Business context and reporting period
Toyota Motor Corporation filed this annual report on Form 20-F on June 23, 2022. It covers the fiscal year ended March 31, 2022 (fiscal 2022), not a standalone 2021 fourth quarter. Toyota reports under IFRS in Japanese yen. Its businesses are automotive, financial services and other operations; it sold 8.23 million vehicles during the year.
Key financial metrics
Unless stated otherwise, amounts are yen in billions. Balance-sheet figures are as of March 31, 2022.
| Metric | FY2022 | Comparable period / change |
|---|---|---|
| Revenue | 31,379.5 | 27,214.6 in FY2021; up 15.3% |
| Operating income | 2,995.7 | 2,197.7; up 36.3% |
| Operating margin | 9.5% | 8.1% in FY2021 |
| Income before tax | 3,990.5 | 2,932.4; up 36.1% |
| Net income attributable to Toyota Motor Corporation | 2,850.1 | 2,245.3; up 26.9% |
| Attributable net margin | 9.1% | 8.3% in FY2021 |
| Basic EPS | ¥205.23 | ¥160.65 in FY2021, presented on a split-adjusted basis |
| Operating cash flow | 3,722.6 | 2,727.2 in FY2021 |
| Investing cash flow | (577.5) | (4,684.2) in FY2021 |
| Financing cash flow | (2,466.5) | 2,739.2 provided in FY2021 |
| Cash and cash equivalents | 6,113.7 | 5,100.9 at March 31, 2021 |
| Liquid assets (company-defined) | 13,451.0 | Down 5.4% year over year |
| Finance receivables, net | 21,764.5 | Up 13.3% year over year |
| Total liabilities / total equity | 40,534.0 / 27,154.8 | Compared with 37,978.8 / 24,288.3 |
| Total borrowings | Approximately 26,496.4 | Up 3.3%; debt-to-parent-shareholders’ equity was 101.0%, versus 109.6% |
| Capital expenditures | 3,611.6 | Broadly unchanged from FY2021 |
Revenue growth reflected higher vehicle sales and favorable exchange rates. Operating income rose despite material-cost inflation: management cited ¥860.0 billion of favorable marketing effects and ¥610.0 billion from exchange rates, partly offset by cost pressures and expenses. Cost-reduction efforts were adversely affected by ¥640.0 billion of material-price increases, partly offset by stated savings. Automotive operating income was ¥2,284.3 billion; financial-services operating income was ¥657.0 billion; other operations’ operating income fell 50.4% to ¥42.3 billion.
Material changes versus FY2021
- Consolidated vehicle sales increased 7.6% to 8.23 million units, recovering from the prior-year decline, although Japan sales fell and production remained constrained.
- Revenue increased 15.3%; operating income increased 36.3%; attributable net income increased 26.9%.
- Cash from operations rose by ¥995.5 billion. Investing cash outflow narrowed substantially, primarily because of reduced time-deposit placements/withdrawals and related funding movements.
- Inventories rose 32.3% to ¥3,821.4 billion, which Toyota attributed mainly to higher unit prices, including precious-metal prices.
- Cash and cash equivalents rose to ¥6,113.7 billion, while company-defined liquid assets declined 5.4% to ¥13,451.0 billion.
- Financial-services receivables grew 13.3%. Toyota reported credit losses of 0.17% in FY2022, down from 0.23% in FY2021.
Outlook, risks and unusual items
Outlook: For fiscal 2023, Toyota expected revenue to increase, mainly from higher vehicle unit sales, but operating income, pretax income and attributable net income to decrease, principally because of soaring material prices. Its planning assumptions were ¥115 per U.S. dollar and ¥130 per euro. Toyota also warned material prices were expected to have a greater negative impact in FY2023.
Strategy and investment: Toyota announced targets of 3.5 million annual BEV sales by 2030 and 30 BEV models by 2030, alongside approximately ¥8 trillion of planned electrification investment through 2030 (about ¥4 trillion relating to BEVs, including about ¥2 trillion for batteries). These are plans and targets, not reported results. Toyota’s stated carbon-neutrality goals include 2050 company-wide and 2035 for global plants.
Principal risks: Semiconductor and other supply constraints, COVID-19 disruption, geopolitical tensions and related raw-material and logistics inflation, intense competition and changing vehicle technology, foreign-exchange and interest-rate volatility, credit and residual-value risks in finance, climate transition and physical risks, cybersecurity, regulation, recalls, and pending litigation or investigations.
Contingencies and unusual matters: Toyota recorded ¥1,171.2 billion of liabilities for recalls and other safety measures within quality-assurance liabilities. It paid a $180 million U.S. civil penalty under a 2021 emissions-reporting consent decree. Toyota disclosed ongoing SEC/DOJ investigations concerning possible anti-bribery violations at a Thai subsidiary. Its 50.18%-owned Hino subsidiary disclosed emissions and fuel-economy certification misconduct; potential governmental penalties or other consequences remained uncertain. Toyota also reported falsified or omitted statutory inspections at multiple Japanese dealerships and said it was taking corrective steps. In an Australian diesel-particulate-filter class action, Toyota appealed an unfavorable first-instance judgment; it estimated the probable economic outflow as immaterial, while noting the final outcome was uncertain.
Toyota declared FY2022 dividends totaling ¥52 per share after the five-for-one stock split (¥260 pre-split basis), or ¥718.2 billion in total. It also announced a subsequent repurchase authorization of up to ¥200 billion. The independent auditor gave an unqualified opinion on the IFRS financial statements and concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Confirm the earnings figure used: the audited statement and operating review report attributable net income of ¥2,850.1 billion, while an earlier business overview sentence gives ¥2,874.6 billion, which corresponds to consolidated net income before non-controlling interests.
- Reconcile reported debt and leverage definitions, including financial-services funding, current maturities and lease liabilities, against the 101.0% debt-to-equity measure.
- Assess how much FY2022 earnings growth came from vehicle mix/marketing and favorable currency movements, and whether these can offset material inflation in FY2023.
- Review production and delivery exposure to semiconductor and supplier constraints, and the resulting inventory and working-capital trends.
- Monitor the quality of finance receivables, credit-loss assumptions, used-vehicle prices and lease residual values.
- Track the recall provision, dealership inspection remediation, Hino investigations, Thai subsidiary investigation, and pending product-liability and other litigation.
- Evaluate the funding, execution and customer-demand assumptions behind electrification, battery and carbon-neutrality targets.