Letter to Shareholders

billion; and consolidated net income increased 40.1% to¥23.9 billion. All of these amounts represent all-time highs
for Toyota Industries.
Of particular note, despite less-than-optimal domestic
economic conditions, we have attained record-highconsolidated net sales, consolidated operating income andconsolidated ordinary income for five consecutive years.
Additionally, consolidated net income has reached a recordhigh for two consecutive years. Thus, we believe these results
provide solid evidence that our management strategies areon the right course.

Most Segments Sustain
Favorable Results

Akira Yokoi

Tadashi Ishikawa

ChairmanPresident

All segments except for the Textile Machinery Segment
continued to post favorable results and recorded sales andprofit increases over the previous term. The Materials
Handling Equipment Segment in particular achieved
outstanding results. Operating results by business segment
are summarized below.
Note: While segment net sales figures do not include intersegment transactions,segment operating income figures do include operating income arisingfrom intersegment transactions.

Dear Shareholders:
Toyota Industries’ results for the sixth months ended
September 30, 2004 (the “term”) were truly outstanding.
Reflective of our excellent performance and commitment to
the future, we not only attained record-high interim
consolidated net sales and profits but also formulated a hostof long-term measures to ensure ongoing growth in theyears ahead.

Record-Breaking Performance
The Japanese economy sustained a mild recovery during theterm, underpinned by growth in exports and private-sector
capital investment. Overseas, the U.S. economy performed
strongly while the European economy continued to record
modest growth.
Despite concerns about exchange rate fluctuations andrising prices of raw materials, Toyota Industries once again
posted excellent results due largely to smooth
implementation of optimal business strategies utilizing thecompetitive strengths of respective businesses, thepromotion of company-wide cost-reduction activities and theaforementioned favorable economic conditions.
Toyota Industries posted consolidated net sales of ¥607.1
billion during the term, up 6.6% over the six months ended
September 30, 2003 (the “previous term”). Consolidated
operating income increased 11.4% to ¥30.1 billion;
consolidated ordinary income increased 28.9% to ¥38.9

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TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005

Automobile Segment
The Automobile Segment, consisting of vehicles, engines, carair-conditioning compressors and other businesses (including
foundry parts for engines and electronic components forautomobiles), is Toyota Industries’ largest business segment
and accounts for 50.8% of consolidated net sales.
Net sales increased 4.2% over the previous term to¥308.7 billion, thanks to growth in sales of vehicles, engines
and car air-conditioning compressors. Operating income
increased 3.2% to ¥15.2 billion. A summary of each of theprincipal businesses making up the Automobile Segment
follows.

Vehicle Business
The Vehicle Business produces the Vitz (Yaris in Europe),
RAV4 (for Europe and North America) and Corolla Sedan (forNorth America) under consignment from Toyota Motor
Corporation (“TMC”).
Despite lower production of the Corolla Sedan during theterm, the Vehicle Business recorded a 1,300-unit increase inproduction to 115,600 vehicles due to higher production
volume of the mainstay Vitz for the domestic market andgrowth in production of the RAV4.
Net sales of the Vehicle Business amounted to ¥139.4
billion, an increase of 2.9% over the previous term.

Engine Business
The Engine Business mainly produces diesel engines andgasoline engines for TMC vehicles and forklift trucks. Engines

for forklift trucks are supplied to TOYOTA Material Handling
Company (“TMHC”), our in-house company, and arerecorded as internal sales (intersegment transactions).
Production of gasoline engines, excluding those forforklift trucks, decreased 11,400 units to 70,000 units due todecreased production of the 2UZ, 2AZ and 1FZ gasoline
engines. Production of diesel engines, excluding those forforklift trucks, increased 13,900 units over the previous term
to 89,200 units. This increase resulted from favorable
European sales of vehicles equipped with the 1CD 2000-cc
direct injection turbo diesel engine with a common rail fuelsystem and higher sales of vehicles fitted with the 1HZ diesel
engine in Australia. As a result, overall production of engines,
excluding those for forklift trucks, increased 2,500 units to
159,200. Internal sales (intersegment transactions) ofgasoline engines and diesel engines to TMHC amounted to30,200 units, an increase of 6,500 units over the previousterm.
Net sales of the Engine Business, excluding intersegment
transactions, totaled ¥56.5 billion, up 8.1%.

Car Air-Conditioning Compressor Business
The car air-conditioning compressors developed andproduced by Toyota Industries are sold to the world’s leading
auto manufacturers through DENSO Corporation (“DENSO”).
In Japan, sales of air-conditioning compressors amounted
to 2.6 million units, an increase of 105,000 units over theprevious term. Overseas sales of car air-conditioning
compressors were also favorable, increasing 312,000 units to
6.6 million units. This reflected an increase in the number ofvehicle models newly fitted with our compressors in North
America as well as robust sales of other vehicles equippedwith our compressors. Total sales volume of car airconditioning compressors thus amounted to 9.2 million
units, an increase of 417,000 units over the previous term.
Net sales of the Car Air-Conditioning Compressor Businessincreased 0.5% to ¥101.3 billion.
At the end of April 2004, cumulative production of car
air-conditioning compressors in Japan, Europe and North
America by Toyota Industries, which initiated production ofcompressors in January 1960, reached 200 million units. This
milestone highlights the wide acclaim from the world’s
leading car manufacturers in recognition of the high quality
and leading-edge technologies embodied in these products.
As we strive to further solidify our strong market position, we
will remain committed to further bolstering ourtechnological capabilities and aggressively develop car airconditioning compressors that address customer needs.

vehicles as aerial work platforms.
Net sales by the Materials Handling Equipment Segment
amounted to ¥239.9 billion, an increase of 10.9% over theprevious term. Operating income increased 36.0% to ¥12.0
billion.
TMHC, excluding sales of BT Industries, recorded
increases in sales volumes both in Japan and overseas,
propelled by the recovery in the global economy. TMHC
proactively strengthened response capabilities for major
customers in Japan and overseas and focused its sales
activities on securing fleet management contracts.
BT Industries attained a 5.0% increase in net sales on a
Swedish krona-denominated basis over the previous term.
Higher sales in North America, Europe and other regions intandem with the recovery of the global economy supported
this increase.
Sales by Aichi Corporation (“Aichi”), which became aToyota Industries subsidiary in May 2003, amounted to¥17.7 billion, a decrease of 6.1% from the previous term.
Nonetheless, steady strides in implementing the Toyota
Production System (TPS), coupled with the effects of cost
reductions, enabled Aichi to achieve operating income of¥1.4 billion, a 26.6% increase over the previous term;
ordinary income of ¥1.5 billion, a 42.0% increase; and net
income of ¥1.7 billion, a 76.0% increase.

Textile Machinery Segment
The Textile Machinery Segment manufactures and sells
spinning-related machinery centering on ring spinning
frames and weaving-related machinery such as air-jet looms.
Toyota Industries is one of the world’s leading manufacturersof air-jet looms and spinning machinery.
Chiefly owing to declining sales and falling sales prices
due to intensifying competition, net sales of the Textile
Machinery Segment amounted to ¥22.3 billion, a decreaseof 6.5% from the previous term. Consequently, this segment
posted an operating loss of ¥0.14 billion, a 134.9%
difference from operating income posted in the previous
term.
Sales of air-jet looms decreased approximately 600 units
to 4,000 units due to a decline in orders in China, ourprincipal market, caused by a tighter monetary policy. Salesof water-jet looms amounted to around 450 units, a decreaseof approximately 300 units. Conversely, in spinning-related
machinery, sales volume of spindles for ring spinning frames
increased approximately 38,000 spindles to 260,000
spindles. This gain was supported by an increase in sales ofring spinning frames in Pakistan and an increase in local sales
by our production and sales base in India.

Materials Handling Equipment Segment
The Materials Handling Equipment Segment primarily
manufactures and sells forklift trucks, warehouse trucks,
automated storage and retrieval systems and automatic
guided vehicle (AGV) systems as well as such special-purpose

Others Segment
The Others Segment consists mainly of new businesses that
we have entered recently, and although still relatively smallin scale, contains strategic businesses foreseen as future

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 20053

pillars of growth. One of the core businesses of this segment
is TIBC Corporation (“TIBC”), which was established in 1998
as a joint venture with Ibiden Co., Ltd. to manufacture ball
grid array (BGA) plastic package substrates and flexible
printed circuit (FPC) substrates. Our Logistics Solutions
Business is also included in this segment.
Net sales of the Others Segment amounted to ¥36.2
billion, an increase of 8.9% over the previous term. This wasdue primarily to higher sales by the Taikoh Transportation
Group, which engages in transportation and other logistics
businesses; increased sales in logistics solutions-related
businesses; and growth in sales by TIBC owing to robust
sales of package substrates for PCs and mobile phones.
Operating income increased 7.2% to ¥3.3 billion.
ST Liquid Crystal Display Corp. (“ST-LCD”), which wasestablished in 1997 as a 50-50 joint venture with Sony
Corporation to manufacture low-temperature polysilicon
TFT-LCD panels, also forms a core pillar of our Electronics
Business. ST-LCD is not a consolidated subsidiary, but rather
is accounted for by the equity method in Toyota Industries’
consolidated financial results. Therefore, its sales andoperating income (loss) are not included in the results forthis segment. In addition to improved profits, ST-LCD
recorded a sharp increase in sales during the term due tosolid sales of its low-temperature polysilicon TFT-LCD panels
for mobile phones and digital still cameras. In October 2004,
cumulative shipment of ST-LCD’s TFT-LCD panels surpassed
100 million units.

Achievements during the Term
Toyota Industries undertook an array of forward-looking
strategic initiatives during the term with the aim of raising its
current and future profitability. Some of the more notablemeasures are as follows.

Approach toward the
Logistics Solutions Business
As previously noted, Toyota Industries has commenced
operations of its Logistics Solutions Business, in which we areengaged in all aspects of outsourced logistics from logistics
planning and the operation of distribution centers to
improving our customers’ entire supply chains. We are solidly
positioned to utilize our production and sales experience ofsuch materials handling equipment as forklift trucks andautomated storage and retrieval systems, as well as ouraccumulated production know-how gained through theimplementation of the TPS. Moreover, in view of thegrowing needs in Japan for logistics rationalization, we
believe our Logistics Solutions Business will become a future
growth business.
We have laid the groundwork for expanding this businessthrough a variety of measures. In addition to steadily
securing orders for the operation of distribution centers, we

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TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005

have established joint ventures with customers to undertake
their logistics operations and promoted alliances withlogistics companies. For instance, in March 2004 we signed abasic agreement with Fuji Logistics Co., Ltd. (“Fuji Logistics”)
and Fuji Electric Holdings Co., Ltd. to form a business andcapital alliance covering all aspects of logistics services. Basedon this agreement, in April 2004 we established TF Logistics
Co., Ltd. (“TF Logistics,” 51% investment by Toyota
Industries), a joint venture with Fuji Logistics. TF Logistics will
undertake outsourced logistics for companies and develop
and offer new value-added logistics services. Seizing diverse
opportunities, Toyota Industries will expand its business forproviding strategic logistics solutions.

Overseas Development ofAutomobile-Related BusinessIn diesel engines and other fields, Toyota Industries engages
in a diverse range of overseas activities, with efforts aimed
largely at contributing to the overseas strategies of TMC.
In Poland, preparations are underway for starting
production of diesel engines for TMC in early 2005 at Toyota
Motor Industries Poland Sp.zo.o. (“TMIP”), a joint venture
between Toyota Motor Engineering & Manufacturing Europe
S.A./N.V., a 100%-owned subsidiary of Toyota Motor Europe
S.A./N.V., and Toyota Industries (40% equity stake). Diesel
engine vehicles enjoy high demand in Europe on account of
excellent fuel economy and environmental friendliness. TMIP
intends to manufacture and supply 2000-cc class diesel
engines for the Corolla, which is produced at Toyota Motor
Manufacturing (UK) Ltd. (“TMUK”) and Toyota Motor
Manufacturing Turkey Inc., as well as for the Avensis
produced at TMUK. In Japan, Toyota Industries’ Hekinan
Plant, our production base for engines, will proactively
support TMIP in gearing up for the start of production. The
Hekinan Plant will serve as a “mother” plant, a model plantfor quality, productivity and production technology,transferring know-how and providing technical andpersonnel support for overseas bases.
In May 2004, Kirloskar Toyoda Textile Machinery Limited(“KTTM”), a subsidiary of Toyota Industries in India that
manufactures and sells textile machinery, began
manufacturing aluminum die cast components to contributeto TMC’s Innovative International Multi-Purpose Vehicle(IMV) Project. KTTM is currently supplying these products to
India-based Toyota Kirloskar Auto Parts Pvt. Ltd. (“TKAP”),
which in turn supplies manual transmission systems for the
IMV Project. (TKAP is a joint venture between TMC and the
Kirloskar Group, with Toyota Industries holding a 26%
share.)In China, Toyota Industry (Kunshan) Co., Ltd. (“TIK”), a
subsidiary of Toyota Industries, produces foundry parts in
Kunshan, Jiangsu Province. In order to augment production
capacity, in April 2004 we established Toyota Industry
Automotive Parts (Kunshan) Co., Ltd. (“TIAP”) as our second
production base for foundry parts in China together with

Automobile-Related Business’s Worldwide Manufacturing Bases

TMIP

Manufacture of diesel
engines for TMC’s plants in
the U.K. and Turkey

Hekinan Plant

Poland
India

China

Manufacture of diesel andgasoline engines

Japan

Higashichita Plant
Manufacture of foundry parts

TIK
TKAP

Manufacture of transmissions
for the IMV Project

KTTM

Manufacture of transmission
parts for TKAP

Manufacture of foundry parts for
manufacturing bases in Poland
and India“Mother” plants of manufacturingbases in Poland, China and India

TIAP

Manufacture of foundry parts forengines

LFTD

Manufacture of automotive
stamping dies and jigs

Taiwan-based Lioho Machine Works, Ltd. (“Lioho”) andToyota Tsusho Corporation. (Toyota Industries has a 60%
investment in TIAP.) TIAP is scheduled to start production in
April 2005. Moreover, in view of expected further growth of
China’s automobile market, we established Lio Fung Tool &
Die (Kunshan) Co., Ltd. (“LFTD”), a joint venture with Liohothat began manufacturing automotive stamping dies in April
2004. (Toyota Industries has a 35% investment in LFTD.)
Striving to make meaningful contributions to TMC’s
overseas strategies, Toyota Industries is actively promoting anarray of initiatives to expand its automobile-related business.

Industries projects that variable displacement compressors,which offer excellent fuel efficiency, will experience growthin demand similar to Europe and Japan. Accordingly, TACG
will respond to this anticipated rise in demand fromautomakers as a plant specializing in variable displacement
compressors. By locally manufacturing variable displacement
compressors at TACG and fixed displacement compressors at
Michigan Automotive Compressor, Inc., an existing
subsidiary in Michigan, Toyota Industries will build a supply
structure for responding quickly to customer needs, thereby
expanding its business in the North American market.

Second Production Base for
Car Air-Conditioning Compressors
in North America

Quality-Control andCost-Reduction Activities

To meet the local procurement requirements of automakers
in North America, Toyota Industries and DENSO jointly
established TD Automotive Compressor Georgia, LLC(“TACG”) in July 2004 as a second car air-conditioning
compressor production base in North America. Situated near
Atlanta, Georgia, TACG is scheduled to commence
production in December 2005. Fixed compressors, which are
noted for outstanding reliability at high operating speeds,
have been the primary compressors used in North America.
However, amid rising environmental awareness, Toyota

TD Automotive Compressor Georgia, LLC (Artist’s rendering)

Toyota Industries recognizes that its ability to continually
reduce costs and offer outstanding quality products andservices represents one of its core competencies. Eachdivision implements cost-reduction projects and carries out
systematic and well-planned cost-reduction activities. Besides
strengthening our ongoing value engineering (VE) and value
analysis (VA) activities, our cost-reduction activities extend toa diverse range of fields, including consideration of
optimized global procurement of materials. We are also
striving to reduce fixed costs at our head office. As part ofthese efforts, we are reviewing the head office organization,
including spinning off functions as subsidiaries andpromoting extensive activities to cut expenses.
Initiatives to continually enhance quality are paramountfor providing products and services that can satisfy
customers. Conversely, any serious quality-related problem
could jeopardize a company’s future existence in a worstcase scenario. With this in mind, Toyota Industries regards“thorough quality assurance” and “maintenance andimprovement of quality” as supremely importantmanagement policies, and carries out group-wide qualityimprovement activities. Extending beyond quality-related

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005

5

education for employees that encompasses quality-control
methods, these activities include the setting of ambitious
quality targets in each division. Not only the director in
charge of product quality and division managers (or an inhouse company president), but also President Ishikawa andother top executives make on-site inspections to check thequality-improvement activities and confirm progress inreaching quality targets.

Business Outlook for Fiscal 2005
Although we expect overall economic growth to continue
during the second half of fiscal 2005, ending March 31,
2005, we are also prepared to face the hurdles of achallenging business environment. While the Japanese
economy is expected to remain on a recovery track,bolstered by higher exports and a robust expansion in
private-sector capital investment, this optimistic outlook is
nonetheless tempered by a host of risk factors. Weak growthin consumer spending, soaring prices of raw materials suchas crude oil and steel, as well as exchange rate fluctuations,are among the obstacles to growth. Moreover, there isparticular concern in the industry about the effects of atightening monetary policy and skyrocketing crude oil prices
on the U.S. economy, as well as the backlash in China
resulting from overheated investment.
Despite such challenging economic conditions, we arepleased to report that Toyota Industries has raised its initial
earnings forecasts for fiscal 2005. We expect results tosurpass initial projections on account of our success indeveloping new products closely attuned to customer needs,
undertaking sales-expansion activities focused mainly on ourcore businesses and implementing proactive qualityimprovement initiatives. We will also promote further costreduction activities, progress with global businessdevelopment, improve management efficiency andstrengthen our management foundation while securing
profitability.
For fiscal 2005 we forecast consolidated net sales of¥1.23 trillion (initial forecast of ¥1.15 trillion), up 5.6% overthe previous fiscal year; consolidated ordinary income of¥70.0 billion (initial forecast of ¥60.0 billion), an increase of
18.7%; and consolidated net income of ¥40.0 billion (initial
forecast of ¥34.0 billion), up 19.0%. Our forecast is based on
an assumed exchange rate of ¥109/US$1.
Note: The financial projections set forth above are based upon a number ofassumptions and estimates that, while presented with numerical
specificity and considered reasonable by us when taken as a whole, areinherently subject to significant economic, business, competitive,
regulatory and operational uncertainties, contingencies and risks, many ofwhich are beyond our control. Financial projections are necessarily
speculative in nature, and it can be expected that one or more of theassumptions underlying the projections will prove not to be valid, andunanticipated events and circumstances are likely to occur. Actual results
will vary from the financial projections and those variations may bematerial. Consequently, this report should not be regarded as arepresentation by us or any other person that the financial projections will
be achieved. Current negative market trends in the global economy makeit particularly difficult at present to predict product demand and otherrelated matters.

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TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2005

Maximizing Shareholder Value
The management team of Toyota Industries believes its mostcritical mission is to continually maximize shareholder value
over the medium and long terms. In fulfilling this mission,
we are working to expand business in the short term whilestrengthening medium- to long-term profitability. To thisend, we will strategically manage our businesses, cultivate
personnel who are well versed in the TPS — the source ofour competitiveness — and establish efficient management
systems that encompass the head office organization.
Determined to win the trust of society as a good corporate
citizen, we will also actively implement environmental
protection and social contribution activities. Concurrently,
we will earnestly promote compliance and corporate
governance initiatives.
In closing, we ask our shareholders for your continued
support and guidance.
December 2004

Akira Yokoi
ChairmanTadashi Ishikawa
President