Tetsuya Otake

Hello, everyone. Welcome to the Financial Results Conference Call for the Fiscal Year 2014 Third 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. Miho Kamizaki [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. Kamizaki [ph] 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 plans and expectations, and our actual results 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 homepage. Now I'd like to turn the call over to Mr. Otake.

Hello, everyone. Thank you for joining us today. This is Tetsuya Otake. I'd like to discuss Toyota's financial results for the 3 months ended December 2013. Let me begin with Slide 5. Our consolidated vehicle sales for the third quarter of this fiscal year increased by 204,000 units to 2,317,000 units year-on-year. In Japan, sales increased by 64,000 units to 540,000 units. This was due to the drop of sales after the expiry of the eco car subsidies in the same period of the previous year in addition to the improving economic infringement. In North America where the new car market continued to be solid, sales increased by 60,000 units to 664,000 units, driven by RAV4, Camry and Tundra, in particular. In Europe, new model of Corolla, Auris and the Auris Hybrid contributed to sales increased by 32,000 units to 223,000 units. In Asia, the sales decreased by 6,000 units as a result of the expiry of the tax rebate for first-time buyers in Thailand, but despite the sales increased in Indonesia due to the successful launch of the new Agya. In other regions, the sales increased by 54,000 units was mainly driven by Central and South America and the Middle East. As shown on the right side of the slide, our consolidated vehicle sales for the 9 months ended December 2013 increased by 156,000 units to 6,785,000 units from the same period last year. Please, see Slide 6. Our consolidated financial performance for the third quarter resulted in net revenues of JPY 6,585,000,000,000; operating income of JPY 600.5 billion; pretax income of JPY 678.9 billion and net income of JPY 525.4 billion. Now I'd like to hand the rest of today's presentation over to Ms. Kamizaki, our interpreter.

Next, using Slide 7, I would like to explain the major factors impacting net income. Net income for the third quarter was JPY 525.4 billion, up JPY 425.5 billion compared to the same period last year. The left side of the slide shows the major factors which impacted operating income. In addition to the impact of the weaker yen, operating income increased due to marketing efforts such as increased vehicle sales and cost reduction activities through collaboration with our suppliers. As summarized in Slide 8, our consolidated financial performance for the 9 months ended December 2013 resulted in net revenues of JPY 19,122,500,000,000; operating income of JPY 1,855,900,000,000; pretax income of JPY 2,022,400,000,000; and net income of JPY 1,526,000,000,000. For your information, Slide 9 summarizes the major factors which impacted net income for the 9-month period ended December 2013. Net income increased by JPY 877.9 billion to JPY 1,526,000,000,000. This was due to our efforts in cost reduction and marketing in addition to continued yen depreciation. Next, with Slide 10, I would like to explain operating income for the third quarter by region. In Japan, operating income grew as a result of favorable foreign exchange rate, increased vehicle sales and improved model mix. In North America, operating income increased sharply from the same period last year, which included the recording of settlement costs related to the U.S. class action litigation. Increased vehicle sales improved model mix, and progress in cost reduction also contributed to the growth of operating income year-on-year. We secured positive growth of operating income in Europe and Asia. For your information, Slide 11 summarizes operating income for the 9 months ended December 2013 by region. As shown, all regions secured positive growth of operating income. Next, please, see Slide 12 for financial services. Operating income, excluding interest rate swap valuation gains and losses for the third quarter, increased by JPY 12.2 billion to JPY 80.2 billion. This was mainly due to increased lending balance and translational impact of the weaker yen, which more than offset the negative impact from decreased lending margins. Please, refer to Slide 13. Equity in earnings of affiliated companies for the third quarter was JPY 89.2 billion, up JPY 31.0 billion from the same period last year. This was mainly due to strong earnings by our affiliated companies in Japan and China. For your information, the fiscal year end of our affiliated companies in China is in December. Equity in earnings of these companies for the third quarter, therefore, reflected their earnings from July to September 2013. Now I'd like to move on to discuss our outlook for the full fiscal year ending in March 2014. Please, see Slide 15. With regard to our consolidated vehicle sales for the current fiscal year, we maintain our November forecast of 9.1 million units. In Japan, where the orders and sales of new models, such as Harrier, Noah and Roxy [ph], and hybrid vehicles have been particularly solid, we now revise our sales expectation to 2.28 million units, up 50,000 units from our November forecast. We will continue to work closely with our distributors to deliver as many vehicles as possible to our customers. In overseas markets, on the other hand, we now expect 50,000 fewer vehicle sales than our November forecast in consideration of the recent changes in new car demand. We intend to monitor the market conditions in each country closely and implement effective marketing measures accordingly. Please, see Slide 16. We revise our foreign exchange rate assumption to JPY 100 to the dollar and JPY 140 to the euro from January 2014 onwards. On a full year basis, this implies JPY 100 to the dollar and JPY 134 to the euro. Based on this revised currency assumption, our forecast of consolidated financial performance for the current fiscal year is now: net revenues of JPY 25,500,000,000,000; operating income of JPY 2,400,000,000,000; pretax income of JPY 2,530,000,000,000; and net income of JPY 1,900,000,000,000. Now, please, see Slide 17 for further analysis of our latest operating income forecast in comparison to our November forecast. We revised our operating income forecast upward by JPY 200 billion to JPY 2,400,000,000,000. This is due to the progress in our recent profit improvement activities through cost reduction and marketing efforts in addition to the change in our assumption of the foreign exchange rates to reflect the trend of yen depreciation. Finally, as shown on Slide 18, we revised our forecast of CapEx and depreciation expenses. This largely is a result of our revised foreign exchange rate assumption. This concludes my presentation on our fiscal results for the fourth quarter (sic) [third quarter] of the current fiscal year ending in March 2014. Thank you very much for your attention.