豐田汽車 (TM) 2021 Q4 法說會逐字稿

Ladies and gentlemen, thank you very much for taking time out of your occupied schedules to be a part of this program. We would like to start the fiscal 2021 financial result press conference by Toyota Motor Corporation. And this press conference consists of 2 parts. Part 1 starts from 1:30 to 2:15 and we break for 10 minutes, and then the Part 2 will start at 2:25.

Let me introduce to you the participants in Part 1: Chief Communication Officer, Jun Nagata; Chief Financial Officer, Kenta Kon. Now ladies and gentlemen, Kon will give you the overview of financial results.

Hello, everyone. Thank you for joining us today. I am Kenta Kon. We would like to express our heartfelt appreciation to our customers around the world who chose us as well as our shareholders, dealers and suppliers who support us.

Let me discuss our financial results for the fiscal year, which ended in March 2021. And consolidated vehicle sales was at 7.646 million units, which was 85.4% of such sales of the previous fiscal year. Toyota and Lexus brand vehicle sales was at 9.087 units, which was 96% of such sales of the previous fiscal year. Due to the spread of COVID-19 in each region, sales volume declined significantly in the first half of the fiscal year, but in the second half of the fiscal year, sales volume increased in many regions compared to the previous fiscal year. In particular, sales of electrified vehicles was at 2.155 million units, which was 112.3% of the previous fiscal year.

Consolidated financial results for the fiscal year were: sales revenue of JPY 27.2145 trillion; operating income, JPY 2.1977 trillion; pretax income, JPY 2.9323 trillion; and net income, JPY 2.2452 trillion.

I would like to explain the factors which impacted operating income year-on-year. First, the effects of foreign exchange rates decreased operating income by JPY 255 billion. Second, cost reduction efforts increased operating income by JPY 150 billion. Third, the effects of marketing activities decreased operating income by JPY 210 billion, largely due to the decrease in sales volume. Finally, a reduction in expenses increased operating income by JPY 70 billion. As a result, excluding the overall impact of foreign exchange rates, swap valuation gains and losses and other factors, operating income increased by JPY 10 billion year-on-year. As shown in the top right of the slide, regarding the changes on a quarterly basis, although operating income significantly decreased in the first half of the fiscal year, it increased in the second half.

Next, I will explain operating income for each region. In Japan, Europe and other regions, operating income decreased year-on-year mainly due to the decrease in the sales volume. On the other hand, in North America and Asia, operating income increased year-on-year, thanks mainly to marketing efforts and cost reduction efforts.

Next, let me explain our consolidated subsidiaries and equity method associates and joint ventures in China as well as our financial services business. As for our China business, both operating income of consolidated subsidiaries and our share of profit of investments accounted for by equity method of affiliates and joint ventures increased year-on-year, thanks largely to marketing efforts. Regarding financial services, operating income, excluding swap valuation gains and losses, increased, thanks to the decrease in costs related to residual value loss and credit loss.

Next, I would like to explain our return to shareholders. We plan to pay a year-end dividend of JPY 135 per common share. Together with the interim dividend of JPY 105 per common share, which included a special dividend of JPY 5, the annual dividend for the fiscal year will be JPY 240 per common share, an increase of JPY 20 per common share compared to the previous fiscal year. And the dividend payout ratio for the fiscal year will be 29.8%. We will continue to aim to pay stable and sustainable dividends while maintaining and improving upon our consolidated dividend payout ratio benchmark of 30%.

As for share repurchases, we postponed them for the interim period of the fiscal year ended March 2021 due to the spread of COVID-19. With regard to the year-end shareholder return, we plan to buy back up to JPY 250 billion. We will continue to implement share repurchases in a flexible manner, taking into account various factors, including investments in growth, dividend levels, liquidity, share price levels and other factors. We will split our common shares at the ratio of 5 shares for each share with the record date of September 30, 2021. The purpose of the stock split is to reduce the minimum investment price, thereby creating an environment where it is easier to invest in our shares.

Now let us move on to discuss the forecasts for the fiscal year ending March 2022. Consolidated vehicle sales for the fiscal year ending March 2022 are expected to be 8.7 million units, which is 113.8% of sales of the previous fiscal year. Vehicle sales are expected to increase in each region.

Toyota and Lexus brand vehicle sales are expected to be 9.6 million units, which is 105.6% of such sales of the previous fiscal year. As for electrified vehicles, we will continue to further enhance our product lineup to meet customer needs in each region and expect to sell 2.8 million units, which is 129.9% compared to the previous fiscal year. We anticipate that the ratio of electrified vehicles will increase up to 29.2%.

Towards carbon neutrality, we are working to develop a full line of products that meet the needs of each region and that can be chosen by customers in those regions.

Next, let me explain the full year consolidated financial performance. We have assumed the foreign exchange rates to be JPY 105 per U.S. dollar and JPY 125 per euro. Based on this, our forecasts of the consolidated financial performance are: net revenue of JPY 30 trillion; operating income of JPY 2.5 trillion; pretax income of JPY 3.110 trillion and net income of JPY 2.3 trillion.

I would like to explain the factors which will impact operating income year-on-year. Firstly, we anticipate that cost reduction efforts will decrease operating income by JPY 135 billion largely due to the significant negative impact of increased prices of materials, despite the planned improvement of around JPY 300 billion on a gross basis. Secondly, we anticipate that marketing efforts will increase operating income by JPY 850 billion mainly due to an increase in sales volume. Thirdly, we anticipate that an increase in expenses will decrease operating income by JPY 350 billion. This is because we are investing more resources than ever in carbon neutrality and digitalization.

As a result, excluding the overall impact of foreign exchange rates, swap valuation gains and losses and other factors, operating income is expected to increase by JPY 365 billion. We will further improve our earnings structure, which we have been strengthening through the transformation of the way we work, and actively invest in the future to accelerate our efforts to transform into a mobility company.

This concludes my presentation. Thank you for your attention.

(Operator Instructions) Now ladies gentlemen, [Mr. Oue] of NHK. (Operator Instructions)

[Oue] of NHK. My question relates to the actual performance of the financial results. First of all, for the period ending in March 2021, in the early part of spring, you adjusted production but increased the sales. And actually, the profit and income is higher than the previous fiscal year. How do you assess and evaluate this? And what was the most important factors that supported this?

Also, the outlook for the period ending in March 2022, there are various factors, but you are going to expect a rather high level. And could you explain to us the background to such positive or high figures?

Thank you very much. The CFO, Kon, will respond to that question.

Thank you. Thank you, [Ms. Oue], for your question. My name is Kon, and I'd like to respond to your question. Last year, in the same forum where we announced the financial results, our President Toyoda talked about the sales units for the fiscal year ending -- that ended in March, talked about 8 million of sales units and posted the operating income of JPY 500 billion. At that time, the situation was quite certain, and we were not able to come up with a clear outlook, but we wanted to present some concrete standards to stakeholders because we do have the large supporting industries for automotive industry. And therefore, considering the importance of giving some figure, we started those figures and announced those figures, and that initiated our various efforts internally.

And there are many factors behind those numbers we have announced. For one thing, since the global financial results, we made continuous efforts to produce better cars and also the overall cost reduction efforts, especially including reduction of fixed expenses. And through those, we were able to reduce the breakeven units significantly. And also, we worked on the supply chain as well. 10 years ago when we had the Great East West Japan Earthquake, together with the suppliers, we made efforts for mitigating -- disaster efforts and also readjusted inventory levels. And also, we enhanced the efficiency of evaluating alternative products, among others.

And as the efforts continue since the great financial crisis, so those produce results. And in addition to that, for the current fiscal year, as Ms. Oue mentioned, in the early spring time, we were not able to sell and produce the right number. And at that time, we realized and knew the importance of having a single car to be purchased by customers. The fact that customers do choose our vehicle represents a great importance to us and including suppliers. Having suppliers that supply our parts and to simply continue to do that required very demanding efforts, and we really had the first-hand feel of that altogether.

And as we did that, altogether, we have 5.5 million partners in the supply chain as well. And everybody was focused on customers in making their efforts, and that resulted in the financial results I have announced today.

When we announced the third quarter results 3 months ago, I just mentioned that we continue to do what we should be doing as a natural course of action without having to think twice. I think I mentioned that. And after that, we had earthquake in Northeastern Japan, and suppliers did have the fire in (inaudible), and those were the events and difficulties we were faced.

And each one of those events could have developed into very serious disasters. I wouldn't say those are trivial matters, but they could have produced a substantial impact on the financial results. But we tied over that and was able to create the financial results I have just mentioned. And that reflects the efforts made by all those people during the past year. And those crystalized in the results that I have just mentioned.

In terms of the actual performance, that is what I can say. In terms of the outlook, JPY 2.5 trillion in terms of operating income is the number that I announced earlier, made public. And as shown on the slide, for the most part, the sales unit is expected to recover significantly for the fiscal year. And that is indeed a very major factor supporting this projection for the full year basis next year.

And for the current running period, what we did in terms of continuous improvement, the change of way we work and also the change of performance that we have been working on during the past year, how can we sustain that and how can we maintain that would be very crucial in the current year. So our determination and natural action will be tested. And we would like to add to what is mentioned here. And in the future, we would like to reduce the breakeven units even further to create additional resources that we can make for investment. So to make sure that what we have been doing over the years really gets established and continued is very important.

That briefly is my response to the question. Thank you.

Thank you very much, [Ms. Oue]. Nikkan Kogyo Shimbun, [Ms. Masatoshi.] (Operator Instructions)

My name is [Masatoshi] from Nikkan Kogyo Shimbun. It was referred to in the previous question, but last year, at the beginning, the breakeven units was set to be reduced by 2 million units compared to the Lehman shock time. But from now on, you will see more next-generation related investment. So the question is about the breakeven point of breakeven units forecast.

And second, for the next-generation investment, I think the major topic will be carbon neutral. Globally, at each region, the regulations or the energy source mix may differ. So in that environment, what will the actions be that Toyota will take?

Thank you very much to [Ms. Masatoshi]. So let us answer the carbon neutral question first and then move on to the investment question. The first question will be -- the first part will be answered by myself, Nagata. Toyota's carbon neutral thinking was the first part of your question. Our President, Mr. Toyoda, has mentioned that at JAMA statement, he had made a statement. It's truly the same outside of Toyota. Electrification rate is not our target. By 2050, we are to realize carbon neutral. That is our target. The new vehicle CO2 is not the point. Transport use this -- overall cycle of CO2 use will have to be neutral. That will be the point.

So at this point, rather than restricting or limiting the types of technologies to be used, in order to realize carbon neutrality, various options or various technologies will have to be addressed. We think that will be the most important point, and that is where Toyota is putting its entire efforts in. More specifically, we at Toyota has HEV, PHEV, battery EVs or BEVs or FCEVs. So we have a full electrified vehicle lineup.

And with Mr. Sato -- GRs and Mr. Sato and Mr. President, our President, we announced the hydrogen engine. So including that, we have a variety of options. And we shouldn't just be working on new vehicles. Carbon neutral will have to be realized by addressing existing vehicles as well, including in fuels. Carbon-neutral fuels is what we have to take up as a challenge. Comprehensively, we would like to take up the challenge of carbon neutral.

But what is important here is not just the technology. For the customers of each region in the world, sustainability and the practicability will have to be realized. Practicability or affordability, in addition to sustainability, would be necessary. So technology in vehicles that achieve these will have to be provided by us, and that is my responsibility.

In 1997, we launched the Prius, and it's already more than 20 years since then. Since the launch of Prius, the CO2 reduction or energy saving is what we should work hard on, and we take pride in that we are a top runner in that area. Over the past 20 years, we have contributed to a reduction of CO2 by 20%. So towards 2030, carbon neutral, Toyota intends to continue to be a top runner. It may be an aggressive goal, but we will continue to work to a cycle. So I hope you will understand.

Now today, towards 2030, what is our target for electrified vehicles is what we would like to explain. Each region has its own regulations and renewable energy situation, and the ultimate choice is up to the customer. So just to understand that this is all our target. So can I have the slides?

So at the top, you see major regions in the world and the ratio of electrified vehicles, and out of which percent is BEV plus FCEVs. As you see, Japan, North America, Europe, you see the regions. For Japan, 95% electrified vehicles; North America, 70%; Europe, close to 100%. China, in 2035, they are aiming at 100% NEV plus energy-saving vehicles.

And as you see on the right-hand side, the battery EVs and FCEVs in Japan, North America, Europe and China are the following numbers: 10%, 15%, 40% and 50%, respectively. And globally, this will add up to 8 million electrified vehicles, including hybrids, out of which battery EVs and FCEVs in total would account for about 2 million units. That is our plan. But of course, ultimately, the choice is up to the customer. But at this moment, this is what we are forecasting.

So if we do what we have to do, batteries supply being a major issue. In terms of production or in terms of gigawatt hour, at the moment, Toyota's supplied power is 6 gigawatts hours. And in order to realize these numbers, 180 gigawatt hours is necessary; in other words, 30x the current number.

So if you translate that into EV production lines, currently, we have 2 lines, but that will have to be more than 60 lines. That is more than 30x. So we will make aggressive investments so that we can realize that. And in addition to that, for battery development or basic units will be reduced. And we will work with alliance partners for procurement so that we can procure the necessary goods.

And in addition to that, for battery EV development, compared to the current situation, 15% to 30% reduction in development lead time is to be aimed at. This is currently under discussion, but PHEV and hybrid EV and the battery EVs sharing the same platform is what we are aiming at so that we can make improvements in supply. So as you see, we aim to have a full line of products as was mentioned at the onset.

We would like to add some comments from Mr. Kon about the investment.

So breakeven units being reduced by 2 million and the forecast this year, the year that has just ended, on a year-on-year basis, so a reduction of breakeven units by hundreds of thousands of units. So depending on the environment or the market, in the short term, it may go up or down. But we will continue to work on the cost improvement, and we will continue to work on sales and marketing efforts. And after the consumer purchases of vehicles, the supply parts, accessories, second-hand car business and software updates, these are sources through which we intend to get more profit. So the value chain profits will be improved.

So for the investments, electrification case, digitalization, roughly speaking, on an annual basis, we are currently making an investment of JPY 1 trillion. This year, compared to the past levels, we intend to increase the investment by 20%. So we will continue to secure the money necessary for investment, and we'll continue to work on reducing the breakeven unit numbers.

Thank you very much, [Ms. Masatoshi]. From Chunichi Newspaper, [Shiraishi-san], please. (Operator Instructions)

[Shiraishi] of Chunichi Newspaper. I have 2 questions. The first question relates to the following. For the press conference of full year results, the absence of a president, I think, is quite unprecedented. For this financial result press conference, Mr. Toyoda, President, is absent. Could you explain the reason behind that?

Secondly, this relates to the Tokyo Olympic games, and it's going to be opened. The scheduled opening is in 2 months or so. And the COVID-19 is quite rampant, and the cases of serious symptoms are increasing. Even these conditions, I think the government is assuming the opening and holding of the Olympic games. But given the medical and health care situation, people are concerned that whether the games can be conducted safely. You are the top sponsor of the Olympic games, and you have been supporting athletes and you are deeply involved and engaged with the Olympic games. And despite COVID-19 being under control, the Olympic games are going to be, well, scheduled to be open. And what is your view on that?

Thank you, [Mr. Shiraishi], for your questions and we received 2 questions. And with respect to the first question, that is to say the absence of President Toyoda for the full year financial result first conference and also as the top sponsor of Olympic games, what is your assessment and position on the current situation. I would like to respond to that.

With respect to the absence of President Toyoda in this press conference, as you already know, Toyoda, our President, has been serving as the chairperson of Japan Automobile Manufacturers Association. And as a separate face, he is (inaudible). He's been engaged in various activities. So he is engaged in many different activities with different faces, including those press conference. And especially, more recently, as Chairman of JAMA, he's been holding a press conference on a monthly basis. And his statement has been inviting various interests and concerns.

And in terms of communicating, presenting at TMC, sometimes they are taken as the JAMA situation. So for this year's press conference, we have decided to face the press with the [CFO] to convey what Toyota is engaging at this moment and also Toyota's value overall with the President being absent in this press conference. That's my response to the first question.

And secondly, let me just explain to you our position as a top sponsor for Olympic games. As you already know, the -- Toyota decided to sponsor the Olympic and Paralympic games because we share the spirit of creating, through sports, a peaceful and inclusive society without discrimination in which anyone can participate. And so echoing those values, we have decided to participate as the top sponsor. And the spirit of Olympic games and Paralympic games, for the Olympic and Paralympic games, the spirit to be fully realized, we must first ensure the safety and peace of mind of athletes who are the core of event and of everyone in the country where the games will take place.

I may be digressing a little bit here, but back in 2009, that is the year in which Toyota had to conduct a major recall and we caused serious convenience to customers worldwide, and we also caused concern in the minds of those customers. And the important learning we made on that occasion was even if the product itself is very safe in terms of technological aspect, but it is also important to ensure the peace of mind. Customers told us that the feeling a peace of mind when using our product was more important than the specific technical details in that.

What we learned, we love sports and we have been supporting athletes who devote their lives to them. We have been deeply concerned by reports that athletes have become the target of some people's frustrations about the current medical situation. And we have been working to identify what we can do as a sponsor to help that situation because we are really concerned with the situation as a top sponsor. We sincerely hope and wish peace of mind for all the athletes and people of this country that can be ensured, and that's the frank and honest feeling that we have at this moment.

Thank you, [Mr. Shiraishi]. From Yomiuri, Katori-san, please. (Operator Instructions)

This is Katori from Yomiuri. About the financial results. First, about the impact of semiconductors. In your case, it seems like you don't have any major problems at the moment. But 9.3 million is the production plan, but does that include any impact of semiconductor supply? And how do you see the supply/demand forecast for semiconductors?

And my next question is about capital investment. We see the question on capital investment, but R&D investment, JPY 1.6 trillion you have, I think this is the highest ever number. Can you give us details of this JPY 1.6 trillion? Carbon neutral case, I think there are other projects as well. So what will be the focal project accounted for the JPY 1.6 trillion? Those are the 2 questions.

Mr. Kon, the CFO, will answer your questions.

Thank you very much, Mr. Katori, for your question. Your first question was about the impact of semiconductors. In our forecasts, the current demand -- the tight demand supply situation is incorporated or discounted for as a risk. Rather than a reduction in production, actually, from the plan at the beginning of the year, the plan is to -- was to increase production, but the numbers were -- are conservative. We are cautious. In the short term, do we foresee any major impact? No, but as a risk, in the second half of the year, we don't think we should -- we can rest and be relaxed. So the risks are incorporated in the numbers.

The supply and demand situation still can fluctuate, and we cannot sit back and relax yet. But we are not forecasting a major impact by semiconductors. One of our suppliers experienced a fire, and Mr. Toyoda, our President, visited them and saw how steadily they are making efforts to recover. And Mr. Toyoda went there and supported them. They're trying to reduce manhours, and the people are working long hours, and that has contributed to us enjoying the situation where there is no impact of semiconductor supplies. I hope you understand the efforts made by those people, even after the Lehman shock.

Efforts to reduce the impact of disasters has been taken and semiconductor inventory has been reviewed. And the assessment of alternative products being done, that is when you switch to an alternative product when supply goes down is made more efficient. In the past, the number processes was very large. But after the Great East Japan Earthquake and after efforts to mitigate the impact of disasters, we are now able to assess -- make assessments of alternative products in a speedy manner. And that was one of the factors behind us being able to mitigate the impact of semiconductor supply. This is not something where we can see results immediately, but our steady efforts being taken are now producing results.

Now to your R&D investment question. As you mentioned, JPY 1.6 trillion is the forecast number that we have announced. To look at the breakdown, in addition to vehicle development, as Nagata-san mentioned, initiatives for carbon neutral, in particular, electrified vehicles or reducing CO2 from factories and also software development for software first and connected initiatives. So these are the areas in which we make investments.

We're not just blindly adding investment project. Minor changes and other changes, we look cautiously at whether they are really necessary. If they are not necessary, we eliminate them and use those funds for other investments. So we just don't add new projects. We review our existing projects for efficiency improvement. And that lets us have resources for investments in other areas. And that allows us to make improvements. That is all from my side.

There seems to be other questions. But since the scheduled ending time is approaching, so the next person will be the final person from -- who will receive questions. Asahi Newspaper, Mr. Kamizawa-san, please. (Operator Instructions)

Kamizawa of Asahi Newspaper. I have 2 questions. As was shown on Page 7 of the materials, with the satisfactory performance for the current year, could you talk about each region? The situation seems to vary from region to region, America, Japan, Asia, among others. So could you share with us the current situation and outlook for the different regions?

And you also showed the outlook for carbon neutral for 2030, and you talked about 6 million, and your plan was to increase carbon-neutral vehicles and PHEV. And could you share with us the reason why you believe customers will be choosing those vehicles?

Now with respect to the first question, the regional breakdown, the recovery for fiscal 2021, Kon, CFO, will respond to your question.

Thank you for your questions. And about Page 7, which shows the operating income by region and also the sales units, and for the fiscal 2021, the period ending March 2022, what will be the likely outlook. In terms of the automotive market, Japan, North America and also Europe and Asia, and Asia includes China as well, and about those regions, the recovery is going on more quickly than we had anticipated. That's our current awareness, generally speaking. And in that general context, we are facing customers and focusing on customers' need. And we are trying to launch the vehicles that can meet customers' demand and also that can enhance the convenience for customers, and we are planning for that.

With respect to ASEAN within Asia, in the overall picture on relative terms, the market recovery seems to be somewhat slower than other regions, we believe. And about those areas relating to the current infection situation, and especially in a country like India, a lockdown is still going on that caused the stoppage of economic activities among others. So compared with other regions, the impact of COVID seems to be more serious and bigger.

Although at a slower pace, but recovery is taking place. That's how we are assessing at the moment. In terms of the sales unit, for the current fiscal year, for each region, compared with the previous fiscal year, we are planning to increase the sales volume. So that's my response to your first question.

With respect to the second question, and the majority of the plan consists of HEV and the PHEV. And I'd like to respond to that question. My name is Nagata. And for 2030, for one thing, as Mr. Kon mentioned in his own question, the battery EV, its prices and availability of infrastructure on the global situation is not likely to progress significantly. That's one assessment. And with respect to hybrid EV and plug-in hybrid EV, those are easier for customers to choose and use.

But I would like to add further to that question about the Japanese data. We are focused on connectivity or connected. And if they're connected network, we obtain information and data on vehicles. And even in the case of hybrid EVs or plug-in hybrid EVs, especially in urban areas, the distance traveled by electric mode is quite long.

And probably we can share with you later on, but in the urban areas, generally speaking, there is some difference between urban area and suburban areas. But in urban areas, even in the case of hybrid electric vehicles, about 50% of the times, it is running on the electric mode. And in the case of PHEV, of course, there are differences in conditions, but 70% or 80% of the times, it is driven on pure electric mode. So hybrid EVs or plug-in hybrid EVs are not just their performance and also the data that we can obtain through connectivity. And also, we use information we obtain for navigation.

And using that, depending upon where the vehicle is located, the EV mode ratio can be increased or decreased, so adjusted. And those can be doable in the future through hybrid vehicles as well as plug-in EVs. So we would like to make contribution to the environment in a sustainable manner as well as practical manner. And when we aim at that, I think hybrid EVs and plug-in hybrid EVs can continue to be a very important weapon for us to achieve that. And those will be explained in details in the second part of this press conference. So please confirm that in the second half. Thank you very much.

Thank you very much, Mr. Kamizawa. With this, we conclude the Part 1 of the financial results meeting. After a 10-minute break, from 2:25, we will start Part 2 of the meeting. Thank you very much for listening.