Toyota Motor Corp. (TM) revealed a profit of ¥1.16 billion ($14.21 million) or 37 yen cents per share for the first quarter of its fiscal year ended March 31, 2012, which is plummeted from ¥190.47 billion ($2.33 billion) or ¥60.74 per share a year ago.
The sharp fall in profit was attributable to substantial decline in vehicle sales all over the world, especially North America and Europe due to disruptions in supply of parts caused by the earthquake and tsunami in Japan on March 11.
In Asia, the company has managed to maintain a similar level of vehicle sales compared with the previous year led by strong sales in Indonesia. Moreover, currency fluctuations had a negative impact on the company’s profit.
Revenues in the quarter dipped 29.4% to ¥3.44 trillion ($42.15 billion), driven by a 33% fall in global vehicle sales to 1.22 million units. Vehicle sales slashed 41.5% to 292,283 units in Japan, 47.6% to 275,468 units in North America, 6.8% to 174,249 units in Europe, 9% to 259,873 units in Asia, and 31.8% to 219,501 units on Other regions.
The automaker had an operating loss of ¥108.0 billion in contrast to an operating profit of ¥211.66 billion in the first quarter of previous fiscal year. Operating profit was negatively affected by marketing activities of ¥280.0 billion and currency fluctuations of ¥50.0 billion.
Segment Results
In the Automotive segment, revenues ebbed 31.6% to ¥3.06 trillion. The segment had an operating loss of ¥202.54 billion compared with an operating profit of ¥96.7 billion in the prior fiscal year, driven by decline in production and sales volumes as well as negative impact from currency fluctuations.
In the Financial Services segment, revenues shrank 8.4% to ¥278.70 billion. However, operating profit decreased to ¥94.6 billion from ¥115.11 billion in the prior fiscal year. The improvement was attributable to recording of valuation losses on interest rate swaps at fair value and credit losses including provision and reversal in sales finance subsidiaries.
In All other businesses, revenues went up 4.2% to ¥106.60 billion. Operating loss was ¥1.95 billion in contrast to an operating profit of ¥4.01 billion a year ago.
Financial Position
Toyota’s cash and cash equivalents was ¥2.13 billion as of June 30, 2011. Long-term debt stood at ¥8.79 trillion as of the above date, reflecting a stable long-term debt-to-capitalization ratio of 46%.
In the quarter, Toyota’s net cash flow of ¥316.35 billion from operating activities decreased from ¥767.09 billion in the prior fiscal year, primarily driven by lower net income and an decrease in deferred income taxes. Meanwhile, capital expenditures (net) increased to ¥167.13 billion from ¥133.71 billion a year ago.
Bleak Outlook
Although, Toyota upgraded its consolidated vehicle sales guidance for fiscal 2012 by 360,000 units from its previous forecast (announced in June 2011) to 7.24 million units to 7.6 million units, it expects revenues to be flat at ¥19.0 trillion compared with the prior year.
Toyota lowered its estimates for operating income and net income by 3.9% and 4.5% to ¥450 billion and ¥390 billion, respectively.
Our Take
Despite the disappointing results and bleak outlook, we believe improving world economy, expansion in the emerging markets such as China, technological development, new product launches and higher demand for fuel-efficient compact cars will positively affect its results. Therefore, the company retains a Zacks #1 Rank (Strong Buy) on its stock for the short term (1 to 3 months).
(Exchange rate: $1 = ¥81.63, the average for April–June 2011)
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