Toyota increases profit forecast
• Better outlook largely due to positive currency effect
Toyota has upgraded its full-year operating profit forecast 8% on expectations of a weaker yen, but flagged a dour outlook for North America, its biggest market, where quarterly sales fell to the lowest in three years.
Toyota has upgraded its fullyear operating profit forecast by 8% on expectations of a weaker yen, but flagged a dour outlook for North America, its biggest market, where quarterly sales fell to the lowest in three years.
Japan’s largest car maker is struggling to sell more cars in North America, where manufacturers are battling for customers with aggressive discounts, particularly on sedans as driver preferences shift to bigger SUVs and pick-up trucks. This has raised marketing costs for Toyota and other car makers.
Toyota said it expected fullyear operating profit to come in at ¥2-trillion ($17.54bn), up from a forecast of ¥1.85-trillion, based on a revised assumption that the yen would trade around ¥111 to the dollar, from ¥110.
The updated profit forecast number is similar to 2016’s operating profit of ¥1.99-trillion and in line with analysts’ forecasts of profit of ¥2.04-trillion.
The improved forecast was largely due to a positive currency effect, Toyota vice-president Osamu Nagata said, adding that marketing activities including financial incentives in the US, would cut into overall profitability in 2017. “Weakening profitability in our US operations is still having a negative impact,” he said, adding that the shift in demand from sedans to SUVs and falling residual values of leased vehicles would continue to weigh on the company.
In July to September, the maker of the Prius hybrid and the RAV4 SUV crossover sold 672,000 vehicles in North America, down from 684,000 a year ago. It was Toyota’s lowest quarterly sales there since the January to March 2015 quarter.
The company anticipates lower annual retail sales in the region for the year to March. At home, sales fell 4.2% during the quarter to 543,000 units.
Honda, Japan’s third-biggest vehicle manufacturer, and smaller Subaru reported that they sold fewer vehicles in North America in July to September and spent more on incentives to reduce inventories. Nissan, the nation’s secondbiggest vehicle maker, reports its results on Wednesday.
Toyota is fighting to stay competitive in the US market, which is coming off a strong run that culminated in record sales of 17.55-million vehicles industry-wide in 2016. For the past year or so, Toyota has been raising the production of its Tacoma and Tundra pick-up trucks and its RAV4 SUV crossover to capitalise on strong demand for larger models.
But improving sales in other markets have been offsetting weakness in the US. Quarterly vehicle sales rose 8% in Europe, and 0.3% in Asia. In growing markets, which include Central and South America, sales rose 0.6%. “Even if sales in the US have flattened out, they’re seeing growth in a lot of other markets, like Asean, Brazil and Russia, which were considered weak spots not so long ago,” CLSA MD Chris Richter said.
Toyota posted a 10% rise in operating profit for the second quarter, exceeding analysts’ forecasts for ¥515.3bn. It also announced a share buyback worth ¥250bn, the latest in a series of buybacks it has made in recent years.
EVEN IF SALES IN THE US HAVE FLATTENED OUT, THEY’RE SEEING GROWTH IN A LOT OF OTHER MARKETS