Toyota Motor (NYSE:TM) said that its operating profit rose 14% in the quarter that ended on Sep. 30, reaching 662.3 billion yen ($6.14 billion), as higher sales and cost controls offset unfavorable currency exchange-rates.

Toyota also said that it will buy back up to $1.8 billion worth of its common stock, or 34 million shares, before its current fiscal year ends on March 31. 

The raw numbers

Like many Japanese companies, Toyota's fiscal year begins on April 1. The quarter that ended on Sep. 30 was the second quarter of its 2020 fiscal year.

Metric Fiscal Q2 2020 Change YOY
Revenue 7.639 trillion yen 4.5%
Vehicle sales 2,748,000 2.7%
Operating income 662.3 billion yen 14.4%
Operating margin 8.7% 0.8 pp
Net income 613.1 billion yen 0%

Data source: Toyota Motor. YOY = year-over-year. PP = percentage points. Vehicle sales include the vehicles sold by Toyota's joint ventures with Chinese automakers and are rounded to the nearest thousand. 

Average exchange rates, April 1 through Sept. 30, 2019, were: 

  • 109 yen per dollar, versus 110 yen per dollar in the year-ago period.
  • 121 yen per euro, versus 130 yen per euro in the year-ago period. 
A red 2020 Toyota Camry TRD, a sporty midsize four-door sedan.

U.S. sales of Toyota's Camry are down slightly in 2019, but it's still America's best-selling sedan. Image source: Toyota Motor.

What happened in the first half of the fiscal year

Note that all results in this section are for the first half of Toyota's 2020 fiscal year, from April 1 through Sept. 30, 2019. 

  • In Japan, Toyota's operating income rose 10.1% to 827.8 billion yen on a 10.6% increase in sales to 1.14 million vehicles. The operating margin in its home market was 9.8%, up from 9.5% a year ago.
  • In North America, operating income rose 62% to 222.6 billion yen on higher sales and a successful cost-reduction effort. Sales rose 2.5% to 1.45 million vehicles. Operating margin in North America was 4%, versus just 2.5% a year ago.
  • In Europe, operating profit rose 14.2% to 70.6 billion yen. Sales rose 6.3% to about 524,000 vehicles, and operating margin rose to 4.2% from 3.9% a year ago.
  • In China, equity income from Toyota's joint ventures with Chinese automakers rose 6% from a year ago to 61.5 billion yen, on higher retail sales. But operating income from Toyota's China subsidiaries fell 13.5% to 78.5 billion yen on unfavorable exchange-rate movements. Toyota's unit sales in China rose 12.2% to about 770,000.
  • In the rest of Asia, excluding Japan and China, operating profit fell 16.5% to 230.7 billion yen on unfavorable exchange-rate movements, despite a 2.2% year-over-year increase in sales to about 829,000. Operating margin fell to 8.6% from 10.5% a year ago. 
  • In Toyota's "rest of the world" region, including Latin America, Oceania, Africa, and the Middle East, operating income fell 25.9% to 47.3 billion yen, again on unfavorable exchange-rate movements. Sales rose 4% to about 700,000 vehicles. Operating margin fell to 4.3% from 5.3% a year ago.
  • Toyota's financial-services unit earned 215.6 billion yen in operating income, up 23.8% from a year ago, on growth in the lending balance and improved residual values for off-lease vehicles. 

Looking ahead: A slight change to guidance

Toyota slightly lowered its guidance for full-year sales, but maintained its prior guidance for revenue and profit. Here's what management said about what investors should expect in the fiscal year that will end on March 31, 2020:

  • Sales (excluding China joint ventures) of about 8.95 million vehicles, down from 9 million in its previous forecast. (Fiscal 2019 result: 8.977 million vehicles.)
  • Revenue of about 29.5 trillion yen, unchanged from prior guidance. (Fiscal 2019: 30.225 trillion yen.) 
  • Operating income of about 2.4 trillion yen, unchanged from the prior forecast. (Fiscal 2019: 2.467 trillion yen.) 
  • Operating margin of 8.1%, unchanged from the prior forecast. (Fiscal 2019: 8.2%.)
  • Net income of 2.15 trillion yen, unchanged from the prior forecast. (Fiscal 2019: 1.88 trillion yen.) 

Toyota also now expects average exchange rates for the fiscal year of 107 yen to $1 and 118 yen to 1 euro, versus 106 yen to $1 and 121 yen to 1 euro in its prior forecast.