Toyota Motor Corporation Q2 FY2022 earnings call

• Expressed appreciation to stakeholders and apologized for production volume reduction due to semiconductor shortage and COVID-19. - Highlighted cost reduction efforts and efficient use of fixed costs. - Return to shareholders with interim ordinary dividend of JPY 120 per share (increase of JPY 15) and plan to repurchase up to JPY 100 billion of common stock. - Explained financial results for the first half, including impact of foreign exchange rates, cost reduction, marketing efforts, and expense reduction on operating income. - Discussed operating income by region and financial services performance.

Consolidated vehicle sales for the first half ended September 2021 were 4,094,000 units, which was 132.7% of the previous fiscal year's first half. Toyota and Lexus brand vehicle sales were 4,852,000 units, 121.0% of the previous year's first half. The ratio of electrified vehicles was 27.7%. Consolidated financial results for the first half included sales revenues of JPY 15,481.2 billion, operating income of JPY 1,747.4 billion, income before income taxes of JPY 2,144.0 billion, and net income of JPY 1,524.4 billion. Operating income increased year-on-year in all regions due to higher sales volume. China business operating income was impacted by foreign exchange rates, and financial services operating income rose due to increased lending balance and margins.

• Consolidated vehicle sales expected to be 8.55 million units (98.3% of previous forecast), Toyota and Lexus brand vehicle sales anticipated at 9.4 million units (97.9% of previous forecast). - Full year consolidated financial performance forecasts: sales revenues JPY 30 trillion, operating income JPY 2,800 billion, income before income taxes JPY 3,440 billion, net income JPY 2,490 billion. - Operating income forecast revised upward due to FX assumptions but downward due to raw material cost increases.

• Semiconductor shortage impacting production. - COVID-19 impact on production in some developing countries leading to plant shutdowns and parts supply limitations. - Sharp rise in raw material costs affecting operating income. - Supply chain uncertainties.

Q: Please assess the first half performance and discuss the production recovery plan.

A: Kenta Kon responded that efforts from dealers, suppliers, and plant workers helped maintain sales despite production volume reduction. Mentioned used car prices were high contributing to financial results and discussed ongoing production recovery plans including weekend operations but still facing COVID impacts.

Q: Talk about relations with suppliers and steel price negotiation.

A: Kenta Kon stated Toyota aims to coexist with suppliers to reduce costs and enhance competitiveness, sharing feedback and working to improve. Jun Nagata mentioned understanding Nippon Steel's circumstances regarding steel price hikes but noting difficulty in passing cost increases to consumers, requiring sincere negotiation.

Q: Explain the sales volume review and downward revision.

A: Kenta Kon explained production volume was reduced due to COVID-19 impacts in Southeast Asia and semiconductor issues causing parts supply shortages, leading to the revision of sales volume forecasts.

Q: Discuss electrified vehicles volume revision and quarterly disclosure.

A: Kenta Kon said the revision of electrified vehicles volume was in line with overall sales volume revision and not a focused change on electrified vehicles. On quarterly disclosure, stated they consider what benefits stakeholders and aim to use internal media to explain company philosophy while also making timely disclosures on key matters.

Q: Talk about cost reduction and material price impact.

A: Kenta Kon discussed cost reduction targets, noting they were slightly short of targets due to market fluctuations and material price hikes, and outlined measures to strengthen profitability through accumulating small benefits and improving value chain profitability.

Q: Discuss electrification promotion plans.

A: Jun Nagata explained Toyota's approach to electrification as a 'department store of electrified vehicles' offering various options, discussed battery EV investments, and expressed challenges in communicating their electrification efforts effectively to ensure understanding.