Toyota Motor Corp. (TM) revealed a fivefold increase in profit to ¥115.5 billion ($1.34 billion) or ¥31.47 per share (37 cents) in the second quarter of its fiscal 2011 ended March 31, 2011 from ¥22.19 billion ($258.26 million) or ¥6.96 per share (8 cents) in the same quarter of previous fiscal year. The profit was boosted by marketing strategy as well as cost reduction measures incorporated by the company during the quarter.
Consolidated revenues in the quarter ascended 6% to ¥4.81 trillion ($55.98 billion) on the back of a 10% rise in global sales volume to 1.9 million units. Vehicle sales declined marginally by 2,509 units to 514,882 units in North America and 19% or 41,496 units to 180,878 units in Europe. Meanwhile, sales rose 18% to 585,496 units in Japan, 27% to 289,826 units in Asia, and 22% to 324,189 units on Other regions.
Operating profit almost doubled to ¥111.46 billion ($1.30 billion) from ¥58 billion ($675.05 million) in the second quarter of fiscal 2010. The rise in operating profit was attributable to positive impacts from marketing efforts and cost reduction measures, offset partially by unfavorable exchange rate.
Segment Performance
In the Automotive segment, revenues scaled up 7% to ¥4.39 trillion ($51.09 billion). Operating profit was ¥32.97 billion ($383.73 million) compared with an operating loss of ¥21.3 billion ($247.9 million) in the prior fiscal year, driven by higher production and sales volumes as well as cost reduction measures.
Revenues improved in all the geographic sales regions, except North America and Europe. Figures increased 14% to ¥1.93 trillion ($22.46 billion) in Japan, 36% to ¥739.63 billion ($8.6 billion) Asia and 2% to¥369.54 billion ($4.3 billion) in Other regions. On the other hand, revenues fell 6% to ¥1.32 trillion (15.36 billion) in North America and 17% to ¥739.63 billion ($8.61 billion) in Europe.
In the Financial Services segment, revenues slid 5% to ¥290.53 billion ($3.38 billion). Consequently, operating profit declined to ¥68.6 billion ($798.42 million) from ¥74.81 billion ($870.7 million) in the prior fiscal year. In All other businesses, revenues dipped 5% to ¥122.84 billion ($1.43 billion). However, operating income rose to ¥10.73 billion ($124.88 million) from ¥4.95 billion ($57.61 million) a year ago.
Financial Position
Toyota had cash and cash equivalents of ¥1.92 trillion ($22.35 billion) as of September 30, 2010, an increase from ¥1.87 trillion ($21.76 billion) as of March 31, 2010. Long-term debt increased by ¥182.65 billion ($2.13 billion) to ¥9.42 trillion ($109.64 billion) as of September 30, 2010, reflecting a stable long-term debt-to-capitalization ratio of 48%.
In the first half of fiscal 2011, Toyota’s net cash flow from operating activities deteriorated to ¥1.23 trillion ($14.32 billion) from ¥1.57 trillion ($18.27 billion) 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 ¥282.73 billion ($3.29 billion) from ¥329.23 billion ($3.83 billion) a year ago.
Outlook Revised
Toyota revised upward its estimates for fiscal 2011 ended March 31, 2011. The automaker now anticipates vehicle sales in the range of 7.38 million–7.41 million units compared with the prior estimate of 7.29 million–7.38 million units.
The company forecasted consolidated revenues to be ¥19 trillion ($221.14 billion), operating income to be ¥380 billion ($4.42 billion) and net income to be ¥350 billion ($4.07 billion). This compared to the prior guidance of ¥19.5 trillion ($226.96 billion) in consolidated revenues, ¥330 billion ($3.84 billion) in operating income and ¥340 billion ($3.96 billion) in net income.
We appreciate Toyota’s efforts to improve its sales volume as well as its cost reduction measures. However, the company expects to suffer from the backlash of its series of automotive safety recalls since September last year. As a result, the company has a Zacks #3 Rank (Hold) on its stock for the short term (1–3 months).
(Exchange rate: $1 = ¥85.92, the average for July–Sep 2010)
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