豐田汽車 (TM) 2016 Q1 法說會逐字稿

Hello, everyone. Welcome to the financial results conference call for the fiscal year 2016 first 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 Miss 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 earnings results, and then Miss Morita 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 insider 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 page.

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 April to June 2015.

Let me start with slide 5.

Compared to the same period last year, consolidated vehicle sales for the first quarter were down 127,000 units to 2,114,000 units, as a result of weaker sales mainly in Japan, Asia, the Middle East and Africa, despite stronger sales in North America.

Please turn to slide 6.

Consolidated financial performance for the first quarter resulted in net revenues of JPY6,987.6 billion, operating income of JPY756.0 billion, pre-tax income of JPY845.2 billion, and net income of JPY646.3 billion.

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

Next using slide 7, I would like to highlight the major factors which impacted operating income for the first quarter year on year.

Favorable foreign exchange rates and cost reduction efforts remained positive factors, while increased expenses to support initiatives for enhancing competitiveness and decreased vehicle sales were negative factors. As a result, operating income increased by JPY63.2 billion compared to the same period of the last fiscal year.

Next I would like to discuss the first quarter operating income for each region. Please look at slide 8.

In Japan, vehicle sales were 470,000 units, down 36,000 units year on year, mainly as a result of the adverse effect of an increase in light vehicle tax this fiscal year. Despite the negative factors such as decreased vehicle sales and increased expenses, operating income was up JPY109.8 billion year on year to JPY475.8 billion due to favorable foreign exchange rates and cost reduction efforts.

Toyota and Lexus brand retail sales were up 15,000 units year on year to 335,000 units.

Please look at slide 9.

In North America, against the backdrop of a solid market environment, vehicle sales increased by 19,000 units year on year to 729,000 units, driven by the Lexus NX, the Tacoma and the Highlander in particular.

In spite of increased vehicle sales and cost reduction efforts, operating income, excluding swap valuation gains and losses, was JPY151.1 billion, broadly unchanged year on year due to increased expenses.

Please turn to slide 10.

In Europe, vehicle sales remained at the level of the first quarter of last year at 206,000 units. Vehicle sales grew in Western Europe where the markets were solid, but slumped in Russia where demand shrunk dramatically.

Despite cost reduction efforts, operating income was JPY7.8 billion, down JPY3.0 billion year on year, mainly due to the foreign exchange translational impact.

Please note that the fiscal year for our subsidiaries in Russia ends in December. Therefore, the figures I cited reflect their performance from January to March 2015.

Please turn to slide 11.

In Asia, overall vehicle sales were down 57,000 units year on year to 328,000 units. This was due to decrease in sales in Thailand and Indonesia, where demand remained depressed and competition intensified, as well as the impact of production adjustment related to the changeover of the Hilux in Thailand.

Operating income was JPY100.0 billion, down JPY10.2 billion year on year, as a result of decreased vehicle sales.

Please move on to slide 12.

In other regions, overall vehicle sales decreased by 52,000 units year on year to 381,000 units due to decreased sales in the Middle East, Central and South America and Africa. Operating income, however, was up JPY3.9 billion year on year to JPY38.0 billion, thanks to marketing efforts such as pricing improvement, which offset the negative impact of the depreciation of emerging market currencies.

Now please look at slide 13 for financial services.

Operating income, excluding swap valuation gains and losses, for the first quarter was JPY96.8 billion, up JPY14.7 billion compared to the same period of the last fiscal year. This was mainly due to an increased lending balance and the translational impact of foreign currencies.

Next, please refer to slide 14.

Equity in earnings of affiliated companies for the first quarter was JPY100.9 billion, down JPY4.4 billion year on year. The contribution from our affiliated companies in China decreased by JPY15.5 billion, mainly as a consequence of increased sales expenses and deterioration of the model mix.

Please note that the fiscal year end of our affiliated companies in China is in December. Therefore, equity in earnings of these companies for the first quarter reflects their earnings from January to March 2015.

Now I would like to move on to discuss our outlook for the full fiscal year ending in March 2016. Please look at slide 16.

First, with regard to consolidated vehicle sales, we are raising our initial forecast by 50,000 units to 8.95 million units. We expect stronger sales in Japan, North America and Europe, despite weaker sales in Asia, Central and South America and Africa.

Please turn to slide 17 for a summary of the latest forecasts of our consolidated financial performance for the full year.

As mentioned in the second footnote in the slide, we maintain our initial ForEx assumptions for July onwards because of uncertainties surrounding the currency markets. Our forecast of net revenues is now revised to JPY27,800 billion, up JPY300 billion from our initial forecast, reflecting the ForEx impact and the revised vehicle sales outlook. Our latest forecast of operating income is JPY2,800 billion.

Please look at slide 18, which compares our latest forecast of operating income with our previous forecast.

We maintain our previous forecast in consideration of both positive factors, such as the actual ForEx rates for the first quarter and the revised outlook of full-year vehicle sales, and the negative factors such as the effects of marketing activities in Russia and China, and an increase in expenses.

Please look at slide 19.

Our forecast of R&D expenses remains unchanged from the previous forecast. As for CapEx and depreciation expenses, our latest forecasts are up JPY10 billion to JPY1,210 billion and JPY880 billion respectively, reflecting the ForEx impact.

Finally, please look at slide 20.

As before, we remain committed to our efforts to build ever better cars. In the second half of the current fiscal year, we plan to conduct full scale marketing campaigns for the new Hilux and Fortuner models which recently went on sale in Thailand. These models will subsequently be rolled out to other markets.

We will also start production of the new Lexus RX at plants in Japan and Canada. We also plan to launch the first model incorporating TNGA before the end is out -- before the year is out.

In China, we will offer hybrid versions of the Corolla and the Levin, which were introduced at Auto Shanghai 2015. These models will feature our first hybrid powertrain components developed and produced outside Japan. We will steadily prepare for the launch and the marketing of these new models which we expect to contribute to our vehicle sales. At the same time, we will continue to strengthen our profit structure by improving our gross margin per vehicle and controlling fixed costs.

This concludes my presentation on the financial results for the first quarter of the fiscal year.

For your information, please note that we made an announcement concerning our share repurchase schedule and the latest sales and production plans for calendar year 2015 earlier today. Please refer to our press releases for details.

Thank you very much for your attention.