March 7, 2021

Toyota, Rebounding From Quake, Raises Profit Forecast

TOKYO — Citing a quicker than expected recovery from Japan’s earthquake, the Toyota Motor Corporation raised its full-year profit forecast by almost 40 percent Tuesday, although it warned that a strong yen continued to weigh on its bottom line.

Toyota and other Japanese automakers have staged a striking comeback from the March earthquake and tsunami, as parts makers swiftly repaired their factories or switched production lines. The rebound has come even though manufacturers of all sorts are still contending with electrical shortages in Japan because of still-crippled or idled power plants.

Toyota, the world’s largest automaker, said it expected a net profit of 390 billion yen, or $5 billion, for the business year that ends next March. In an earlier postquake forecast, it projected net profit of only 280 billion yen.

The revised estimate came as Toyota posted a 1.1 billion yen net profit for the April-June quarter. That was the period most affected by the magnitude 9 earthquake and tsunami on March 11, damaging factories and severing supply chains.

Toyota plants in Japan were halted for about two weeks after the quake. In April, the automaker started production at all of its domestic factories, but at a sharply reduced capacity.

As a result, the quarter’s profit was a tiny fraction of the 190.4 billion yen Toyota earned in the period a year earlier. But as with other Japanese automakers, the rebound has been stronger than expected.

On Monday, the Honda Motor Company increased its profit forecast for the current fiscal year by 18 percent, to 230 billion yen.

Last week, Nissan, which is much less dependent than Toyota on production in Japan, posted a 85.02 billion-yen profit for the April-to-June quarter that was more than twice the mean estimate of analysts forecasts compiled by Thomson Reuters.

In Toyota’s case, its plants have tried to make up for lost production with extra shifts. The company now expects to lose only 150,000 units in global output for the year because of the quake, compared with an earlier estimate of 450,000 reported by Bloomberg. In the year ending next March, Toyota now expects to produce 7.72 million units, up from a previous forecast of 7.39 million.

Robust sales elsewhere in Asia are contributing to Toyota’s recovery, the company said. In China, sales rose 30 percent in July, rebounding from a plunge of more than 50 percent in the previous three months.

Still, the battered dollar’s drop against the yen, to near-record lows, is eating into Toyota’s profits. A strong yen makes Japanese exports like cars and electronics more expensive overseas, and therefore less competitive. The higher yen also erodes the value of Toyota’s overseas earnings when repatriated into the home currency.

Takahiko Ijichi, a senior managing director, said at a news conference Tuesday that the yen, which has risen more than 11 percent this year against the dollar, was squeezing profits. He said a car sold in the United States, Toyota’s biggest market, would give it several thousand dollars less in gross profit.

“Our history has been defined by a constant battle against currency swings, and it has made us stronger,” Mr. Ijichi said. But a recent rise in the yen to around 76 to the dollar “is beyond the limit,” he said.

Mr. Ijichi said Toyota intended to push aggressively in the United States with new models and bigger incentives to reclaim the market share it lost this year following the natural disaster. For the first six months, Toyota had a 12.8 percent share of the United States market, down from 15.1 percent for the same period last year, according to AutoData.

“By next March, we expect to gain back the market share we had before the quake,” Mr. Ijichi said of the United States.

Toyota shares fell 0.3 percent to 3,160 at the close of trading in Tokyo, before the earnings were announced. The shares have dropped more than 10 percent since the March quake. In midday trading in New York on Tuesday, its American depository receipts were little changed.



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