Toyota Q3 2010 Earnings Call Transcript

123jump.com Staff
10 Feb, 2010
New York City

Sales rose 10.2% to

Toyota Q3 2010 Earnings Call Transcript

Toyota Motor Corp. ((TM))
Q3 2010 Earnings Call Transcript
February 4, 2010 8:00 a.m. ET

Executives

Taro Takado – Public Affairs and Investor Relations
Takuo Sasaki – Managing Officer, Finance and Accounting
Keiko Morita – Narrator

Analysts

Steve Usher – Japaninvest
Margaret Moore – DuPont Capital Management Corporation
Kurt Sanger – Deutsche Bank
Benjamin Moyer – Blackrock
James Irwin – Moon Capital Management
John Buckland – MF Global

Presentation

Taro Takado

Hello, everyone. Thank you for joining us today. I am Taro Takado, member of the Public Affairs and Investor Relations of Toyota Motor Corporation. I would like to welcome you to the Fiscal Year 2010 Third Quarter Financial Results Conference Call. I am joined by Mr. Takuo Sasaki, Managing Officer of Toyota and the narrator, Ms. [Keiko Morita].

Today''s conference call is consist of two parts. First, Mr. Sasaki will discuss the highlights of Toyota''s earning results and Ms. Morita will take over the rest of the presentation. At the conclusion of presentation, we will open for your questions. We expect that the entire call will last approximately an hour.

Also please note that the following presentation contains forward-looking statements that reflects our plans and expectations and our actual results may be materially different from those expressed by these forward-looking statements. A complete cautionary statement with respect to forward-looking statements is included in page three of today''s presentation material. In addition, a complete cautionary statement with respect to insider trading is included in page four of today''s presentation material which, again can be downloaded from our Internet homepage.

Now, I would like to turn the call over to Mr. Sasaki.

Takuo Sasaki

Hello, everyone. My name is Takuo Sasaki, the Managing Officer of Toyota Motor Corporation responsible for Finance and Accounting. Thank you for joining us today. I would like to discuss Toyota''s financial results for the third quarter of the fiscal year ending March 2010.

Our consolidated vehicle sales for the third quarter reached 2.065 million vehicles, up 227,000 vehicles from the same period last year as a result of customer demand for our wide range of environmentally-friendly, particularly hybrid, vehicles, including Prius and Lexus HS250H.

The right side of this slide shows our consolidated vehicle sales for the nine months ended December 2009. The results were down 894,000 vehicles from the same period last year due to the adverse market conditions triggered by the global financial crisis mainly during the first half of the fiscal year.

The foreign exchange rate used for the third quarter is 90 yen against the U.S. dollar, an appreciation of 6 yen compared to the same period last year and 133 yen against the euro, a depreciation of 6 yen compared to the same period last year.

Our consolidated financial performance for the third quarter resulted in net revenues of 5,292.9 billion yen, operating income of 189.1 billion yen, pre-tax income of 224.9 billion yen and net income of 153.2 billion yen.

Now, I''d like to hand the rest of today''s presentation over to Ms. Morita.

Keiko Morita

[Technical difficulty]

Next, I would like to explain the major factors impacting our net income. Compared to last year, our net income increased by 317.9 billion yen to 153.2 billion yen. The left side of this slide shows the major factors that impacted operating income. As you can see, operating income increased by 549.7 billion yen as a result of the improved sales volume and mix by 210 billion yen and reduction of the variable costs by 150 billion yen and of the fixed costs by 80 billion yen.

Slide seven summarizes our consolidated financial results for the nine months to December 2009. Net revenues of 13,670.5 billion yen, operating income of 52.2 billion yen, pre-tax income of 161.9 billion yen and net income of 97.2 billion yen. Please see slide eight for the major factors influencing our net income for the nine months.

Next, I would like to discuss the progress of our emergency profit improvement activities. At our second quarter results announcement in November last year, we commented that we had identified 1,250 billion yen equivalents of improvement for the full year.

Having continued our serious company-wide efforts since, we managed to achieve 1,210 billion yen in improvements in the nine months to December 2009. Our progress has been, thus, exceeding our plan and it is our intention to accelerate our efforts further.

Our company-wide serious efforts have resulted in a total of 1,210 billion yen improvement in the nine months to December 2009. Our progress has been, thus, exceeding our plan and it is our intention to accelerate our efforts further.

With regard to our operating income by region, we achieved year-on-year improvement in all regions for the third quarter. In Japan, improvement of our parent company''s operating performance made positive contribution. In North America, we increased operating income. Thanks to the recovering trend of the market and our improved earnings from the financial services.

In Asia and other regions where we''d strong, we had strongest sales, in Thailand, Taiwan and India, we maintained a high level of earnings. For the nine months to December 2009, our operating income by region was as summarized in slide 11.

Next, let me discuss our operating income for the financial services business. Operating income excluding interest rate swap valuation gains or losses increased by 73.5 billion yen to 69.2 billion yen. This was due to improved lending margins as a result of decreased expenses related to loan losses and residual losses and declining funding costs mainly in the United States. We plan to improve earnings from financial services while applying adequate risk controls.

Equity in earnings of affiliated companies for the third quarter was 58.4 billion yen, up 56.1 billion yen from the same period last year. This was due to improved earnings of affiliated companies in Japan and China. For the nine months ending December 2009, equity in earnings in affiliated companies declined year on year due to the valuation losses on our shareholding of certain affiliated companies which had been posted in the second quarter.

For your reference, slide 14 summarizes our unconsolidated financial results for the third quarter. We resulted in net revenues of 2,439.9 billion yen, operating loss of 20.2 billion yen, ordinary income of 23.1 billion yen and net income of 24.7 billion.

Our unconsolidated net income increased by 31.1 billion to 24.7 billion yen mainly due to the reduction of variable and fixed costs. Please refer to slide 16 for our unconsolidated financial results for the nine months to December 2009. Major factors affecting the nine months unconsolidated net income are as shown in slide 17.

Next, I''d like to discuss our outlook for the full fiscal year ending March 2010. We revised our consolidated vehicle sales target by 150,000 vehicles from 7.03 to 7.18 million vehicles. This reflects our stronger-than-expected sales results in the third quarter.

We revised our consolidated financial forecast for the full year as follows, adopting a foreign exchange rate assumption of 90 yen against the U.S. dollar and 125 yen against euro for the final quarter. Net revenues of 18,500 billion yen, operating loss of 20 billion yen, pre-tax income of 90 billion yen and net income of 80 billion yen.

Please see slide 21 analyzing the main factors behind our revised consolidated operating income forecast. Our emergency profit improvement activities have been progressing faster than our earlier plan as a result of our upwardly-revised outlook of our vehicle sales and the concerted efforts of our suppliers and employees for variable and fixed costs reduction.

We now expect to achieve a total of 1,590 billion yen, up 340 billion yen from the target that was announced earlier. We will continue to be committed in promoting these activities to further improve our earnings prospects.

Please note that our revised forecast includes the potential impact of our recent recall of accelerator pedals on earnings and vehicle sales as far as we could estimate at this point in time. For your information, please also see slide 22 for comparison between our revised forecast and previous year''s results.

The 440 billion yen improvement in operating income was supported by a reduction of variable and fixed costs through our emergency profit improvement activities which exceeded the negative impact of unfavorable foreign exchange rates and the decline in sales volume and mix.

Lastly, we also revised our full-year forecast for capital expenditures and R&D expenses. We have been pursuing CapEx efficiently by maximizing the use of unemployed and idle facilities and excess goods in stock. Further, efficiency in use of R&D expenses has been also achieved.

This concludes our Toyota''s presentation on the third quarter results and the full-year prospects. Thank you very much for your attention.

Taro Takado

Thank you, Mr. Sasaki and Ms. Morita. During the Q&A session, we will have consecutive interpretation for questions and answers in both Japanese and English. I would like to limit the number of your questions to two questions each. Now, our conference call operator will explain how to connect your line.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

Before receiving your questions and giving responses to those questions, I would like to make one statement in advance that relates to the expected estimate of the negative impact on earnings stemming from the expenses relating to accelerator pedal. I earlier mentioned that expenses related to the measures to be implemented addressing accelerator pedal issue is already factored into the full-year projections. So I would like to explain to you how that is incorporated because we have received various questions and therefore, let me respond to that in advance.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

As assumptions for the performance forecast, we estimated likely impact that we could -- to the extent that we could make such estimations at this point in time of the measures addressing the issues relating to floor mats and accelerator pedals, whose implementation has been already determined for various regions.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

To be more specific, we incorporated approximately 100 billion yen as quality-related expenses which is evenly allocated to the third and fourth quarters. And therefore, one half approximately is allocated to the third quarter and the remaining half to the fourth quarter. Furthermore, we incorporated about 70 billion to 80 billion yen into the fourth quarter forecast as the likely impact on sales and others.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

The impact on sales and others stems from the fact that we assumed that unit sales may be negatively impacted to the tune of approximately 100,000 units globally and at the same time, in addition to that, we added some additional expenses which may be expected to be taken in response to customers'' enquiries or in addressing customers'' requests.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

If I may just repeat, those numbers that I have just cited are the assumptions used in preparing full-year forecasts and therefore, the actual impact may be different from the assumptions that we are using this time.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

At any rate, we will be making maximum all-out efforts in restoring the confidence and trust of customers early and that in turn, I believe would help minimize the reduction in the sales units.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

At this juncture, I would like to start receiving the questions.

Question-and-Answer Session

Operator

Thank you. Today''s question-and-answer session will be conducted electronically. If you would like to ask a question, please press the star key followed by the digit one on your touch-tone telephone. Again, please press star one if you would like to ask a question. If you find that your question has already been answered and you would like to remove yourself from the queue, you may do so by pressing the pound or the hash key. We''ll now pause for a moment to assemble the roster. And again, that is star one. We''ll pause for a moment.

We''ll take our first question from Steve Usher with Japaninvest

Steve Usher – Japaninvest

Good evening and thank you very much for this call. I just have two questions. First of all, could you please comment on the cost associated with the closure of NUMMI? And are those, I don’t want to imagine those are including the recall cost. So if you could please give us a bit more detail on that?

My second question is could you please talk about the profitability''s in China and included in that question, could you comment on the recall costs in china, you had a number of recall, recall thus far this year and if you could give us a bit more detail on those costs I''d appreciate it? Thank you very much.

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

With respect to NUMMI as the production moved towards the completion and final closure, there maybe the possibility of that operation may lapse in stability going forward. And in order to assure stable delivery of Corolla''s and Tundra''s for which demands are very high. Without causing any troubles or consent I want the part of customers, we will incur a second cost. And those cost and expenses are in the reasonable extent incorporated and booked on the third and fourth quarters.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

However, when it comes to specific amount involved, please accept my statement that I would like to refrain from mentioning those numbers.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

With respect to China, we actually recalled 75,000 units of RAV4 and therefore, there are certain recall-related expenses or costs. It is not a very significant amount. Although, I cannot cite any specific number in relation to that, please do understand that recall costs related to China is incorporated in the aggregate number I cited earlier. The number such as 100 billion yen, for example.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

At any rate, please do understand that the expenses related to China is not a significant amount. With respect to the market in China, we expect that the market is likely to grow very substantially in the fiscal year 2010 as well. For example, the market in 2009 in China was slightly less than 14 million units, that is to say, in the higher part of 13 million units.

And this year the growth of the market is likely to exceed even that. And on the part of Toyota, we''ve sold approximately 710,000 units in China. And this year, we are planning to sell at the level of around 800,000 units. We believe our Chinese market is, of course, the market with a very strong and high potential over medium, long term

Steve Usher – Japaninvest

Thank you very much. Could you comment on the profitability in China and the profit contribution to equity earnings in Q3 and thus far this fiscal year?

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

During the three months of the third quarter, in the equity method profit, the profit related to our Chinese business is included to the tune of between 20 billion to 30 billion yen. And in addition to that, we do have a profit from Chinese subsidiaries as well as profit earned by delivering parts and vehicles from Japan to China. And therefore, during the three months of the third quarter, we booked approximately 70 billion yen in profit for Chinese business.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

Allow me to correct my earlier statement. I earlier mentioned that the profit from Chinese business is included to the profits accounted for by equity method to the tune of between 25 billion to 30 billion yen. Actually, that amount included in the equity method profit was slightly less than 25 billion yen. But the total profit relating to Chinese business is about 70 billion, as I mentioned earlier.

Steve Usher – Japaninvest

Great. Thank you very much. I appreciate that.

Taro Takado

Next question, please.

Operator

Margaret Moore with DuPont Capital Management Corporation. Please go ahead.

Margaret Moore – DuPont Capital Management Corporation

Yes. Thank you for the call. The first question is, I was wondering if the recall costs include the most recent announcement of problems with the Prius brakes. And if not, do you have any estimate at this time for what the amelioration costs for that would be?

My second question is regarding the financial services. In your assumptions for the financial services business, are you now revisiting resale value assumptions in your guidance? Thank you.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

First of all, with respect to the issue of Prius, it has not been clearly identified what sort of improvement or amelioration measures specifically are going to be implemented. And therefore, any cost relating to the Prius is not incorporated in the forecast I mentioned earlier.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

Regarding the resale price of used vehicles, it''s very difficult to forecast what those prices are likely to be. However, I earlier cited the likely impact on sales of about 70 to 80 billion yen and a part of that includes the risk of a possibly reduced value of used cars.

Margaret Moore – DuPont Capital Management Corporation

Thank you.

Taro Takado

Next, please.

Operator

And we''ll take our next question from Kurt Sanger with Deutsche Bank.

Kurt Sanger – Deutsche Bank

Thanks. And thank you for the call. Two questions. One, on the North America profit for the third quarter, excluding valuation gains, you have 69.7 billion yen. Can you give us a rough idea how much was the finance business and how much was the Auto business of that?

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

Please give us a moment.

Takuo Sasaki

Unidentified Speaker

[Foreign Language]

Kurt Sanger – Deutsche Bank

Okay. Great. Thank you.

Takuo Sasaki

During the third quarter, excluding interest rate loss related earnings, the profit of North America was 59.7 billion yen. And of that, about 50 billion yen relates to the financial services gains, that is gains from TMCC.

Kurt Sanger – Deutsche Bank

Great. Thank you. Second question, Sasaki-san is on the domestic market. The sales in Japan have been extremely strong, helped by the government incentives. That certainly helped your parent company and domestic production levels over the last quarter. Just looking into next year, after the incentive program ends in September, what is your view of the domestic market? I''m more concerned about the domestic production levels going forward. Thank you.

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

As you have just mentioned in September, the domestic subsidy regarding environmental friendliness will expire. However, that''s only one aspect of those incentives. The ecological or environmentally-friendly tax breaks will last a little longer, up until 2012. And as I mentioned, just a part of that that is ecological subsidy, expires in September and therefore, we are also concerned about the potential decline in demand in and after October this year.

However, at the same time the markets in other regions of the world are recovering and will start recovering further. And therefore we are hoping that those stronger market recovery in the regions of the world outside of Japan would be able to cover and make up for a potential decrease in demand here in Japan.

Kurt Sanger – Deutsche Bank

Okay. Thank you. The impact has been to help shrink the parent losses to only 20 billion yen in the third quarter, I believe. Would you be hopeful that the parent company could actually break even next year?

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

Well, the business plan, the plan for the next fiscal year is something that we are working on right now and therefore, it''s very difficult for me to answer either way, either yes or no. And especially, when you talk about parent company, there is another factor, that is to say, the exchange rate may fluctuate quite significantly from what we see today. And therefore, all I can say at this point is that we will make a very serious effort so that we can break even this year.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

And this year on the standalone basis or at the parent company basis, earnest efforts are being made to reduce fixed costs, for example. And therefore, compared with the situation in the past, we have acquired stronger fundamental capabilities which allows us to make earnings even at the current exchange rate level. And therefore, we need to make of course even further efforts going forward for next year as well.

Kurt Sanger – Deutsche Bank

Great. Thank you very much.

Taro Takado

Next question, please.

Operator

Ben Moyer with Blackrock, please go ahead.

Benjamin Moyer – Blackrock

Yes. Hi, thanks for the call. I had a question about your volume assumption for the fourth quarter and the impact of the recall. You said that you anticipated a 100,000 unit impact. I''m assuming that''s at the retail level. Are you assuming that the wholesale volume will be impacted the same amount or by any lesser or larger amount? That''s the first question.

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

Basically speaking, I think you will be able to understand that the impact on the wholesale is in line with or about the same level as that on the retail level.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

In formulating the consolidated full-year forecast, the volume assumption was made on that basis.

Benjamin Moyer – Blackrock

Okay. Okay. And this is kind of a follow up to that. I''m curious how you came up with this 100,000 unit estimate. It looks like if we look only at North America and we look at the run rate in North America through the end of the third quarter, a 100,000 unit drop in the fourth quarter would imply about a 20% drop from the run rate through the end of the third quarter and that''s only at North America. So it just seems to me that it''s possible your assumption of a 100,000 unit impact may be a little bit too conservative. In other words, the impact could be larger than 100,000. That''s just my impression. I wonder if you could comment on that.

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

I earlier mentioned that the impact globally could be 100,000 units. And for North America, we estimated the impact to be around 80,000 units and in the remaining areas, specifically Europe and others, 20,000 units. So, 80,000 North America, 20,000 Europe and other regions, totaling 100,000 units.

But this is the estimates we made for the purpose of formulating the full-year projections to be used as an assumption for that. And as I mentioned earlier, the actual impact may be potentially different from those assumptions I have just mentioned. So rather than being able to describe how we have arrived at those numbers, let me just say that an estimation was made by soliciting opinions and views of those people at the forefront of sales.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

Needless to say, those people at the forefront of sales are really making every possible effort in order to keep those impacts on volume to be at the minimum possible level. They are working hard in order to regain trust and confidence of the customers. And therefore, when the actual result arrives it may be different from those assumptions I have just mentioned.

Benjamin Moyer – Blackrock

Okay. And then my other question is more about the recall and the problems that have been mentioned in the press continuously for the last two weeks or less than two weeks. I''m not sure, but it seems a lot of focus is now being put on the electronics in the vehicles and some people believe that there could be an electronic problem. Toyota has so far said that there is no electronic problem and I believe they seem to be saying that with a lot of confidence. And I''m just wondering if you could tell us something about why you''re so confident that the problem is not electronic?

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

Not being an engineer myself, all I can do in response to your question is to convey what I have heard from engineers or engineers'' opinions. Now Toyata''s engineer said that the electronics throttle control system has many layers of redundant failsafe mechanisms and systems incorporated. And therefore, there have not been any facts that have been confirmed that sudden unintended acceleration was caused by electronic throttle control systems. That''s what I have heard and I simply cannot mention any more specifics than what I have just mentioned.

Benjamin Moyer – Blackrock

Okay. Well, thank you.

Taro Takado

Okay. Next question, please.

Operator

James Irwin with Moon Capital. Please go ahead.

James Irwin – Moon Capital Management

Hi. Thank you for doing the call. Can you hear me okay?

Keiko Morita

Yes. Thank you.

James Irwin – Moon Capital Management

Thank you. Yeah, the last question was focused on what I had the same issue on. Your methodology on the 100,000 hit from the -- on the sales side. I did have one follow up on that, though. And that''s simply, if we looked at your sales results in United States in January and we looked at the sales level on the first 20 days versus the underlying sales level on the last 10 days of the month, what was the actual hit in terms of that sales running rate? Like the prior caller, I thought that the 100,000 unit was a potentially low number in terms of the real impact here just based on the market share trends. Maybe I''m missing something, though. Can you share with me what happened in the last 10 days of January in terms of your U.S. sales rate? Thank you.

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

I''m sorry, I can''t give you any specific answer because I don''t have those specific numbers with me at this moment. But one thing I can say is that this very last week of January includes the weekend that is a Saturday and Sunday and on January 25, the announcement was made to stop the sales. And so the impact on sales was clearly observed in the last week because of that.

And rather than sales of the last week continuing on into the future, since the announcement of counter measures and implementation therein was made on February 1, dealers have been making all-out efforts fixing the vehicles currently by the customers and then moving onto modifying, the vehicles in the inventory subsequent to that. And that will result in the resumption of sales going forward. Therefore, I''m not quite sure it is appropriate to simply extrapolate the figure of the sales of the last week of January into the future.

James Irwin – Moon Capital Management

Yeah. Thank you. I would agree with that but directionally, we have in the U.S. Congress a couple of hearings coming up in February relating to the NHTSA and the recall issues. And from a communications standpoint, as Ben Moyer mentioned, there''s a lot of confusion and negative press out there in the marketplace and again, two big congressional hearings coming up in February.

As of today, now that Toyota has identified the fix and is implementing it, has Toyota planned to embark on a significant public relations or advertising campaign to address a lot of the negative commentary that''s being put out there regarding the brand? Or is that still to be determined?

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

As I mentioned earlier, now that we have identified the problem we are making all-out efforts in addressing and fixing this problem. And the first primary focus is to restore confidence and trust on those customers, Toyota fans, who have been using Toyota vehicles thus far. And that will be the first measure that is to be implemented and that will be implemented.

Now about the various media coverages and press reports, what sort of public relations effort needs to be made was included in the question. And of course, that is something that we need to consider implementing some counter measures at the corporate level. But for me, it''s a bit difficult to give you some direct answers to that. In the overall context, taking into account the various factors, that public relations campaign will be one of the options that we need to consider.

James Irwin – Moon Capital Management

Thank you very much.

Taro Takado

Okay. Next question. This is the final question.

Operator

We''ll take our final question from John Buckland with MF Global.

John Buckland – MF Global

Good afternoon. Thank you for including me on the offer of questions. I just wondered if you can offer some insight into the markets as you see them post incentives, particularly in Europe, but also the underlying picture for North America. Because it''s not clear to me exactly why you increased your forecast? Clearly, you''ve done better up until now in terms of the sales, but is that a real underlying improvement? Is it the fact you''ve benefited more than you expected to from incentives?

In Europe, particularly, there seems to be quite a contrast in terms of forecasts. For example, Ford give a forecast down 8% to down 15%. Fiat says it could be 12% or 16%. Yesterday, Volkswagen said the German market wasn''t so bad, maybe even the European market is flat. So I wondered if you could tell us what you think the calendar year forecast would be? What your assumption for 2010 is? And in North America, excluding the impact of the recall, do you see the actual recovery rate improving such that you -- that''s what is underlying your higher forecast there?

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

Let me just confirm your question regarding the market conditions in Europe and the United States. Have you raised the question regarding calendar year 2010 rather than fiscal year ending in March 2010?

John Buckland – MF Global

Yes.

Takuo Sasaki

Pardon me.

John Buckland – MF Global

Yes. It''s the calendar year if --

Takuo Sasaki

Calendar year 2010, right?

John Buckland – MF Global

Well, yes, because clearly you''re right at the end of the current fiscal year. The last quarter of your fiscal year is the first quarter of calendar year 2010. Where in Europe, for example, there still is the impact of incentives being felt. In particular, some markets still have their incentives in place, others are running out but there still is the impact there. So really what I''m trying to judge is your assumptions about what happens in Europe post the incentives. So we really need to look at the whole of 2010 calendar year? And then in the U.S., obviously, it''s just the rate -- the pace of sales recovery which perhaps applies also to the whole of 2010.

Unidentified Speaker

[Foreign Language]

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

With respect to Europe you are quite right. Last year, governments of various countries in Europe introduced scrappage incentives and other measures. But the countries in which those incentives will continue in the subsequent year are France and Italy. And in other countries, those incentives are to expire or have expired. So the situation is quite different from country to country.

In terms of our sales assumptions for full calendar year 2010, at the retail basis our assumption stands at 840,000 units for calendar year 2010. And this contrasts to the calendar year 2009, the decrease of 50,000 units. So this is down 50,000 units from the actual level reached in calendar year 2009.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

As for the United States, the market for the entire period of this year is assumed to be around 11.5m units, partly due to expected increase in production stemming from inventory adjustments made by corporates of the United States. And also, albeit at a very slow clip, there are some signs of an improvement in economic activities in general. And furthermore, the first half of last year was really the worst period and therefore, compared with that we are assuming that there will be some rise in the market still around 11.5m units.

Unidentified Speaker

[Foreign Language]

Takuo Sasaki

And with respect to the assumptions for North American sales for the calendar year this year, we have already announced that we forecast about 2.19m units of sales volume for North America. This is the assumption made prior to incorporating the impact of recalls which I mentioned earlier and therefore, we will very carefully monitor the actual development in the market and its impact going forward. The assumptions for the United States U.S. market – U.S. sales is 1.97m units.

John Buckland – MF Global

Okay. Thank you.

Taro Takado

Thank you to you. Okay, so this concludes today''s conference call. Should you require further information regarding today''s conference or on Toyota, please feel free to contact our Investor Relations representatives in London and New York. Their contact details were given at the end of the invitation to this conference call. Thank you again for joining us today. Goodbye.