Toyota Industries Corporation

Company Profile

Publication Date: 18 Dec 2008

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TABLE OF CONTENTS

TABLE OF CONTENTS

Company Overview..............................................................................................4
Key Facts...............................................................................................................4
SWOT Analysis.....................................................................................................5

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Toyota Industries Corporation
Company Overview

COMPANY OVERVIEW

Toyota Industries Corporation (Toyota Industries) is engaged in the manufacturing and selling of
automobiles, materials handling equipment and other services. The company operates in Japan,
North America, Europe and Asia. It is headquartered in Aichi, Japan and employed 39,528 people
as on March 31, 2008.

The company recorded revenues of JPY2,000,536 million (approximately $17,564.7 million) during
the financial year ended March 2008 (FY2008), an increase of 6.5% over 2007. The operating profit
of the company was JPY96,853 million (approximately $850.4 million) during FY2008, an increase
of 7.7% over 2007. The net profit was JPY80,460 million (approximately $706.4 million) in FY2008,
an increase of 35.3% over 2007.

KEY FACTS

Head Office Toyota Industries Corporation

2-1
Toyoda-cho
Kariya-shi
Aichi 448-8671
JPN
Phone 81 566 22 2511
Fax 81 566 27 5650
Web Address http://www.toyota-industries.com
Revenue / turnover 2,000.5
(JPY '000)
Financial Year End March
Employees 39,528
Tokyo Ticker 6201

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SWOT Analysis

SWOT ANALYSIS

Toyota Industries is a Japanese manufacturer of auto parts, textile machinery and electric components.
The company has strong engineering capabilities, which would help it to enter new markets and
develop new products. However, a weak economic outlook for Japan, the US and Eurozone, the
primary markets of the company, would put pressure on the revenues of the company.

Strengths Weaknesses

Strong engineering capability Weak performance of ‘material handling

Strong financial performance equipment’ division
Strong relationship with Toyota Motors Retirement benefit liabilities

Opportunities Threats

Growing demand for hybrid electric vehicles Economic slowdown

Global material equipment market Kyoto Protocol
Growing opportunities in emerging Exchange rate fluctuations
automotive markets

Strengths

Strong engineering capability

The company has strong engineering capabilities. During its inception in 1926, the company
manufactured automatic looms for use in the textiles industry. Gradually it leveraged its engineering
capabilities to manufacture more complex textile machinery, automobiles, materials handling
equipment, electronics and logistics solutions. Currently the company engineers and manufactures
automobile engines (diesel and gasoline engines), car air-conditioning compressors, and automobile
assembly operations. It manufactures passenger cars such as Vitz and RAV4, industrial vehicles
such as forklift trucks, and automatic guide vehicles. For the textile industry the company manufactures
spinning and weaving machinery. Its car air-conditioning compressors are known for superior quality
and reliability.

The company has further leveraged its technical capabilities to enter new markets and develop new
products. For instance the company has recently formed a logistics segment which would provide
advisory services for logistics management. The company is also extending its product portfolio to
include hybrid engines and hybrid vehicles. Toyota Industries was among the first lift truck
manufacturers to develop the fuel-cell hybrid system for lift trucks in-house. The company also
manufactures electric compressor for hybrid vehicles. The company’s strong engineering capabilities
allow it to expand its product portfolio.

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SWOT Analysis

Strong financial performance

The company recorded strong financial performance in the last three year period. During 2006–08,
Toyota Industries revenues increased at a CAGR of 15.3%, from JPY1,505,955 million (approximately
$13,222.3 million) in FY2006 to JPY2,000,536 million (approximately $17,564.7 million) in FY2008.
The company also witnessed significant growth in profitability. The company’s operating profit
increased at a CAGR of 23% from JPY64,040 million (approximately $562.3 million) in 2006 to
JPY96,853 million (approximately $850.4 million) in 2008. The net profit of the company reached
JPY 80,460 million (approximately $706.4 million) in 2008 from JPY47,077 million (approximately
$413.3 million) in 2006.

During the financial year, the operating profit margin of the company increased from 4.2% to 4.8%.
Similarly, the net profit margin of the company increased from 3.1% to 4.0%. In addition, the
company’s cash from operations increased at a CAGR of 19.7% from JPY131,784 million
(approximately $1,157.1 million) to JPY188,805 million (approximately $1,657.7 million). The strong
financial performance of the company has contributed to its market dominance, which would enhance
the investor confidence.

Strong relationship with Toyota Motors

The leading vehicle manufacturer Toyota Motor has a stake of 24.6% in Toyota Industries. Toyota
is the leading automotive manufacturer in the world. In the annual ranking of top 100 global brands
by BusinessWeek and Interbrand in 2008, Toyota figured in the 6th position. The Toyota brand was
valued at $34.1 billion in 2008. It is the highest ranking automotive brand name. Toyota Industries
leverages the brand strength of Toyota to penetrate markets.

Toyota Industries plays a key role in Toyota’s car production programs as one of the vehicle assembly
arms within the Toyota Group. Toyota Industries’ vehicle business primarily assembles compact
and midsize automobiles under consignment from Toyota. At present, Toyota Industries manufactures
two models, the RAV4 for Europe and the US and the Vitz (Yaris outside Japan). In FY2008, the
company received 35.6% of its total revenue from Toyota Motor. Besides the brand-leverage
advantage, Toyota Industries receives manufacturing contracts from Toyota.

Weaknesses

Weak performance of ‘material handling equipment’ division

The material handling equipment business division of the company witnessed poor performance in
the last financial year. In FY2008, the revenues of this operating division grew at a sluggish rate
2.1% to reach JPY783,173 million (approximately $6,876.2 million) in 2008 from JPY767,237 million
(approximately $6,736.3 million). In addition, the operating income from this division declined
significantly. The division recorded the operating profit of at JPY39,843 million (approximately $349.8
million) for the FY2008, a decline of 15.6% from JPY47,201 million (approximately $414.4 million)

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SWOT Analysis

in 2007. Weak performance of material handling equipment division, the second largest business
division of the company is likely to pull down the overall financial performance of the company.

Retirement benefit liabilities

Toyota Industries provides pension benefits and other post-retirement health and life insurance
benefits to employees. During the FY2008, the company incurred post retirement benefit expenses
of JPY11,493 million (approximately $100.9 million). The company also paid a total of JPY10,878
million (approximately $95.5 million) for the post retirement benefit plans during 2007.

Further, by the end of March 2008, the company's projected pension and post-retirement benefit
obligations stood at JPY149,465 million (approximately $1,312.3 million) as compared to the planned
assets of JPY105,287 million (approximately $924.4 million), resulting into an unfunded status of
JPY41,826 million (approximately $367.2 million) after making the adjustments like Unrecognized
actuarial gain, unrecognized loss in service etc. Sizeable unfunded post retirement benefits would
force the company to make periodic cash contributions towards bridging the gap between post
retirement benefits obligations and planned assets, which would reduce cash available for growth
plans.

Opportunities

Growing demand for hybrid electric vehicles

Worldwide demand for light hybrid electric vehicles (HEV) is estimated to reach 4.0 million units by
2015. Rising energy costs and increased emissions regulations are likely to increase the demand
for HEVs, as hybrid engines are more fuel efficient and less polluting than conventional gasoline
and diesel engines. Toyota Industries has strong focus on devices for plugin hybrid vehicles. The
company also develops the core parts for electronic components and devices for hybrid vehicles.
For instance, Toyota Industries is engaged in the development and production of DC-DC converters
for hybrid vehicles. The company provided these DCDC converters to the Prius (first hybrid vehicle
by Tata Motor), the Harrier Hybrid, the Camry Hybrid, and the Lexus LS600h (hybrid vehicle models
produced by Toyota Motors). The company’s competency on hybrid technology is likely to drive
growth in the medium term.

Global material equipment market

The global material equipment market is witnessing strong growth in the coming period. For instance,
the total revenues of this market are projected to reach $113.5 billion by 2010. Toyota Industries is
the leading manufacturer of the lift trucks, warehouse trucks, shovel loaders and tow tractors. Further,
the company is pushing a number of measures to strengthen its world leadership position. For
instance, the company deployed the Toyota Production System (TPS) (a renowned manufacturing
method) throughout its manufacturing operations for material handing equipment. Further, the

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SWOT Analysis

company provides customized vehicles for each and every market. The growing material equipment
market would help the company to improve its business operations.

Growing opportunities in emerging automotive markets

The company is increasing its focus in the emerging markets such as Russia, China, India and the
Middle East region. These markets are expected witness strong growth in the coming future. For
instance, the total automobile sales in the Russian market are expected to reach 5.9 million units
by 2012, and increase of 51% over 2008. In China, vehicle demand is projected at around 12 million
units in 2010 due to growth in personal income levels. While, the total vehicle demand (excluding
trucks and buses) is India is expected to reach approximately 2.6 million units by 2010. Similarly,
the total demand for Japanese-brand vehicles in Middle East is expected to reach approximately
900,000 units in 2010.

The automobile business division of the company manufactures vehicles, and engines, and car
air-conditioning compressors for various automobile manufacturers, whose businesses are
concentrated in these emerging markets. Further, the company also provides automotive logistics
services. The company with strong automotive business operations would be benefited by the
growing vehicle demand in these emerging markets.

Threats

Economic slowdown

Toyota Industries derives a large proportion of its revenues from Japan, North America and European
market. In FY2008, the company generated 67.1% of its overall revenues from Japan, 13.3% from
North America (primarily from the US), 16.4% from Europe. According to the IMF World Economic
Forum October 2008, the real GDP growth of Japan, the US and Eurozone is expected to slowdown
in 2009.

The GDP growth in Japan is expected to slowdown from 2.1% in 2007 to 0.7% in 2008 and 0.5% in
2009, while the GDP growth of the US economy is forecasted to slow down from 2.0% in 2007 to
1.6% in 2008 and 0.1% in 2009. Similarly, the GDP growth of the Eurozone is forecasted to decline
from 2.6% in 2007 to 1.3% in 2008 and 0.2% in 2009. The poor economic performance and a weak
economic outlook for Japan, the US and Eurozone, the primary markets of the company, would put
pressure on the revenues of the company.

Kyoto Protocol

The Kyoto Protocol for the reduction of greenhouse gases went into effect in 2005. As a result, Japan
is now faced with the daunting task of cutting back greenhouse gases by 14% from the 1990 level
within the four years to 2012. As of May 2008, the protocol ratified by 181 countries and calls on
industrialized countries to reduce their greenhouse gas emissions from the 1990 level by 5.2% on

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SWOT Analysis

an annual average during 2008-2012. The stipulated reduction target is 6% for Japan. Further,
Toyota Industries designated the prevention of global warming as one of its most crucial management
issues and focuses on measures to curb global warming. For FY2009, Toyota Industries set the
target of improving its eco-efficiency by 30% on a non-consolidated basis compared with 1991 level.
The government’s strong stand on the reduction of greenhouse gases is expected to significantly
increase compliance cost for manufacturing companies such as Toyota Industries. This in turn would
drastically increase the cost structure of the company.

Exchange rate fluctuations

Toyota Industries’ businesses encompass the production and sales of products and the provision
of services worldwide. Toyota is sensitive to the fluctuations in foreign currency exchange rates and
is principally exposed to fluctuations in the value of the Japanese yen, the US dollar and the Euro.
In the recent period, the Japanese Yen appreciated significantly against the US dollar. For instance,
the average exchange rate for Japanese Yen in the first half of FY2009 (from April 1, 2008 to
September 1, 2008) stood at $1=JPY106.1, a decrease of 11% (per $1) over the first half of FY2008
(whose average was $1=JPY119.3). Similarly, the average exchange rate for FY2008 was
$1=JPY114.3, which is significantly higher to the average exchange rate for the first half period of
FY2009. The strengthening of the Japanese yen against the US dollar can have a material adverse
effect on Toyota Industries’ reported operating results, which may in turn affect the valuation of the
company.

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