Toyota expected to post fifth straight profit drop
Analysts say weaker sales volumes in some overseas markets and rising costs linked to the Middle East conflict likely weighed on earnings.
Toyota is projected to announce a ¥1.11 trillion (US$7.04 billion) profit for the April-June quarter, representing a 5% decrease from the previous year, according to the median forecast of eight analysts polled by LSEG. The decline in earnings is attributed to weaker vehicle sales and rising operational costs, exacerbated by the recent earthquake in southern Japan.
The world's leading automaker anticipates reporting the downward trend in earnings on Tuesday, as investors closely monitor the potential aftermath of the incident.
In the first quarter, global sales of Toyota and Lexus vehicles experienced a 3% decrease, totaling just over 2.5 million units. The decline was primarily driven by sharp drops in China and the Middle East, which were offset by a modest increase in the United States. Furthermore, the earthquake's impact was felt at Toyota's domestic plants, with production halted at four locations until Wednesday and another plant in central Japan until Friday.
Two of the four affected plants were vehicle assembly sites, adding to the uncertainty surrounding the company's output.
The first quarter's global sales were adversely affected by a 28% decline in China and a third drop in the Middle East. Christopher Richter, an autos analyst at CLSA, forecasted that the first quarter might be more challenging than anticipated due to weaker sales volumes than initially expected. Additionally, Toyota suffered from reduced sales in Oceania and Latin America, where Chinese brands have been gaining traction. Sales in Oceania dropped by 16%, while those in Central and South America decreased by 5%.
The ongoing conflict in the Middle East has resulted in increased material prices, including aluminium and naphtha, and disrupted vehicle shipments to the region. Analysts have also pointed out that Toyota has faced pressure on US sales due to the transition of its RAV4 sport utility vehicle to a redesigned variant. As investors await details on when Toyota anticipates an acceleration in sales of the redesigned model, they will also scrutinize any modifications to the company's ¥3 trillion operating profit forecast for the current financial year. Higher material costs and earthquake-related disruptions weigh heavily on the outlook.
Written by urgent.news from Free Malaysia Today's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
