Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

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

Stock Markets Aug 03, 2022 12:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Toyota Motor Corporation cars are seen at a briefing on the company's strategies on battery EVs in Tokyo, Japan December 14, 2021. REUTERS/Kim Kyung-Hoon/File Photo

By Satoshi Sugiyama

TOKYO (Reuters) - Toyota Motor (NYSE:TM) Corp is expected to report a double-digit drop in first-quarter profit this week, as a chip shortage and supply-chain woes forced the world's top automaker by sales to repeatedly slash production targets.

The Japanese car maker cut its monthly production targets three times during the April-June first quarter, falling 10% behind its initial goals, due to shortages of semiconductors and the impact of COVID-19 lockdowns in China.

Like other manufacturers, Toyota is grappling with higher costs and fears that global inflation could put the brakes on consumer demand. Its production woes are notable because they mark a departure from its initial success in navigating supply problems at the start of the pandemic.

Last year first-quarter profit surged as Japan's biggest automaker left the worst of the pandemic's woes behind, but this year, the only positive in the first quarter is likely to be the weaker yen, said Koji Endo, an analyst at SBI Securities.

"Last year's first quarter was a period of thorough cost cutting," Endo said. "Compared to that, profits are likely to have fallen sharply this time around."

Toyota is expected to report on Thursday a 15% decrease in operating profit to 845.8 billion yen ($6.47 billion) for the April-June quarter, according to the average estimate in a poll of 10 analysts by Refinitiv. The profit drop, nevertheless, is the smallest for the automaker in three quarters.

Graphic: Japan automaker shares - https://fingfx.thomsonreuters.com/gfx/mkt/jnvwengnmvw/image-1659499279920.png

The yen weakened some 10% during the April-June quarter, almost touching 137 to the dollar at one point, compared to Toyota's forecast for the year of 115 yen.

A weak yen is typically a boon for companies that export, as it boosts revenue when overseas earnings are brought home. However, some of the benefit has been offset in recent years as Japanese companies manufacture more abroad, meaning that their overseas costs also go up as the yen weakens.

CHALLENGES

Toyota and its major Japanese rivals, Nissan (OTC:NSANY) Motor and Honda Motor, are also grappling with longer term challenges including electrification and automation of vehicles.

And consumer trust issues rear their head frequently in Japan, with major Toyota affiliate Hino Motors admitting on Tuesday it falsified emissions data for longer than previously disclosed.

A key near-term question for analysts and investors is whether Toyota can maintain the 9.7 million global vehicle production target for the current financial year ending in March.

Meeting that would likely depend on the outlook for the chips shortage and supply chains - as well as the economic outlook, said Endo of SBI Securities.

But even if the economy slows down, Toyota has an enormous backlog of orders, and a decrease in demand for consumer electronics could divert chips to automobile production, he said.

If Toyota does not change the full-year production target in the second quarter, that means it is very confident about production in the second half of the year to hit the goal, he said.

($1 = 130.6300 yen)

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

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email