Toyota Motor Corporation (NYSE: TM) said on Aug. 3 that it earned 682.6 billion yen ($6.1 billion) in operating profit in the quarter that ended on June 30.
Cost reductions and higher sales in Asia drove the result, which was 19% higher than Toyota's operating profit a year ago , and higher than the 638.74 billion yen consensus Wall Street estimate as compiled by Thomson Reuters .
CEO Akio Toyoda's cost-reduction efforts helped push Toyota's operating margin higher in the most recent quarter. Image source: Toyota Motor Corporation. That's not a typo -- his name is spelled "Toyoda" in English.
The raw numbers
Like many Japanese companies, Toyota's fiscal year begins on April 1. The quarter that ended on June 30, 2018, was the first quarter of Toyota's 2019 fiscal year.
All financial results are shown in billions of yen. Vehicle sales are rounded to the nearest thousand.
Yen per U.S. dollar, average during period
2 fewer yen per dolllar
Yen per euro, average during period
8 more yen per euro
Data source: Toyota Motor Corporation. Vehicle sales include the vehicles sold by Toyota's joint ventures in China. Ppts = percentage points.
How Toyota's business units performed
Toyota reports separate operating results for each of its regional business units as well as its captive-financing arm. Here's how each performed in the quarter that ended on June 30, 2018.
- In its home market of Japan, Toyota's operating income rose 23.8% from a year ago, to 396.1 billion yen. Toyota's sales in Japan actually fell 6.3%, but a rise in exports, along with an ongoing cost-reduction campaign, helped boost its operating result. Toyota's operating margin in Japan was a very strong 10.2%, up from 8.7% a year ago.
- In North America, Toyota's operating income fell 11.8% to 78.3 billion yen, and its margin fell to just 2.8% from 3.3% a year ago. While Toyota's sales in the region rose 3.2% to about 746,000 in the quarter, the company's spending on incentives -- particularly on its important sedan models -- also rose significantly, squeezing its profit margin.
- In Europe, Toyota's operating income rose 12.7% to 23.1 billion yen. Sales rose 5.4% to about 253,000, and its operating margin rose 0.2 percentage points to 2.9%. Toyota said "a reduction in expenses" helped improve its margin.
- In Asia (excluding Japan and Toyota's joint ventures in China), operating income rose 38.3% to 142.2 billion yen on an 8.5% increase in sales (to about 394,000).
- In China, equity income from Toyota's joint ventures with Chinese automakers fell 9.8% from a year ago, to 27.5 billion yen. Toyota's income declined despite an 8.7% increase in sales (to about 324,000), a result of competitive pricing pressures.
- Toyota's "rest of the world" region includes Latin America, Oceania, Africa, and the Middle East. Here, Toyota's operating income rose 3.8% to 41 billion yen, despite a 3.5% decline in sales (to about 333,000). Cost cuts helped boost Toyota's operating margin in the region to 6.9% from 6.5% a year ago.
- Toyota's financial services unit earned 82.2 billion yen, up 9.5% from a year ago. More loans, a lower percentage of loan losses, and improved residual values (the values of vehicles returned when leases end) all helped boost profit.
Also of note: In June, Toyota announced a $1 billion investment in a Singapore-based ride-hailing company, Grab Taxi Holdings.
Looking ahead: Toyota slightly lowered sales guidance
Toyota slightly lowered its full-year expectations for sales (excluding its China joint ventures) and the yen-to-dollar exchange rate, but it otherwise maintained most of the guidance it issued at the beginning of its 2019 fiscal year.
For the fiscal year that will end on March 31, 2019, Toyota now expects:
- Sales (excluding China joint ventures) of about 8,900,000 vehicles, down from its prior forecast of 8,950,000 (2017 result: 8,964,000).
- Revenue of about 29 trillion yen, unchanged from prior forecast (2017 result: 29.3795 trillion yen).
- Operating income of about 2.3 trillion yen, unchanged from prior forecast (2017 result: 2.4 trillion yen).
- Operating margin of 7.9%, unchanged from prior forecast (2017 result: 8.2%).
- Net income of 2.12 trillion yen, unchanged from prior forecast (2017 result: 2.494 trillion yen).
Toyota also now expects average exchange rates of 106 yen to the U.S. dollar (previous guidance: 105 yen) and 126 yen to the euro (previous guidance: 130 yen).
10 stocks we like better than Toyota Motor
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Toyota Motor wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of June 4, 2018