Tetsuya Otake

Hello, everyone. Welcome to the financial results conference call for the fiscal year 2014 first quarter. I am Nobukatsu Takano [ph], from the Accounting division of Toyota Motor Corporation. Today, we have Mr. Tetsuya Otake, Managing Officer in charge of the Accounting Group of Toyota Motor Corporation; and Ms. Keiko Morita [ph], our interpreter, with us. The agenda of today's conference call is as follows. First, Mr. Otake will briefly discuss the highlights of Toyota's earnings results. And then Ms. Morita will take over the rest of the presentation. This will take about 10 minutes. After the presentation, you are welcome to ask questions. Please note that the presentation contains forward-looking statements that reflect our current expectations, and our actual result may be materially different from these statements. A complete cautionary statement concerning forward-looking statements is included on Page 2 of today's presentation material, and a complete cautionary statement concerning insider trading is included on Page 3. Both of the statements can be downloaded from our Internet homepages. Now I'd like to turn the call over to Mr. Otake.

Thank you for joining us today. This is Tetsuya Otake. I would like to discuss Toyota's financial results for the 3 months through June 2013. Please see Slide 5. Our consolidated vehicle sales for the first quarter of this fiscal year decreased by 37,000 units to 2,232,000 units compared to the same period last year. In Japan, where the new Crown, which was launched in December 2012, and the new Lexus IS, which was fully renewed in May, are being extremely popular. Our sales, nevertheless, decreased from the first quarter of the last fiscal year, when the eco cars subsidies boosted demand. In North America, on the other hand, where the new car market has been solid, our sales have been growing, driven by RAV 4 and Avalon, among others. In Europe, our sales decreased as a result of the sluggish market. In Asia, our sales decreased as well, mainly as a result of declined sales in China, a slowdown of the economy in India and the expiry of the first-time car buyer tax rebate in Thailand. For your information, the fiscal year end in December in China. Hence, the first quarter results for China represents the period from January to March 2013. In other regions, sales increased due to solid sales in Central and South Africa -- America, the Middle East and Africa. Please see Slide 6. Our consolidated financial performance for the first quarter resulted in net revenues of JPY 6,255,3,000,000, operating income of JPY 663.3 billion, a pretax income of JPY 724.1 billion, and a net income of JPY 562.1 billion. And now I'd like to hand the rest of today's presentation over to Ms. Morita, our interpreter.

Next, using Slide 7, I would like to explain the major factors impacting net income year-on-year. Net income for the first quarter increased by JPY 271.8 billion to JPY 562.1 billion, compared to the first quarter of the previous fiscal year. The left side of Slide 7 shows the major factors that impacted the operating income. Operating income increased due to the impact of foreign exchange rates, as well as our global effort for profit improvement through cost reduction activities, such as the company-wide VA, and through marketing activities, such as enhancement of the model mix and pricing. Next, with Slide 8, I would like to explain operating income for the first quarter by region. As you can see, operating income increased in each of the regions. In Japan, operating income increased substantially due to the favorable foreign exchange rates and profit improvement activities, despite increasing R&D and other expenses. In North America, operating income improved, thanks to increased vehicle sales and cost reduction efforts. In Asia, we secured positive growth in operating income with lower vehicle sales, mainly as a result of cost reduction efforts. Next please look at Slide 9 for financial services. Operating income, excluding valuation gains and losses related to interest rate swaps for the first quarter, was JPY 78.2 billion, up JPY 8 billion from the previous year. Although the lending margin decreased and the costs related to loan losses and residual value losses increased, operating income grew as the lending balance grew, mainly in North America and Asia. Please refer to Slide #10. Equity in earnings of affiliated companies for the first quarter was JPY 89.9 billion. This represented an increase of JPY 18.5 billion year-on-year, thanks to the strong financial performance of affiliated companies in Japan. Next, let me move on to discuss our outlook for the full fiscal year to March 2014. And for that, please look at Slide 12. With regard to our projected consolidated vehicle sales for the full fiscal year, while taking into account the slowing down in markets and increased competition in Asia and other regions, we maintain our May forecast of 9.1 million units, representing an increase of 229,000 units year-over-year, reflecting sales growth in Japan. In Japan, we plan to capitalize on the demand growth supported by improving consumer sentiment by introducing attractive new models into the market. In overseas markets, despite uncertainty over some parts of the emerging markets, we plan to increase vehicle sales by actively stimulating demand with introduction of the new Corolla in North America and Europe and the new compact cars dedicated to the emerging markets. Please look at Slide 13. As a result, and based on the actual foreign exchange rate for the first quarter, we revised our forecast of consolidated financial performance for the current fiscal year as follows: net revenues, JPY 24 trillion; operating income, JPY 1,940,000,000,000; pretax income, JPY 2,030,000,000,000; and net income, JPY 1,480,000,000,000. Please note that we maintain our assumption on the foreign exchange rates of JPY 90 to the U.S. dollar, and JPY 120 to the euro from July onwards. On the full year basis, based on the actual exchange rates for the first quarter, we are assuming JPY 92 to the U.S. dollar and JPY 122 to the euro. While paying close attention to the conditions in each market and taking measures flexibly in response, we plan to continue our efforts to improve the company's profit structure. Finally, please look at Slide 14 for our revised forecast of CapEx, depreciation expenses and R&D expenses, based on the revised Forex rate assumption. This concludes my presentation on the financial results for the first quarter. Thank you very much for your attention.