Toy­ota says net profit jumps to $16b, raises FY fore­cast

The Pak Banker - - COMPANIES/BOSS -

Toy­ota said nine-month net profit jumped nearly 10% to 1.9 tril­lion yen ($16 bil­lion), de­spite fall­ing sales in most re­gions, with the world's top au­tomaker fo­cused on squeez­ing more pro­duc­tiv­ity out of its plants. The Corolla and Prius maker also slightly raised its fis­cal year profit fore­cast to 2.27 tril­lion yen, but unit sales were down in most re­gions, in­clud­ing Europe and Ja­pan, while North Amer­ica rose.

The re­gion has stood out for Ja­panese au­tomak­ers, with ri­val Honda last week say­ing it was a bright spot that helped off­set slug­gish sales at home. Toy­ota and its do­mes­tic ri­vals have ben­e­fited from healthy growth in the US where low in­ter­est rates proved a boon to con­sumers, al­though the slim pos­si­bil­ity of rate hikes this year could dampen sales.

Weak­en­ing de­mand in emerg­ing mar­kets such as Thai­land and In­done­sia, as well as a planned con­sump­tion tax hike in Ja­pan next year, could also eat into the mar­ket, an­a­lysts said. Sales in China, the world's top ve­hi­cle mar­ket, ticked up, Toy­ota said, adding that de­mand for it its RAV4 sport util­ity ve­hi­cle was strong in North Amer­ica. "A fur­ther slow­down in emerg­ing economies may af­fect (Toy­ota's) sales over­seas, and an ex­pected rate hike in the United States would dampen cus­tomers' ap­petite" for new cars, said Shigeru Mat­sumura, an­a­lyst at SMBC Friend Re­search Cen­ter.

"Th­ese are po­ten­tial risks." The weaker yen has made Ja­panese au­tomak­ers rel­a­tively more com­pet­i­tive over­seas and in­flated the value of repa­tri­ated over­seas prof­its, al­though the unit has strength­ened re­cently. Toy­ota has said all its do­mes­tic parts plants would shut for a full day next week, ex­pand­ing a pro­duc­tion sus­pen­sion that is set to be its long­est since the March 2011 earth­quake and tsunami disas­ter. The move was due to a com­po­nents short­age fol­low­ing an ex­plo­sion at a sup­plier.

I t was not clear if the tem­po­rary pro­duc­tion shut­down would af­fect re­sults in the cur­rent quar­ter. "We are go­ing to take all the nec­es­sary mea­sures for a speedy re­cov­ery of pro­duc­tion," Toy­ota man­ag­ing of­fi­cer Tet­suya Otake told a news briefing. "The im­pact of the sus­pen­sion is not taken into ac­count in our fore­casts-it is dif­fi­cult to eval­u­ate for the time be­ing."

Also this week, Toy­ota said it will drop its Scion brand, the of­ten-quirky line of cars it launched in the United States more than a decade ago tar­geted at younger Amer­i­cans. The com­pany said the move was driven by a mar­ket shift­ing away from small cars and by changes in buy­ing habits.

Fri­day's re­port comes af­ter Toy­ota last month kept the ti­tle of world's top au­tomaker for the fourth straight year af­ter say­ing it sold 10.15 mil­lion ve­hi­cles glob­ally in 2015, driv­ing past Volk­swa­gen and Gen­eral Mo­tors. In the first half of 2015, the Ger­man gi­ant, whose other brands in­clude Porsche and Audi, was set to take the crown as it rode mo­men­tum in emerg­ing economies.

But then it posted its first drop in an­nual sales for more than a decade af­ter be­ing ham­mered by a mas­sive pol­lu­tion cheat­ing scan­dal. "Volk­swa­gen is in a se­vere sit­u­a­tion," said Rakuten Se­cu­ri­ties an­a­lyst Ya­suo Imanaka. "Ja­panese au­tomak­ers can take ad­van­tage of the slump by win­ning Volk­swa­gen cus­tomers. It could be a plus for Ja­panese firms."

Toy­ota has been fo­cus­ing on squeez­ing out pro­duc­tiv­ity gains and bet­ter us­ing ex­ist­ing plants-it put on hold build­ing new fac­to­ries for sev­eral years. The com­pany be­gan op­er­at­ing a new Thai plant in 2013, but then halted in­vest­ment as the global car mar­ket strug­gled with over­sup­ply and weak de­mand. It has since an­nounced it was end­ing the con­struc­tion freeze as it un­veiled plans for a $1.0 bil­lion plant in Mex­ico, while it is over­haul­ing its op­er­a­tions in China. It also wants to over­haul its pro­duc­tion meth­ods, vow­ing to slash de­vel­op­ment costs to try to off­set any down­turn in the mar­ket.

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