Challenges remain with currency value, the end of incentives in Japan, and a weak Europe.
Sales and profits increased strongly at Toyota Motor Corporation as the Japanese giant this morning posted a profit in its first quarter of fiscal year 2011. TMC had produced a large loss in the year earlier quarter.
Toyota made a 190.47 yen billion net profit in its quarter ended June 30, a turnaround from net loss of 77.82 billion yen in the same quarter a year earlier. This is Toyota’s highest quarterly net profit since Q2 of 2008.
On a consolidated basis, net revenues for the first quarter totaled 4,871.8 billion yen, an increase of 27.0% compared to the same period last fiscal year. Operating income increased from a loss of 194.9 billion yen to 211.6 billion yen, while income before income taxes and equity in earnings of affiliated companies was 263.0 billion yen. Operating income increased by 406.5 billion yen.
Toyota said major factors contributing to the increase include the effects of marketing efforts of 400 billion yen and cost reduction efforts of 50 billion yen. The finance unit also posted strong profits as residual values increased.
Toyota said it expects to increase marketing expenses in the second quarter to increase volume. In the U.S. for example, Toyota vehicle sales decreased by 7%, even though the overall market increased 5% in August. North America remains Toyota’s largest market, followed by Japan.
TMC vehicle sales for the first quarter totaled 1,820 thousand units, an increase of 419,000 units compared to the same period last fiscal year due to strong deliveries in Asia.
“Due to an increase in vehicle sales and a large decrease in the costs related to loan losses and residual losses in Financial Services, operating income improved substantially on last year,” said TMC Senior Managing Director Takahiko Ijichi.
Operating income improved year-over-year in all regions for the first quarter. However, the company is still struggling with profitability in Europe, and market share in the U.S. The end of a government stimulus “Eco Car” plan in Japan at the end of September, which subsidizes hybrids where Toyota is leader, is also problematic. Toyota has now sold more than one million hybrids in Japan in total.
“We note a lack of visibility concerning currency movements and the possible backlash in demand after the end of the demand-stimulus program in Japan, which requires our close monitoring,” said Ijichi.
- In Japan, operating loss improved by 184.5 billion yen to 27.5 billion yen.
- In North America, operating income increased by 113.4 billion yen to 109.7 billion yen, including 700 million yen of valuation gains/losses from interest rate swaps. Operating income, excluding the impact of valuation gains/losses from interest rate swaps, increased by 125.1 billion yen to 109.0 billion yen.
- In Europe, operating loss improved by 13.6 billion yen to a loss of 6.8 billion yen.
- Operating income in Asia increased by 63.3 billion yen to 90.2 billion yen.
- In Central and South America, Oceania and Africa, operating income increased by 23.6 billion yen to 41.0 billion yen.
In the financial services segment, operating income increased by 65.5 billion yen to 115.1 billion yen compared to the same period last fiscal year, including 5.6 billion yen of valuation gains/losses from interest rate swaps.
Excluding valuation gains/losses, operating income increased by 74.9 billion yen to 109.5 billion yen. The increase was in part due to higher than expected prices of used vehicles and a large reduction in costs related to loan losses and residual losses in the United States. Toyota’s marketing program also increased the lending balance.
TMC revised its consolidated vehicle sales for the full fiscal year ending March 31, 2011 from 7.29 million to 7.38 million units, an increase of 90 thousand units from TMC’s forecast announced in May 2010.
TMC also revised its consolidated financial forecasts for fiscal year 2011 to consolidated net revenues of 19.5 trillion yen, operating income of 330 billion yen, income before income taxes and equity in earnings of affiliated companies of 380 billion yen and net income of 340 billion yen.