Toyota's sales and earnings are in full-scale recovery

2013 sales targeted at 9.91 million units

2013/01/23

Summary

 This is to report trends in Toyota Motor Corporation's sales and earnings, recovering on a full scale, mainly based on the CY2012 results forecast and CY2013 plans for vehicle sales and production released in December 2012 and the financial results for the April-September FY2012 period and a full fiscal year results forecast released in November 2012.

 Due to the economic downturn after Lehman's fall, Toyota's unit sales plunged in 2008 and 2009, and concurrently the yen had been appreciating. The Great East Japan Earthquake and Thai flooding in 2011 also slowed down sales and earnings. In CY2012, however, the Group's global unit sales totaled 9.7 million units, up 1.75 million units. Toyota Group seems to be back to the global No. 1 in vehicle unit sales, over General Motors and Volkswagen AG. CY2013 global unit sales target is 9.91 million units.

 Toyota expects its FY2012 consolidated operating income to be almost tripled to 1.05 trillion yen from 355.6 billion yen of FY2011, according to its announcement in November 2012. It is mainly because Toyota's unconsolidated operating deficit, for its operations in Japan including exports, which resulted in over 400 billion yen in FY 2010 and FY2011, is predicted as of November 2012 to diminish to 20 billion yen. By region, Toyota anticipates a fall in sales in China and Europe, which should be supplemented by growth in North America and Southeast Asia. The consolidated global unit sales in the October 2012-March 2013 period, however, is forecast to fall by 2.1% y/y.

 Yen to U.S. dollar rate in the April-September FY2012 period for Toyota's financial results was 79 yen and its October-March period forecasts are based on the exchange rate of 78 yen to the dollar. If weak yen against dollar continues as in late December, further profit expansion can be predicted.

 Although Toyota's earnings have largely been recovering as explained above, it plans to seek for further efficiency when making capital expenditure decisions so that it should flexibly respond to demand fluctuations. Especially for the coming three years, it will not construct new plants as a rule, except for already decided Thailand and Indonesia plants, limit investment in production expansion to existing plants, keep fixed costs down to lower the break-even point, according to media reports in January 2013.

Toyota Group's Global Sales Operating income & capitai expenditures

Reference:
Toyota's earnings improvement plans for development, procurement and production (Jun. 12, 2012)



Toyota Group global unit sales to reach 9.7 million units in CY2012 and 9.91 million units in CY2013

 Toyota forecasts the Group's CY2012 global vehicle sales including Daihatsu and Hino as 9.7 million units, achieving a large 22.0% increase of 1.75 million units from the CY2011 result. The company seems to be back to the global top seller, over GM and VW, with the record high sales among OEMs worldwide.

 Toyota expects sales to drop in China and Europe in CY2013. The company, however, anticipates strong increases in North America and Asia and plans to sell 9.91 million units worldwide.

 As for the CY2012 global production volume, Toyota announced its forecast as 10.05 million units in August 2012, when it released its April-June financial results. In November, however, the figure was revised down to 9.92 million units due to situations in China and Europe, missing an opportunity to achieve the global first 10 million-unit production. It plans to output 9.94 million units in 2013.

Sales and Production Plan for CY2013

(thousands of units)
Toyota Daihatsu Hino Total
CY2012
Results
forecast
Sales Japan 1,700 670 40 2,410
Overseas 6,980 200 110 7,290
Worldwide 8,680 870 150 9,700
Production Japan 3,490 780 150 4,420
Overseas 5,250 230 20 5,500
Worldwide 8,740 1,000 180 9,920

 

Toyota Daihatsu Hino Total
CY2013
Plan
Sales Japan 1,400 600 40 2,040
Overseas 7,500 240 130 7,870
Worldwide 8,900 840 170 9,910
Production Japan 3,100 720 160 3,980
Overseas 5,600 330 30 5,960
Worldwide 8,700 1,050 190 9,940

Source: Toyota press release 2012.12.26

 

CY2012 Toyota & Lexus global sales are forecast as 8.68 million units and CY2013 plan is 8.9 million units

 In 2011, sales of the Toyota & Lexus vehicles plunged to 7.1 million units, affected by the Great East Japan Earthquake and the Thailand floods. The CY2012 global sales result, however, is forecast to reach the record high 8.68 million units with an increase of 1.58 million units. The company expects the CY2013 sales to further increase by 220,000 units to 8.9 million units, renewing its record.

 Toyota plans to sell 1.4 million units in Japan in 2013, decreased from the CY2012 results forecast of 1.7 million units, affected by the terminated eco-car subsidies. The CY2013 sales overseas, however, are planned to expand by 520,000 units, from expected 6.98 million units in CY2012 to 7.5 million units.

Toyota & Lexus vehicles: Global sales and production

(thousands of units)
2007 2008 2009 2010 2011 2012
Forecast
Plan for
2013
Sales Japan
Overseas
1,587
6,842
1,470
6,526
1,376
5,604
1,566
5,961
1,201
5,896
1,700
6,980
1,400
7,500
Worldwide 8,429 7,996 6,980 7,527 7,097 8,680 8,900
Share of emerging markets 33.0% 37.1% 39.3% 42.7% 46.3%
Production Japan
Overseas
4,226
4,309
4,012
4,198
2,792
3,579
3,283
4,340
2,760
4,169
3,490
5,250
3,100
5,600
Worldwide 8,535 8,211 6,371 7,623 6,929 8,740 8,700
Source: Toyota press release 2012.12.26
Note 1. "Emerging markets" indicate regions other than Japan, North America and Europe. By 2015 Toyota aims to achieve 50% sales in emerging markets.
2. In the "Toyota Global Vision," Toyota announced in March 2011 that it would establish the solid profitability as soon as possible to achieve a consolidated operating return of 5%-operating income of about 1 trillion yen- and to restore TMC to profitability on an unconsolidated basis at 85 yen to the dollar exchange rate and at a 7.5 million-unit global sales volume of Toyota and Lexus vehicles. According to Toyota, the companies' earnings structure improvements have been progressing steadily towards the above-mentioned profit target (May 2012).
3. Toyota U.S. sales in CY2012 totaled 2,082,504 units, up 26.6% y/y, with 14.4% market share. Toyota had continued to drop sales in the U.S. for four consecutive years through 2011 from an all-time high in 2007 of 2.62 million units. Toyota also set a new record for North American production with 1.78 million vehicles manufactured in 2012, surpassing its previous record of 1.72 million in 2007.
4. Toyota China sales in CY2012 fell 4.9% y/y to approx. 845,000 units. It plans to sell 900,000 units in CY2013, while its CY2012 target was 1 million units. This is the first time for Toyota to post a year-on-year sales drop in China.

 

For FY2012 Toyota expects 530,000-unit sales increase of North America and 400,000-unit sales increase in Asia

 According to Toyota's release on its consolidated regional sales on fiscal year basis, its total sales for FY2012 ending on March 31, 2013 is expected to grow by 1.398 million units over the FY2011 result, out of which Toyota expects 530,000-unit increase of North America and 400,000-unit increase of the Asian region excluding China. Toyota also anticipates 140,000-unit increase in the Middle East.

 In the April-September period, the sales expanded by 1.49 million units, up 49.2% y/y, from 3.026 million units to 4.516 million units, as Toyota explained, "the result was beyond our strength, supported by the following wind". Toyota has forecast that sales would drop in Japan, North America and Europe in the October-March period and that the consolidated unit sales would fall by 92,000 units, from 4.326 million units to 4.234 million units.

FY2012 consolidated unit sales (Toyota, Daihatsu and Hino, excluding China sales of locally manufactured vehicles)

(thousands of units)
April-September October-March Fiscal year
FY2011 FY2012 FY2011 FY2012
Forecast
FY2011
Results
(A)
FY2012
Forecast
(B)
Change
(B)-(A)
Consolidated 3,026 4,516 4,326 4,234 7,352 8,750 1,398
Japan 797 1,192 1,274 1,058 2,071 2,250 179
Overseas 2,229 3,324 3,052 3,176 5,281 6,500 1,219
North America
Europe
Asia
689
361
615
1,261
412
840
1,183
437
712
1,139
378
890
1,872
798
1,327
2,400
790
1,730
528
(8)
403
Central & South America
Oceania
Africa
127
95
94
185
130
130
162
128
120
175
130
140
289
223
214
360
260
270
71
37
56
Middle East
Others
243
5
363
3
307
3
327 550
8
690 140
thereof: Daihatsu/Hino 389 517 520 483 909 1,000 91

Source: Toyota's release on its financial results. The unit sales for the October-March period are calculated by subtracting the April-September results from the full FY2012 forecast results announced in November.

 

 



1.05 trillion yen consolidated operating income forecast for FY2012

 Toyota announced in May 2012 that for FY2012 it would aim to increase sales of Toyota & Lexus vehicles to 8.8 million units, up 1.388 million units y/y, to achieve 22 trillion yen in consolidated net revenues and one trillion yen in operating income with operating income ratio of 4.4%.

 In November, Toyota announced financial results for the July-September FY2012 period and revised the forecasts. Considering situations in China and Europe, it revised the net revenues forecast to 21.3 trillion yen, down 700 billion yen. The operating income forecast, however, was revised up to 1.05 trillion yen (with operating income ratio of 4.9%) from one trillion yen. The company revised net income upward to 780 billion yen, up 20 billion yen, although its equity in earnings of the Chinese affiliates is expected to fall by approx. 30 billion yen.

 Although in the April-September 2012 period the yen was strong with 79 yen against the dollar, Toyota's financial results were favored by sales expansion in both domestic and overseas markets and other factors. It has earned consolidated operating income of 693.7 billion yen in the April-September period, 66.1% of the full FY2012 forecast of 1.05 trillion yen.

Consolidated financial results

(millions of yen)
FY2009 FY2010 FY2011 Apr.-Sep.
2011
Apr.-Sep.
2012
Forecast
for FY2012
as of Nov.
Net Revenues
Operating income
Income before taxes
Net income
18,950,973
147,516
291,468
209,456
18,993,688
468,279
563,290
408,183
18,583,653
355,627
432,873
283,559
8,015,922
(32,573)
(1,403)

81,581
10,908,354
693,750
794,537
548,269
21,300,000
1,050,000
1,180,000
780,000
R&D Expenses
Capital Expenditures
725,300
579,000
730,300
642,300
779,800
706,700
377,300
263,800
407,400
319,200
810,000
820,000
Market share
(Japan)
Toyota excl. mini-vehicles 48.2% 47.3% 45.5% 42.1% 48.9% approx. 49%
Toyota, Daihatsu, Hino incl. mini-vehicles 44.3% 43.7% 43.2% 40.6% 45.1%
Foreign
exchange rate
yen to US Dollar 93 86 79 80 79 79
yen to Euro 131 113 109 114 101 100

Source: Toyota's Financial Results released in May/November 2012

 

Unit sales increase and cost reduction efforts contributing to improve operating income. Even further profits expected.

 Reviews on Toyota's operating income and its rise and fall factors over the past few years show that the "sales factor, specifically weak unit sales" and "exchange rate fluctuations" have put pressures on profits, after achieving the operating income of over two trillion yen in FY2007. From FY2010, however, the sales factor has turned to be positive and Toyota predicts larger sales growth in FY2012. It also expects 370 billion yen of the cost reduction effects.

 Effects of yen-dollar fluctuations in FY2012 are forecast downward to 110 billion yen as of November 2012. If the yen should be entrenched in the lower level as in late December 2012, larger profits should be expected.

Analysis of consolidated operating income from FY2007 to FY2012

(billions of yen)
Marketing
efforts (effects)
Effects of
exchange rate
fluctuations
Cost reduction
efforts
Increase/
decrease in
expenses, etc.
Fixed cost
reduction /
Financial
business
Changes in
operating
income
Operating
income
FY2007 290 0 120 (378.3) 31.7 2,270.3
FY2008 (1,480) (760) 0 (491.3) (2,731.3) (461)
FY2009 (370) (320) 520 38.5 (Note 2) 740 608.5 147.5
FY2010 490 (290) 180 (59.3) 320.7 468.2
FY2011 150 (250) 150 (162.6) (112.6) 355.6
FY2012 Forecast 550 (110) 370 (115.6) 694.4 1,050
Source: Toyota's Financial Results. FY2012 Forecast is based on an annoucement in November 2012.
Note 1. Marketing efforts, Effects of sales, Effects of unit sales and product mix (varies by the fiscal year) are integrated into Marketing efforts (effects).
2. Of the FY2009 Fixed cost reduction/Financial business, fixed cost reduction was 470 billion yen and recovery in financial business earnings was 270 billion yen.
3. As for exchange rates, in May, Toyota forecast ±0 for effects of exchange rate fluctuations for FY 2012 on the basis of 80 yen to the dollar and 105 yen to the euro. In November, it predicts effects of 110 billion yen at 79 yen to the dollar and 100 yen to the euro (at 78 yen to the dollar and 100 yen to the euro for October-March period).

 

Unconsolidated operating deficit to diminish to 20 billion yen, contributing to expanded consolidated operating income

 Toyota's subsidiaries, mainly overseas businesses, generate approx. one trillion yen operating income/year, except for emergencies such as Lehman's fall. For the unconsolidated financial results, Toyota posted operating income of over one trillion yen in FY2006 and FY2007. Appreciated yen, however, hits directly CBU and parts exports from Japan, and from FY2008 through FY2011, Toyota ended in operating deficit, which had put pressure on the consolidated operating income.

 In April-September 2012, marketing efforts (250 billion yen) and cost reduction efforts (190 billion yen) contributed to raise operating income to 67.7 billion yen, while the company exported 988,000 units at a rate of 79 yen to the dollar. In full FY2012, it plans to export 1.85 million units at the 79 yen to the dollar and the operating deficit is forecast to decrease to 20 billion yen.

 Toyota is also strengthening sales in Japan to increase the unconsolidated profits while maintaining its domestic production of three million units. The domestic market share (excluding mini-cars) for FY 2012 is expected to rise to approx. 49% from 45.5% in FY2011.

 

Unconsolidated financial results

(millions of yen)
FY2009 FY2010 FY2011 Apr.-Sep.
2011
Apr.-Sep.
2012
Forecast
for FY2012
as of Nov.
Net Revenues 8,597,872 8,242,830 8,241,176 3,346,600 4,879,200 9,200,000
thereof: Japan 3,523,100 3,059,200 3,245,800 1,224,400 1,838,600
thereof: Exports
5,074,600 5,183,500 4,995,300 2,122,100 3,040,500
Operating income (328,061) (480,938) (439,805) (322,300) 67,700 (20,000)
Ordinary income (77,120) (47,012) 23,098 (75,600) 405,500 570,000
Net Income 26,188 52,764 35,844 49,700 316,800 470,000

 

Production/Export from Japan
(thousands of units)
Production in Japan
Export from Japan
3,206
1,644
3,004
1,698
3,119
1,670
1,235
665
1,737
988
3,300
1,850
Export/Production 51.3% 56.5% 53.5% 53.8% 56.9% 56.1%

Source: Toyota's Financial Results released on November 5, 2012

 

 



Promoting efficiency in using capital expenditures and cutting off fixed costs to improve profitability

 Considering the fact that the large investment over 1.3 trillion yen each year from FY2006 to FY2008 had expanded the fixed costs, Toyota plans to cut the investment by 40% to make the same level of achievements. From FY2009 to FY2011, it halved the capital expenditure, and in FY2012, the beginning of a new expansion, it has kept the consolidated capital expenditure to 820 billion yen.

 The vehicle manufacturing plants that recently started operations have a small production capacity of 70,000 units, which is to expand according to conditions.

 It has been reported that Toyota will not build new plants for the next three years, except for already decided ones in Thailand and Indonesia, and that investment in production expansion will be limited to existing plants and the capital expenditure will be smaller than 820 billion yen of FY2012. It will keep fixed costs down to lower the break-even point to achieve lean production operations unaffected by demand fluctuations, according to media reports.

 In the Middle East, Africa and Latin America, however, Toyota plans to increase KD production, which is possible to be launched at relatively lower cost. It has upgraded its section responsible for the KD business to KD Business Planning Division in January 2013. Toyota has started KD production in Egypt in April 2012. In Vladivostok, Russia, Toyota is said to start KD production at the end of 2012 or early 2013.

 Toyota has also increased powertrain production capacities overseas to raise cost competitiveness in the local markets and decrease exports from Japan at the same time, which is improving its earnings.

Building small-scale vehicle plants

Production model Annual capacity Start of
Production
Investment
Plant No.2 in India (Note 1) Etios 70,000 December 2010
New Sorocaba Plant in Brazil Etios 70,000 September 2012 USD 600 million
Gateway Plant No.2 in Thailand Small car 70,000 Mid-2013
Karawang Plant No.2
in Indonesia (Note 2)
New small car 70,000 Early 2013
Note 1. Toyota's plant No.2 in India will increase annual production capacity to 120,000 units in the first half of 2012 and to 210,000 units in 2013.
2. Production capacity will be increased at Karawang Plant No.2 in Indonesia to 120,000 units/year in early 2014.
3. Toyota planned the following two plants with an annual production capacity over 100,000 units before Lehman's fall. Although its plan for the Mississippi plant in the U.S. was announced in February 2007 and a groundbreaking ceremony for the new Changchun plant in China was held in October 2008, construction of the both plants had been halted.
Production model Annual capacity Start of
Production
Investment
Mississippi plant in the U.S. Corolla 150,000 October 2011
New Changchun plant in China Corolla 100,000 May 2012 Approx.
JPY 50 billion

 

Powertrain plants overseas: New constructions and capacity expansions

Production model Capacity increase Start of
Production
Investment
U.S.
Kentucky Plant 2.5L 4-cylinder engine 440,000→540,000 August 2013 USD 30 million
Alabama Plant (Note 1) 4-cylinder/V6/V8 engine 510,000→720,000 March 2014 USD 80 million
West Virginia Plant (Note 2) 6-speed AT 270,000→520,000 Summer 2013 USD 109 million
Asia
Siam Toyota Manufacturing in Thailand Petrol engine 740,000→840,000 Early 2014 JPY 14 billion
Diesel engine 320,000→610,000 2015 JPY 40 billion
Toyota Kirloskar Auto Part (TKAP) Engine Plant in India Petrol engine for Etios 100,000 Autumn 2012 JPY 23.4 billion
including
aluminum casting
TKAP Transmission Plant in India Transmission for Etios 240,000 Early 2013
Brazil and China
Engine Plant in Brazil 4-cylinder engine 200,000 Late 2015
CVT Plant in Jiangsu, China CVT 240,000 September 2014 USD 285 million
Note 1. At the Alabama plant, 4-cylinder, V6 and V8 engines are already produced with respective annual production capacities of 216,000 units, 146,000 units and 144,000 units. Production of a new V6 2GR engine will be added with the capacity of 216,000 units, which should bring the engine output capacity at the Alabama plant to 722,000 units from 506,000 units.
2. Toyota announced that it would invest USD 64 million to boost the 6-speed AT production capacity at the West Virginia plant to 400,000 units at the end of 2012, from 270,000 units as of February 2011. It also announced in March 2012 to further increase the capacity to 520,000 units in the summer of 2013 with an investment of USD 45 million.

 

References: Toyota's materials on financial results, press releases and media reports.

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