Taro Takado - IR Takuo Sasaki - Managing Officer

Steve Usher - Japaninvest Margaret Moore - DuPont Capital Management Kurt Sanger - Deutsche Bank Ben Moyer - BlackRock James Irwin - Moon Capital John Buckland - MF Global

Hello everyone, thank you for joining us today. I am Taro Takado, Member of Public Affairs & Investor Relations of Toyota Motor Corporation. I would like to welcome you to the fiscal year 2010 third quarter financial results Conference Call. I am joined by Mr. Takuo Sasaki, Managing Officer of Toyota and our Narrator Ms. (inaudible). Today's conference call consists of two parts, first Mr. Sasaki will discuss the highlights of Toyota's earnings results and Ms. (inaudible) will take over the rest of the presentation. At the conclusion of the presentation we will open for your questions. We expect that the entire call will last approximately an hour. Also please note that the following presentation contains forward-looking statements that reflects our plans and expectations and our actual results maybe materially different from those expressed by these forward-looking statements. A complete cautionary statement with respect to forward-looking statements is included in page 3 of today's presentation material. In addition, a complete cautionary statement with respect to insider trading is included in page four of today's presentation material, which again can be downloaded from our internet homepage. Now I would like to turn the call over to Mr. Sasaki.

Hello everyone. My name is Takuo Sasaki, the Managing Officer of Toyota Motor Corporation responsible for finance and accounting. Thank you for joining us today. I'd like to discuss Toyota's financial result for the third quarter or the fiscal year ending March 2010. Our consolidated vehicle sales for the third quarter reached to 2,065,000 up 227,000 vehicles from the same period last year as a result for customer demand for our wide range of environmentally friendly particularly hybrid vehicles including Prius and Lexus HS250h. The right side of the slide shows our consolidated vehicle sales for the nine months ended December 2009. The results were down 894,000 vehicles from the same period last year, which is adverse market conditions to rectify the global financial crisis, many during the first half of the fiscal year. The value used for the third quarter is ¥90 against the US dollar, and appreciation of ¥60 compared to the same period last year. And ¥133 against the Euro a depreciation of ¥60 compared to the same period last year. Our consolidated financial performance for the third quarter resulted in net revenues of ¥5,292.9 billion, operating income of ¥189.1 billion a pre-tax income of ¥224.9 billion and net income of ¥153.2 billion. Now I would like to hand the rest of today's presentation over to the moderator.

Just after impacting our net income, compared to last year our net income increased by ¥317.9 billion to a ¥153.2 billion. The list side of this slide shows the major factors that impacted operating income. As you can see operating income increased by ¥549.7 billion as a result of the improved sales volume and mix by ¥210 and reduction of the variable cost by a ¥150 billion and of the fixed cost by ¥80 billion. Slide seven summarizes our consolidated financial results for the nine months till December 2009; net revenues of ¥13,670.5 billion, operating income of ¥52.2 billion, pre-tax income of a ¥161.9 billion and net income of ¥97.2 billion. Please see slide eight for the major factors influencing our net income for the nine months. Next I would like to discuss the progress of our emergency profit improvement activity. At our second quarter results announcement in November last year, we communicated that we had identified ¥1,250 billion equivalent of improvement for the full year. Having continued our [serious] company-wide efforts since we managed to achieve ¥1,210 billion in improvement in the nine months till December, 2009. Our progress has been just exceeding our plan and it is our intention to accelerate our efforts further. Our company-wide [serious] efforts have resulted in a total of ¥1,210 billion in improvement in the nine months till December 2009. Our progress has been just exceeding our plan and it is our intention to accelerate our efforts further. With regards to our operating income by region, we achieved year-on-year improvement in all regions for the third quarter. In Japan improvement or a parent company's operating performance made positive contribution. In North America, we increased operating income, thanks to the recovering trend of market and our improved earnings from the financial services. In Asia and other regions where we had strongest sales in Thailand, Taiwan and India remains seeing the high level of earnings. For the nine months till December 2009, our operating income by region was as summarized in slide 11. Next, let me discuss our operating income for the financial services business. Operating income excluding interest rate swap valuation gains or losses increased by ¥73.5 billion to ¥69.2 billion. This was due to the improved lending margins as a result of decreased expenses, related to loan losses and residual losses and declining funding cost mainly in the United States. We plan to improve earnings from financial services, while applying adequate risk control. Equity in earnings of affiliated companies for the third quarter about ¥58.4 billion up ¥56.1 billion from the same period last year. This was due to improved earnings of affiliated companies in Japan and China. For the nine months ending December 2009, equity in earnings in affiliated companies declined year-on-year due to the valuation losses on our shareholding certain affiliated companies, which had been posted in the second quarter. For your reference slide 14, summarizes unconsolidated financial results for the third quarter. We resulted in net revenue of ¥2,439.9 billion, operating loss of ¥20.2 billion, ordinary income of ¥23.1 billion and net income of ¥24.7 billion. Our unconsolidated net income increased by ¥31.1 billion to ¥24.7 billion mainly due to the reduction of variable and fixed cost. Please refer to slide 16 for our unconsolidated financial results for the nine months through December 2009. Major factors affecting the nine months and consolidated net income are shown in slide 17. Next, I'd like to discuss our outlook for the full fiscal year ending March 2010. We revised our consolidated legal sale target by a 150,000 vehicles from 7.03 to 7.18 million vehicles. This reflects our stronger than expected sales results in the third quarter. We revised our consolidated financial forecast for the full year as follows adapting a foreign exchange rate assumption of ¥90 against US dollar and a ¥125 against Euro for the final quarter. Net revenues for ¥18,500 billion operating loss of ¥20 billion pre-tax income of ¥90 billion and net income of ¥80 billion. Please see slide 21, analyzing the main factors behind our revised consolidated operating income forecast. Our Emergency Profit Improvement activities have been progressing faster than our earlier plan as a result of the upwardly revised outlook of our vehicle sales and the concerted efforts of our suppliers and employees for variable and fixed cost reduction. We now expect our ¥1,590 billion up ¥340 billion from the target that was announced earlier. We will continue to be committed in promoting these activities to further improve our earnings prospects. Please note that our revised forecasts include the professional impact of our recent recall of accelerated pedals on earnings and vehicle sales as far as we could estimate at this point in time. For your information please also see slide 22 for comparison between our revised forecast and previous years result. The ¥440 billion improvement in operating income was supported by reduction on variable and fixed cost to our emergency profit improvement activities which exceeded the negative impact of unfavorable foreign exchange rate and the decline in sales volumes and mix. Lastly, we also revise our full year forecast for a capital expenditures and R&D expenses. We’ve been pursuing CapEx efficiently by maximizing the use of unemployed and idle facilities and excess growth in stock. Further efficiency in use of R&D expenses have been also achieved. This concludes Toyota's presentation on the third quarter results and the full year. Thank you very much for your attention.

Thank you Mr. Sasaki and moderator. During the Q&A session we will have consecutive interpretation for questions and answers in both Japanese and English. I would ask to limit the number of your questions to three questions each. Now our conference call operator would explain how to connect your line.

Before receiving questions and giving responses to those questions, I would like to make one statement in advance that relates to the expected estimate of the limited impact on earnings spending from the expenses relating to accelerated pedal. I earlier mentioned that expenses related to the measure to be implemented addressing accelerated that are issued is already factored in to the full year projection. So, I would like to explain to you how that is incorporated because we have received various questions and therefore let me respond to that in advance. As assumptions for the performance forecast we estimated likely impact of that to the extent that we could make such estimation at this pointing time of the measures addressing this is relating to [floor map] and accelerated pedals whose implementation has been already determined for various reasons. To be more specific we incorporated approximately ¥100 billion as quality related expenses which is evenly allocated to the third and fourth quarters and therefore one half approximately of that is allocated to the third quarter and the remaining half to the fourth quarter. A furthermore we incorporated about ¥70 billion to ¥80 billion in to the fourth quarter forecast as the likely impact on sales and others. The impact on sale and others stems from the fact that we esteemed that the unique sales may be negatively impacted to the tune of approximately 100,000 units globally and at the same time in addition to that we added some additional expenses which may be expected to be taken in response to our customer in (inaudible) or in addressing customers request. If I may just repeat although the numbers that I have just cited the assumptions used in preparing for your forecast and therefore the actual impact may be different from the assumption of that we are using this time. Anyways we will be making maximum all out efforts in restoring of the confidence and trust of customers early and that in turn I believe would help minimize the reduction in the sales unit. At this juncture I would like to start receiving the question.

(Operator Instructions). We'll take our first question from Steve Usher with Japaninvest. Steve Usher - Japaninvest: Good evening and thank you very much for this call. I just have two questions, first of all could you please comment on the cost associated with the closure of NUMMI and are those, I don’t want to imagine those are including the recall cost so if you could please give us a bit more detail on that. My second question is could you please talk about the profitability's in China and included in that question could you comment on the recall costs in china, you had a number of recall, recall thus far this year and if you could give us a bit more detail on those costs I'd appreciate it. Thank you very much.

With respect to NUMMI as the production moved towards the completion and final closure, there maybe the possibility of that operation may lapse in stability going forward. And in order to assure stable delivery of Corolla's and Tundra's for which demands are very high. Without causing any troubles or consent I want the part of customers we will incur a second cost. And those cost and expenses are in the reasonable extent incorporated and booked on the third and fourth quarters. However, when it comes to specific amount involved, please accept my statement that I would like to refrain from mentioning those numbers. With respect to China we actually recalled 75,000 units of RAV4 and therefore there are certain recall related expenses or cost. It is not a very significant amount, although I cannot cite any specific number in relation to that. Please do understand, that recall cost related to China is incorporated in the [unmet] number I cited earlier the number such as ¥100 billion, for example. Anyway, please do understand that the census related to China is not significant amount. With respect to the market in China, we expect that market is likely to grow very substantially in the fiscal year 2010 as well. For example the market in 2009 in China was slightly less than 14 million units that is to say in the higher part of 13 million units. And this year the growth of the market is likely to be even bad and then the part of Toyota, we have sold approximately 710,000 units in China and this year, we are planning to sell upper level of around 800,000 units. We believe our Chinese market is of course the market with a very strong and high potential over a medium long term. Steve Usher - Japaninvest: Thank you very much, could you comment on the profitability in China? And is the profit contribution to equity earnings in Q3 and as far in this fiscal year?

During the three months of the third quarter in the equity method profit, the profit-related to our Chinese business is included and through the tune of between ¥20 billion to ¥30 billion and in addition to that we do have a process from Chinese subsidiaries as well as profits and by delivering parts and [recall] from Japan, and therefore during the three months, the third quarter we booked approximately ¥70 billion in profit, Chinese business. Allow me to correct earlier statement I earlier mentioned that the profit from Chinese business is included to the profits accounted for by equity methods to the tune of between ¥25 billion to ¥30 billion. Actually, that amount included in the equity, net of profit was actually less than ¥25 billion, but the profit-related Chinese business is about ¥70 billion as I mentioned earlier.

Margaret Moore with DuPont Capital Management, please go ahead. Margaret Moore - DuPont Capital Management: Thank you for the call. The first question is I was wondering if the recall cost includes the most recent announcement of problems with the (inaudible) and if not, do you have any estimate at this time for what the annual inventory cost for that would be. My second question is regarding the financial services. In your assumptions for the financial services business, are you now revisiting [lease sales value] functions in the guidance process?]

First of all with respect to this year it appears it has not been clearly identified what sort of improvement on the [ratio] measure specifically are going to be implemented and therefore any cost relating to the [players] is not incorporated in the forecast I mentioned earlier. Regarding of the resale price of used vehicles it's very difficult to forecast where those prices are likely to be. However, I earlier sighted that the likely impact on sales of about ¥70 billion to ¥80 billion and a part of that includes the risk of possibly reduced value of used cars. Thank you.

And we'll take our next question from Kurt Sanger with Deutsche Bank. Kurt Sanger - Deutsche Bank: Hi this is excellent. Thank you for the call. Two questions, one on the North America profit for the third quarter excluding valuation gains you have ¥69.7 billion. Can you give us a rough idea of how much was the finance business and how much was with the order business of that?

Please give us a moment.

In the third quarter excluding interest rate flock related earnings the profit of North America where the ¥69.7 billion and of that about ¥50 billion are related to the financial services or gains from TMCC. Kurt Sanger - Deutsche Bank: The second question what fund is on the domestic market, the sales in Japan have been extremely strong helped by the government consensus that certainly helped your parent company and domestic production levels over the last quarter. Just looking into next year after the incentive program and in September what is your view of the domestic market and I am more concerned about the domestic production levels going forward. Thank you.

As we've just mentioned in September, the domestic subsidy regarding environmental friendliness will expire. However that's only one aspect of those incentives. The ecological or environmental friendly [test brake] will last a little longer up until 2012, and as I mentioned just the part of that provided its ecological subsidy expired in September, and therefore we are also concerned about the potential decline in demand in October this year. However, at the same time, the markets in other regions of the world are recovering and will start to recovering further and therefore we are hoping that above the stronger market recovery in the regions of the world, outside of Japan would be able to cover and make up for potential decrease in demand here in Japan. Kurt Sanger - Deutsche Bank: Okay thank you. The impact has been to help shrink the parent losses to only ¥20 billion in the third quarter. Would you be hopeful that the parent company could actually break even next year?

The plan for the next fiscal year is something that we are working on right now and therefore its very difficult for me to answer either way, and especially when you talk about parent company there is another factor that it’s a the exchange rate may fluctuate quite significantly from what is it today. And therefore, all I can say at this point is that we'll make a very serious effort so that, we can breakeven. And this year on a standalone basis or at the parent company basis earnest efforts are being made to reduce that fixed cost for example and therefore comparing to this situation in the past, we have a prior stronger fundamental capabilities which allows us to make earnings even at the current exchange rate level. And therefore, we need to make of course even further efforts going forward for next year as well.

And, Ben Moyer with BlackRock. Please go ahead. Ben Moyer - BlackRock: Yes hi. Thanks for the call. I had a question about your volume assumption for the fourth quarter and the impact of the recall. You said that you anticipated a 100,000 unit impact? I'm assuming that at the retail level are you assuming that the wholesale volume will be impact at the same amount or by a lesser or larger amount. That’s the first question.

Basically speaking I think you will be able to understand the impact on the wholesale is in line with about the same level as that on the retail level. And formulating the consolidated, the full year forecast of the volume assumption was made on that basis. Ben Moyer - BlackRock: Okay and this is kind of a follow up to that I am curious how you came up with this 100,000 units estimate. It looks like if we look only at north America and we look at the run rate in north America through the end of the third quarter our 100,000 unit drop in the fourth quarter would imply about a 20% drop from the run rate through the end of the third quarter and that is only at north America so it just seems to me that its possible your assumption of 100,000 unit impact may be a little bit too conservative, in other words the impact could be larger than 100,000 units that is just my impression I wonder if you could comment on that.

I earlier mentioned that the impact globally could be 100,000 units and for North America, we estimated impact to be around 80,000 units and in the remaining areas, specifically Europe and others of 20,000 units. So 80,000 North America, and 20,000 Europe and other regions are totaling 100,000 units, but this is the estimates been made for the purpose of formulating the full-year projections to the used as an assumptions for that. And as I mentioned earlier, the actual impact maybe potentially different from those assumptions I've just mentioned. So rather than being able to describe how we have arrived at those numbers, let me just say that estimation was made by soliciting opinions and views of those people as the forefront of sales. On (inaudible) say those before at the forefront of sales we’ll be making every possible efforts in order to keep those impact on volume to be at the minimal possible level and they are working hard in order to regain trust and confidence of the customers and therefore, the actual results arise is maybe different from those assumptions I have just mentioned. Ben Moyer - BlackRock: Okay. And then my other question is more about the recall and the problems that have been mentioned n the press continuously for the last two weeks or less than two weeks. I’m not sure but it seems a lot of focus is now being put on the electronics in the vehicles and some people believe that there could be an electronic problem. Toyota had so far said that there is no electronic problem, and I believe they seem to saying that with a lot of confidence. And I'm just wondering if you could tell us something about why you are so confident that the problem is not electronic?

Not being an engineer myself all I can do in respond to your question is to convey what I have heard from engineers or engineers' opinion. Now Toyota's engineers said that the electronics total control system has many layers of redundant sales type mechanism and systems incorporated. And therefore there has not been any fact that have been confirmed that certain unintended acceleration are caused by electronics total control system that’s what I heard. And I simply cannot mention any more specifics than what I had just mentioned.

And, James Irwin with Moon Capital. Please go ahead. James Irwin - Moon Capital: The last question was focused on what I had the same issue on your methodology on 100,000 hit from on the sales side. I did have one follow-up on that though and that's simply if we looked at your sales results in United States in January and we looked at the sales level in the first 20 days, versus the underlying sales level in the last 10 days of the month what was the actual hit now in terms of that sales run rate and like the prior caller I thought that the 100,000 unit was a potentially low number in terms of the real impact here just based on the market share trends. May be I am missing something can you share with me what happened in the last 10 days of January in terms of US sales rate? Thank you.

I'm sorry I can't give you any specific answer because I don't have those specific numbers with me at this moment, but one thing I can say is that this very last week of January includes the weekend that is Saturday and Sunday and on the 26th of January, the announcement was made at the start of the sales, and so the impact on sales was clearly observed in the last week because of that. And well rather than trend of the last week continuing on into the future, since the announcement of counter measures and implementations, therein was made on the 1st of February, dealers have been making all out efforts fixing the vehicle currently used by the customers. And then moving onto modifying the vehicles and the inventory, since subsequent to that, and that will result in the redemption of sales going forward, and therefore I must (inaudible) it is appropriate for simply to extrapolate the figure of the sales of the last week of January into the future. James Irwin - Moon Capital: Thank you. I would agree to that, but directionally we have in the US Congress, a couple of hearings coming up in February relating to the [NXTS] and the recall issues, and from a communication standpoint as Ben Moyer mentioned there is a lot of confusion and negative press startup there in the market place and again two big congressional hearings coming up in February. As of today has not too early have identified the fix and is implementing it has Toyota plan to embark on a significant public relations or advertising campaign to address a lot of a negative commentary that’s being put out there regarding the (inaudible) or is that still to be determined?

As I mentioned earlier, now that we have identified the problem we are making all our efforts in adjusting and fixing this problem. And first the primary focus is to restore confidence and trust of those customers (inaudible) who have been moving towards the (inaudible) thus far. And that will be the first measure that needs to be implemented and that will be implemented. Now about the news and media coverage's and press reports what total public relations efforts need to be made was included in the question. And of course that is something that we need to consider implementing some counter measures at the corporate level but for me it’s a bit difficult to give you some direct answers to that. In the auto context taking in to account the various factors that public relations campaign will be one of the options that we need to consider.

We'll take our final question from John Buckland with MF Global. John Buckland - MF Global: I just wonder if you can offer some insight into the markets as you see them, post incentives particularly in Europe but also the underlying picture for North America because its not clear to me exactly why you increased your forecast clearly you have done better up until now in terms of the sales but is that a real underlying improvement is it the funds you've benefited more than you expected to from incentives. In Europe particularly this seems to be quite a contrast in terms of forecast, for example Ford give a forecast down 15, Fiat says it could be down 12 or 16; yesterday, Volkswagen said the German market wasn’t so bad may be even European market is flat. So I am wondering if you could tell us what you think the calendar year forecast would be what your assumption for 2010 is. And in North America excluding the impact of the recall do you see the actual recovery rate improving such that you that’s what’s underlined your higher forecast there?

Let me confirm that your question regarding the management decisions in Europe and the United States. Have you raised a question regarding calendar year 2010 rather than fiscal year ending in March 2010? John Buckland - MF Global: Yes, it's a calendar year.

Actually it's a 2010, right? John Buckland - MF Global: Yes because clearly, you're right to the end of the current fiscal year, the last quarter of the old fiscal year in the first quarter of calendar year 2010, where in Europe for example, there still is the impact of incentives being felt in a particular some markets still have there and intentions in place, others are just running out, but there is still impact there. So I really what I'm trying to judge is your assumptions about what happens in Europe post incentives, so you really need to look at the whole of 2010 calendar year and then in the U.S. obviously, it's just the rate of pace of sales recovery which is of better supplies also the whole of 2010.

We've referred on higher price rates, last year government sent (inaudible) to use scrappage incentives and other measures and but the countries in which evolving centers will continue in the subsequent year are France and Italy. And in other countries all the incentives are to expire or have expired so it's quite a situation is quite different from country to country. In terms of our sales assumptions for calendar year 2010. At the retail basis our assumptions stands at 840,000 units for calendar 2010. And this contrast to the calendar year 2009 the decrease of 50,000 units so this is down 50,000 units from the actual level reached in calendar 2009.

As for the United States the market for the entire period of this year is assumed to be around 11.5 million units partly due to expected increase in productions standing from inventory adjustments made by corporate United States. And also all albeit at a very has slow [flip] there are some finds of improvement in six months in general. And further more the first half of last year was really the worst period and therefore compared with that we are assuming that we'll do some ride in the market its 11.5 million units. And with respect to the assumptions for North American sales for the calendar year this year we have already announced that we forecast about 2.19 million units of sales volume for North America. This is the assumption made prior to incorporating the impact of recall which I mentioned earlier and therefore we are constantly monitored their development in the market and its impact going forward. The assumptions for the U.S. sales is 1.97 million units.

This concludes today’s conference call should you require further information regarding today’s conference in Toyota basically you need to contact our investor relation representatives in London and New York. Their contact details were given at the end of the invitation to this conference call. Thank you again for joining us today. Good bye.