豐田汽車 (TM) 2017 Q2 法說會逐字稿

Hello, everyone. Welcome to the financial results conference call for FY17 second quarter. I am Masayoshi Hachisuka from the Accounting Division of the 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 conference call is the following.

First, Mr. Otake will briefly discuss the highlights of Toyota's earning results, and then Ms. Otake 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 the 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 a complete cautionary statement concerning insider trading is included on page 3. Both of the statements can be downloaded from our Internet 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 first half of the fiscal year which will end in March 2017.

Let me start with slide 5.

Compared to the same period of the last fiscal year, consolidated vehicle sales increased by 85,000 units to 4,363 million units. Vehicle sales decreased in Middle East and Africa where the economies and the markets were affected by falling oil prices, but increased in Japan and Asia, mainly driven by popular new models.

Please look at slide 6.

Our consolidated financial results for the first half of the current fiscal year was net revenues of JPY13,070.5 billion, operating income of JPY1,116.8 billion, pre-tax income of JPY1,176.5 billion, and net income of JPY946.1 billion.

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

(interpreted) Next, using slide 7, I would like to explain the factors which impacted operating income year on year.

Despite the positive factors, such as cost reduction and marketing efforts, operating income was down JPY466.5 billion compared to the first half of the last fiscal year due to the significant impact of yen appreciation. Nevertheless, operating income, excluding the overall impact of foreign exchange rates and swap valuation gains and losses, was up JPY200 billion.

Please see slide 8.

For the second quarter, our consolidated financial results were net revenues of JPY6,481.4 billion, operating income of JPY474.6 billion, pre-tax income of JPY499.4 billion, and net income of JPY393.7 billion.

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

Now I would like to elaborate on operating income for each region. Please see slide 10.

In Japan, vehicle sales increased by 94,000 unites year on year to 1,078 million units, driven by new models such as the Prius, Sienta and Passo. Operating income, however, declined by JPY473.4 billion to JPY485.7 billion due to the effects of ForEx rates and an increase in expenses, despite vehicle sales growth and cost-reduction efforts.

Please see slide 11.

In North America, vehicle sales were 1.4 million units, down 13,000 units year on year, due to a decline in passenger car sales as demand shifted to light trucks. Nevertheless, operating income improved by JPY11.0 billion to JPY296.8 billion compared to the first half of the last fiscal year, mainly as a result of cost-reduction efforts despite increased marketing expenses.

In Europe, on slide 12, vehicle sales grew by 27,000 units years on year to 434,000 units on the back of solid sales in Western Europe, particularly of hybrid models. Operating income increased by JPY2.4 billion to JPY34.6 billion as a result of vehicle sales growth and other marketing efforts.

Please see slide 13.

In Asia, vehicle sales were up 111,000 units year on year to 765,000 units, driven by new models such as the IMV series light trucks, and [Kia in] Indonesia and the Philippines in particular. Operating income decreased by JPY23.1 billion year on year to JPY219.6 billion despite marketing and cost-reduction efforts, due to increased expenses and the decreased exports to the Middle East.

Please move on to slide 14.

In other regions, overall vehicle sales were 686,000 units, down 134,000 units year on year, as sales declined in the Middle East and Africa under the influence of falling oil prices. Operating income decreased by JPY13.8 billion to JPY55.2 billion, primarily because of the effect of ForEx rates and an increase in expenses, despite marketing efforts such as raising prices.

Next, please see slide 15 for financial services.

Operating income, excluding swap valuation gains and losses for the first half of this fiscal year declined JPY41.9 billion year on year to JPY138.1 billion due to increased costs related to loan losses and residual value losses, despite an increase in lending balance.

On slide 16, equity in earnings of affiliated companies for the first half of this fiscal year increased by JPY6.7 billion year on year to JPY168.3 billion. This was a result of solid performance of our affiliated companies in China.

Next, please look at slide 17 on shareholder return.

With regard to the interim dividend on common shares, we plan to maintain the level of the last fiscal year at JPY100 per share. This is based on our policy of paying dividend stably and sustainably using the consolidated payout ratio of 30% as a benchmark.

Next, please see slide 18.

In addition, we plan to buy back up to JPY200 billion or 40 million shares of our common stock. We will continue to repurchase common shares flexibly as a means of improving shareholder return, as well as capital efficiency.

Please refer to slide 19 which compares our shareholder return programs for the current fiscal year and those of the last fiscal year.

In addition to the interim dividend on common shares, we plan to pay an interim dividend of JPY52.5 per share on the model AA class shares. As a result, the total amount of interim dividends will be JPY302.8 billion.

Adding this to the share repurchase program of JPY200 billion, the total shareholder return for the interim period will be up to JPY502.8 billion, and the total return ratio will be up to 53.1%.

Slide 20 shows changes in the balance of treasury stock.

We held 300 million shares of treasury stock at the end of March 2016. The balance is expected to be 375 million shares at the end of March 2017. As a consequence of both the announced share repurchase programs for the purpose of shareholder return and the share exchange for the purpose of acquiring the full ownership of Daihatsu, we intend to keep the balance of treasury stock at approximately 300 million shares for the sake of flexibility of management and to cancel excess shares in principle. Therefore, we plan to cancel 75 million shares of treasury stock by the end of this fiscal year.

Now I would like to move on to discuss the outlook for the full fiscal year ending in March 2017. Please look at slide 22.

Our latest forecast of consolidated vehicle sales for the full fiscal year are 8.85 million units, down 50,000 units from our previous forecast. Vehicle sales are expected to increase in Asia against the backdrop of the recovering market, but are likely to decrease in North America where passenger car sales are more severely affected by the demand shift to light trucks in Japan, where the mini car market is slowing down, and the Middle East, where market conditions are deteriorating with weak oil prices.

Please see slide 23.

We maintain our assumption of foreign exchange rates of JPY100 per $1 and JPY110 per EUR1 for October onwards, thus adopting JPY103 per $1 and JPY114 per EUR1 for the full fiscal year.

Based on this, our forecast of consolidated financial performance for the full fiscal year are net revenue of JPY26 trillion, operating income of JPY1,700 billion, pre-tax income of JPY1,900 billion; and net income of JPY1,550 billion.

Please see slide 24 for an analysis of our latest operating income forecast.

In comparison to our previous forecast at the first-quarter reporting, while reflecting actual ForEx rates for the first half, we have factored in additional profit improvement measures totaling JPY65 billion consisting of cost reductions, marketing efforts and revision of expenses. As a result, we revise our forecast up JPY100 billion to JPY1.7 trillion.

Next, please see slide 25 which compares the latest operating income forecast for the current fiscal year with the result of last fiscal year.

Operating income, excluding the overall impact of ForEx rates and swap valuation gains and losses was expected to improve by JPY50 billion year on year at the first-quarter reporting. It is now expected to improve by JPY115 billion as a result of the additional profit improvement measures of JPY65 billion.

Finally, please see slide 26 for the outlook of R&D expenses, capital expenditures and depreciation expenses.

The outlook of R&D expenses and CapEx remain unchanged from our previous forecast. Depreciation expenses on the other hand are now reduced by JPY10 billion to JPY910 billion.

This summarizes our latest financial results and forecasts. Going forward, our external environment is likely to remain challenging with the yen appreciation and ongoing changes in market conditions. We will, therefore, pursue further profit improvement in the areas of marketing efforts, cost reduction and fixed cost control.

At the same time, we are determined to make progress towards our future growth through the implementation of TNGA and R&D activities involving ADAS connected vehicles, and next-generation environmental technologies.

This concludes my presentation on the financial results for the first half of the fiscal year ending in March 2017.

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.