Tokyo: Toyota Motor Corp said on Friday it expects operating profit this business year to fall 35% to ¥300 billion ($3.7 billion) after Japan’s biggest earthquake on record severely disrupted car production and slashed sales and a strengthening yen cut into overseas earnings.
The 9.0 magnitude earthquake that rocked northeastern Japan on 11 March forced Toyota and other Japanese automakers to cut output at home and abroad as they struggled to secure vital parts. The ensuing nuclear disaster and power shortages have compounded problems.
The massive disruption to production will likely mean Toyota will fall behind General Motors Co and possibly Volkswagen AG to rank third in global vehicle sales this year.
That possibility was downplayed by a Toyota official on Friday.
“We don’t see it as necessary to be the largest automaker in the world,” said Toyota’s executive vice president, Satoshi Ozawa.
In addition to production problems, the carmaker has had to cope with a strengthening yen that cuts the value of overseas earnings and makes cars it builds in Japan for foreign markets more expensive to produce.
Toyota said on Friday it expects the dollar to average ¥82 in the current financial year to next 31 March, against an averaged currency rate of a 86 yen-per-dollar last year.
The line in the sand to stay in profit, Toyota said, is a rate of ¥85 and sales of at least 6.6 million cars.
Toyota said on 11 May that the earthquake has contributed to a 52% fall in profit during the January-March quarter, but the company delayed unveiling the annual forecasts as it weighed the impact of the disaster on consumption and its supply chain.
“Structural weakness remains for Toyota, as it has a higher portion of domestic production than Honda and Nissan, which makes it vulnerable to the yen’s strength,” said Park Sang-Won an analyst at Eugene Investment & Securities in Seoul.
The world’s biggest automaker cut its group-based global vehicle sales forecast for the 2011-12 business year to 7.24 million units from 7.3 million. The figures include sales at truck maker Hino Motors Ltd. and compact car maker Daihatsu Motor Co.
“We are studying production capabilities overseas. By increasing production towards the end of this year, we would like to regain market share that we have lost temporarily,” Toyota’s Ozawa said.
Toyota’ latest earnings guidance compares with a consensus of a ¥434 billion operating profit based on the average of 23 forecasts by analysts polled by Thomson Reuters I/B/E/S. Operating profit in the year to March 2011 was ¥468.3 billion.
Toyota’s shares have fallen 7.5% since the disaster, underperforming the benchmark Nikkei 225 average which lost 6.5%. Its shares on Friday rose 0.9% to close at ¥3,300 before the company released the profit forecast.