Toyota Motor (TM) 2014 Results - Earnings Call Transcript

May. 8.14 | About: Toyota Motor (TM)

Toyota Motor (NYSE:TM)

2014 Earnings Call

May 08, 2014 2:05 am ET

Executives

Tetsuya Otake - Managing Officer

Unknown Executive

Hello, everyone. Welcome to the financial results conference call for the fiscal year 2014. I am Nobukatsu Takano [ph] 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. Keiko Morita, our interpreter with us.

The agenda of today's conference call is as follows: first, Mr. Otake will briefly discuss the highlights of Toyota's earning results, and then Ms. Morita will take over the rest of presentation. This will take about 10 minutes. After the presentation, you are welcome to ask questions.

Please note that 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 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 homepage. Besides, the President of Toyota Motor Corporation, Mr. Toyoda's speech, also can be downloaded on that same homepage.

Now I'd like to turn the call over to Mr. Otake.

Tetsuya Otake

Hello, everyone. Thank you for joining us today. This is Tetsuya Otake. I'd like to discuss Toyota's financial results for fiscal year ended March 2014.

Let me begin with Slide 5. Our consolidated vehicle sales for the fiscal year increased by 245,000 units year-on-year to 9,116,000 units. While sales in Asia decreased, sales in areas such as Japan, North America, Europe and the Middle East grew solidly. This was the result of the launches of attractive new models in each country and region in our effort to deliver better curve and effectual marketing program executed in collaboration with our dealers.

Please see Slide 6. Our consolidated financial performance resulted in net revenues of JPY 25,691,900,000,000; operating income of JPY 2,292,100,000,000; pretax income of JPY 2,441,000,000,000; and net income of JPY 1,823,100,000,000.

Now I would like to hand the rest of today's presentation over to Ms. Morita, our interpreter.

Unknown Executive

Next using Slide 7, I would like to explain the major factors contributing to the increase of operating income by JPY 971.2 billion year-on-year. Despite the increased expenses, including the costs related to the agreement with the U.S. Attorney's Office for the Southern District of New York that we disclosed in March, operating income increased due to the impact of yen depreciation, cost reduction activities with our suppliers and marketing efforts such as increased vehicle sales.

Please take a look at Slide 8. Compared to our February forecast of JPY 2,400,000,000,000, our actual operating income for the fiscal year was JPY 107.9 billion less. This is due to the expenses of about JPY 200 billion related to the agreement with the U.S. Attorney's Office and the ending of production in Australia. Our profit improvement activities, nevertheless, progressed steadily through cost reduction and marketing efforts.

Next with Slide 9, I would like to explain operating income for the fiscal year by region. In Japan, sales increased by 86,000 units to 2,365,000 units. This was due to the improving economic sentiment, a strong demand prior to the consumption tax increase and the positive customer response to Corolla Hybrid, which was launched in August last year and our new models such as Harrier, Noah and Voxy.

Operating income for Japan was JPY 1,510,100,000,000; up JPY 933.8 billion as a result of favorable foreign exchange rates, in addition to our cost reduction and other profit-improvement activities, which more than offset the increase in R&D and other expenses.

In North America where new car demand remained solid, sales increased by 60,000 units to 2,529,000 units, driven by RAV4, Lexus IS and Tundra in particular. Operating income, excluding the swap valuation gains and losses, was JPY 341.5 billion, up JPY 152.7 billion compared to the previous fiscal year. Increased vehicle sales and cost reduction efforts, among other factors, contributed to the growth of operating income year-on-year.

In Europe, new models such as Corolla and RAV4, as well as hybrid models such as Auris and Yaris, drove the sales increase of 45,000 units to 844,000 units. Operating income was JPY 58.2 billion, up JPY 31.7 billion year-on-year, thanks to increased vehicle sales and cost-reduction efforts.

In Asia, sales were down by 75,000 units year-on-year, affected by weaker sales in Thailand and India, where demand shrank and competition increased despite increased sales in Indonesia, particularly of the new Agya. Operating income in Asia was JPY 395.7 billion, up JPY 19.6 billion from the previous fiscal year, secured mainly as a result of cost-reduction efforts, which offset the impact of declined sales.

In the other regions -- this is Slide 13, vehicle sales increased significantly in the Middle East and Central and South America in particular, to reach 1,769,000 units, up 129,000 units compared to the previous fiscal year. Operating income was JPY 42.5 billion, down JPY 91.1 billion despite increased vehicle sales due to the negative impact from the change in exchange rates of the local currencies and from the costs relating to the ending of production in Australia.

Next, please take a look at Slide 14 for financial services. Operating income, excluding swap valuation gains and losses for the fiscal year, increased by JPY 30.7 billion to JPY 316.9 billion year-on-year. This is mainly due to increased lending balance and translational impact of foreign currencies, which more than offset the negative impact from decreased lending margin.

Please refer to Slide 15. Equity in earnings of affiliated companies for the fiscal year was JPY 318.3 billion, up JPY 86.8 billion from the previous year. This was mainly thanks to strong earnings maintained by our affiliated companies in Japan and China.

For your information, the fiscal year end of our affiliated companies in China is December. Equity in earnings of these companies for the fiscal year to March 2014, therefore, reflected their earnings from January to December 2013.

Let me move on the Slide 16. With regard to the year-end dividend, we plan to propose JPY 100 per share at the annual general shareholders meeting next month. The full year dividend will therefore be JPY 165 per share, including the interim dividend of JPY 65 per share. This represents an increase by JPY 75 per share compared to the previous fiscal year.

We regard dividends as our most important means to return value to shareholders. In order to develop a long-term trusted relationship with our shareholders, we plan to pay dividends stably and sustainably in consideration of our annual earnings results, investment plans and cash reserves, among other factors.

Please take a look at Slide 17. As was announced on 26th of March, we plan to purchase and cancel our shares, subject to the approval of the proposed disposition of our shares established through the Mobility Foundation for the purpose of social contribution at the annual shareholders meeting next month. We intend to return value to our shareholders through the reduction of the shares issued and outstanding by 30 million shares. We will continue to flexibly consider share buybacks as an option to increase shareholder return in the context of long-term capital efficiency.

Now I would like to move on to discuss our outlook for the current fiscal year ending in March 2015. Please take a look at Slide 19. With regard to our consolidated vehicle sales for the current fiscal year, we forecast 9.1 million units, almost flat year-on-year. In Japan, we expect a sales decline by 155,000 units from the previous fiscal year because of the impact of the consumption tax increase. We will, however, continue to stimulate demand by introducing attractive new models, especially with superior fuel efficiency and through flexible marketing programs in response to the ongoing market trends. In overseas markets, vehicle sales are expected to exceed the sales of the previous fiscal year, despite uncertainty in some emerging markets, thanks to the solid outlook of the market in North America.

Please look at Slide 20. Our foreign exchange rate assumption for the current fiscal year is JPY 100 to the U.S. dollar and JPY 140 to the euro. Based on this, our forecast of consolidated financial performance for the current fiscal year is net revenues of JPY 25,700,000,000,000; operating income of JPY 2,300,000,000,000; pretax income of JPY 2,390,000,000,000; and net income of JPY 1,780,000,000,000.

Now please look at Slide 21 for the analysis of our operating income forecast in comparison to the previous fiscal year. As Akio Toyoda, our President, clarified, the current fiscal year is a year in which Toyota takes the first step forward towards sustainable growth. We plan to make investments to enhance our competitiveness in areas of advanced and cutting-edge technologies, develop human resources, implement TNGA and reform operational mechanisms in pursuit of further innovation.

With regard to the profit improvement activities for this fiscal year, our current plan is to achieve JPY 40 billion. We are determined to maintain and improve a strong earnings structure through uncompromising effort across the group.

Finally, please take a look at Slide 22 for our forecast of CapEx, depreciation expenses and R&D expenses. We intend to carry out CapEx and invest in R&D actively and strategically, which will contribute to the enhancement of "true competitiveness."

This concludes our presentation of our financial results for the fiscal year ended March 2014. Thank you very much.

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