Toyota Raises Forecast Despite Steep Drop in Profits

Aug. 2, 2011
Automaker expects a second-half production rebound.

Toyota raised its full-year profit target despite seeing first quarter net profits tumble 99% as it grappled with the March disasters and a strong yen.

The world's biggest automaker said net profits plunged to 1.16 billion yen ($14.9 million) in April-June from a year-earlier 190.4 billion, squeezing out a gain despite disruption caused by the March 11 earthquake and tsunami.

However, amid a faster-than-expected recovery from the disasters, Toyota said it expects a second-half production rebound to help it to an annual net profit of 390 billion yen, up 39% from its June estimate.

"Restoration has occurred at a faster-than-expected speed," Toyota senior managing officer Takahiko Ijichi told reporters Tuesday.

The automaker has said it plans to hire up to 4,000 contract workers at its Japan factories to make up lost ground, as component supplies normalize after the factories of Tohoku-based suppliers were damaged in the disasters.

Post-Quake Recovery

Production is expected to fully recover after September when post-quake parts shortages subside, Ijichi told reporters on Tuesday, after an inability to produce hammered sales in April-June.

The automaker now expects annual production to be reduced by 150,000 units due to the disaster, a third of a previous estimate.

For the year ending March 2012, Toyota forecast an operating profit of 450 billion yen on net sales of 19 trillion yen.

The maker of the Prius hybrid and upscale Lexus brand slipped to an operating loss of 108 billion yen in the period from a year-earlier profit of 211.6 billion yen. Net revenue fell 29.4% on-year to 3.4 trillion yen.

Japanese companies are nevertheless staging a rebound from the impact of the 9.0-magnitude earthquake and a tsunami that left 20,000 dead or missing and crippled power-generating facilities, including a nuclear plant at the center of an ongoing crisis.

As power and parts supply woes mounted in the quake's aftermath, automakers announced production disruptions domestically and overseas because of the crisis, temporarily slowing output or shutting plants.

"In Japan and North America where the effects of the earthquake were particularly serious, vehicle sales declined substantially," Ijichi said.

In Japan, sales in the period plunged 42% on-year and 48% in the United States.

Strong Yen Wreaking Havoc

Compounding the quake impact is a strong yen that analysts say threatens Japan's post-disaster rebound and could force more production overseas.

For Toyota, which makes around 40% of its cars domestically, the strong yen makes it difficult to earn money on them when sold overseas. It recently announced plans to merge Tohoku-based subsidiaries to help it cope.

At around 77 to the dollar and 111 to the euro, the yen is currently trading at a higher rate than Toyota's full-year assumptions of 80 yen to the dollar and 116 yen to the euro.

"The yen's current level is really hard for exporters like us. The level is beyond the limit," Ijichi told reporters. "To be honest, we cannot catch up with the speed of forex rate fluctuations."

However, he added: "It is important for Toyota to be based in Japan. The company needs to produce 3 million cars (in Japan annually). We have to cope with the yen's strength while protecting domestic production."

Toyota is the third of Japan's big-three automakers to report April-June quarter earnings.

Honda said net profit for the period plunged 88.3% to 31.7 billion yen. Nissan saw a less severe 20.3% decline to 85 billion yen.

The March disaster hit Toyota just as it was recovering from a crisis that saw it recall nearly 9 million autos between late 2009 and February last year due to brake and accelerator defects.

Toyota shares closed down 0.31% at 3,160 in Tokyo trade before the announcement on Tuesday.

Copyright Agence France-Presse, 2011

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