Quake-hit Toyota sees 35% profit dip
Toyota Motor Corp forecast a larger-than-expected 35% fall in annual profit on Friday and warned the strong yen was making it difficult to justify keeping production in Japan.autos Updated: Jun 10, 2011 20:46 IST
Toyota Motor Corp forecast a larger-than-expected 35% fall in annual profit on Friday and warned the strong yen was making it difficult to justify keeping production in Japan.
The world's largest automaker has struggled to restore output after a massive 9.0 earthquake in March rocked northeastern Japan and forced Toyota and other Japanese automakers to slash output at home and abroad. The ensuing nuclear disaster and power shortages have compounded their woes.
"This is probably another conservative estimate from Toyota, but it's predicting a loss in the fiscal first half so we can tell how serious the damage from the earthquake was," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Tokyo.
Toyota said it was looking to ramp up output overseas to claw back lost market share and reiterated its plan to restore output to pre-quake levels by November, helped by a recovery in the supply chain for key parts.
"Once our product supply is back to normal, we can compete with no problem. We have the resources and are fully charged," said Satoshi Ozawa, executive vice-president, Toyota.
But Ozawa warned that Toyota was getting hammered by the yen and called on the Japanese government to take action to stem its rise.
The Japanese currency hit a one-month high against the dollar this week and is now about 5 yen stronger than the 85 level it sees as the break even profit for profiting on production in Japan.
Toyota said it expects operating profit to fall 35% to 300 billion yen ($3.7 billion) in the financial year to March 2012.
The forecast, which the company would have announced in May along with its annual results if not for the earthquake, incorporates a 100 billion yen negative impact from the yen.
"Structural weakness remains for Toyota, as it has a higher portion of domestic production than Honda and Nissan, which makes it vulnerable to the yen's strength," said Park Sang-Won an analyst at Eugene Investment & Securities in Seoul.
Toyota forecast global sales will fall 1% to 7.24 million vehicles in the year to March. The figures include sales at truck maker Hino Motors Ltd. and compact car maker Daihatsu Motor Co.
The drop is expected to place Toyota behind General Motors Co and possibly Volkswagen AG in the global vehicle sales rankings this year. Toyota downplayed the possibility.
"We don't see it as necessary to be the largest automaker in the world," Ozawa said. "The most important thing is creating a stable business base."