豐田汽車 (TM) 2015 Q3 法說會逐字稿

Hello, everyone. Welcome to the financial result conference call for the fiscal year 2015 third quarter. I am [Nobukatsu 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. Morita], 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 earning results and then Ms. Morita will take over the rest of 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 the 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'm Tetsuya Otake. It's my pleasure to discuss Toyota's financial results for the three months from October to December 2014.

Let me start with slide 5. Our consolidated vehicle sales for the third quarter of this fiscal year decreased by 54,000 units to 2.263m units year on year. This was due to declining sales mainly in Japan and Asia, despite increased sales in North America.

As shown on the right side of slide 5, our consolidated vehicle sales for the nine months from April to December 2014 decreased by 45,000 units to 6.74m units.

Please see slide 6. Our consolidated financial performance for the third quarter of this fiscal year resulted in net revenues of JPY7.17 trillion, operating income of JPY762.8b, pre-tax income of JPY846.4b and net income of JPY600b.

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

Next is on slide 7. I would like to highlight the major factors which impacted operating income for the third quarter year on year. Despite an increase in expenses, operating income improved by JPY162.3b to JPY762.8b due to the yen's depreciation and continued cost reduction efforts.

As summarized in slide 8, our consolidated financial results for the nine months from April to December 2014 were net revenues of JPY20,115.6b, operating income of JPY2,114.8b, pre-tax income of JPY2,355.6b and net income of JPY1,726.8b.

Please take a look at slide number 9 for the major factors which impacted operating income for the nine months year on year. Operating income improved by JPY258.8b to JPY2,114.8b as a result of the positive factors, such as favorable foreign exchange rate and cost reduction efforts, which more than offset the negative factors such as increased expenses.

Next I would like to discuss operating income for each region. Please take a look at slide number 10, particularly the left side of the slide indicating the third-quarter results.

In Japan, although new models such as the Esquire and the Lexus NX drove sales, overall vehicle sales for the third quarter decreased by 42,000 units to 498,000 units as demand continued to falter after the rise in the consumption tax rate. Operating income, however, increased by JPY93.4b to JPY424.8b, due primarily to favorable foreign exchange rates and cost reduction efforts.

Please look at slide 11. In North America, against the backdrop of solid market conditions, the third-quarter vehicle sales rose by 48,000 units to 712,000 units year on year, driven particularly by the Highlander and the Tacoma. Operating income, excluding valuation gains and losses from interest rate swaps, etc., was JPY167.9b, up JPY45b compared to the third quarter of the last fiscal year. This was mainly a result of increased vehicle sales and cost reduction efforts.

Please look at slide number 12. In Europe, vehicle sales for the third quarter remained in line with the same period of the last fiscal year at 220,000 units. This was due to declined sales in Eastern Europe and Russia, despite strong sales of the Aygo and Yaris HB, mostly in Western Europe. Operating income was JPY33.2b, up JPY15.5b year on year, primarily as a result of cost reduction efforts.

Please look at slide 13. In Asia, overall vehicle sales for the third quarter were down 48,000 units to 374,000 units, mainly due to declined sales in Thailand, where the market remained sluggish, and in Indonesia, where competition was severe. Operating income remained broadly unchanged year on year at JPY107.6b as decreased vehicle sales, etc., offset the effect of cost reduction efforts.

Please move on to slide number 14. In other regions, the third-quarter vehicle sales increased in Oceania and the Middle East, but declined in Africa and Central and South America year on year. As a result, overall vehicle sales fell by 9,000 units to 459,000 units compared to the same period of the last fiscal year. Operating income was JPY29.3b, down JPY2.8b year on year, mainly due to an increase in expenses in spite of the positive impact from marketing efforts.

Now please take a look at slide 15 for financial services. Operating income, excluding valuation gains and losses from interest rate swaps, etc., for the third quarter was JPY86.1b, up JPY5.9b compared to the same period of the last fiscal year, mainly due to an increased lending balance.

Next, please refer to slide 16. Equity in earnings of affiliated companies for the third quarter was JPY85.1b, down JPY4.1b year on year. Please note that the fiscal year end of affiliated companies in China is in December. Therefore equity in earnings of these companies for the third quarter reflects their earnings from July to September 2014.

Now I would like to move on to discuss our outlook for the full fiscal year, which will end in March 2015.

Please take a look at slide number 18. With regard to our consolidated vehicle sales for the full fiscal year, we reduced our November forecast of 9.05m units by 50,000 units to 9m units. Based on the latest sales trends, we now expect weaker sales in Japan, Europe and Asia and stronger sales in North America and the other regions. We will continue to monitor the market conditions in each country closely and stimulate demand for our vehicles by implementing effective marketing measures accordingly.

Please move on to the next slide, slide number 19. We revised our assumption on foreign exchange rates to JPY115 to the US dollar and JPY135 to the euro from January 2015 onwards, thus adopting JPY109 to the US dollar and JPY139 to the euro for the full year. Based on this ForEx assumption, our revised forecasts of consolidated financial performance for the current year are net revenues of JPY27 trillion, operating income of JPY2,700b, pre-tax income of JPY2,920b and net income of JPY2,130b.

Now please look at slide 20 for the analysis of our latest operating income forecast in comparison to our November forecast. While we expect a reduction in vehicle sales, we are raising our operating income forecast by JPY200b to JPY2,700b, factoring in the change in our ForEx assumption and the progress in our profit improvement activities, such as cost-reduction efforts.

Finally, please refer to slide 21 for our forecasts of R&D expenses, CapEx and depreciation expenses. In our latest forecasts, R&D expenses are up JPY20b to JPY1 trillion in order to further reinforce our R&D activities as well as due to the revised ForEx assumption. We also revised our forecasts of CapEx and depreciation expenses upwards by JPY20b and JPY10b respectively in accordance with the revised ForEx assumption.

Toyota is actively promoting initiatives to increase its competitiveness towards sustainable growth. At the end of 2014, we launched Mirai, a fuel cell vehicle with a potential to realize a new mobility society. We also plan to install Toyota Safety Sense, a newly developed package of active safety technologies with world-leading performance, in almost all our passenger vehicles for Japan, North America and Europe by the end of 2017.

In order to deliver ever better cars which will bring smiles to our customers, we will continue to work steadily towards reinforcement of R&D capabilities and establishment of a business foundation which is able to support annual production and sales of 10m units.

We at Toyota are determined to do our best so that each of these activities will lead not only to the enhancement of our true competitiveness towards sustainable growth, but also to a virtuous cycle of the Japanese economy.

This concludes my presentation on the third-quarter financial results. Thank you very much for your attention.