Toyota Motor (NYSE:TM) reported operating profit of 384 billion yen ($3.58 billion) for the quarter that ended on March 31, down 27.5% from a year ago, and warned that the ongoing effects of the COVID-19 pandemic could drive its operating profit down almost 80% over the next four quarters.
But despite the warning, Toyota said that it will maintain its pre-outbreak levels of new-product and capital spending, more than $10 billion in the coming fiscal year, as it expects demand for new vehicles in the U.S. and Europe to fully recover in the first half of 2021.
What Toyota said about the fiscal year ahead
In a news conference, CEO Akio Toyoda said that he expects the decline in vehicle sales following the coronavirus pandemic to be "bigger than during the Lehman crisis." But, he said, because Toyota expects to remain profitable in the coming fiscal year, it will continue investing in new products and future technologies, including self-driving vehicles.
Here's Toyota's official guidance to auto investors for the fiscal year that will end on March 31, 2021:
- Total sales of about 8.9 million vehicles, including sales by its joint ventures in China. (Fiscal 2020: 10,457,000.)
- Revenue of 24 trillion yen. (Fiscal 2020: 29.929 trillion yen.)
- Operating income of 500 billion yen. (2020: 2.442 trillion yen.)
- Operating margin of 2.1%. (2020: 8.2%.)
Toyota's forecasts assume average exchange rates over the year of 105 yen per U.S. dollar and 115 yen per euro.
How Toyota performed in the quarter
Toyota didn't give investors much color on its regional results, aside from the obvious impact of the COVID-19 outbreak, but here are the numbers.
- In Japan, Toyota's operating income fell to 336 billion yen from 446.2 billion yen in the year-ago quarter, and its operating margin dropped to 8.4% from 9.9%. Sales fell to about 583,000 vehicles from 631,000 a year ago.
- In North America, Toyota's operating loss worsened to 39 billion yen from 19.5 billion yen a year ago, and its operating margin fell to negative 1.6% from negative 0.7%. Sales fell to about 600,000 vehicles from 654,000 a year ago.
- In Europe, Toyota's operating profit fell to 31 billion yen from 34.1 billion yen a year ago, and its operating margin slipped to 3.8% from 3.9%. Sales fell to about 259,000 vehicles from 269,000 a year ago.
- Toyota reports income for its China business one quarter behind, meaning that the income for the quarter ended on March 31 was earned in the fourth quarter of the calendar year 2019. For that quarter, Toyota's operating income fell to 17.7 billion yen from 18.6 billion yen in the fourth quarter of 2018, while equity income from Toyota's joint ventures with Chinese automakers rose to 23.9 billion yen from 20.2 billion yen in the prior-year period.
- During the quarter ended March 31, Toyota's sales in China fell to about 189,000 from roughly 326,000 a year earlier.
- In Asia, excluding China and Japan, Toyota's operating income fell to 57.7 billion yen from 58.7 billion yen a year ago, but its operating margin increased slightly, to 4.4% from 4.2%. Sales fell by about 40,000 vehicles to roughly 370,000.
- In Toyota's "rest of the world" region, including Latin America, Oceania, Africa, and the Middle East, operating income rose to 9.2 billion yen from 5.2 billion yen a year ago, and its operating margin increased to 1.9% from 1%. Sales rose by about 5,000 vehicles from a year ago, to approximately 317,000.
- Toyota's financial-services subsidiary generated just 1.7 billion yen in operating income in the quarter, down from 78.4 billion yen in the year-ago period.
Special items and liquidity
Toyota took one-time charges totaling 305.2 billion yen in the quarter, all of them noncash accounting charges as it recognized unrealized losses from equity investments. It took one-time credits of 16.2 billion yen for unrealized gains in the year-ago quarter.
As of March 31, Toyota had 2.774 trillion yen (about $25.9 billion) in cash available to its automotive business, down from 2.79 trillion yen at the end of the prior fiscal year.
Toyota noted that in April, it set up a new revolving line of credit totaling 1.25 trillion yen ($11.65 billion), to bolster its balance sheet against the risk that the pandemic could have a more prolonged impact than it currently expects.
The raw numbers
Below you'll find the key numbers from Toyota's report for both the fourth quarter and the full fiscal year. Note that like many Japanese companies, Toyota's fiscal year begins on April 1. The quarter that ended on March 31, 2020, was the fourth quarter of its 2020 fiscal year.
|Metric||Fiscal Q4 2020||Change (Decline) vs. fiscal Q4 2019||Fiscal 2020||Change vs. fiscal 2019|
|Revenue||7.099 trillion yen||(8.4%)||29.930 trillion yen||(1%)|
|Operating income||384 billion yen||(27.5%)||2.442 trillion yen||(1%)|
|Operating margin||5.4%||(1.4 pp)||8.2%||no change|
|Net income||63.1 billion yen||(86.3%)||2.076 trillion yen||10.3%|
|Net income excluding one-time items||368.3 billion yen||(16.9%)||2.114 trillion yen||(2.9%)|
Average exchange rates from Jan. 1, 2020, through March 31, 2020, were:
- 109 yen per U.S. dollar, versus 110 in the year-ago period.
- 120 yen per euro, versus 125 a year ago.
And for the year ended March 31:
- 109 yen per U.S. dollar, versus 111 in fiscal 2019.
- 121 yen per euro, versus 128 in fiscal 2019.