Toyota expects its 2016 profit to fall to its lowest since 2013TOKYO: Toyota Motor Corp flagged its smallest annual profit in four years for 2016/17 as the Japanese automaker braces for the impact from a strengthening yen amid slowing demand for some of its auto models in the key North American market.
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Japan’s largest vehicle maker by global sales expects a net income of ¥ 1.45 trillion ($14.3 billion) in the financial year ending March 2017, down from its May forecast of ¥ 1.5 trillion on the stronger-than-anticipated yen.
The company reported a ¥ 552.4 billion ($5.4 billion) net profit for the April-June period, compared with ¥ 646.4 billion during the same period previous year.
In anticipation of a stronger yen than previously estimated, the world’s largest automaker slashed its earnings outlook for fiscal 2016, a year after posting record profits as it benefited from the yen’s depreciation amid Prime Minister Shinzo Abe’s “Abenomics” policy package that includes bold monetary easing by the Bank of Japan. The results were better than the ¥435bn profit that analysts surveyed by FactSet had projected.
After a three-year streak of foreign-exchange rates boosting operating income, President Akio Toyoda said in May that currency tailwinds raised Toyota’s earnings above the level of its “true capabilities”. A strong yen is particularly a source of concern as it tends to hurt their overseas profits when repatriated. “They are the most aggressive in terms of cutting the forecast”. The company said it lost output of about 80,000 vehicles due to earthquakes in Kumamoto prefecture in April, Japan’s most devastating since March 2011.
Tokyo-based Honda kept its full year forecasts unchanged at Y390 billion yen in profit, up 13 per cent from the previous year.
Overall, Toyota’s US sales have dropped 2.5 percent this year, trailing the auto industry’s 1.3 percent increase.
In the USA poor sales of Toyota’s electric hybrid Prius have also been blamed on lower petrol prices. Currency effects also dampened the impact of a 16% increase in new vehicle sales through June for Toyota in China so far this year, as the Chinese remnibi has declined relative to the USA dollar. A year earlier, the automaker sold 5.021 million Toyota, Lexus and Daihatsu-branded vehicles from January through June.
Particularly worrisome to some observers, Toyota’s operating profit margin dipped to 9.7% for the latest quarter, down from 10.8% a year earlier.
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Honda said sales of the revamped Ridgeline truck and the Pilot SUV across North America had been brisk during the quarter, adding that it was increasing its focus on light trucks while keeping cars a main stay of the line.
