豐田汽車 (TM) 2017 Q1 法說會逐字稿

Hello, everyone. Welcome to the financial results conference call for the fiscal year 2017 first quarter. 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 Toyota Motor Corporation, and [Ms. Ota], our interpreter, with us.

The agenda for today's call conference call is the following. First, Mr. Otake will briefly discuss the highlights of today's earnings results and then Ms. Ota 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 the plans and expectations and the actual results may be materially different from these statements. A complete cautionary statement concerning forward-looking statements is included on page two of today's presentation material and the complete cautionary statement concerning insider trading is included on page three. 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's my pleasure to discuss Toyota's financial results for the three months from April to June 2016.

Let me start with slide five. Compared to the same period of the last fiscal year, consolidated vehicle sales increased by 58,000 units to 2,172,000 units. Vehicle sales were down year on year in North America, Middle East and Africa but up in Japan, due to strong sales of new models in Asia, driven by Indonesia and the Philippines, and in Europe on the back of a solid market.

Please see slide six. Our consolidated financial results for the first quarter were net revenues of JPY6,589.1 billion, operating income of JPY642.2 billion, pretax income of JPY677.7 billion and net income of JPY552.4 billion.

Now, I would like to hand the rest of this presentation to Ms. Ota, our interpreter.

Next, using slide seven, I would like to explain the factors which impacted operating income year on year. Despite the positive factors such as cost reduction efforts and marketing efforts, operating income was down JPY113.7 billion compared to the first quarter of the last fiscal year, due to the significant impact of yen appreciation. Nevertheless, operating income, excluding the overall impact foreign exchange rates and swap valuation gains and losses, etc., was up JPY145 billion.

Now, I would like to elaborate on operating income for each region. In Japan, despite the suspension of production following the Kumamoto earthquakes, vehicle sales increased by 41,000 units year on year to 511,000 units, driven by new models such as the Prius, Sienta and Passo. Operating income, however, declined by JPY186.9 billion to JPY290.1 billion, due to the effect of ForEx rates and increased expenses in spite of progress in cost reduction efforts.

In North America, vehicle sales were down 14,000 units year on year to 715,000 units despite positive performance of the new Prius and the RAV4. This was due to declined sales of our passenger cars overall as demand shifted to light trucks. Nevertheless, operating income improved by JPY14.2 billion to JPY165.4 billion compared to the first quarter of the last fiscal year, as an increase in marketing expenses was more than offset by positive factors such as cost reduction efforts and decreased expenses.

In Europe, on slide 10, vehicle sales grew by 16,000 units year on year to 222,000 units on the back of solid demand in Western Europe. Nevertheless, operating income decreased by JPY1.6 billion to JPY8.5 billion, mainly as a result of the depreciation of the British pound and the Russian ruble.

In Asia, vehicle sales were up 56,000 units year on year to 384,000 units as sales remained robust in Indonesia, the Philippines and other countries, driven partly by launches of new models such as the IMV series and the Avanza. Operating income improved by JPY22.4 billion year on year to JPY124.6 billion as positive factors such as increased vehicle sales and cost reduction efforts more than made up for negative factors such as an increase in depreciation expenses related to full model changes.

Now, please move on to slide 12. In other regions, overall vehicle sales were 340,000 units, down 41,000 units year on year as a result of decreased sales in the Middle East and Africa, where weak oil prices affected the markets. Operating income decreased by JPY6.3 billion to JPY28.1 billion, primarily because of the underlying import profitability by weaker local currencies and an increase in labor and other costs with inflation, despite improved model mix driven by sales of the IMV series.

Now, please see slide 13 for financial services. Operating income excluding swap valuation gains and losses for the first quarter declined JPY15.2 billion year on year to JPY81.6 billion despite an increase in lending balance. This was mainly due to the increased costs related to residual value losses and the translational impact of ForEx rates.

Please refer to slide 14. Equity in earnings of affiliated companies for the first quarter was JPY90.0 billion, down JPY10.9 billion compared to the same period of the last fiscal year. Our affiliated companies in Japan posted a decrease in their earnings while our affiliated companies in China posted an increase.

Now, I would like to move on to discuss the outlook for the full fiscal year ending in March 2017. Please look at slide 16. We maintained our forecast of consolidated vehicle sales at 8.9 million units, as we initially announced in May. We expect further sales growth in North America, driven by pickup trucks and SUVs in Europe, led by robust sales in Western Europe, and in Asia, following the improvement of market conditions. On the other hand, we anticipate a further decline in sales in Middle East as the marketing environment continues to deteriorate, with weak oil prices.

Next, I would like to discuss our latest forecast of consolidated financial performance. We revised our assumption of foreign exchange rates to JPY100 per dollar and JPY110 per euro from July onwards, thus adopting JPY102 per dollar and JPY113 to euro for the full fiscal year. Based on such assumptions, our forecasts of consolidated financial performance for the full fiscal year are net revenue of JPY26 trillion, operating income of JPY1,600 billion, pretax income of JPY1,780 billion and net income of JPY1,450 billion.

Now, using slide 18, I would like to explain the major factors behind the downward revision of operating income by JPY100 billion from JPY1.7 trillion. We plan to implement profit improvement measures totaling JPY115 billion comprising of cost reduction efforts, marketing efforts and reduction of expenses. However, the anticipated negative impact of the effects of ForEx rates of JPY185 billion and other of JPY30 billion will be significant. As a result, operating income for the current fiscal year is expected to be JPY100 billion, less than our initial forecast.

Next, please see slide 19, which compares the latest operating income forecast for the current fiscal year with the result of the last fiscal year. Operating income, excluding the overall impact of ForEx rates and swap valuation gains and losses, etc. was initially expected to drop by JPY65 billion according to our forecast in May. However, it is now expected to improve by JPY50 billion as a result of profit improvement measures of JPY115 billion.

Finally, please see slide 20 for the outlook of R&D expenses, capital expenditures and depreciation expenses. The outlook of R&D expenses is now revised down to JPY1,070 billion, due to an efficiency improvement of JPY10 billion. Factoring in the revised assumption of ForEx rates, we also revised down our forecast of CapEx and depreciation expenses by JPY10 billion each to JPY1,340 billion and JPY920 billion respectively.

The external environment, including yen appreciation, is likely to remain challenging for us. Nevertheless, we will continue to pursue further improvement over earnings prospects by maximizing delivery of our vehicles to our customers and incessantly promoting cost reduction activities. As was discussed in May, when we reported the last fiscal year's results, we are determined to make steady progress in making ever better cars through TNGA and other initiatives while sowing seeds for the future through the development of autonomous driving and other technologies.

This concludes my presentation of the financial results for the first quarter of the fiscal year ending March 2017. Thank you very much for your attention.