Toyota Motor Corporation (NYSE:TMC) announced its Q1 earnings for fiscal 2013, which were buoyed by strong performances in Japan and North America. Although these results come on the back of a low base, these were generally better than expected. Last year's results were badly affected due to production and supply chain disruptions caused by the tragic tsunami and earthquake.
Net revenues surged 60% to 5,501.5 billion yen in the first quarter while the operating income jumped to 353 billion yen. Last year's operating income stood at a negative 108 billion yen. Net income for the quarter was 290.3 billion yen. (Toyota 6-K)The results left investors encouraged, as the stock traded 5% higher after the results.
As a result of this strong quarter, Toyota now expects to sell 9.76 million Toyota and Lexus vehicles in fiscal 2012, an increase of 2.5% over the previous guidance. Profitability remained stable as the gross profits (after excluding depreciation and R&D expenses in the cost of products) stood at 21.9% for the quarter.
We currently have a $93 price estimate for Toyota's stock, but we are in the process of revising our price estimates to incorporate Q1 earnings.
Higher Production Means Higher Sales
The automaker sold a total of 2.27 million vehicles in the quarter, an increase of 85.8% over the previous year quarter. In the first half of 2012, Toyota overtook General Motors (NYSE:GM) to regain its spot as the largest auto selling company in the world. In North America, which is Toyota's biggest market, the automaker sold a whopping 141% more cars this quarter than it did in the previous year quarter. Sales were certainly helped by a two and a half fold increase in production in the region.
In Europe too, the automaker was able to sell 20% more vehicles than it did last year. But again, the high growth rates are because of low base effect witnessed in the previous year quarter. It will be interesting to watch out for Toyota's performance in the region in the coming months once the effect of low base is discounted out.
Vehicle sales in Japan surged 97% during the quarter. Japan accounts for over 40% of Toyota's global production and the automaker exports nearly half of its vehicles produced in Japan to international markets. The strong Yen could dent the automaker's profitability in case the currency continues to remain strong. Toyota has assumed a conversion rate of 1 USD to 80 yen while forecasting its fiscal 2013 guidance.
Big Plans For Asia / Emerging Markets
Toyota is also gearing up for a greater presence in Asia and other emerging economies. It is in the process of developing eight new compact models aimed specifically for the markets of China, Brazil, Indonesia, India and other developing markets. By 2015, the automaker hopes to achieve half of its sales from developing markets, up from 45% currently. For the fiscal 2013, management expects the capital expenditure in Asia to surge 25%. The company-wide capital expenditure is expected to jump more than 15% over the previous fiscal year.
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