Toyota's FY 2012/13 net profit more than triples to JPY962 bil.

Q4 and FY 2012/13 results

Toyota today (8 May) released its financial results for the fourth quarter (January-March 2013) and full fiscal year (FY) 2012/13. In the fourth quarter, its consolidated net profit surged 159.4% year-on-year (y/y) to nearly JPY314 billion (USD3.2 billion), compared with JPY121 billion in the corresponding quarter of the previous FY. Operating profit also more than doubled to JPY502.3 billion during the quarter, on sales of JPY5.84 trillion, up 2.3% y/y. For the full FY, Toyota's net profit rose dramatically, more than tripling to JPY962.1 billion. The automaker reported an operating profit of JPY1.32 trillion during the period, also more than triple the JPY355.6 billion recorded in the previous FY – and the first time it has breached the trillion-yen mark since posting a record JPY2.27 trillion on the eve of the financial crisis five years ago. The jump in operating income was mainly due to increases in both unit sales and cost-reduction efforts. Positive effects from marketing activities generated JPY650 billion, while cost-reduction efforts and favourable currency fluctuations saved nearly JPY450 billion and JPY150 billion, respectively, for the automaker. Revenues rose 18.7% during the FY to more than JPY22 trillion as unit sales increased by nearly 1.52 million units to 8.87 million vehicles worldwide.

Commenting on the results, Toyota president Akio Toyoda said, "In the fiscal year ended March, we experienced increased sales of our vehicles mainly in North America and Asia, and, coupled with the results of companywide profit improvement activities, we booked operating income of 1.32 trillion yen. We have faced many challenges since 2009 but have learned valuable lessons, including the need for Toyota to maintain sustainable growth. We believe that the driver for sustainable growth is ultimately ever-better cars, and we are launching cars developed with this mindset. We are also making progress in reforming our manufacturing technologies and vehicle development processes under the Toyota New Global Architecture and I am convinced that the positive cycle defined for our business in the Toyota Global Vision is now gradually but steadily taking shape."

FY 2013/14 forecast

For the FY that ends in March 2014, Toyota forecasts an operating profit of JPY1.8 trillion and net income of 1.37 trillion, on consolidated revenues of JPY23.5 trillion, projecting its global vehicle sales to rise by nearly 229,000 units to 9.1 million, mainly on higher overseas volumes. Toyota has assumed average exchange rates during the FY staying at JPY90:USD1 and JPY120:EUR1 when arriving at these new forecasts.

Outlook and implications

Toyota's robust financial performance during the recently concluded FY came after the world's largest automaker ended the final quarter strongly, posting its fifth straight quarterly gain, spurred mainly by solid sales in Asia and North America and a dramatically weakening yen that depreciated nearly 20% against the US dollar since mid-November 2012, thanks to deflation-busting policies adopted by Japan's five-month-old government. Toyota's full FY net profit comfortably beat its own forecast of JPY860 billion issued earlier this year (see Japan: 5 February 2013: Toyota's Q3 net profit increases 23.5% y/y, FY 2012/13 profit outlook raised). In the wake of its strong showing in the final quarter of the FY, Toyota continued to enjoy a lead over rivals General Motors (GM) and Volkswagen (VW) in terms of global sales in the first quarter of 2013 (see World: 24 April 2013: Toyota leads global vehicle sales in Q1).

A regional breakdown of Toyota's unit sales reveals major gains in all of its operating regions, including Europe, during FY 2012/13. In Japan, its second largest market after North America, sales revenues rose nearly 15% to JPY12.8 trillion as unit sales rose by nearly 208,000 vehicles to 2.28 million, boosted mainly by strong demand for its Prius and Aqua hybrids, particularly in the first half of the FY, before the government's "eco-car" tax subsidy programme expired in September 2012. In North America, revenues surged 32.3% to JPY6.28 trillion as unit sales jumped by 596,381 vehicles to nearly 2.47 million. In Europe, revenues increased 4.5% to more than JPY2 trillion as unit sales increased by 1,092 vehicles to just over 799,000 units. In Asia, revenues jumped 31.5% to JPY4.38 trillion as unit sales surged by nearly 356,750 units to 1.68 million units, despite the weak demand in China in the second half of the FY, which was offset by strong sales in Southeast Asia, particularly Thailand and Indonesia. In Central and South America, Oceania, and Africa, revenues increased 19% to JPY2.09 trillion as the automaker sold 1.64 million units, a surge of 356,516 units.

The latest results largely indicate Toyota's continued progress after it bounced back with stronger-than-expected results in FY 2011/12, shrugging off a firm yen and supply disruptions from natural catastrophes in Japan and Thailand (see Japan: 9 May 2012: Toyota's FY 2011/12 Net Profit Slides 30.5% Y/Y Despite Fivefold Jump in Q4 Profit). Although Toyota has had to shell out significant amounts of money in settling various lawsuits in the United States related to its recall saga over unintended acceleration issues back in 2010, these expenses were partially offset by robust sales in North America, which emerged as its fastest growing market globally last FY. Pent-up demand for newly refreshed models such as the Avalon full-size sedan and RAV4 compact sport utility vehicle (SUV) is fuelling Toyota's North American sales. Toyota emerged as the largest gainer among the bigger players in the US market during 2012, managing a 27% increase in sales volumes to 2.082 million units.

Toyota's cautious net profit projection for the current FY is lower than industry estimates. Although the automaker expects the weakness of the yen against other major currencies to continue for some more time, it faces fiercer competition in the United States and falling demand in China. Toyota's market share in the United States has fallen to a 15-month low amid a resurgence in the truck market, which mainly benefits US automakers, and its deliveries in China have fallen for three straight quarters. Toyota does not expect its Chinese sales to recover fully before the third quarter of this year as consumers' antipathy towards Japanese brands continues. Although Toyota relies less on Europe than VW, GM, Ford, or Hyundai, it still faces the prospect of a protracted slowdown in that region, where car sales are heading towards a 20-year low. That said, having unveiled a major shake-up of its organisational and management structure and a new multi-faceted production strategy recently, Toyota looks set to take its operations to the next level.