Toyota 2008 Annual Report Download - page 83

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•Annual Report 2008 • TOYOTA
Performance Messages from the Management &
•Overview •Management •Special Feature •Business Overview •Corporate Information •Financial Section •Investor Information •
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• 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 cur-
rency translation rates during fiscal 2007. Eliminating the differ-
ence in the yen value used for translation purposes, financial
services operations net revenues would have been approxi-
mately ¥1,254.2 billion during fiscal 2007, a 25.8% increase com-
pared 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 billion impact of fluctuations in foreign currency transla-
tion rates, a ¥78.1 billion increase in research and development
expenses, increased expenses in expanding business opera-
tions 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, par-
tially 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 com-
mon parts that result in a reduction of part types and other
manufacturing initiatives designed to reduce the costs of vehi-
cle 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 dur-
ing fiscal 2007, which were partially offset by the impact of con-
tinued 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 expenses caused primarily by higher interest
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 deriv-
ative 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
compared with the prior year. This increase (before the elimina-
tion of intersegment amounts) reflects an increase of ¥239.6 bil-
lion, 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 primarily attributed to impact of increased
expenses and the impact of fluctuations in foreign currency
translation rates.
Research and development expenses (included in cost of
products sales and selling, general and administrative expens-
es) 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 envi-
ronmentally conscious technologies including hybrid and fuel-
cell technology, aggressive developments in advanced
technologies relating to collision safety and vehicle stability
controls and the impact of expanding new models to promote
Toyota’s strength in a global market to further build up compet-
itive strength in the future.
■Operating Income
Toyota’s operating income increased by ¥360.3 billion, or
19.2%, to ¥2,238.6 billion during fiscal 2007 compared with the
prior year. Operating income was favorably affected by the
vehicle unit sales growth partially offset by changes in sales mix,
the impact of increased parts sales, continued cost reduction
efforts and the favorable impact of fluctuations in foreign curren-
cy translation rates. These increases were partially offset by
increases in research and development expenses and the
impact of business expansion. As a result, operating income
increased to 9.3% as a percentage of net revenues for fiscal 2007
compared to 8.9% in the prior year.