TOKYO — Toyota updated its full-year net profit forecast on Thursday, forecasting higher profits on the back of a weak yen, even after first-quarter net profit was hit by supply chain issues related to the pandemic.
Global chip shortages, Covid-19 lockdowns disrupting Chinese factory production and Russia’s invasion of Ukraine are all weighing heavily on the auto industry.
But Japanese companies like Toyota selling products overseas have also benefited from a cheaper yen, which has hit a 24-year low against the dollar in recent months.
The world’s top-selling automaker now forecasts annual net profit of 2.36 trillion yen ($17.6 billion) – up from its previous estimate of 2.26 trillion yen, but still down 17% compared to last year’s record results.
For the three months ending in June, the auto titan said its net profit fell 17.9% year-on-year to 736.8 billion yen.
“Despite the positive currency effects of the weak yen, the significant impact of lower sales volume due to supply constraints and higher raw material prices resulted in lower operating profit” in the first quarter, the company said.
At the same time, “revised exchange rate assumptions had a positive impact on operating profit forecasts,” he said.
Revisions to the expected impact of “skyrocketing material prices” and cost-cutting efforts would also lower operating profit this fiscal year, Toyota added.
Buoyed in part by the weak yen, Toyota in May posted a record net profit of 2.85 trillion yen for 2021-2022.
The focus will now be on the company’s ability to maintain its global production target of 9.7 million units for this fiscal year given the shortage of parts, said Satoru Takada, an automotive analyst at the company. TIW research and consulting.
Three major Japanese automakers – Toyota, Nissan and Honda – have been “unable to resume production sufficiently” to meet consumer demand, Takada told AFP.
However, Toyota has so far largely escaped the worst of the crises, he said, adding that the company had “customers waiting for its cars thanks to strong demand”.
The company forged stronger ties with domestic suppliers after the 2011 earthquake and tsunami in Japan, which analysts say helped it overcome a pandemic-triggered semiconductor shortage – an essential component of modern cars – better than its rivals.
But it has been forced to repeatedly adjust production targets due to chip shortages and pandemic-related factory shutdowns.
Added to the problems is the uncertainty stemming from Moscow’s war in Ukraine. Toyota announced in March that it would halt operations at its sole plant in Russia and stop shipping vehicles to the country.
Ahead of the earnings announcement, SC Capital called Toyota’s full-year outlook “the lowest in the industry,” predicting a sharp upward revision later this year as semiconductor supplies become more plentiful.
“Toyota’s first quarter…should be bad. But consensus is far too low for the rest of the year as Shanghai supply constraints ease from Q2 and chip inventory grows more than expected,” SC Capital said in a comment. from SmartKarma.
“Anyone who has spoken with the company knows that the second quarter will see a V-shaped recovery and an upward revision for the full year.”
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