Toyota Motor Corporation (TM 1.11%) said on Nov. 6 that its operating profit rose 11% in the quarter that ended on Sep. 30, on strong demand for profitable SUVs and an ongoing cost-cutting initiative.
Toyota earned an operating profit of 579.1 billion yen ($5.09 billion) on a 2.3% increase in revenue from the same period in 2017, to 7.31 trillion yen ($64.3 billion). The company also raised its profit guidance for the fiscal year that will end on March 31, 2019.
CEO Akio Toyoda's cost-cutting efforts helped boost Toyota's operating margin again last quarter. Image source: Toyota Motor Corporation.
Toyota earnings: The raw numbers
Like many Japanese companies, Toyota's fiscal year begins on April 1. The quarter that ended on September 30, 2018, was the second quarter of Toyota's 2019 fiscal year.
All financial results are shown in billions of yen. Vehicle sales are rounded to the nearest thousand.
| Metric | Q2 FY 2019 | Q2 FY 2018 | Change (YOY) |
|---|---|---|---|
| Revenue | 7,311.2 billion yen | 7,143.6 billion yen | 2.3% |
| Vehicle sales | 2,677,000 | 2,626,000 | 1.9% |
| Operating income | 579.1 billion yen | 522.2 billion yen | 11% |
| Operating margin | 7.9% | 7.3% | 0.6 ppts |
| Net income | 585.0 billion yen | 458.2 billion yen | 27.7% |
| Yen per U.S. dollar, average during period | 111 | 111 | unchanged |
| Yen per euro, average during period | 130 | 130 | unchanged |
Data source: Toyota Motor Corporation. Vehicle sales include the vehicles sold by Toyota's joint ventures in China. "Ppts" = percentage points. YOY = year over year.
How Toyota's business units performed
Toyota reports separate operating results for each of its regional business units as well as its captive-financing arm. Here's how each performed in the quarter that ended on September 30, 2018.
- In Japan, Toyota's operating income rose 10.5% to 355.5 billion yen, even as overall sales declined 4.1% to about 521,000 vehicles. The explanation: an increase in exports from Japan to other markets, and that ongoing cost-reduction campaign. Toyota's operating margin in Japan was 8.9%, up from 8.2% in the year-ago period.
- In North America, Toyota's operating income rose 12.6% to 58.9 billion yen. Sales declined slightly to about 665,000 vehicles, but the "mix" of products sold improved as more Americans chose higher-margin SUVs over lower-margin sedans. Toyota's margin in North America was 2.2%, up from 2% a year ago.
- In Europe, Toyota's operating income more than doubled to 38.7 billion euros. Sales rose 4.8% to about 240,000, but Toyota attributed much of the gain to cost reductions. Toyotas operating margin in Europe rose to 4.9% from 2.4% a year ago.
- In Asia, excluding Japan but including China, Toyota's operating income rose 21.7% to 134 billion yen on a 9.2% increase in sales (to about 417,000), which the company attributed largely to "marketing efforts." Toyota's margin in Asia rose to a robust 10.2% from 8.6% a year ago.
- Toyota's "rest of the world" region includes Latin America, Oceania, Africa, and the Middle East. Here, Toyota's operating income fell 29.4% to 22.8 billion yen on a 2.6% decrease in sales (to about 340,000) and unfavorable exchange-rate movements in key Latin American markets.
- Toyota's financial-services unit earned 91.8 billion yen in operating income, up 33.4%, on growth in lending, improved auction values for off-lease vehicles, and a reduction in loan losses.
Looking ahead: Toyota boosted its full-year profit guidance
Toyota increased its full-year guidance for revenue, operating income, operating margin, and net income. For the fiscal year that will end on March 31, 2019, Toyota now expects:
- Sales (excluding China joint ventures) of about 8,900,000 vehicles, unchanged from its prior forecast (fiscal 2018 result: 8,964,000).
- Revenue of about 29.5 trillion yen, up from 29 trillion yen in the prior forecast (fiscal 2018 result: 29.3795 trillion yen).
- Operating income of 2.4 trillion yen, up from about 2.3 trillion yen in the prior forecast (fiscal 2018 result: 2.4 trillion yen).
- Operating margin of 8.1%, up from 7.9% in the prior forecast (fiscal 2018 result: 8.2%).
- Net income of 2.3 trillion yen, up from 2.12 trillion yen in the prior forecast (fiscal 2018 result: 2.494 trillion yen).
Toyota also now expects average exchange rates of 110 yen to the U.S. dollar (previous guidance: 106 yen), and 130 yen to the euro (previous guidance: 126 yen).
