豐田汽車 (TM) 2017 Q3 法說會逐字稿

Hello, everyone. Welcome to the financial results conference call for the fiscal year 2017 third 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. [Saito], our interpreter, with us. The agenda of today's conference call is the following: first, Mr. Otake will briefly discuss the highlights of Toyota's earnings results and then Ms. Saito 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 two of today's presentation materials 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 third quarter of the fiscal year, which will end in March 2017.

Let me start with slide five. Compared to the same period of previous fiscal year, consolidated vehicle sales for the third quarter increased by 65,000 units to 2,280,000 units. Vehicle sales grew year on year in Japan, Europe and Asia, mainly driven by new models, and in North America on the back of solid demand for pickup trucks and SUVs. This more than offset the decline in vehicle sales in the Middle East, where local economies and the markets suffered from weak oil prices.

Please see slide six. Our consolidated financial results for the third quarter were net revenues of JPY7,084.1 billion, operating income of JPY438.5 billion, pretax income of JPY587.5 billion and net income of JPY486.5 billion.

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

Next, using slide seven, I would like to explain the factors which impacted operating income for the third quarter year on year. Despite the positive factors such as cost reduction and marketing efforts, operating income was down JPY283.6 billion compared to the third quarter of the previous fiscal year. This was mainly due to the appreciation of the yen and an increase in expenses.

Please turn to slide eight. For the cumulative nine months, our consolidated financial results were as following: net revenues of JPY20,154.7 billion, operating income of JPY1,555.4 billion, pretax income of JPY1,764.0 billion and net income of JPY1,432.7 billion.

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

Now, I would like to elaborate on operating income for each region. Please turn to slide 10. In Japan, vehicle sales for the third quarter increased by 41,000 units year on year to 534,000 units, driven by new models such as the Roomy, Tank, C-HR and the Prius. Due to the effect of ForEx rates and an increase in expenses, however, operating income declined by JPY181.9 billion to JPY211.1 billion, despite cost reduction efforts and vehicle sales growth.

Please see slide 11. In North America, vehicle sales for the third quarter were 745,000 units, up 17,000 units year on year, as a result of robust sales of SUVs and pickup trucks including the RAV4, Highlander, Tacoma and Tundra. operating income was JPY101.3 billion, down JPY40.4 billion. This was mainly due to the negative factors such as an increase in marketing and other expenses, which exceeded the positive factors such as cost reduction efforts and the increase in vehicle sales.

In Europe, as you see on slide 12, vehicle sales for the third quarter grew by 23,000 units year on year to 233,000 units on the back of solid sales of the brand-new C-HR and the RAV4. Nevertheless, operating income was in line with the results of the previous year at JPY20.9 billion, due to an increase in expenses and the effect of foreign exchange rates.

Please turn to slide 13. In Asia, vehicle sales for the third quarter were up 66,000 units year on year to reach 428,000 units, driven by new models such as the Calya, Sienta and [INV] series light trucks, especially in Indonesia and the Philippines. Operating income decreased by JPY18.2 billion year on year to JPY118.3 billion despite the positive impact of cost reduction efforts, mostly due to the effect of foreign exchange rates and decreased exports to the Middle East.

Please move on to slide 14. In other regions, overall vehicle sales for the third quarter were 340,000 units, down 82,000 units year on year, as vehicle sales in the Middle East were affected by weak oil prices. Operating income increased by JPY10.7 billion to JPY25.0 billion, mainly due to marketing efforts including price improvement, which more than offset an increase in expenses.

Next, please turn to slide 15 for financial services. Operating income, excluding swap valuation gains and losses for the third quarter, declined JPY10.6 billion year on year to JPY72.6 billion. Although the lending balance continued to grow, the costs related to digital value losses increased as used-car prices for passenger cars in North America deteriorated.

On slide 16, equity in earnings of affiliated companies for the third quarter decreased by JPY16.4 billion year on year to JPY89.6 billion, due to declined earnings of our affiliated companies in China.

Now, I would like to move on to discuss the outlook for the full fiscal year to March 2017. Please look at slide 18. Our latest forecast of consolidated vehicle sales are 8.9 million units, revised up by 50,000 units from a previous forecast. We are expecting additional vehicle sales in North America as our supply of light trucks has improved and in Central and South America as the vehicle sales continue to be solid.

Please turn to slide 19. We have revised our assumption of foreign exchange rates to JPY110 per dollar and JPY120 per euro for January onwards, thus adopting JPY107 per dollar and JPY118 per euro for the full fiscal year. Based on this, our revised forecast of consolidated financial performance for the full fiscal year are net revenue of JPY26,500 billion, operating income of JPY1,850 billion, pretax income of JPY2,070 billion and net income of JPY1,700 billion.

Please turn to slide 20 for an analysis of our latest operating income forecast in comparison to our previous forecast at the time of Q2 reporting. We have revised up our forecast by JPY150 billion to JPY1,850 billion based on the assumption of the weaker yen and the increase in vehicle sales. Excluding the impact of foreign exchange rates and swap valuation gains and losses, however, operating income is now expected to be less than our previous forecast. This is due to additional provisions for residual value losses at our financial service business in the United States and an increase in expenses.

Next, please turn to slide 21, which compares the latest operating income forecast for the current fiscal year with the results of the last fiscal year. Excluding the impact of foreign exchange rates and swap valuation gains and losses, etc., operating income is now expected to decline by JPY15 billion year on year. However, we will strive to turn this into a year-on-year increase through further profit improvement activities.

Finally, please turn to slide 22. The outlook of R&D expenses, capital expenditure and depreciation expenses remain unchanged from our previous forecast. This summarizes our latest financial results and forecasts. Recently the business environment surrounding the automotive industry is changing dramatically. This is why it is important for us at Toyota to reinforce our commitment to the Company's principle of contributing to society through manufacturing automobiles. Based on this principle we will carry on our activities. Particularly over the past month or so, we were able to think further about what Toyota could do in order to support each country and region in which we operate. At the same time, we recognized once again how much support we have been given by our customers and all other stakeholders in each country and region. To make our customers happy, we will remain committed to making ever better cars based on Genchi Genbutsu, sowing seeds for the future and strengthening our financial foundation. Step by step, we would like to carve our path towards sustainable growth, together with all our stakeholders.

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