Toyota 2007 Annual Report Download - page 81

ANNUAL REPORT 2007 79
Net revenues in Other were favorably impacted primarily by vehi-
cle unit sales growth due to the IMV series.
• Financial Services Operations Segment
Net revenues in fiscal 2007 for Toyota’s financial services opera-
tions increased by ¥303.6 billion or 30.5% compared to the prior
year to ¥1,300.5 billion. This increase resulted primarily from the
impact of a higher volume of financings mainly in North America
and the favorable impact of fluctuations in foreign currency trans-
lation rates during fiscal 2007. Eliminating the difference in the
yen value used for translation purposes, financial services opera-
tions net revenues would have been approximately ¥1,254.2 billion
during fiscal 2007, a 25.8% increase compared with the prior year.
• All Other Operations Segment
Net revenues for Toyota’s other businesses increased by ¥133.4
billion, or 11.2%, to ¥1,323.7 billion during fiscal 2007 compared
with the prior year. This increase primarily relates to increased
sales attributed to the housing business and the expansion of
intelligent transport systems operations.
■Operating Costs and Expenses
Operating costs and expenses increased by ¥2,550.8 billion, or
13.3%, to ¥21,709.4 billion during fiscal 2007 compared with the
prior year. The increase resulted primarily from the approximate
¥900 billion impact on costs of products attributed to vehicle unit
sales growth partially offset by changes in sales mix, a ¥708.5 bil-
lion impact of fluctuations in foreign currency translation rates, a
¥78.1 billion increase in research and development expenses,
increased expenses in expanding business operations and
increased costs related to the corresponding increase in parts
sales. These increases were partially offset by the approximate
¥100 billion impact attributed to the net impact of cost reduction
efforts including the rise in prices of production materials and
parts in fiscal 2007.
Continued cost reduction efforts reduced operating costs
and expenses in fiscal 2007 by approximately ¥100 billion, partial-
ly offset by increases in the prices of steel, precious metals, non-
ferrous alloys including aluminum, plastic parts and other
production materials and parts, over what would have otherwise
been incurred. These cost reduction efforts relate to ongoing
value engineering and value analysis activities, the use of
common parts that result in a reduction of part types and other
manufacturing initiatives designed to reduce the costs of vehicle
production.
Cost of products sold increased by ¥2,021.0 billion, or 12.4%,
to ¥18,356.3 billion during fiscal 2007 compared with the prior year.
This increase (before the elimination of intersegment amounts)
reflects an increase of ¥2,005.5 billion, or 12.8%, for the automotive
operations and an increase of ¥118.9 billion, or 11.7%, for all other
operations segment. The increase in cost of products sold for
automotive operations is primarily attributed to the increased
vehicle unit sales partially offset by changes in sales mix, the impact
of the increase in parts sales, the impact of the increase in research
and development expenses and
the impact of fluctuations in foreign
currency translation rates during
fiscal 2007, which were partially
offset by the impact of continued
cost reduction efforts. The increase
in cost of products sold for all other
operations primarily related to the
increase in net revenues.
Cost of financing operations
increased by ¥262.4 billion, or 43.1%,
to ¥872.1 billion during fiscal 2007
compared with the prior year. The
increase resulted primarily from the
impact of increased interest expens-
es caused primarily by higher inter-
est rates and an increase in borrowings
attributed to business expansion in
the United States. The increase is
also attributed to the impact of losses due to changes in the fair
value of derivative financial instruments that are not designated
as hedges and are marked-to-market at the end of each period.
Selling, general and administrative expenses increased by
¥267.4 billion, or 12.1%, to ¥2,481.0 billion during fiscal 2007 com-
pared with the prior year. This increase (before the elimination of
intersegment amounts) reflects an increase of ¥239.6 billion, or
11.9%, for the automotive operations, an increase of ¥35.3 billion,
or 15.5%, for the financial services operations and an increase of
¥14.6 billion, or 10.9%, for all other operations segment. The
increase for the automotive operations consisted primarily of the
impact of increased expenses in expanding business operations
and the impact of fluctuations in foreign currency translation
rates. The increase for the financial services operations is primari-
ly attributed to impact of increased expenses and the impact of
fluctuations in foreign currency translation rates.
Research and development
expenses (included in cost of prod-
ucts sales and selling, general and
administrative expenses) increased
by ¥78.1 billion, or 9.6%, to ¥890.7
billion during fiscal 2007 compared
with the prior year. This increase
primarily relates to expenditures
attributed to the development of
environmentally conscious technolo-
gies including hybrid and fuel-cell
technology, aggressive develop-
ments in advanced technologies
relating to collision safety and vehi-
cle stability controls and the impact
of expanding new models to pro-
mote Toyota’s strength in a global
market to further build up competi-
tive strength in the future.
20,000 100
12,000 60
8,000 40
4,000 20
16,000 80
00
Cost of Products Sold
(¥ Billion) (%)
FY ’04’03 ’05 ’06 ’07
% of sales of products
(Right scale)
1,000 12
500 6
250 3
750 9
00
R&D Expenses
(¥ Billion) (%)
FY ’04’03 ’05 ’06 ’07
% of sales of products
(Right scale)