Toyota has raised its annual operating profit forecast by 13% to ₹3.4 trillion yen ($21.6 billion) for the year ending March, reflecting a much softer yen and announcing a share buyback of up to ₹1 trillion yen ($6.3 billion). According to Business Standard, the Japanese automaker has sharply revised down its average yen assumptions to 160 yen to the dollar from 150 yen, with the yen currently trading around 157 yen to the dollar following U.S.-Japan joint yen-buying intervention. However, shares closed down 1.5% on Tuesday, with analysts attributing the decline to disappointment in the size of the share buyback, as Toyota sits on ₹15 trillion yen of net cash and its stock trades below book value.
Toyota reported a 9% slide in first-quarter operating profit, marking its fifth straight quarterly operating profit decline this week. As reported by Business Standard, this decline is attributed to weaker vehicle sales and rising costs, particularly from the Iran war that has battered sales in the Middle East and led to increased costs for raw materials including aluminium. The world's biggest automaker will report these results on Tuesday, with the company noting that its upward revision did not take into account the impact of the deadly earthquake that struck Japan's Kyushu island last week, forcing it to halt output at four domestic plants.
Global sales of Toyota and Lexus vehicles fell 3.5% during the quarter, with the company being hit particularly hard in China where sales tumbled 28% and the Middle East where sales plunged by a third due to the war. According to Business Standard, Toyota has switched to overland routes to ship cars to the Middle East that bypass the Strait of Hormuz, helping support earnings. In the U.S., Toyota's biggest market, sales were up a mere 1%, with the automaker lagging Ford, GM and Stellantis, which have benefited from strong demand for high-margin pickup trucks. The company has now raised its annual vehicle sales target by 100,000 units to 9.7 million, citing solid demand in North America and Europe.
Toyota has lowered its estimate of the impact of the Iran war to ₹510 billion yen this fiscal year from its previous forecast of ₹670 billion yen, though this remains one of the largest hits to earnings from the war disclosed by a global company to date. As reported by Business Standard, the company has also switched to overland routes to transport vehicles to the Middle East, with Toyota now expecting 25% of its exports to the region to be affected from September, compared with an initial estimate of 50% for the full year. The automaker plans to cancel 200 million shares as part of its share buyback program.
The deadly earthquake that struck Japan's Kyushu island has significantly disrupted production at suppliers and forced Toyota to halt output at four domestic plants. According to Reuters, Toyota has suspended production at three plants in the region through Wednesday and halted output at another plant in central Japan through Friday. Two of the four plants are vehicle assembly sites, with supplier Aisin unable to provide a timeline for resuming output at a damaged plant near the quake's epicentre. The Kumamoto quake has now claimed 36 lives as of the latest reports, with 4,213 homes damaged and 46,700 households still without water supply.
Despite the challenges, Toyota plans a 10% jump in hybrid car sales to 5 million units this financial year and will expand battery production capacity to meet demand. According to Business Standard, the company will gradually shift from nickel-metal hydride batteries to lithium-ion technology, which will improve performance while lowering costs by several tens of thousands of yen per vehicle. With the yen trading around 157 yen to the dollar following intervention, Toyota's annual operating profit forecast of ₹3.4 trillion yen is still 10% lower than the past financial year, reflecting ongoing market pressures from geopolitical tensions and regional sales challenges.
