Toyota Motor Corporation

operating officer and CFO Kenta Kohn Now, Mr. Kohn will provide the explanation for the financial results of Q3. Hello, everyone. Thank you for joining us today. I am Kenta Kohn. First and foremost, the battle against COVID-19 is still continuing, and I would like to extend my sincere gratitude to the medical workers and all of you who support our daily lives. We also would like to express our heartfelt appreciation to our customers around the world who choose us, as well as our shareholders, dealers, and suppliers who support us. Let me discuss our financial results for the first nine months from April to December 2020. Consolidated vehicle sales for the first nine months ended December 2020 was at 5,438,000 units, which was 79.3% of consolidated vehicle sales for the same period of the previous fiscal year, and mainly a result of the continued spread of COVID-19 in all regions. Toyota and Lexus brand vehicle sales was at 6,627,000 units, which was 89.5% of such sales for the first nine months of the previous six years. As for the trend in Toyota and Lexus brand vehicle sales, with April being the floor, global Toyota and Lexus brand sales have been solidly recovering. Since September 2020, it recovered to above the previous year's levels, namely over 100%, year on year, and the trend in each region is as stated in the presentation. Once again, we would like to express our sincere gratitude to our customers around the world who chose us and all of our stakeholders, including our sales outlets and suppliers, who have made efforts to deliver as many vehicles that our customers want as possible. Consolidated financial results for the first nine months of this fiscal year were sales revenue of 19 trillion 525.2 billion yen, operating income of 1 trillion 507.9 billion yen, pre-tax income of 1 trillion 869.9 billion yen, and net income of 1 trillion 468 billion yen. I'd like to explain the factors which impacted operating income year on year. First, the effects of foreign exchange rates decreased operating income by 175 billion yen. Second, cost reduction efforts increased operating income by 100 billion yen. Third, the effects of marketing activities decreased operating income by 615 billion yen, largely due to the decrease in sales volume caused by the continued spread of COVID-19. Finally, a reduction in expenses increased operating income by 85 billion yen. As a result, including the overall impact of foreign exchange rates, swap valuation, gains and losses, and other factors, operating income decreased by 430 billion yen year-on-year. Regarding the changes on a quarterly basis, although operating income decreased year-on-year between April and June and between July and September, operating income increased year-on-year between October and December 2020 thanks to marketing efforts and other factors. As for operating income for each region, although operating income decreased year-on-year in all regions largely due to the decrease in sales volume caused by the continued spread of COVID-19, we succeeded in increasing operating income year-on-year in all regions between October and December 2020. Next, let me explain our consolidated subsidiaries and equity method affiliates in China as well as our financial services business. As for our China business, operating income of consolidated subsidiaries increased by 75.8 billion yen year-on-year to 178 billion yen thanks largely to marketing efforts. Our share of profit of investments accounted for using the equity method was up 25 billion yen year-on-year to 113.9 billion yen thanks largely to marketing efforts. Regarding financial services, operating income excluding swap valuation gains and losses for the fiscal year increased by 50.6 billion yen year-on-year to 355.3 billion yen thanks to the decrease in cost-related residual value loss and increase in lending margins. Now let us move on to discuss the outlook for the full fiscal year ending March 2021. With regards to our consolidated vehicle sales, we have increased our forecast that was announced in November 2020 by 100,000 units to 7.6 million units. The regional sales breakdown is as stated in the presentation. As for Toyota and Lexus brand vehicle sales, we anticipate that vehicle sales will be at 8.9 million units a 300,000-unit increase from our forecast that was announced in November 2020. With respect to Toyota and Lexus brand vehicle sales in the fourth quarter, we anticipate that sales will be approximately 110% of the same period in the previous year. Next, let me explain the forecast for our full-year consolidated financial performance. We have adopted Forex rate assumptions for January onwards of 100 yen, per dollar and 125 yen per euro, which makes the full-year assumptions 105 yen per dollar and 123 yen per euro. Based on this, our forecasts for our full-year consolidated financial performance are sales revenue of 26,500,000,000 yen, operating income of 2 trillion yen, pre-tax income of 2,550,000,000 yen, and net income of 1,900,000,000,000 yen. Now I would like to explain the factors that contributed to such change in the operating income forecast. Operating income is now expected to be 2 trillion yen, up 700 billion yen from the forecast that was announced in November 2020. Detailed analysis is as stated in the presentation. Please see slide 14, which compares the latest operating income forecast for this fiscal year with the result of the previous fiscal year. The environment surrounding us remains highly uncertain considering the ongoing spread of COVID-19. While carefully monitoring the risks, we will continue to make efforts together with all our stakeholders, including cost reduction efforts at all levels and efforts at manufacturing sites and sales outlets. We also remain committed to continuing to steadily sow seeds for the future and accelerate our transformation. This concludes my presentation. Thank you for your attention.

We would now like to receive questions and provide responses.

If you have any questions, please use the raise hand button on your screen. We will call on your name, and when your name is called, please turn your microphone and camera on. And we would like to ask you that in order to receive as many questions as possible, we'd like to limit the questions to two per person. Mr. Chiba from Asahi Newspapers, please. We will now switch the screen. When you see yourself on the screen, please start with your question. We are now switching the screen. Mr. Chiba, your question, please. This is Chiba speaking from Asahi Newspapers. Regarding about the change or revision in the information, the reasons why your revenue has increased and why you have strengthened your company structure, I would like to hear further detailed explanation. Those will be my two questions. And starting with the three months in the quarter, the per region profit incomes, North America and Japan and Asia, the operating income margin has improved. So what would be the factors of why you have made improvements in the operating income margin? Per market, would you be able to explain to me in more detail? This will be my first question. Going on to my second question. For your operating income, the revision that you have made, a year-on-year comparison, you have made an improvement with the cost reduction, 185 billion. So how to understand this number? I think variable cost is included here, too. on a year-on-year comparison, probably it will be on the same level. And cost reduction efforts, what kind of improvements have you made this quarter, and how was that reflected in this number? And based on that, for the third quarter financial results, can you provide your assessment and appraisals? Thank you for your question.