Toyota Tsusho Corporation (8015) Earnings Call Transcript & Summary

Thank you very much. I am Mr. Imai. Let me talk about the Next Mobility. In the areas of Next Mobility, we are in the [indiscernible] in a century type of transformation. And as you've heard, from Toyota, the electrification intelligence and diversity have become the key words. We have strength that we developed in our mobility. So we are working towards moving us into Next Mobility areas. From the perspectives of electrification, intelligence and diversity, I would like to discuss that first of all. Let's talk about intelligence. In the area of intelligence, the connected mobility services are being planned, and I would like to talk about 2 of them. Toyota Tsusho Mobility Informatics is a company that we established in Singapore to offer connected services. The collected information will be sent to drivers to help, for example, car hailing services. On the right is what we established in UAE, Toyota Tsusho connected Middle East. Within Mid-East dealership, we offer connected cars. Telematics connected services to customers in the Middle East. This company will expand its business to African nations going forward. Now in terms of diversity, in order to realize free and comfortable loyalty society, we diversify the most of services. Our African company, Zipline, as well as Nagasaki Prefecture's Sora-iina are explained on the slide. Sora-iina offers drone services for remote islands delivering medicine, for example. In the middle, what you see is the used car media platform called Sgcarmart. Used car online sales have -- drove our business even during the COVID pandemic. On the right, you see KAI Senegal, which is a [ mass ] company in Senegal. This company offers Uber-like services. And as you can see, the cars are largely Suzuki, India made starlets. So this company now offers synergy with our existing businesses. Now electrification is the area where we see lots of changes. Let me talk about what we think of the batteries. As you can see on the right, we have businesses throughout the battery value chain, starting from the lithium resources. On the right, we have cathode and anode components. And then battery manufacturing in the United States and China, and then rebuild, reuse, recycle or 3Rs of batteries for circular economy. Now starting with the uppermost stream, lithium resources. In 2012, in Argentina, we acquired a concession at Salar de Olaroz and producing 17.5 tons of lithium carbonate since that time, and then we will be expanding the capacity to 425,000 tonnes in 2023. In Fukushima Prefecture, Naraha-machi, we established Toyota Lithium in 2018 to produce lithium hydroxide. In November 2022, the plant was completed and we started offering the Japan's first lithium hydroxide. Now the aluminum for collector is manufactured by [ Sana ] Aluminum in January 2023. And last year, together with Nippon Shokubai, we invested in Hunan Fluopont New Materials, which manufacture electrolyte lithium. So we continue to collaborate with competitive companies in the area. Now in addition to acquiring such components as well as resources, we are also involved in manufacturing batteries. On the left, you see Toyota's first battery manufacturer, TBMNC, for the electric cars, which we will see increasing demand going forward. This company will produce batteries in North Carolina for HEVs and BEVs. In Japan and 7 countries, including China and Taiwan, we are building 3R schemes. Now let me talk about hydrogen, the next-generation energy. The value chain of hydrogen comprises producing, transporting and consuming and we focus on producing and transporting. In the area of consuming, we have [ IG ] and Tokyo, we do run hydrogen stations, but SC Mobility, for example, at ports and public transportation, we have to work more and that's exactly what we're doing. This is an example of LA port in the United States, running up to 2035 trucks and all the handling equipment will have to become 0 emission, therefore, working with the port authority, top handlers, dryer trucks. I will now become FC-driven using Toyota's FCs. In the commercial vehicle area, hydrogen is largely being looked at. Therefore, together with TMC, we will continue to work in the area going forward. Now in the area of manufacturing. On the left, we show our collaboration with Iwatani and JGC, waste plastic-driven hydrogen. In 2021, our project was adopted by [ Nido ] as a commissioned project. The research and development done. We will continue working on production, and we issued a press release with Iwatani and JGC in December 2021. We produce hydrogen from wasted plastic in IT Prefecture, where we establish locally produced and locally consumed model. On the right, green hydrogen, global supply model is depicted. The Totalenergies France and Toho Gas of the Chubu region are our MOU partners that we signed agreement last year. We have multiple projects underneath and we will accelerate our endeavor to realize hydrogen society for decarbonization. Now let us talk about Africa, which we commit to strongly. Africa is set to be the large frontier in 21st century and the future is full of potential. Currently, of the 7.9 billion living in the world, Africa has 1.3 billion. In 2050, the world population will be 10 billion, out of which 1 quarter will be African people. As you see at the bottom, With Africa, For Africa is our slogan. And under this slogan, for the smiles of the future African children, we want to contribute to the recent economy developments through our business. Now let me briefly talk about our business in Africa. This is the map of Africa. First, we have a business in all 54 countries in Africa. The red circle is Mobility; green dots, our Healthcare; yellow dots, Consumer; blue dots, Infrastructure business. The number of affiliates is 155. The number of employees accounts for 1/3 of the entire group, 22,000. For sales or revenue, 2 years ago for the first time, we surpassed JPY 1 trillion in Africa. And for the year ending March 2023, we have been able to achieve JPY 1.3 trillion, which is over JPY 1 trillion for 2 years in a row in Africa. Let me start with our main business, Mobility business. In January of 2019, from TMC, African business was transferred in full. 70,000 was the sales volume and the sales was increased to 230,000. And after that, we had alliance with Suzuki. In calendar year '22, sales volume was over 270,000. The African auto market will see increase in population and expansion of the middle segment and it is expected to grow significantly. So as an interim target, focusing on Toyota vehicles, in 2030, we are aiming at vehicle sales of 500,000 units. For Healthcare and Consumers business, let me show you some examples. On the left-hand side is Healthcare business. Historically, we've had, in West Africa, pharmaceutical wholesale business. However, in the future, growth is expected in East Africa, and in order to go into a retail segment, last year in March, the East African major pharmacy chain, Good Life Pharmacy's shares. 30% of them was acquired. And Good Life pharmacies that has 100 locations in Kenya and Uganda and it sales pharmaceuticals to 1.7 million consumers. In 2025, we want to increase the number of outlets from 100 to 250 and provide pharmaceuticals to 8.5 million people. On the right-hand side is a retail business in Côte d'Ivoire, Cabo Verde and Senegal in West Africa. The largest retailer in France, Carrefour, is our partner here to do supermarket business. As of end of last year, we had 29 supermarkets and hypermarkets in this area. Most recently, in July of 2022, in Yaoundé, the capital of Cameroon, we opened a largest shopping mall in the country. As a recent initiative, we have CVCs for African start-ups. In Africa, we are starting to see tech start-ups in various industries. Our mainstay business is Mobility and Healthcare. So in these areas, we have 2 CVCs; Mobility 54 and Health 54, and we invest in startups. In the Mobility area, as we mentioned before, we have KAI and other mass business to invest in and we entered the Next Mobility area. In the Healthcare area, likewise, we invest in start-up companies to enter the Next Healthcare area. Lastly, there is no slide for this, but we focus on 4 businesses in Africa. And one of them is Infrastructure business. And we also have Renewable Energy business, which contributes to African carbon neutrality. Prime Minister Kishida recently visited Egypt. And we have wind power generation, the largest wind power generation project in Egypt. So that is all from my side. And for our circular economy, EVP, Mr. Sago, will make a presentation.

Thank you very much for your attention. Now this is Mr. Sago speaking. I will talk about circular economy initiatives. We have a long history of recycling. From the 1970s, over 50 years, we've been working on circular economy as a business. We see all goods as resources. We recover waste, sort them out, recycle them and recycle resources to support manufacturing. And by doing so, we create a circular society. From here on, I would like to talk about our initiatives in the circular economy area. The arterial supply chain that starts from raw material and the reverse supply chain that is the vein are both areas in which we have functions. Recovery, recycling, reuse, appropriate disposal. We have various functions like these. And in order to create value over the life cycle of the material, we try to establish traceability and provision of data. We create the platform for these functionalities. Now let me talk about the Circular Economy Innovation Center, which is for the future. Toyota Group and other customers on the arterial side who faced challenges in realizing a circular economy come to us as partners. And we identify their needs and we try to connect them to recycling companies and social infrastructure. In order to promote new commercialization and technical development linking the arterial and vein side, we collaborate with Toyota Group companies to establish the innovation center. This is under discussion now. Rather than seeing EoL products as waste, we will see them as resources. Over 50 years, we have accumulated expertise and strength. So by evolving this functionality and developing recycling technology and product design based on the assumption that recycling, reuse will be done, we will create new businesses. Now let me introduce to you 2 specific examples. First, Toyota Metal and PLANIC's automobile-derived plastic recycling. For end-of-life vehicles, they are a bundle of resources. Toyota Metal will pulverize and process end-of-life vehicle bodies. Shredder does sorting and utilization is done by Toyota Metal. The sorted plastic resources and a different type of plastics coming from other industries are mixed. And if they are mixed, they cannot be reused as is. That was a major source of problem. PLANIC, which is part of our group, takes these waste plastic and mixed plastics, sort them out using a high-level technology and recycle them as recycled plastics for automotives. So car-to-car initiatives are undertaken to suppress environmental pollution and high-quality recycled plastics will contribute to the pride of Japanese manufacturing, which is the automotive industry. Second, with Maruti Suzuki in India, we have end-of-life vehicle recycling business. In India, there are 46 million vehicles running on the road. And every year, 4 million new vehicles are sold. The automotive market is expanding. With it, end-of-life vehicles recovery and disposal are starting to be challenges. Servicing loss on automobile recycling is being prepared. In order to solve this issue, with Maruti Suzuki in India, we established a joint venture, Maruti Suzuki Toyota India from recovery to disassembly and abstraction of waste, solution of end-of-life vehicles. We process environmentally friendly, high-quality products by appropriately processing end-of-life vehicles, illegal dumping of vehicles and parts will be reduced. And it will be friendly to the environment responding to global warming, soil pollution and water pollution. Next is Mr. Ishikuro, who will be talking about renewable energy and energy management. Thank you for your attention.

Thank you very much. I am Mr. Ishikuro. I would like to discuss our renewable energy and energy management. Since 1980s, we have been in business of renewable energies, producing electricity from various sources, including wind, solar, hydro and biomass. Especially in Japan, we have Eurus Energy Holdings, which is the largest wind turbine farm operator. In terms of PVs, as we announced last week, we acquired 85% of the stake of SB Energy. The new company is now called Terras Energy. What it means is Terra, meaning the earth, and we want this company to shine over the earth. Currently, we have the 4.5 gigawatts of installed capacity, which will be increased to 5 gigawatts in March 2025 and 10 gigawatts in March 2030. We will solidify functions in the power value chain. Within this mechanism of generating and stabilizing and delivering power, we will continue to offer affordable and stable energy to contribute to a better environment. Now renewable energy has to be expanded in order for the society to decarbonize itself rather than the producing area, which we have prowess, we have to stabilize -- learn how to stabilize power and deliver it. SB Energy or Terras Energy now being a part of the group, we now have the expertise in renewable energy and we can put that together with the SoftBank Group's AI and IoT prowess so that we can have a solid basis of doing this business. In 2002, Eurus Energy Holding was established with TEPCO Holdings and [indiscernible]. 20 years later, we acquired 40% of the stake from TEPCO in August 2022 to make Eurus a 100% subsidiary, the biggest in installed capacity in terms of onshore wind power generation. We will expand the business to offshore going forward. In Hokkaido, we are getting ready to start our business of JPY 230 billion of wind power, storage and power distribution. Now, the storage will be the largest. The storage battery, which we'll be able to stabilize the intermittency of the solar -- rather wind power generation. As I mentioned earlier, as of 28th of April, SB Energy became Terras Energy. And Toyota Tsusho America will be building the 30-megawatt solar power plant for Toyota Motor Manufacturing, Alabama. And 70% of the electricity used in Alabama will be supplied by PV. Now only wind, we are the biggest PV power supplier so that we can offer clean energy to all sorts of customers depending on their needs. Now in strengthening value chain of power, we have to solidify our development power in multiple power sources. In the area of collecting, stabilizing and delivery, we will make sure we meet the demand of various customers. Now starting from the consultancy, we can propose energy saving and what cannot be conserved, we can always offer the clean energy, including PV and wind. So we will continue to refine our power value chain within the group. Lastly, I'd like to report to you on what we are doing with the communities that we operate in. What you're seeing is to offer elementary schools, some classes to understand renewable energy or invite school children and community residents to our facilities. We will continue to listen to the community going forward as we continue to run our businesses. So that is all about renewable energy and energy management. I would like to invite Hamase, CHRO, for human capital and compliance.

All the 6 materialities, I will talk about people, safety and compliance. First, for the HR area materiality, respect of human right, development, utilization of human resources, development in human resources that contribute to the society, the examples that I will give you. Recently, there is a lot of talk about human capital management. And strengthening human capital and maximum use of human capital is necessary. In other words, we need to allow each employee to demonstrate their capabilities to the full. In order to do that, initiatives to improve quality and quantity and preparing the environment in place are necessary. First, the current status of human capital management will have to be visualized. And in order to do that, we were certified last year for ISO30414, second in Asia, a nonfinancial information to be converted into financial information and human beings are investments and not costs. This idea will have to be permeated within the company, and the company as a whole will have to work towards that end. With this certification, the PDCA cycle can be utilized using a human capital KPI, which is a global standard. In disclosing to this stakeholders, we have now developed internal information collection platform. And we have introduced a system for visualization. Now for human resources development, business strategy and HR strategy are two sides of the same coin. And our business has 100 -- business has 130 countries in the world. The characteristics of the company is: first, 70% of our revenue comes from overseas, 90% of ordinary income is operating income, and we also have a promotion of DX, CN, and CE. The major issues is global management resources and business management resources for various business formats and sizes and also DX, a carbon-neutral circular economy human resources will also have to be secured. For global management human resources development, we have a training on a global consolidated basis, and especially for women, we have early dispatch overseas before major life events. For business management human resources development, understanding of the vision and history of management and learnings from current managers and knowledge and know-how is necessary for management is learned. For new areas, based on business strategy, DX Human Resources development training is undertaken. And also mid-career hiring is done for capabilities that do not exist internally. Now for successor development. We specify posts that have major impacts on consolidated management. And about 200 of them are defined as global posts. Every year, we review them and develop the successive plan and development plan. Through this process, we allocate the most appropriate person to each post. So we allocate the appropriate person to the appropriate post, and we also strengthen the management foundation by having many human resources. Currently, overseas, we have 95 global posts, out of which 23 posts are overseas people. In the next 5 years, we intend to increase this to 67 posts. We will develop local human resources and at the same time, we will be able to strengthen human resources in Japan that can be used for new businesses. Now for organizational development. We are promoting organizational strengthening as well. Specifically, we are trying to enhance the communication capability of management and employees, coaching skill development to evolve performance and capabilities of direct reports is done and also engagement -- global engagement surveys are done to measure the health status of the organization. For office reform, we see the office as a place for people to get to know each other and create innovation. So a co-creation of resonance and diversity will be created within the organization to create an open-minded organization. Now let me talk about health and productivity management. The employees being healthy and being able to demonstrate the capabilities to the full is at the basis of human capital management. And therefore, we are tackling health and productivity management. For -- strengthening and maximum use of human capital is necessary for human capital management. Recently, we have done workplace vaccination for group companies and subsidiaries. And we also have health guidance to tackle diseases and obesity. Top management training is also done. And as a result, for 3 years in a row, we have been selected as a Health & Productivity Stock. For human rights due diligence, recently, socially, there is a lot of interest in this area. We are a company that has many global consolidated subsidiary. As a social responsibility of such a company, we need to identify the negative impact of human rights violations. If there are issues, we need to correct them. And we did a global human rights due diligence of consolidated companies last year, and we will continue to do this year. So that each company can do the same on their own. Our company does a global business and for supply chain companies as well, we would like to utilize the consolidated company's know-how for due diligence in the supply chain. Now for our company, safety and compliance are the starting points of all businesses. We have various initiatives here so that our employees can safely do business. At our factories of our group companies, we have a gate of safety to aim at no accidents and no disasters. And we also have the safety experience workshop by [indiscernible] which can be used by suppliers as well, so that safety and health awareness will improve. On the compliance side, we have the global code of conduct and ethics. We have compliance training, and we also have internal whistleblowing system by external organizations, and we also have the top management send out messages and also have conversations at the [indiscernible]. We pursue economic and social value. These initiatives are the center piece of our business. And therefore, we need -- we will continue to work on contributing to better value. That was for safety compliance and human capital initiatives. Thank you very much.

If I can ask Mr. Kashitani, as President to close?

Thank you, very much for participating in the large briefing session. And for the first time, as a company, we had an ESG briefing, and thank you very much for participating in that part as well. Our slogan is, as you see on the poster, a better global environment for the future children. So through our business, ESG and materiality solution is what we will endeavor for. Towards a new stage, we will continue to move forward. So please continue to support the Toyota Tsusho Group. Thank you, very much for coming today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]