TOYOTA MOTOR CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥24.63T
• Operating Income: ¥2.01T
• Net Income: ¥1.85T
• EPS: ¥136.07

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Toyota Motor Corporation (72030) reported FY2026 Q2 consolidated results under IFRS showing resilient profitability and strong balance sheet capacity, albeit with signs of margin compression and investment-led cash outflows. Revenue was 24,630.753 billion yen, with operating income of 2,005.692 billion yen, which declined 18.6% YoY, indicating cost pressure and/or mix effects despite scale benefits. Net income was 1,773.426 billion yen, down 7.0% YoY, implying better resilience at the bottom line than at the operating level, supported by non-operating and tax dynamics. Using disclosed revenue and cost of sales, implied gross profit is approximately 7,496.601 billion yen, yielding a gross margin of about 30.4%, while SG&A intensity was 9.8% of sales. Operating margin is approximately 8.1% (computed from disclosed figures despite “reported operating margin” being N/A), and EBITDA was 3,133.656 billion yen with an EBITDA margin of 12.7%, reflecting solid underlying cash earnings capacity. DuPont analysis shows a net margin of 7.2%, asset turnover of 0.252x, and financial leverage of 2.54x, resulting in ROE of 4.6%, which is moderate for a capital-intensive OEM with a large financial services arm. Operating cash flow was 1,817.177 billion yen, broadly in line with net income (OCF/NI 1.02x), suggesting reasonable earnings quality for the period. However, free cash flow was negative at -1,268.575 billion yen as investing cash outflows were sizable at -3,085.752 billion yen, reflecting elevated reinvestment and/or financial services asset growth. The balance sheet remains robust: total assets of 97,574.878 billion yen and equity of 38,456.954 billion yen yield an equity ratio of 38.4% and leverage of 2.54x. Liquidity is ample with cash and equivalents of 8,982.404 billion yen, providing flexibility to fund capex, R&D, and shareholder returns. Reported debt metrics are incomplete, but the provided debt-to-equity ratio of 1.47x suggests manageable solvency for Toyota’s size and business mix. The effective tax rate of 35.0% weighed on net income and will be a sensitivity for full-year earnings. Dividend metrics are partially disclosed; a calculated payout ratio of 80.2% and negative FCF imply tighter coverage in this half, though the cash position and equity base mitigate near-term risk. Working capital items show inventories of 4,598.232 billion yen, receivables of 3,679.722 billion yen, and payables of 5,527.347 billion yen; without current liabilities, a precise current ratio cannot be computed. Data limitations are notable (e.g., gross profit, capex, interest expense, dividends and some balance sheet components unreported), so conclusions focus on available, non-zero data and derived metrics. Overall, Toyota remains profitable with high cash balances and solid equity, but faces near-term margin pressure and investment-heavy cash usage as it navigates product mix, technology transition, and financial services growth.

Profitability Analysis

ROE of 4.6% decomposes into a 7.2% net margin, 0.252x asset turnover, and 2.54x financial leverage, indicating that profitability is driven more by scale and leverage than by exceptionally high margins. Implied gross margin is about 30.4% (revenue minus cost of sales), reflecting pricing power and favorable mix but still subject to material and logistics costs. SG&A was 24,027.19 (hundred million yen), or 9.8% of revenue, consistent with the scale of global OEM operations. Operating margin is approximately 8.1% (2,005.692 / 24,630.753), showing contraction versus the prior year given operating income declined 18.6% YoY while revenue YoY is not disclosed. EBITDA margin of 12.7% evidences good cash earnings, with D&A of 1,127.964 billion yen representing about 4.6% of sales. The effective tax rate of 35.0% compressed after-tax returns; sustaining lower tax rates would be accretive to ROE. Operating leverage appears adverse this period: operating profit fell more sharply than net profit and revenue growth is undisclosed, implying cost inflation or unfavorable mix absorbed by the P&L. Equity-method income of 264.315 billion yen is supportive to bottom line, partly buffering operating headwinds.

Growth Assessment

Top-line sustainability cannot be benchmarked YoY as revenue growth is undisclosed, but the absolute scale (24.63 trillion yen for the half) remains robust. Profit growth is under pressure: operating income fell 18.6% YoY and net income declined 7.0% YoY, indicating contraction in core profitability despite scale. Margin compression likely stems from cost of sales dynamics (materials, FX, logistics) and product mix; SG&A discipline helped, but was insufficient to offset operating headwinds. Equity-method gains provide a partial offset to operating softness, but are not a structural substitute for core margin expansion. With EBITDA at 3.13 trillion yen, underlying profit generation remains strong, supporting reinvestment. Outlook hinges on cost normalization, mix/pricing, and continued recovery in supply chains; investing outflows suggest ongoing capacity, technology, and financial services asset growth, which can support future revenue but may keep near-term FCF subdued. Absent revenue YoY data and R&D disclosure, we assume Toyota is maintaining strategic investment levels to support electrification, software, and autonomous initiatives, which can dampen near-term margins but support medium-term growth.

Financial Health

Liquidity is strong with cash and equivalents of 8,982.404 billion yen; however, lacking current liabilities data, we cannot compute current or quick ratios. Reported working capital equals current assets (37,078.676 billion yen), suggesting the true working capital position is not derivable from disclosed items. Solvency appears healthy: equity ratio is 38.4%, assets are 97,574.878 billion yen, and total liabilities are 56,722.437 billion yen. Leverage is moderate for an OEM with a financial services arm: assets-to-equity of 2.54x and debt-to-equity of 1.47x (as provided). Accounts payable (5,527.347 billion yen) exceed receivables (3,679.722 billion yen), offering some supplier financing, while inventories are sizable at 4,598.232 billion yen. Interest coverage cannot be computed due to unreported interest expense, but EBITDA and operating income scales suggest headroom. Overall capital structure is balanced with significant equity and cash cushions, enabling funding of investments and shareholder returns while absorbing cyclical shocks.

Cash Flow Quality

OCF was 1,817.177 billion yen, approximately 1.02x net income, indicating reasonable alignment between earnings and cash generation. Free cash flow was -1,268.575 billion yen due to large investing cash outflows of -3,085.752 billion yen; with capex unreported, investing CF likely reflects a mix of capex, strategic investments, and growth in financial services assets. The negative FCF in the half suggests reinvestment intensity or balance sheet growth, not necessarily weak operating cash conversion. EBITDA of 3,133.656 billion yen underscores strong cash earnings, but working capital movements are not disclosed in detail, limiting insight into inventory and receivables turns. The sizable cash balance (8,982.404 billion yen) provides a buffer to fund negative FCF periods without straining liquidity. Earnings quality appears fair given OCF/NI >1.0x, though sustained negative FCF would need to be accompanied by clear returns on invested capital.

Dividend Sustainability

The calculated payout ratio of 80.2% indicates a high share of earnings returned to shareholders in this period, but dividend amounts and DPS are unreported. FCF coverage is -0.89x, implying dividends were not covered by free cash flow in the half; however, this is influenced by elevated investing CF and the timing of cash flows. Given the large cash balance and strong equity base, near-term dividend capacity appears supported, though sustained high payout alongside negative FCF would depend on continued OCF strength and/or moderation of investing outflows. Policy commentary is constrained by missing DPS and total dividend data; we assume a stable-to-progressive approach consistent with large-cap Japanese OEMs, subject to earnings and cash generation. Monitoring full-year FCF, capital allocation between capex, R&D, and buybacks, and the effective tax rate will be key to assessing sustainability.

Risk Assessment

Business Risks:

• Input cost and logistics inflation impacting cost of sales and margins
• Product mix shifts and pricing discipline affecting operating margin
• FX volatility (JPY) influencing revenue translation and cost base
• Technology transition risk across HEV/BEV/PHEV and software-defined vehicles
• Supply chain constraints (e.g., semiconductors) impacting volumes and inventory
• Quality/recall risks affecting brand and costs
• Geopolitical and trade policy uncertainties across key markets
• Competition from global OEMs and new entrants in EVs
• Dependence on financial services segment performance and residual values

Financial Risks:

• Negative free cash flow due to elevated investing outflows
• Limited visibility on interest expense and debt structure (interest coverage N/A)
• High effective tax rate (35%) pressuring net margins
• Working capital swings with large inventories and payables
• Exposure to credit risk and interest rate sensitivity in financial services assets

Key Concerns:

• Operating income down 18.6% YoY indicating margin compression
• Free cash flow negative at -1,268.575 billion yen in the half
• Data gaps (capex, interest expense, DPS) constrain full assessment of coverage and leverage

Investment Implications

Key Takeaways:

• Scale remains strong with 24.63 trillion yen revenue and solid EBITDA of 3.13 trillion yen
• Operating margin of ~8.1% and net margin of 7.2% reflect healthy, but pressured, profitability
• ROE at 4.6% is modest, driven by leverage and scale rather than high margins
• OCF tracks earnings (1.02x NI), but investing outflows drive negative FCF
• Balance sheet strength (38.4% equity ratio, 8.98 trillion yen cash) provides flexibility
• High calculated payout ratio (80.2%) with negative FCF suggests tighter dividend coverage near term

Metrics to Watch:

• Operating margin trend and cost of sales ratio
• Free cash flow and composition of investing cash flows (capex vs. financial assets)
• Effective tax rate trajectory
• Inventory and receivables turns (working capital efficiency)
• Equity-method income contribution sustainability
• FX impacts and pricing/mix dynamics

Relative Positioning: Within Japanese auto OEMs, Toyota maintains superior scale, strong liquidity, and a solid equity base; current-period ROE is moderate and margins show some compression, but overall financial resilience remains comparatively strong given cash balances and diversified earnings, including financial services.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis