Toyota warns of first profit drop in nine years
by Daniel Rook
TOKYO (AFP) – Toyota Motor Corp. warned Thursday that it expects its first drop in annual profits in nine years due to a weak US economy, a stronger yen and soaring raw material costs.
Japan’s largest automaker reported another record performance for the financial year which ended in March on the back of brisk demand in emerging markets such as Brazil, Russia, India and China.
Toyota, on course to overtake Detroit giant General Motors as the world’s top selling automaker, posted a 4.5 percent rise in annual net profit to 1.72 trillion yen (16.4 billion dollars).
Operating profit increased by 1.4 percent to 2.27 trillion yen as revenue climbed by 9.8 percent to 26.29 trillion yen, both all-time highs, a company statement said.
Japanese automakers have enjoyed brisk profits in the US market, helped by firm demand for fuel-efficient cars and a weak yen.
But a credit crunch, the surging cost of steel and other raw materials, and a falling dollar are now weighing on their earnings prospects.
“We are facing a severe business environment,” Toyota president Katsuaki Watanabe said in the earnings statement.
Toyota forecast a 27.2 percent plunge in net profit to 1.25 trillion yen in the current financial year to next March.
It sees a 29.5 percent drop in annual operating earnings to 1.60 trillion yen this year and a 4.9 percent fall in revenue to 25.0 trillion yen.
“It’s going to be the first year-on-year decline in nine years which really suggests that even for Toyota the current situation is very, very tough,” said Credit Suisse auto analyst Koji Endo.
“The US market is slowing down and even Toyota seems to be facing a very tough time selling their light trucks. Raw material costs — especially steel, precious metals and plastics — are going up and that’s probably going to be very significant this year,” said Endo.
Toyota has expanded aggressively outside of Japan, helped by its reputation for fuel efficient vehicles, including petrol-electric hybrids.
After taking the giant US car market by storm, Toyota and its rivals are now targeting emerging economies to maintain their growth.
Toyota said it had sold 8.91 million vehicles last year, up 389,000 from the previous year, despite a drop in Japan where a shrinking population is weighing on the market.
“Improved profitability in Asia has become an important driver for Toyota’s strong growth,” the automaker said.
The earning results were roughly in line with the company’s own forecast made in February, when it had forecast a net profit of 1.70 trillion yen, an operating profit of 2.30 trillion yen and revenue of 25.5 trillion yen.
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