Toyota Posts Q3 Loss, Cuts Forecasts for 3rd Time

Toyota Motor Corp announced Feb 6, 2009, its consolidated financial results for the third quarter (October to December 2008) of fiscal 2008. Sales declined 28.4% year-on-year (YoY) to ?4.8028 trillion, operating loss reached ?360.6 (from the operating income of ?601.5 billion a year ago) and net loss amounted to ?164.7 billion (from the net income of ?458.6 billion). The results were significantly impacted by the market's sharp downturn. Also, Toyota announced a downward revision of its financial forecasts for the full fiscal 2008. This is the third time that Toyota has reviewed its full-term forecasts in fiscal 2008. Sales drop in all regions Sales dropped in all regions (Japan, North America, Europe, Asia and the others). Operating losses were marked for Japan, North America and Europe, and operating income decreased in Asia and the other regions. In Japan, sales fell 24.4% YoY to ?3.0141 trillion, and operating income (?389.4 billion a year ago) decreased to a loss of ?164.2 billion. The biggest factor behind the income degradation was the yen's appreciation against the US dollar and the euro, followed by the decreased production and exports and the increased expenses. On a unit basis, sales in Japan decreased YoY from the 541,000 units to 465,000 units. Sales of 1.94 million units are expected for the full fiscal 2008 (2.188 million units in fiscal 2007). In North America, sales went down 43.5% YoY to ?1.339 trillion, and operating income (of ?63.6 billion a year ago) dropped to a loss of ?247.4 billion. Income worsened due to (1) decreased production and unit sales, (2) increased expenses due to bad loans and losses on residual values of leased vehicles at the US sales financing subsidiary and (3) increased losses on revaluation of interest swap transactions, for example. Unit sales in the North American market fell from the 756,000 units a year ago to 521,000 units. Fiscal 2008 sales are estimated to be 2.07 million units (2.953 million units in fiscal 2007). Based on the fact that Toyota sold 1.879 million units during the first three quarters, the company is expecting Q4 sales to be about 200,000 units (compared with 705,000 units sold in Q4 of the preceding year). In Europe, sales declined 32.8% YoY to ?660.5 billion, and operating income (of ?34 billion in fiscal 2007) dropped to a loss of ?43.4 billion. A decrease in production and unit sales curtailed the region's income most. Unit sales fell from last year's 308,000 units to 235,000 units in Europe. For the full fiscal year 2008, 1.03 million-unit sales are expected (1.284 million units in the full year fiscal 2007). In Asia, sales went down 15.7% YoY to ?683.9 billion, and operating income fell 37.0% YoY to ?40.5 billion. Sales in Asia outperformed those in Europe in Q3. Sales in Europe had been larger than sales in Asia until the preceding Q2. The Q3 sales in Asia declined from the 241,000 units in fiscal 2007 to 222,000 units. Sales of 890,000 units are forecast for full fiscal 2008 (956,000 units in fiscal 2007). ?450 bil operating loss expected for full fiscal year According to Executive Vice President Mitsuo Kinoshita, the automobile sales environment in Q4 is becoming worse than in Q3. In light of this, Toyota lowered its financial results forecasts for the full fiscal 2008. Toyota now estimates sales of ?21 trillion (lowered from the previous estimate of ?21.5 trillion issued Dec 22, 2008, fiscal 2007 sales were ?26.2892 trillion), an operating loss of ?450 billion (lowered from an estimated loss of ?150 billion, fiscal 2007 operating income was ?2.2703 trillion) and a net loss of ?500 billion (lowered from an estimated loss of ?50 billion, fiscal 2007 net income was ?1.7178 trillion). On the other hand, the company reiterated its capital investment and R&D spending plans. Compared with its previous estimates issued December 22, 2008, the estimated operating loss was increased by ?300 billion (from an estimated loss of ?150 billion to 450 billion). Of the ?300 billion, "impacts from sales" accounted for 210 billion, and "losses on revaluation of interest swap transactions" constituted ?90 billion. Compared with fiscal 2007, operating income will have worsened by ?2.7203 trillion in fiscal 2008. "Efforts to improve initial costs" boosted operating income by ?20 billion, while "impacts from the fluctuation in exchange rates," "impacts from sales" and "increased expenses and other factors" curtailed income by ?890 billion, 1.39 trillion and 460.3 billion, respectively. This time, Toyota lowered its forecasts primarily due to a decrease in unit sales. Toyota predicted its fiscal 2008 consolidated sales to be 7.54 million units Dec 22, 2008, but lowered it to 7.32 million units. The previous estimate was dragged down by a total of 220,000 units: 70,000 units in Japan, 100,000 units in North America, 10,000 units in Europe, none in Asia and 40,000 units in the other regions.