豐田汽車 (TM) 2018 Q2 法說會逐字稿

Hello, everyone. Welcome to the Financial Results Conference Call for the Fiscal Year 2018 Second Quarter. I'm Masayoshi Hachisuka from the Accounting Division of Toyota Motor Corporation. Today, we have Mr. Tetsuya Otake, Senior Managing Officer in charge of the Accounting Group of Toyota Motor Corporation; and Ms. Morita, our interpreter with us.

The agenda for today's conference call is the following: first, Mr. Otake will briefly discuss today's earning results. 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 reflects 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 home pages. Now I'd 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 first half of the fiscal year, which will end in March 2018. Let me start with Slide 5.

Compared to the first half of the previous fiscal year, consolidated vehicle sales increased by 26,000 units to 4,389,000 units. This was a result of robust sales in Japan and the Europe.

Please look at Slide 6. Consolidated financial results for the first half of this fiscal year were: net revenues of JPY 14,191,200,000,000; operating income of JPY 1,096,500,000,000; pretax income of JPY 1,252,100,000,000; and a net income of 1,071,300,000,000.

Using Slide 7, I'd like to explain the factors which impacted operating income year-on-year.

Despite the positive effect of yen depreciation and cost-reduction efforts, operating income decreased by JPY 20.3 billion, mainly due to the effect of marketing activities and an increase in expenses.

Excluding the overall impact of foreign exchange rates and swap valuation gains and losses, operating income fell by JPY 110 billion.

Next, I'd like to elaborate on operating income for each region. Please see Slide 8.

In Japan, vehicle sales increased by 9,000 units year-on-year to 1,087,000 units. Operating income was up JPY 156 billion year-on-year to JPY 641.7 billion, mainly due to the effect of foreign exchange rates and the cost-reduction efforts.

Please see Slide 9. In North America, vehicle sales were 1,396,000 units, barely changed year-on-year. Operating income was JPY 141.1 billion, down JPY 155.6 billion compared to the first half of the previous fiscal year. This was largely a result of increases in marketing expenses combined with temporary decline in vehicle production related to the Camry's switchover.

In Europe, vehicle sales grew up 35,000 units year-on-year to 469,000 units on the back of solid sales of the brand-new C-HR.

Operating income was up JPY 4.4 billion to JPY 39 billion. This was mainly a result of increased vehicle sales and cost-reduction efforts.

Please look at Slide 11. In Asia, vehicle sales were down 21,000 units year-on-year to 744,000 units.

Operating income decreased by JPY 6.7 billion to JPY 212.9 billion, largely due to the effect of ForEx rates.

Please move on to Slide 12. In other regions, overall vehicle sales went up 7,000 units year-on-year to 693,000 units, driven by Oceania and the Central South America.

Operating income increased by JPY 16.6 billion to JPY 71.8 billion, mainly due to the impact of ForEx rates and the marketing efforts.

Next, please see Slide 13. On the operating income for financial services. Operating income, excluding swap valuation gains and losses for the first half of this fiscal year, was up JPY 5.8 billion year-on-year to JPY 144 billion, mostly due to an increase of the lending balance.

Next, please look at Slide 14 on shareholder returns. With regard to the interim dividend on shares of common stock, we plan to make it JPY 100 per share, the same amount as the last fiscal year.

We will continue to pay dividends stably and sustainably, using the consolidated payout ratio of 30% as a benchmark.

Please look at Slide 15 on share buyback. We plan to repurchase up to JPY 250 billion or 45 million shares of common stock. We intend to continue quick share repurchase, as a means of improving shareholder return and the capital efficiency.

As a result, together with the interim dividend and the total shareholder return for the first half of this fiscal year, will be up to JPY 547.1 billion, and the total payout ratio will be maximum of 51%.

Now I'd like to move on to discuss the outlook for the full fiscal year. Please look at Slide 17.

Our latest forecast of consolidated vehicle sales for the full fiscal year are 8.95 million units, up 50,000 units from our previous forecast of the first quarter results reporting.

We have improved our sales plan for Europe and other regions.

Please see Slide 18. We adopt the ForEx assumptions of JPY 110 per dollar, and JPY 130 per euro from October, which makes the full year assumption, JPY 111 per dollar and JPY 128 per euro.

Based on this, our forecast for consolidated financial performance for the full fiscal year are: net revenues of JPY 28,500,000,000,000; operating income of JPY 2 trillion; pretax income of JPY 2,250,000,000,000; and net income of JPY 1,950,000,000,000.

Please see Slide 19, which compares the latest operating income forecast for this fiscal year with the previous forecast of the first quarter reporting.

Operating income forecast has been revised up by JPY 150 billion to JPY 2 trillion.

In addition to adjusting the ForEx rate assumptions to the weaker yen, we have factored in additional profit improvement, and this stated from cost-reduction and marketing efforts and the deduction of expenses.

Next, please see Slide 20, which compares the latest operating income forecast for this fiscal year as a result of the previous fiscal year. Operating income, excluding the overall impact of ForEx rates and swap valuation gains and losses, is now expected to improve by JPY 150 billion compared to our initial forecast. Compared year-on-year, however, it is still expected to be down JPY 185 billion.

Under the challenging business environment, which is also affected by rising low raw material prices, we will strive further to improve the underlying profitability.

Please see Slide 21. As has been communicated since May, we are focusing on solely enhancing our competitiveness during this fiscal year, while reforming the ways we work to address the challenges identified on the in-house company system. We are accelerating the research and development of advanced and cutting-edge technologies.

In this way, we will continue to engage in actions for both defense and offense.

In the final part of my presentation, I'd like to mention that Toyota Investor Summit an IR Event held at the new headquarter of Toyota Motor North America in Plano, Texas in the United States.

In his presentation, Akio Toyoda, our President, will discuss Toyota's initiative and strategy to lead mobility innovation for the future in the following areas: manufacturing next-generation product range, connected vehicles, autonomous driving.

Please see the following slides, which summarize the relevant discussions. The full presentation is available for replay on our website as indicated in the footnote of Slide 27.

Please take a look at it when you can spare time. This concludes my presentation. Thank you for your attention.