豐田汽車 (TM) 2016 Q4 法說會逐字稿

Hello everyone. Welcome to the financial results conference call for the fiscal year ended March 2016. I am 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 Toyoda Motor Corporation, and [Ms. Morita], an interpreter, with us.

The agenda for this conference call is the following. First Mr. Otake will briefly discuss the highlights of Toyota's earnings results, and then Ms. 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 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 homepages.

Now I would like to turn the call over to Mr. Otake.

Hello everyone, thank you for joining us today. I am Tetsuya Otake. It is my pleasure to discuss Toyota's financial results for the fiscal year which ended in March 2016.

Let me start with slide 5. Compared to the previous fiscal year, consolidated vehicle sales decreased by 291,000 units to 8,681,000 units. Sales increased in North America against a backdrop of a solid market. However, sales decreased in Japan where the mini vehicle markets contracted, in Asia where competition intensified on the back of sluggish markets, and in the Middle East, Africa and Central and South America where weak oil prices and local currencies affected the demand.

Please look at slide 6; our consolidated financial results for the fiscal year were net revenues of JPY28.4031 trillion; operating income of JPY2.8539 trillion; pretax income of JPY2.9833 trillion; and net income of JPY2.3126 trillion. Now I would like to hand the rest of this presentation to Ms. Morita, our interpreter.

(interpreted) Next, using slide 7 I would like to explain the factors which impacted operating income in year on year. The positive factors such as cost reduction efforts and favorable foreign exchange rates more than offset the negative factors such as decreased vehicle sales and increased expenses, particularly labor costs and R&D expenses. As a result, operating income increased by JPY103.4 billion compared to the previous fiscal year.

Next I would like to elaborate on operating income for each region by referring to slide 8. Please note that in the presentation slides each region's operating income excludes valuation gains and losses from interest-rate swaps attributed to financial services.

In Japan, although new models such as the Sienta and the Prius drove sales, overall vehicle sales decreased by 95,000 units year on year to 2,059,000 units as the mini vehicle market was sluggish. Operating income increased by JPY102.6 billion to JPY1.6767 trillion mainly as a result of cost reduction efforts and favorable foreign exchange rates in spite of decreased vehicle sales and increased R&D and depreciation expenses.

Please look at slide 9. In North America vehicle sales grew by 124,000 units to 2,839,000 units year on year, driven primarily by SUVs such as the RAV4 and Lexus NX on the back of a solid market environment. Operating income was JPY505.6 billion, down JPY32.2 billion compared to the previous fiscal year. This was mainly due to increased costs for the relocation of our North American headquarters and declining profitability of exports to Canada and Mexico caused by the stronger US dollar which more than offset the increased vehicle sales and cost reduction efforts.

In Europe, as shown on slide 10, vehicle sales decreased by 15,000 units year on year to 844,000 units. This was mainly due to decreased sales in Russia where the market was affected by weak oil prices and ruble depreciation despite solid sales in Western Europe. Even with a negative foreign-exchange impact and fewer vehicle sales, however, operating income rose year on year to JPY75.7 billion primarily due to the effects of marketing activities such as pricing improvement and cost reduction efforts.

Please look at slide 11. In Asia overall vehicle sales were down 144,000 units year on year to 1,345,000 units, particularly due to decreased sales in Thailand and Indonesia where competition intensified on the back of sluggish demand.

Nevertheless, operating income reached JPY455 billion, up JPY21.4 billion year on year. This is because the negative impact of decreased vehicle sales was more than offset by marketing efforts such as pricing improvement, improved profitability of exports due to depreciation of the local currencies and cost reduction efforts.

Please move on to slide 12. In other regions overall vehicle sales were 1,594,000 units, down 161,000 units year on year as a result of decreased sales in the Middle East, Central and South America and Africa where weak oil prices and local currencies affected the markets.

Operating income decreased by JPY6 billion year on year to JPY103.4 billion despite the positive impact of pricing improvement and the full model change of the IMV series, mainly as a result of deteriorated import profitability due to weaker local currencies and rising labor costs with inflation in Central and South America.

Next please take a look at slide 13 for financial services. Operating income excluding swap valuation gains and losses for the fiscal year maintained the level of the previous fiscal year at JPY319.0 billion. This was a result of growth in both lending balance and margins, which offset an increase in costs related to loan losses and residual value losses.

Please refer to slide number 14. Equity in earnings of affiliated companies for the fiscal year was JPY329.0 billion, up JPY20.5 billion year on year. This was a result of strong performance of our affiliated companies in China.

Next please look at slide 15 on shareholder return. Earlier today our Board of Directors resolved to pay JPY110 per share as the year-end dividend on common shares. The full-year dividend on common shares for the fiscal year will be JPY210 per share, including the interim dividend of JPY100 per share. This represents an increase by JPY10 per share compared to the previous fiscal year. This is based on our policy of paying stable and sustainable dividends targeting at a consolidated payout ratio of 30%.

Next please look at slide 16. Also today our Board of Directors resolved a plan to buy back up to JPY500 billion or 100 million shares of our common stock. Adding this to the already repurchased common stock in the amount of JPY139.3 billion following the resolution at the second quarter financial reporting, our total share repurchase for the fiscal year to March 2016 will be up to JPY639.3 billion or 123 million shares.

This based on both our intention to improve capital efficiency, and our capital policy which is responsive to ongoing financial conditions and changes in the business environment, marks a higher level of shareholder return than before.

Please note that when discussing share repurchase for a fiscal year, we refer to the total amount of shares actually repurchased or authorized to be repurchased by our Board as a means of shareholder return during and at the end of that particular fiscal year.

Please look at the chart on slide 17, which indicates the total shareholder return over the recent years consisting of both dividends on common shares and Model AA class shares and share repurchase. The total shareholder return for the fiscal year through March 2016 will be up to JPY1.2872 trillion, representing a payout ratio of up to 55.6%. In appreciation of a long-term relationship of trust with our shareholders, we will continue to ensure stable, sustainable and flexible shareholder return.

Now I would like to move on to discuss the outlook for the current fiscal year which will end in March 2017 by referring to slide 18 and beyond. Following the Kumamoto Earthquake we suspended all vehicle assembly lines in Japan in stages. We regret that this may have caused inconvenience and concern to our customers and all other stakeholders.

Since April 25 we have restarted these lines in stages and are back to normal operations. We are now making maximum efforts to deliver vehicles to our customers as soon as possible. However, please note that the impact of the suspended operations is not factored in our forecast due to difficulties in estimation at this point in time. We appreciate your understanding.

So at this juncture please refer to slide 19. Our consolidated vehicle sales are expected to increase by 219,000 units year on year to 8.9 million units. We anticipate sales growth in Japan driven by CHR and other new models on top of the recently launched Prius and Passo in Asia, due to a full-scale marketing of the IMV series, and in Western Europe, due to continued strength of the markets.

Please move on to the next slide -- slide 20 that is. Based on the foreign exchange rate assumption of JPY105 per US dollar and JPY120 per euro, our forecasts of consolidated financial performance for the fiscal year [through] March 2017 are: net revenues of JPY26.500 trillion; operating income of JPY1.700 trillion; pretax income of JPY1.900 trillion; and net income of JPY1.500 trillion.

Now please look at slide 21 for the analysis of our operating income forecast for the current fiscal year in comparison to the previous year. The negative impact of foreign exchange rates is the most significant cause for the expected decrease in operating income year on year while continuing cost reduction and other profit improvement activities, as well as benefiting from increased vehicle sales; we also assume an increase in expenses. As a result we expect a decline in operating income by about JPY1.1 trillion.

Finally, please look at slide 22 for the outlook for R&D expenses, capital expenditures and depreciation expenses. CapEx is expected to increase by JPY57.5 billion compared to the previous fiscal year due to investments for production facilities for new TNGA models as well as the full impact of building new North American headquarters.

R&D expenses are also expected to increase year on year as development of advanced and cutting edge technologies accelerates. We are determined to continue our investment for the future regardless of external factors such as foreign-exchange rates. At the same time we aim to enhance efficiency and effectiveness of our investments and further improve our prospective earnings going forward.

This concludes my presentation on the financial results for the fiscal year through March 2016. Thank you 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.