Toyota Ending Five Year Buyback Drought as Cash Pile Expands – Bloomberg
Toyota Motor Corp., the world’s
largest automaker, said it will buy back stock for the first
time in five years as its cash pile swells and profit climbs.
Toyota will repurchase as many as 60 million shares,
equivalent to a 1.9 percent stake, for 360 billion yen ($3.5
billion), according to a statement yesterday. The company will
retire about half of the shares by June. Toyota rose 0.1 percent
to 5,627 yen at 10:18 a.m. in Tokyo trading, while Japan’s
benchmark Topix Index dropped 1.4 percent.
The carmaker’s growing cash pile fueled calls from the
likes of Takaki Nakanishi, Institutional Investor magazine’s
top-ranked Japanese auto analyst, for the company to return
money to shareholders or invest in new factories. The maker of
the Camry sedans and Prius hybrids has forecast a record 1.9
trillion yen profit for the year ending March 31.
“They have the cash and this is still a conservative
amount that they’re buying back,” Frank Schwope, a Hanover-based analyst at NordLB who recommends buying Toyota, said by
telephone. “This is good news for the company and ultimately
Toyota shares have declined 12 percent this year, compared
with an 11 percent drop in the Topix. The automaker last bought
back stock in February 2009.
The buyback coincides with President Akio Toyoda starting
the Toyota Mobility Foundation, which will support global
nonprofits and researchers’ work on improving transportation
systems in developing markets, the company said.
“These nonprofit funds can sometimes be very effective and
sometimes not so,” Steve Usher, an analyst at JI Asia in San
Diego, said by telephone. “The intention is correct and is
positive. From an investment standpoint, the impact of the share
buyback is far more significant.”
In forming the foundation, Toyota is following efforts at
other automakers to invest in mobility technology as growing
megacities, pollution and gridlock pose risks that could lead to
global car sales peaking, which IHS Automotive estimates will
occur in the next decade.
Ford Motor Co. Executive Chairman Bill Ford formed an
investment company called Fontinalis Partners in 2009 that has
supported bike-sharing service Zagster and ParkMe parking-assistance software. General Motors Co. created a subsidiary
called GM Ventures the following year to invest in new
Toyota plans to sell 30 million of its shares to the
foundation at a discounted price of 1 yen apiece so that the
charity can use the stock to fund future activities. The company
said it will provide about 3 billion yen to 4.5 billion yen to
the foundation each year, with the plan pending approval from
shareholders at the annual general meeting in June.
Toyota has said it aims to pay 30 percent of net income as
dividends. The company’s cash, equivalents and short-term
investments climbed to 3.57 trillion yen by the end of December,
from 2.77 trillion yen a year earlier.
“Toyota has traditionally relied on dividends to return
value to shareholders, but these moves demonstrate the
possibility that it will also consider share buybacks as another
option for enhancing shareholder returns,” Kei Nihonyanagi, a
Tokyo-based analyst for Bank of America Corp.’s Merrill Lynch,
said yesterday in a report.
Toyota has said it won’t build new car factories until at
least 2015 as it focuses on improving efficiency at existing
plants. With the carmaker reluctant to spend on additional
capacity, Nakanishi, an analyst for Jefferies Group LLC, said
last month that the carmaker’s shareholder return policy was
“the most significant driver” of its stock performance.
“Increased expectations of further yen depreciation,
appropriate growth in investment, and enhancements to intrinsic
product strength will be needed before we can look for share
price performance to turn up,” Nakanishi wrote in a Feb. 21
Toyoda, 57, has steered the company founded by his
grandfather through a recovery after a series of crises. After
Lehman Brothers Holdings Inc.’s collapse in 2008 led to a global
recession that dented auto demand, the automaker recalled more
than 10 million vehicles the next two years to fix problems
related to unintended acceleration.
This month, Toyota agreed to pay a $1.2 billion fine, the
largest penalty of its kind imposed on any automaker, to end a
U.S. criminal probe after the Department of Justice said the
company intentionally concealed information and misled the
public about safety defects in its cars.
In each of the last two years, Toyota has rebounded by
outselling all other automakers and the company is targeting
more than 10 million deliveries this year.
“The significance is not as much in the size of this
buyback as it is in the very fact that it’s happening,” said
Usher, who has a buy rating on the company. “It shows
confidence on the part of Toyota that it’s back on track and
that it can afford to spend on share buybacks.”
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Craig Trudell in Tokyo at
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Young-Sam Cho at