Toyota Caetano: an
errata
As I previously stated I am and will be wrong so you should always do
your own research. My mistakes have been mostly when analyzing the renting unit
before. In fact, I was under the impression that their fleet was renewed less
often than it actually is. In fact, in August last year the following statement
in 1H2014
“In June 210 units were acquired for RACs segment, the impact of which
in Turnover will only have effects in the next half of the year. We have good
perspectives for the second half of the year, as the sale of about 560 RAC's
vehicles is expected.”
lead me to the belief that they were preparing a global divestment in
the rent-a-car business of 350 units.
Since they ended the year with only 592 units
that seemed to be pretty accurate. However, they did a similar statement in
1H2015
“For the RAC
segment, 250 units were acquired in June, whose impact on turnover will only be
reflected in the following semester. We have good prospects for the 2nd half, as
the sale of about 465 RAC vehicles is expected”
but the number of RAC units rose to 1137 (a 545 growth since year end ).
So they actually renew their fleet much more often, which means a bigger chunk
of the unit profit comes from vehicle sales at a profit after depreciation
instead of coming from the renting itself.
In addition, since I assume those units to be mostly Toyota (and I still
need to confirm that), an important role of the rental unit might be to help
the company achieve new vehicles sales volume for Toyota. That could mean the rental
unit might bring profit to other units while roughly breaking-even by itself.
And this leads me to another point, which I was writing some time ago:
a. which is the return on equity of the renting units?
i.
Auto renting
equity at year end 2013/2012: 1.740k/1.523k generated a net income of 263k/368k
at year end 2014/2013, which would mean a ROE of 15,1%/24.2%. However net
income in 2012 was marginally positive and it was negative in 2011/2010.
ii.
Industrial
equipment renting unit equity at year end 2013/2012: 21.725k/24.532k generated
a net income of 1142k/860k at year end 2014/2013, which would mean a ROE of
5,2%/3.5%
iii.
The ROE of the
industrial equipment renting unit is quite low. I did not have that idea which
means I might have posted somewhere on previous posts a different number due to
some miscalculation (fortunately you all read my disclaimers where I state that
I am and will be wrong).
iv.
Recent ROE in
the auto renting unit is high but that might be due to a fleet reduction at
above book prices. Past ROE was negative. If we look at the full cycle returns
might be even worse than the industrial equipment renting unit ROE.
So on the one side this units seems to help increase Toyota/BT volumes
and as such contribute to firm profits but on the other side individually their
ROE is quite low. So low in fact that if there is no indirect profit it might
not make much sense to have that money invested.
Toyota Caetano:
1H2015
A few key quotes from the first half report:
“The main landmark in the first semester was the end of
production of the Dyna model,and the preparations for starting the production
of the Land Cruiser series 70 (LC70).”
“The forecast is that by the end of the year 1,250 units of this model
will be
manufactured exclusively for exporting.”
This forecast is important since this was released at the end of August
so they should get it approximately right. One year ago the forecast was:
“as an estimate of the activity to be developed for the 2nd half of
the current financial year, over 900 Toyota physical units and about
1,000 conversions are expected to be assembled”
And the real number was: 903 and
2019, respectively. So they seem to get it right when it comes to Physical
units. Conversions are dependent on auto sales it is harder to predict. So 1250
it is.
“In the PPO/PDI activity (Transformed /Prepared Physical Units), there
was a 78% increase over the same period last year.”
This partially countered the fact that they only assembled vehicles in
two months of the semester. The results were, unsurprisingly poor: a 2322K€ net
income loss.
The company earned 1059k€. However they previously mentioned they
expected to break even in the industrial unit in 2H2015. So what would the
result have been at break even? 3381k€ (0,097€/share).What if second half is
equal to last year’s (quite conservative estimate) but with a break even in the
industrial unit? They lost 1017k€ on the industrial unit and had a net profit
of 2154k, which would mean a net profit of 3171k€ (0.091€/sh). That would make 0,188€/year if things were to stay flat after
that. I still think these assumptions are conservative for normal earnings but
since all earnings are paid out that would be a nice dividend yield at current
prices (1,07€).
Other quotes:
“For the second half of the year, the outlook is quite favorable, namely
with the
expected good performance of hybrid vehicles and of the aforementioned
models -Aygo, Yaris, Hilux and Dyna -, as well as with the expected increased
sales of Auris and Avensis, which were the object of strong product renewals.”
“This was mainly due to the materialization of a large fleet business in
the Warehouse Equipment segment that significantly influenced both the market
as well as BT sales.” (a BT Business of 349 units.)
And at Caetano Auto:
“As for depreciations, and keeping the criteria of applying the maximum
rates allowed for tax purposes, this item still represents more than 1 million
euros per semester, significantly influencing pre-tax profit.” – for some
reason I like this statement.
Disclaimer: read my previous disclaimers in Toyota Caetano. I am and will be wrong, do your own research, I own shares
