Toyota Profits Continue To Fall

Zacks Investment Research
updated | Zacks.com

Toyota Motor Corp. (NYSE:TM) posted an 18.5% fall in profit to ¥80.42 billion ($1.03 billion) in the second quarter of fiscal year ended September 30, 2011 from ¥98.69 billion in the same quarter of prior fiscal year. On a per share basis, profits were ¥25.65 (33 cents) versus ¥31.47 in the second quarter of fiscal 2011, missing the Zacks Consensus Estimate of 52 cents.

The continuous decline in profit was attributable to a fall in production volumes and sales volumes all over the world, especially Japan, North America and Europe due to disruptions in supply of parts caused by the earthquake and tsunami in Japan on March 11, 2011.

Revenues in the quarter ebbed 5% to ¥4.57 trillion ($58.56 billion) on a 5% fall in sales volume to 1.81 million units. Vehicle sales dipped 14% to 504,780 units in Japan and 20% to 413,836 units in North America. However, it increased 3% to 186,873 units in Europe, 23% to 355,315 units in Asia, and 6% to 344,728 units in Other regions.

Operating income in the quarter nosedived 32% to ¥75.39 billion from ¥111.46 billion in the second quarter of the previous fiscal year.

Segment Results

In the Automotive segment, revenues slid 5% to ¥4.18 trillion. The segment had an operating loss of ¥7.47 billion compared with an operating profit of ¥32.97 billion in the prior fiscal year. The decrease in operating income was attributable to decreases in both production and sales volumes and the negative impact of changes in exchange rates.

In the Financial Services segment, revenues sagged 8.5% to ¥271.05 billion. However, operating profit increased to ¥76.39 billion from ¥68.60 billion in the prior-year quarter. In All other businesses, revenues appreciated 9% to ¥255.14 billion. Operating income decreased to ¥9.94 billion from ¥10.73 billion a year ago.

Financial Position

Toyota had cash and cash equivalents of ¥1.76 trillion as of September 30, 2011 compared with ¥2.08 trillion as of March 31, 2011. Long-term debt stood at ¥11.39 trillion as of September 30, 2011, reflecting a stable debt-to-capitalization ratio of 53% compared with 54.5% as of March 31, 2011.

In the first six months of fiscal 2012, Toyota’s net cash flow from operations deteriorated to ¥489.36 billion from ¥1.23 trillion in the same period of prior fiscal year, primarily driven by lower profit and a decrease in deferred income taxes. Meanwhile, capital expenditures (net) increased to ¥299.38 billion from ¥262.92 billion a year ago.

Outlook

Toyota did not provide any guidance for vehicle unit sales, net revenues and earnings for the fiscal year ending March 31, 2012. The company revealed that it needs more time to complete the examination of production and sales plans due to the impact of floods in Thailand.

Zacks Rank

Toyota is the leading automaker in the world in terms of sales and production. Its product portfolio consists of a full range of models of passenger cars, minivans and trucks as well as related parts and accessories. Its domestic competitor includes Honda Motor Co. (NYSE:HMC) and Nissan Motor Co. (NASDAQ:NSANY).

Due to the disappointing results and the absence of any sales and earnings outlook, the company retains a Zacks #4 Rank, which translates into a “Sell” rating for the short term (1 to 3 months).

(Exchange rate: $1 = ¥78.09)

 
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