Thursday, 8 October 2015
Toyota Caetano an errata and 1H2015
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€).
“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