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

Hit by rising costs and supply snarls, Toyota profit tumbles 42%

Stock Markets Aug 04, 2022 05:55AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. The Toyota emblem is seen on the tyre rim of a vehicle during the media day of the 41st Bangkok International Motor Show after the Thai government eased measures to prevent the spread of the coronavirus disease (COVID-19) in Bangkok, Thailand July 14, 202

By Satoshi Sugiyama

TOKYO (Reuters) -Toyota Motor Corp's profit slumped a worse-than-expected 42% in its first quarter as the Japanese automaker was squeezed between supply constraints and rising costs.

Operating profit for the three months ended June 30 sank to 578.66 billion yen ($4.3 billion) from 997.4 billion yen in the same period a year ago, Toyota said on Thursday, capping a tough period. It has repeatedly cut monthly output goals due to the global chip shortage and COVID-19 curbs on plants in China.

The scale of the earnings hit was far beyond expectations - analysts polled by Refinitiv had estimated a 15% drop - and appeared to catch investors by surprise. Shares of Toyota, the world's biggest automaker by sales, extended losses, sliding 3%.

"It's extremely bad," said Koichi Sugimoto, an analyst at the Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities.

While production snarls had already been flagged by the automaker, Sugimoto said some of the higher costs stood out.

The automaker said rising material prices cost it 315 billion yen.

Despite the grim quarter, the automaker stuck to its forecast for full-year operating profit and a plan to produce 9.7 million vehicles this fiscal year, citing what it said was strong residual demand.

A Toyota spokesperson said the car company would be able to procure the chips that had hampered production and expected staffing shortages at some domestic factories due to COVID-19 outbreaks to be resolved.

Production would pick up towards the second half of the financial year, the spokesperson said.

Sugimoto, the analyst, said supply problems looked likely to improve thanks to an easing in both the global chips shortage and the COVID-19 situation in China.

Like other auto manufacturers, Toyota is grappling with higher costs and fears that global inflation could put the brakes on consumer demand.

Toyota lifted its full-year net profit outlook by 4% to 2.36 trillion yen, helped by the weakness of the yen, which means sales booked in overseas currencies become more valuable.

Still, the boost from the weaker yen was not sufficient to fully offset the impact from rising material costs, said Seiji Sugiura, senior analyst at Tokai Tokyo Research Institute.

Toyota expects material costs for the full year to increase by 17% to 1.7 trillion yen from its previous estimate - the majority of that from the rising prices of steel and aluminium.

Toyota's current production woes mark a departure from its initial success in navigating supply chain problems in the early stages of the pandemic.

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

"We were not able to produce enough, with customers globally waiting for their vehicles to be delivered," the Toyota spokesperson said.

Toyota shares, which were down 0.5% just before the release of the earnings, closed down 3% at 2,091 yen, while the benchmark Nikkei 225 index was slightly firmer.

Toyota's Japanese rival Honda Motor Co is set to report its first-quarter earnings next week.

($1 = 133.7200 yen)

Hit by rising costs and supply snarls, Toyota profit tumbles 42%
 

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