.9 billion, pretax income of JPY1,509.1 billion and net income of JPY1,126.8 billion.

Now, I would like to hand the rest of today's presentation to Ms. Sakai, our interpreter.

Next, using slide 7, I'd like to highlight the major factors which impacted operating income year on year. In addition to cost reduction efforts and favorable foreign exchange rates, valuation gains and losses mainly from interest rate swaps were positive factors. As a result, despite a negative impact of model mix and increase in expenses, operating income increased by JPY96.4 billion compared to the first half of the last fiscal year.

As summarized in slide 8, our consolidated financial performance for the second quarter of this fiscal year resulted in net revenues of JPY6,554.9 billion, operating income of JPY659.2 billion, pretax income of JPY737.3 billion and net income of JPY539 billion.

For your information, slide 9 summarizes the major factors which impacted the second-quarter operating income year on year.

Next, I would like to elaborate on operating income by region. In Japan, although new models such as the Harrier, Noah and Voxy as well as the Corolla Hybrid drove sales. Overall, vehicle sales decreased by 71,000 units year on year to 1,030,000 units as demand fell following the consumption tax rise. Operating income decreased by JPY111.2 billion to JPY718.7 billion in spite of favorable foreign exchange rates and cost reduction efforts. This was due to marketing efforts undermined by decreased vehicle sales and weaker model mix in addition to an increase in research and development and other expenses.

Please see slide 11. In North America, against the backdrop of solid demand for new cars, vehicle sales increased by 97,000 units year on year to 1,395,000 units driven by the Corolla, the RAV4 and other models. Operating income excluding swap valuation gains and losses was JPY289.1 billion, up JPY103.5 billion compared to the first half of the last fiscal year as a result of increased vehicle sales and cost reduction efforts.

In Europe, on slide 12, vehicle sales increased by 7,000 units year on year to 414,000 units driven particularly by the Yaris hybrid and the Camry. Operating income was JPY33.2 billion, up JPY7.7 billion year on year, thanks to marketing and cost reduction efforts.

In Asia, on slide 13, despite increased sales of the Agya and the Yaris, overall vehicle sales were down by 25,000 units to 755,000 units due to continued weakness of the Thai market. Nevertheless, operating income reached JPY212.9 billion, up JPY17.2 billion year on year, supported by cost reduction efforts and favorable foreign exchange rates.

Please move on to slide 14. In the other regions, vehicle sales for the first half of this fiscal year remained in line with the same period last fiscal year at 883,000 units thanks to robust sales in Central and South America, especially Brazil, where the new Corolla sold well, and in the Middle East, which offset decreased sales in Africa and Oceania. Operating income was JPY77.9 billion, up JPY1.8 billion year on year, thanks mainly to marketing efforts offsetting the negative impact of foreign exchange rates.

Next, please see slide 15 for financial services. Operating income excluding swap valuation gains and losses for the first half of the current fiscal year was JPY163.2 billion, marginally increased year on year, mainly due to increased lending balance.

Please refer to slide 16. Equity and earnings of affiliated companies for the first half of this fiscal year was JPY165.8 billion, up JPY7.1 billion year on year. This was primarily due to continued strong earnings posted by our afiliated companies in China. Please note that the fiscal year end of our affiliated companies in China is in December. Therefore, equity and earnings of these companies for the first half of this fiscal year reflects their earnings from January to June 2014.

Next, I would like to discuss our interim dividend. Please look at slide 17. We would like to propose an interim dividend of JPY75 per share, an increase of JPY10 over last year. We believe that paying a dividend is the most important means of returning value to our shareholders. In order to enhance long-term trusted relationships with shareholders, we intend to pay dividends stably and sustainably in consideration of our earnings results, investment requirements and the level of cash reserves. We have steadily bought back 38.92 million shares, equivalent to JPY239.9 billion, to date since July in accordance with the share buyback program resolved at our Board of Directors meeting in June.

Now, I would like to move on to discuss our outlook for the full fiscal year. Please see slide 19. With regard to our consolidated vehicle sales for the full fiscal year, we reduced our August forecast of 9.1 million units by 50,000 units to 9.05 million units. In consideration of the latest sales trend in each region, we revised our expectation upwards in North America and Europe and downwards in Japan and Asia. We plan to stimulate demand through global rollout of the new Lexus NX and RC and launch of new models meeting each region's requirements and characteristics, such as the Camry in North America and the Esquire in Japan, which flexibly implementing market measures.

Please see slide 20. We revised our foreign exchange rate assumption to JPY105 to the dollar and JPY135 to the euro from October onwards, thus adopting JPY104 to the dollar and JPY137 to the euro for the full year. Based on this revised currency assumption, our forecasts of consolidated financial performance for the current fiscal year are now net revenues of JPY26,500 billion, operating income of JPY2,500 billion, pretax income of JPY2,700 billion and net income of JPY2,000 billion.

Now, please see slide 21 for the analysis of our latest operating income forecast in comparison to our August forecast. We are revising our operating income forecast upwards by JPY200 billion to JPY2,500 billion. This reflects the progress in our profit improvement activities through marketing and cost reduction efforts, the change in our foreign exchange rates assumption, along with decrease in vehicle sales and increase in fixed costs, particularly R&D expenses.

Finally, please see slide 22 for our forecasts of R&D expenses, CapEx and depreciation expenses. In our latest forecast, R&D expenses are up JPY20 billion and CapEx is up JPY10 billion from the previous forecasts. Toyota is committed to undertake necessary initiatives to strengthen the foundation for sustainable growth. In this regard, we are currently pursuing maximum utilization of existing plants and facilities and maximum improvement of investment efficiency in order to establish a strong production base to support vehicle manufacturing around 10 million units per annum. We continue to aim at achieving our medium to long-term sustainable growth through reform of work processes such as TNGA and establishment of a new North American headquarters, proactive developments and investments for the future and improvement of our profit structure, driven by marketing and cost reduction efforts.

This concludes my presentation on the financial results for the first half of the fiscal year ending March 2015. Thank you very much for your attention.