豐田汽車 (TM) 2016 Q3 法說會逐字稿

Hello, everyone. Welcome to the financial results conference call for the FY16 third quarter. I'm Masayoshi Hachisuka 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 Saito], our interpreter with us.

The agenda for today's conference call is the following. First, Mr. Otake will briefly discuss the highlights of today's Toyota's earning results and then Miss Saito will take over the rest of the presentation. This will take about 10 minutes. After the presentation, you are welcome to ask your questions.

Please note that 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 those statements can be downloaded from our Internet home pages.

Now, I would 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 third quarter of the fiscal year ending March 2016.

Let me start with slide 5. Compared to the same period of the previous fiscal year, consolidated vehicle sales for the third quarter of the current fiscal year decreased by 48,000 units to 2,215,000 units.

Although sales in North America grew and the market remained solid, sales in Africa, Central and South America, and the Middle East, fell as a consequence of lower oil prices and weaker local currencies. Sales in Asia also fell due to sluggish markets and intensified competition.

As shown on the right-hand side of slide 5, our consolidated vehicle sales for the nine months from April to December 2015 decreased by 247,000 units to 6,493,000 units. For your information, total retail vehicle sales for the third quarter increased by 37,000 units year on year, as indicated in the bottom of the slide.

Please look at slide 6. Consolidated financial results for the third quarter of the current fiscal year were; net revenues of JPY7,339.8 billion; operating income of JPY722.2 billion; pre-tax income of JPY777.7 billion; and net income of JPY627.9 billion.

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

(interpreted) Next, using slide 7, I would like to highlight the factors behind the decrease by JPY40.6 billion in the third quarter operating income year on year. Despite the positive factors, such as progress in cost reduction efforts in each region, operating income was down, due to fewer vehicle sales and an increase in R&D and other expenses.

Please turn to slide 8. Consolidated financial results for the nine months from April to December 2015 were; net revenues of JPY21,431.3 billion; operating income of JPY2,305.6 billion; pre-tax income of JPY2,452.9 billion; and net income of JPY1,886.0 billion.

For your information, slide 9 summarizes the major factors which impacted operating income for the nine months year on year.

Next, I would like to discuss operating income for each region, focusing mainly on the third-quarter performance indicated on the left-hand side of each of the next five slides.

Page 10 is Japan. Although new models such as the Sienta, Alphard and Vellfire drove sales, overall vehicle sales for the third quarter decreased by 5,000 units year on year to 493,000 units, as the mini vehicle market continued to be sluggish.

Operating income decreased by JPY32 billion to JPY392.7 billion, mainly as a result of increased R&D and depreciation expenses, in spite of progress in cost reduction efforts. We are pleased to inform you that orders for the new Prius reached nearly 100,000 units, so roughly 8 times as many its planned monthly sales, almost within a month after its launch.

Please turn to slide 11. In North America, the third-quarter vehicle sales grew by 16,000 units to 728,000 units year on year, driven by SUVs such as the RAV4, Lexus NX and the 4Runner in particular.

Operating income, excluding valuation gains and losses from interest rate swaps, etc., was JPY141.8 billion, down JPY26.1 billion compared to the third quarter of the previous fiscal year. This was mainly due to increased sales expenses, which exceeded the positive factors, including cost reduction efforts.

On slide 12 is Europe. Vehicle sales for the third quarter decreased by 10,000 units to 210,000 units. This was mainly due to decreased sales in Russia where the market remained depressed, despite increased sales, especially in Western Europe such as France, where the Auris and the Yaris performed strongly.

Operating income was JPY20.5 billion, down JPY12.7 billion year on year, primarily due to the effects of marketing activities.

Please turn to slide 13. In Asia, overall vehicle sales for the third quarter were down 12,000 year on year, to 362,000 units, as sales dropped in Indonesia where the market remains sluggish, and in Thailand where competition became tougher.

Nevertheless, operating income reached JPY134.8 billion, up JPY27.1 billion year on year, as improved export profitability due to the depreciation of the local currencies and progress in cost reduction efforts more than offset the negative impact of a decline in vehicle sales.

In Asia, following the renewal of the IMV series light trucks in Thailand, our manufacturing plants in Indonesia started producing the new Innova in November and the new Fortuner in January. Going forward, we will maintain and enhance the efficiency of global production and supply of the IMV series light trucks, while further improving their cost competitiveness.

Please turn to slide 14. In other regions, the third quarter vehicle sales increased in Oceania, driven by the Camry, for instance, but decreased in Africa, Central and South America, and the Middle East year on year. As a result, overall vehicle sales fell by 37,000 units to 422,000 units compared to the same period of the previous fiscal year.

Operating income was JPY25 billion, down JPY4.3 billion year on year, mainly due to fewer vehicle sales, despite cost reduction efforts.

Now please turn to slide 15 for financial services. Operating income, excluding swap valuation gains and losses for the third quarter, remained in line with the same period of the previous fiscal year at JPY83.2 billion. This was mainly due to growth in lending balance, which offset an increase in costs related to loan losses and residual value losses.

Please turn to slide 16. Equity in earnings of affiliated companies for the third quarter increased by JPY20.9 billion year on year, to reach JPY106.0 billion. This was due to a solid performance of our affiliated companies in Japan and China.

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 third quarter reflects their earnings from July to September of 2015.

Now, let me move on to discuss our outlook for the full fiscal year, which will end in March of 2016. Please turn to page 17.

As we announced earlier, our vehicle production in Japan will be suspended from Monday, February 8. This may cause concern, as well as inconvenience, to our customers and other stakeholders. However, please be assured that we will ensure safety and product quality as top priority, and take all measures across the Company for a speedy recovery.

Please note that the impact of the suspended vehicle production is not factored in our forecasts, due to difficulty of estimation at this point in time. We appreciate your understanding on this matter.

Please turn to slide 18. With regard to our consolidated vehicle sales for the full fiscal year, we maintain our forecast of 8.75 million units in total, as previously announced in November. Please note, however, that the regional breakdown is now revised; up 20,000 units for North America; and down 10,000 units each for Central and South America, and for the Middle East, respectively.

Please turn to page 19. We revise our assumption of foreign exchange rates to JPY115 to $1 and JPY125 to EUR1, from January onwards, thus adopting JPY120 per $1 and JPY132 per EUR1 for the full fiscal year. Based on this assumption, we maintain our forecast of net revenues, operating income and pre-tax income as we previously announced.

With regard to net income, however, we raise our forecast by JPY20 billion to JPY2,270 billion, factoring in the improved outlook of equity and earnings of affiliated companies.

Now please look at slide 20 for the analysis of our latest operating income forecast in comparison to our previous forecast. At JPY2.8 trillion, our latest forecast remains unchanged from the previous forecast, having reflected both positive factors such as progress in cost reduction and the weaker than expected yen so far. And negative factors, such as an expected increase in sales and other expenses.

Please turn to slide 21 for the outlook of R&D expenses, capital expenditure and depreciation expenses. We raised our forecast for CapEx by JPY20 billion to JPY1,230 billion, as we intend to bring forward part of the TNGA-related investment. For R&D and depreciation expenses, our forecast remain unchanged.

Page 22, please. Lastly, we will continue to manage our operations diligently, whilst staying vigilant in assessing the current uncertainty over the outlook of emerging markets and the impact of the suspension of vehicle production. At the same time, we will continue to focus on the improvement of our profit structure, through cost reduction and other efforts, while steadily implementing initiatives for strengthening our true competitiveness, including investments for future growth.

This way, we remain committed to working towards establishment of a business foundation, which enables us to respond speedily to any changes.

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

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.