One of the world’s largest vehicle manufacturers is the Japanese company Toyota. The firm’s vehicles are sold in numerous countries, and they get involved in everything from cars to light and heavy commercial vehicles.
Despite shares declining 11% in value in the last year, the company is set to make an estimated record profit of 1.9 trillion yen by the end of March 2014!
Share repurchasing plan
It has been recently reported that Toyota is planning to buy back up to 60 million shares, the equivalent stake of just under 2% in the entire company. The value of the shares that they are buying is worth around 360 billion yen and the Japanese firm are also planning to retire about half of those shares by the end of June 2014.
When the announcement by Toyota was made, the firm’s share price rose around 2% and closed at 5,731 yen per share at the end of trading on the Tokyo Stock Exchange. At the same time, Japan’s Topix Index had rise around 0.4%.
According to Frank Schwope, an industry analyst based in Hanover, Germany that spoke with Bloomberg Businessweek, Toyota has stockpiles of cash that they are sitting on, and the amount of shares they are planning to buy back is just a conservative amount relative to the amount of money they have.
The company’s share repurchasing plan is welcomed by existing shareholders and investors in the firm. Toyota is aiming to pay around 30% of its net income as dividends to its shareholders, and is obviously keen to spread the wealth given that their total cash in the bank and value of short-term investments was around 3.57 trillion yen towards the end of 2013, an increase of 800 billion yen from the same period in 2012.
The Japanese carmaker has stated that they have no plans to build any new car production plants for at least a year, as they want to work on improving efficiency at their existing car plants, presumably using their existing lean manufacturing techniques and processes. Ordinarily, a car manufacturer telling the world that they have no plans to increase production capacity is usually a sign of trouble, but it seems they have redeemed themselves with the share buyback plan.
Not-for-profit mobility foundation
Also confirmed are plans for Toyota to set up a not-for-profit mobility foundation, according to sources at Ancaster Toyota.
The carmaker is following in the footsteps of other major car manufacturers to invest in mobility technology, as they realise at some point in the near future new car sales will effectively plateau due to the constantly growing world population, and the ensuing pollution and traffic gridlock that will follow.
Toyota is going to sell 30 million shares to the new foundation at a super-low price of just 1 yen per share, so that it can use its newly-acquired shares to pay for future activities. At this moment in time, the plan is still pending shareholder approval, which the company will seek at their next AGM (annual general meeting) in June 2014.