Toyota Industries Corp. (TYIDF, Financial) is the original Toyota Motor Corp. (TM, Financial). The company excels in automotive parts and forklifts. It also holds billions of dollars in Toyota stock and several other Japanese companies. The stock is a major holding of the Third Avenue Value Fund.
The stock trades at 5,790 yen ($50.69), there are 325.84 million shares outstanding and the market cap is 1.89 trillion yen ($16.5 billion). It takes 114 yen to buy one dollar. Earnings per share are 401.92 yen and the price-earnings ratio is 14.4. The dividend is 125 yen and the dividend yield is 2.16%.
Sales last year were 2.25 trillion yen and increased from 2.17 trillion yen in 2015. Free cash flow was 79.7 billion yen and the free cash flow yield is 4.21%. Not a bad yield in a country with pretty low interest rates.
The balance sheet shows 407 billion yen in cash, 287 billion yen in receivables and a whopping 2 trillion yen in investments. The liability side shows 242 billion yen in payables, 339 billion yen in the current portion of long-term debt and 736 billion yen in debt. Bulletproof balance sheet.
Roughly half of the company’s sales are automotive parts, the other half is forklifts and then the textile division is a very small part. The Yaris and Rav-4 are made by Industries. The company is big into air conditioning compressors, engines and electronic parts.
Recently, Industries purchased Indiana-based Bastion Solutions for 29 billion yen. It lists Johnson & Johnson (JNJ, Financial), Home Depot (HD, Financial) and General Motors (GM, Financial) as major clients. Industries also purchased Vanderlande of Holland for 130 billion yen. Both companies excel in moving cargo and manufactured goods around warehouses, airports and other facilities. Vanderlande lists Amazon (AMZN, Financial) and DHL as clients and is in several European airports.
Growth has been good from the economic crisis in 2010, but sales are actually a little higher than where they were in 2008. Sales were 2 trillion yen. For all of the great products that Industries creates, sales have been flat. That is a little disconcerting. It makes one wonder if this could happen to the U.S. economy.
Industries was founded over 90 years ago as a loom manufacturer. It started a small auto division, which it later spun off. Now, that small division has grown to a behemoth. Toyota owns 23.51% of Industry’s shares outstanding. Denso Corp. (TSE:6902, Financial) also owns 9.1% of shares. Industries owns 8.72% of Denso. Industries owns 6.73% of Toyota. Cross holdings are a way of life in Japan. It is very difficult for an outsider to force change.
You can read extensively on Industries by reading Third Avenue's literature. Martin Whitman (Trades, Portfolio) has held the stock for years. If memory serves me correctly, I think he has the ticker symbol on the license plate of his Toyota Prius.
No doubt Industries is at the cutting-edge of automobile and lift truck technology. The parts for the Prius are as high-tech as it gets. Lift trucks and forklifts are sure to be driverless in the coming years. Still, I am not going to buy shares. Why? I am concerned about the automotive industry. It has been on a tear for years and needs six and seven-year financing. That has to come to an end at some point. When it does, the whole industry will take a shot.
Disclosure: We hold Third Avenue Value.
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