By on November 5, 2012

Toyota’s CFO Satoshi Ozawa presented the financial results of the first half of fiscal 2013 to a packed conference room in the basement of Toyota’s Tokyo HQ. Analysts were astounded to hear that the company beat their expectations with a 6 month operating profit of 693.7 billion yen ($8.64 billion), an EBIT of 794.5 billion yen ($9.9 billion), and a net profit of 548.2 billion yen ($6.83 billion) after Japanese taxes are paid. What baffled them much more was Toyota’s business outlook: Toyota says it might make even more money than previously predicted.

After Honda cut its profit forecast for the fiscal year to March by more than a billion dollars due to a drastic drop in China sales, observers expected other Japanese majors to follow suit. Toyota did the opposite. (Nissan will announce its numbers tomorrow.)

Toyota forecasts a full year operating income of 1.05 trillion yen (13 billion), an EBIT of 1.18 trillion yen ($14.7 billion), and a net profit of 780 billion yen ($9.7 billion), up sundry billions from the previous estimate. That on revenue that is 700 billion yen ($8.72 billion) less than forecasted. How do they do this? The old-fashioned, way, with stringent savings and increased sales. A proud Ozawa explained that “some expenses budgeted for the period were never spent.” In the German and U.S. companies I had known, not spending your budget was considered a mortal sin, right up there with coveting the CEO’s wife. In Japan, you are mentioned in dispatches to the media.

Toyota’s global sales forecast for the fiscal also appeared to be unaffected by the Chinese fallout. It was down revised slightly to 8.75 million vehicles from 8.8 million.

Expect this number to trip up journalists around the globe. They will predict that with 8.75 million units, Toyota will for sure be eclipsed by GM, if not by Volkswagen. No, it will not.

“Joint venture sales are outside the scope of the consolidated results,” explained Ozawa to the inquiring reporter. Translation: Production, sales, and even financial results of the Chinese joint ventures remained unmentioned. Asked what the true total global group production number for the calendar year might be, including JVs, Ozawa said: “I think it will be slightly less than 10 million.” This happens to be the same as our working number since last week, when we took the China effect into account.

Ozawa said many times that as far as China goes, the “future outlook is quite uncertain,” and “coming up with a forecast is quite difficult.” Any financial impact of the Chinese row will remain a Chinese matter, at least for a while: The Joint Ventures are treated according to the equity method.  To be seen by the end of the year, as an asset line item.

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15 Comments on “Toyota Half Year Results: China Problem? What China Problem?...”

  • avatar

    Congratulations USA! Another foreign company making billions of you suckers and sending it all back to the home country.

    Oh yeah I’m sure it’s recipircal right? I mean they must pay the USA for the military support?

    USA on the way to Brazil level world status…

    • 0 avatar

      Glad to see the whole nation isn’t blind to whats happening before their eyes. Do the Japanese ‘pay’ us though for their defense? I could see this being politically unpopular since the ‘end’ of the Cold War.

      However Brazil is kind of coming up in the world, I would say were becoming more like Argentina circa 2000.

    • 0 avatar

      Is there something wrong with Japanese people making money? I feel like these protectionist, nationionalistic rants are just a bit racist. America needs to look at its human and physical capital. We need to focus on making our companies better through better education, cheaper higher education costs, cheaper healthcare, better and easier to understand regulations and the like, rather than trying to restrict competition. If we become a nation of skilled workers with a sensible regulatory approach, then there will be nothing stopping us from succeeding on the global stage

      • 0 avatar

        Yes and no. So called ‘free trade’ is important, as is competition, but globalization -starting with the Japanese invasion of the auto industry in the 70s- is really what has decimated our national industry. Now you can say well Detroit built crap (which they did then) and this is what they deserve, but by adopting such an attitude we are only hurting ourselves. I can’t speak for the Japanese auto industry other than what I have read on here, but it seems they are loyal to a fault to their own national industries. Others may make some market share headway (such as VW) but I doubt you’ll ever see the day where Toyota, Nissan, or Honda are on the defensive on their own turf so-to-speak. If domestic automakers literally build nothing which suits you on the same price point then I suppose ‘what are you gonna do’, but going straight to that Toyonda dealership everytime is not only foolish for not vetting out your options, but tantamount to putting one more nail on the coffin of our national industry. Sure US dealers, some US manufacturing etc, still a foreign entity with profits flowing overseas. Our parents (boomers) are probably the first generation of Americans to wholly turn their backs on our own industry and the chickens will come home to roost (can’t pay pensions, can’t afford healthcare, deficits, no investment in future jobs etc).

    • 0 avatar
      el scotto

      Maybe not pay us for military support, but they buy a lot of our equipment. Yes, it’s biased but it’s good for a quick equipment count. We also have a unique self-defense agreement with Japan due to Japanese legal restraints on the Japanese Self Defense Force.

  • avatar
    schmitt trigger

    Something one must give credit to the Japanese society in general, and Toyota in particular, is that they shine in the face of adversity.
    I believe this is the general tone of this news bit, and as such, I don’t understand the first poster’s rant.

  • avatar

    Can someone clarify things for me. If the following statement is true :
    “Joint venture sales are outside the scope of the consolidated results,” explained Ozawa to the inquiring reporter. Translation: Production, sales, and even financial results of the Chinese joint ventures remained unmentioned

    Then why would people expect Toyota to have made less money than last year (when they had earthquake issues) or make less cars? Wouldn`t the Chinese torching of Japanese cars would affect the JV’s rather than Toyota directly?

  • avatar

    I, for one, congratulate Toyota. They are an exceptional company. I don’t think the racists would make the same comments if it were Volkswagen earning these numbers.

    I also hope these profits allow Toyoda-san to green-light the next sports car.

  • avatar
    100 mph fastball

    If the yen can weaken to around 100/USD, Toyota will really be rolling in the dough.

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