Toyota Motor Corporation

Thank you very much for joining us today, and welcome to Toyota Motor Corporation Fiscal Year 2026 Financial Results Briefing. We'd like to thank you very much for attending despite your busy schedules. I am Hatsumoto, the moderator of this conference. I'm from Corporate Communications. So I would like to introduce our speakers first, Kent Bakon, President and Chief Executive Officer. Yoichi Miyazaki, Executive Vice President and Chief Financial Officer. and Takanori Azuma, Accounting Group Chief Officer, and from Corporate Communications, Chief Officer Hiroyuki Ueda. As for our agenda, this conference will begin with presentation by Takanori Azuma. and Yoichi Miyazaki to explain the financial results, followed by a brief greeting by our president, Kenta Kon, and then we will have a Q&A session at the very end. So I'd like to hand it over to Takamori Asuma, please. Hello, ladies and gentlemen. I am Asuma, accounting group chief officer. We'd like to start by sincerely thanking our customers around the world who love Toyota cars, our shareholders who support our efforts, as well as our dealers and suppliers and all other stakeholders involved. Thank you so very much. I'll begin with the summary of the financial results for the fiscal year ended March 26. Operating income for fiscal year 26 amounted to 3.8 trillion yen. Despite the impact of U.S. tariffs, we were able to secure profits in line with our guidance due to increased vehicle sales volumes and the effects of price revisions underpinned by strong product competitiveness as well as steadily accumulated improvement efforts such as expanded value chain profits. Taking into account the Middle East impacts, we are forecasting operating income for the fiscal year ending March 27 of 3.0 trillion yen, representing a year-on-year decrease of 800 billion yen. As a result, we expect operating income to decline for the third consecutive year. We believe this is because our response to changes in the operating environment has been limited to measures that can be implemented in the short term, while progress on business structure transformations from a mid- to long-term perspective remains only partway complete. Therefore, in the current fiscal year, we aim to return to a sustainable growth trajectory. Regarding shareholder returns, the dividends for fiscal year 26 will be 95 yen per share, an increase of 5 yen year-on-year, and for fiscal year 27, we plan another increase of 5 yen for a forecast annual dividend of 100 yen per share, and we will continue to uphold our policy of stable dividend increases to reward our long-term shareholders. Now I'll explain the details of the results for the fiscal year ended March 26th. Consolidated vehicle sales for this fiscal year reached 9,595,000 units, or 102.5% year-on-year. Toyota and Lexus vehicle sales totaled 10,477,000 units, or 102.0% over the previous fiscal year. Thanks to strong demand from customers, mainly in Japan and North America, vehicle sales increased. Sales of electrified vehicles exceeded 5 million units for the first time, primarily driven by ATVs that were well received in regions such as North America and China, while PATVs and BVs also posted volume growth. Consolidated financial results were sales revenues of 50 trillion 684.9 billion yen, operating income of 3 trillion 766.2 billion yen, income before income taxes of 5 trillion 152.9 billion yen, and net income of 3 trillion 848 billion yen. Now, let me explain the factors behind the changes in operating income. Against the backdrop of steady demand centered on hybrids through sales efforts, including increased vehicle sales, price revisions, and value chain profits, we absorbed the negative factors such as foreign exchange fluctuations, higher R&D expenses, increased labor costs, and materials cost inflation. However, we were not able to fully offset the impact of U.S. tariffs amounting to 1.38 trillion yen, and as a result, consolidated operating income declined by 1.39.3 billion yen year-on-year. Now, this slide shows operating income by geographical region. In Japan, operating income decreased due to foreign exchange fluctuations and increases in expenses. In North America, operating income decreased due to the impact of U.S. tariffs, and other regions recorded an increase in operating income due to the impact of price revision.

Chinese business bottom line increases in one operating income due to marketing efforts. two, in share of profit of investments by equity method and cost reductions, and number three, in the financial services segment with an increase of outstanding loan balances. Now, let's talk about the forecast for the current fiscal year ending March 2027. The consolidated vehicle sales forecast has been set at 9.6 million yen, which is 100.1% of the previous fiscal year. While Hino Motors is excluded from consolidation from the fiscal year and in March 27, production will go into full swing for models refreshed in the previous fiscal year, such as the RAV4, resulting in a level comparable to the previous fiscal year. Toyota Lexus vehicle sales are expected to be 10.5 million yen or 100.2% of the previous fiscal year. Additionally, hybrid sales should exceed 5 million units for the first time this fiscal year, and total electrified vehicle sales, approximately 6 million units. Next, on the consolidated financial forecast, the full-year foreign exchange rate assumptions are 150 yen per dollar and 180 yen per euro. For guidance for the full-year consolidated results, sales revenues of 51 trillion yen, operating income of 3 trillion yen, income before taxes of 4,230,000,000 yen, and net income of 3 trillion yen. Now, the year-on-year changes in operating income. In the current fiscal year, we will work to absorb increases in labor costs and other expenses through marketing efforts such as price revisions and expansion of value chain profits. However, we do not believe we can fully offset negative 670 billion yen Middle East impact resulting in the operating income forecast of 3 trillion yen down 766.2 billion yen from the previous fiscal year. Next, let's turn to shareholder returns. Our dividend policy is to increase dividends in a stable and continuous manner in order to reward our long-term shareholders. Despite the decrease in profit for the fiscal year ended March 26, we set the full-year dividend of 95 yen, an increase of 5 yen from the previous year, for the fiscal year ending March 27. While performance is hard to forecast due to impact from the Middle East and other factors, we set a full-year dividend forecast at 100 yen, an increase of 5 yen from the previous year. Regarding share buybacks, we will not set year-end share repurchase limits. Moving forward, taking into account the stock price levels and other factors, in order to respond as necessary to requests to sell our company shares, we will flexibly implement share repurchases.

Next to our CFO, Mr. Miyazaki. Yes, I am Miyazaki, CFO. As Accounting Group Chief Officer Azuma mentioned earlier, the business environment remains extremely uncertain. Against this backdrop, we achieved operating income of 3.8 trillion yen for the fiscal year ended March 26th and have announced operating income outlooks of 3 trillion yen for fiscal year 27th. We would like to express our sincere gratitude for the day-to-day efforts of our employees, as well as the continued support of many stakeholders, including dealers and suppliers. Looking ahead, we intend to move forward with confidence together with such stakeholders. On the other hand, we expect operating income to decline for the third consecutive fiscal year in fiscal 27. I take this very seriously in my capacity as CFO. This reflects the fact that amid the rapid changes in the business environment, the scope of the responses and measures we took have been largely limited to what can be implemented in the short term, resulting in slower progress in business structural transformations that should be performed. performed from a mid- to long-term perspective and slower pace of slowing speed for future growth. This shows the factors contributing to changes in operating income over a three-year period from the actual results for the fiscal year 24 through fiscal year 27. We offset rising material costs and comprehensive investments aimed at future growth with improvement efforts such as cost reductions and expansion of value chain profit, enabling us to maintain an earnings power of 5 trillion yen. However, due to major business environment changes like U.S. tariffs and the situation in the Middle East, we have yet to fully offset these impacts. Now, I'd like to talk about how we will overcome this challenge and how we will once again return to a sustainable growth trajectory. Our initiatives have two main pillars. One is making ever better cars. The other is transforming into a mobility company. Making ever better cars is being advanced by an overwhelming expansion in model lineup through five brands led by Century and by the multiplication of our ability to generate income. On the other hand, transform into a mobility company is being pursued with the following key elements. Further expansion of existing value chain revenue, provision of new mobility across land, sea, and air, and robotics leveraging connected as well as SDV technologies.