TOKYO – Toyota Motor Corp.’s operating profit edged ahead 2.8 percent in the latest fiscal year on rising sales, tighter cost control and lower incentives in the crucial U.S. market.
Operating profit increased to 2.40 trillion yen ($21.66 billion) in the carmaker’s fiscal full year ended March 31, Toyota said on Wednesday.
Net income, by contrast, declined 25 percent to 1.88 trillion yen ($16.96 billion).
Results were driven lower by special losses on equity securities that compared against robust results the year before that were artificially inflated by a windfall U.S. income tax gain.
Revenue increased 2.9 percent to 30.23 trillion yen ($272.78 billion).
Global retail sales advanced 1.6 percent to 10.6 million vehicles in the full fiscal year, including results from its Daihatsu small-car subsidiary and truck-making affiliate Hino.
Worldwide wholesale volume inched ahead 0.1 percent to 8.98 million vehicles.
In announcing the earnings results, Executive Vice President Koji Kobayashi said lower incentives boosted performance in the critical North American market, Toyota’s biggest.
Toyota has targeted spiff spending on vehicles that actually need it, while dialing back on those that don’t. A roll out of higher margin vehicles, such as light trucks, also helped.
Regional operating profit in North America increased 8.3 percent 144.1 billion yen ($1.30 billion) in the 12-month period, as regional wholesale volume declined 2.2 percent to 2.75 million vehicles.
But regional operating profit margin languishes around 2 percent, said Kobayashi, who serves as CFO. That is far below the target of 8 percent operating profit margin for the region.
Kobayashi said he wasn’t confident Toyota could reach that target, as intended, in the fiscal year ending March 31, 2021. But he said Toyota will further work to control incentives, improve the model mix and ratchet up factory efficiency to come closer.
“I want to continue to argue that message, or the message will be lost,” Kobayashi said. “We are always working with that goal in mind.”
In the January-March period, average spiff spending on Toyota and Lexus brand cars by Toyota Motor Sales U.S.A. dropped 5.4 percent and was about $1,250 below the industry average of $3,574 per vehicle, according to figures from Autodata Corp.
Average industry outlays declined 4.6 percent in the quarter.
The Toyota brand’s incentives fell 8.1 percent in the January-March quarter, from a year earlier, to an average of $1,967 per vehicle. Average spending at Lexus decreased 1.3 percent to $4,840, according to figures from Autodata Corp.
In Europe, wholesale volume increased 2.7 percent to 994,000 vehicles in full fiscal year. European regional operating profit expanded to 121.0 billion yen ($1.09 billion), from 77.1 billion yen ($695.8 million) the year before.
Citing the impact from the accounting change for handling of depreciation and further cost cutting efforts, Toyota predicted net income would increase 19.5 percent in the current fiscal year ending March 31, 2020, while operating profit advances 3.3 percent.
Toyota forecast that global wholesale volume will increase 0.3 percent to 9.0 million vehicles in the current fiscal year. It predicts North American sales will decline 1.6 percent to 2.7 million vehicles, while European volume improves by 3.6 percent to 1.03 million units.
It says global retail sales should rise 1.3 percent to 10.74 million.