Toyota likely to post lower Q1 profit as production woes cast shadow

Toyota Motor Company automobiles are seen at a briefing on the corporate’s methods on battery EVs in Tokyo, Japan December 14, 2021. REUTERS/Kim Kyung-Hoon/File Photograph

TOKYO, Aug 3 (Reuters) – Toyota Motor Corp (7203.T) is predicted to report a double-digit drop in first-quarter revenue this week, as a chip scarcity and supply-chain woes pressured the world’s prime automaker by gross sales to repeatedly slash manufacturing targets.

The Japanese automotive maker lower its month-to-month manufacturing targets 3 times in the course of the April-June first quarter, falling 10% behind its preliminary objectives, on account of shortages of semiconductors and the affect of COVID-19 lockdowns in China.

Like different producers, Toyota is grappling with greater prices and fears that world inflation may put the brakes on shopper demand. Its manufacturing woes are notable as a result of they mark a departure from its preliminary success in navigating provide issues firstly of the pandemic.

Final yr first-quarter revenue surged as Japan’s greatest automaker left the worst of the pandemic’s woes behind, however this yr, the one optimistic within the first quarter is prone to be the weaker yen, mentioned Koji Endo, an analyst at SBI Securities.

“Final yr’s first quarter was a interval of thorough price reducing,” Endo mentioned. “In comparison with that, income are prone to have fallen sharply this time round.”

Toyota is predicted to report on Thursday a 15% lower in working revenue to 845.8 billion yen ($6.47 billion) for the April-June quarter, in line with the typical estimate in a ballot of 10 analysts by Refinitiv. The revenue drop, however, is the smallest for the automaker in three quarters.

The yen weakened some 10% in the course of the April-June quarter, nearly touching 137 to the greenback at one level, in comparison with Toyota’s forecast for the yr of 115 yen.

A weak yen is often a boon for corporations that export, because it boosts income when abroad earnings are introduced residence. Nonetheless, a number of the profit has been offset in recent times as Japanese corporations manufacture extra overseas, that means that their abroad prices additionally go up because the yen weakens. learn extra

CHALLENGES

Toyota and its main Japanese rivals, Nissan Motor (7201.T) and Honda Motor (7267.T), are additionally grappling with long term challenges together with electrification and automation of autos.

And shopper belief points rear their head continuously in Japan, with main Toyota affiliate Hino Motors (7205.T) admitting on Tuesday it falsified emissions information for longer than beforehand disclosed. learn extra

A key near-term query for analysts and buyers is whether or not Toyota can preserve the 9.7 million world automobile manufacturing goal for the present monetary yr ending in March.

Assembly that will doubtless depend upon the outlook for the chips scarcity and provide chains – in addition to the financial outlook, mentioned Endo of SBI Securities.

However even when the financial system slows down, Toyota has an infinite backlog of orders, and a lower in demand for shopper electronics may divert chips to car manufacturing, he mentioned.

If Toyota doesn’t change the full-year manufacturing goal within the second quarter, meaning it is extremely assured about manufacturing within the second half of the yr to hit the aim, he mentioned.

($1 = 130.6300 yen)

Reporting by Satoshi Sugiyama; Enhancing by David Dolan and Muralikumar Anantharaman

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