Toyota Motor Corp. (TM) posted a 39% fall in profit to ¥93.63 billion ($1.14 billion) or ¥29.86 (36 cents) per share in the third quarter of fiscal 2011 from ¥153.22 billion ($1.86 billion) or ¥48.86 (59 cents) per share in the year-ago quarter. The fall in profit was attributable to lower sales in Japan, North America and Europe as well as a stronger yen.
Consolidated revenues in the quarter dipped 12% to ¥4.67 trillion ($56.74 billion) on the back of a 13% fall in global sales volume to 1.8 million units. Vehicle sales declined 21% to 507,861 units in North America, 31% to 402,476 units in Japan and 5% to 207,621 units in Europe. Meanwhile, sales rose 21% to 334,504 units in Asia and 2% to 349,219 units in Other regions.
Operating profit almost fell ¥90.03 billion to ¥99.07 billion from ¥189.11 billion in the quarter. The decrease in operating profit was attributable to unfavorable changes in exchange rates.
Segment Performance
In the Automotive segment, revenues dipped 12% to ¥4.26 trillion due to lower unit sales. The segment saw an operating loss of ¥27.53 billion in the quarter in contrast with an operating profit of ¥124.48 billion in the prior fiscal year due to the same factors that affected the company’s operating income.
In the Financial Services segment, revenues slipped 3% to ¥297.50 billion. Consequently, operating profit declined by ¥35.80 billion to ¥116.44 billion from ¥80.64 billion in the prior fiscal year. In All other businesses, revenues ebbed 7% to ¥224.65 billion. However, operating profit rose by ¥27.79 billion to ¥13.39 billion.
Financial Position
Toyota had cash and cash equivalents of ¥1.78 trillion as of December 31, 2010, a decline from ¥1.87 trillion as of March 31, 2010. Long-term debt decreased by ¥273.92 billion to ¥8.96 trillion as of December 31, 2010, reflecting a stable long-term debt-to-capitalization ratio of 47%.
In the first nine months of fiscal 2011, Toyota’s net cash flow from operating activities deteriorated to ¥1.43 trillion from ¥2.05 trillion in the prior fiscal year, despite an improvement in net income. This can be attributable to higher provision for doubtful accounts and credit losses and equity in losses of affiliated companies. Meanwhile, capital expenditures decreased to ¥419.91 billion from ¥449.57 billion a year ago.
Guidance Raised
Toyota revised its estimates upward for fiscal 2011. The automaker now anticipates vehicle sales in the range of 7.41 million–7.48 million units up from the prior estimate of 7.38 million–7.41 million units.
The company forecasted consolidated revenues to be ¥19.2 trillion, operating income to be ¥550 billion and net income to be ¥490 billion. This compared to the prior guidance of ¥19.0 trillion in consolidated revenues, ¥380 billion in operating income and ¥350 billion in net income.
Toyota’s results clearly reflect loss of consumer confidence as a result of its series of automotive safety recalls since September 2009. However, we appreciate the company’s efforts to improve its sales volume as well as its cost reduction measures. As a result, the company has a Zacks #3 Rank (Hold) on its stock for the short term (1–3 months).
(Exchange rate: ¥1 = $0.01215)
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