Toyota Profits More Than Threefold - Analyst Blog

By Zacks | November 05, 2012 AAA

Toyota Motor Corp. (TM) saw more than threefold increase in profits to ¥257.92 billion ($3.28 billion) or ¥81.44 ($1.04) per share in the second quarter of fiscal year ended September 30, 2012 from ¥80.42 billion or ¥25.65 in the same quarter of prior fiscal year.

The increase in profits can be attributable to strong demand for Toyota vehicles as well as positive impact from the company's cost control measures. However, profits were lower than the Zacks Consensus Estimate of $1.62 per share.

Revenues in the quarter grew 18.2% to ¥5.41 trillion ($68.75 billion) on a 14.9% rise in sales volume to 2.16 million units. Vehicle sales increased in all the regions, except Europe. Operating income more then quadrupled to ¥340.61 billion ($4.33 billion) from ¥75.39 billion in the second quarter of previous fiscal year.

Segment Results

In the Automotive segment, revenues appreciated 19.7% to ¥5.00 trillion ($63.57 billion). The segment operating profit increased ¥246.84 billion ($3.14 billion) to ¥239.37 billion ($3.04 billion) from a loss of ¥7.47 billion in the prior fiscal year quarter. The improvement in profits was attributable to increases in both production volume and vehicle unit sales as well as positive impact from cost reduction measures.

In the Financial Services segment, revenues went up marginally by ¥520 million to ¥264.58 billion ($3.36 billion). Operating profits rose 14.9% to ¥87.77 billion ($1.12 billion) from ¥76.39 billion a year ago due to an increase in valuation gains from transactions such as interest rate swaps measured at fair value, despite credit losses including provision and reversal in sales finance subsidiaries.

In All Other segment, revenues scaled up 6.4% to ¥143.25 billion ($1.82 billion). Operating income surged 32.1% to ¥13.13 billion ($167.0 million) from ¥9.94 billion a year ago.

Financial Position

Toyota had cash and cash equivalents of ¥1.67 trillion ($21.18 billion) as of September 30, 2012 compared with ¥1.68 trillion as of March 31, 2012. Long-term debt decreased to ¥11.73 trillion ($149.10 billion) as of September 30, 2012 from ¥12.0 trillion as of March 31, 2012. However, debt-to-capitalization ratio remained almost stable at 52.2% compared with 52.0% as of March 31, 2012.

In the first six months of fiscal 2013, Toyota's net cash flow from operations improved to ¥1.24 trillion ($15.76 billion) from ¥489.36 billion in the same period of prior fiscal year, primarily driven by a significant ¥501.22 billion ($6.37 billion) rise in profits and an ¥59.45 billion ($755.98 million) increase in deferred income taxes. Meanwhile, capital expenditures (net) increased to ¥335.38 billion ($4.26 billion) from ¥299.38 billion a year ago.

Lower Sales Guidance

For fiscal 2013 ending March 31, 2013, Toyota projected lower consolidated vehicles sales of 8.75 million units, down 50 thousand units from the prior guidance. The automaker also lowered its consolidated revenues outlook to ¥21.30 trillion (up 14.6% from fiscal 2012) from the prior guidance of ¥22.00 trillion. The downward revision of sales outlook was based on difficulties in Chinese and European markets.

However, it raised operating income guidance to ¥1.05 trillion (up 195.3% from fiscal 2012) from the prior level of ¥1.00 trillion and profits to ¥780.0 billion (175.1%) from the previous projection of ¥760.0 billion.

Our Take

Toyota is the leading automaker in the world. Its product portfolio consists of a full range of models from passenger cars, minivans and trucks as well as related parts and accessories.

The company's domestic competitors include Honda Motor Co. (HMC) and Nissan Motor Co. (NSANY). Despite better results, the company to currently retains a Zacks #3 Rank on its shares, which translates to a short-term (1 to 3 months) rating of Hold, owing to the global economic weakness and problems in China, the company's one of the biggest markets.

(Exchange rate: $1 = ¥78.64)

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