Connect with us

Hi, what are you looking for?

Capital Business
Capital Business
Japan's biggest automaker Toyota


Toyota profits fall, scraps forecast on Thai floods

Japan's biggest automaker Toyota

TOKYO, Nov 8 – Japan’s biggest automaker Toyota on Tuesday said first half net profit tumbled on the impact of the March earthquake on production and sales, as a strong yen continued to dent profitability.

The car giant, like rival Honda, also withdrew its full year forecasts as Thailand’s worst flooding in decades forced plant closures there that threaten to further undermine efforts to recover from the impact of Japan’s disasters.

Thailand’s floods have further clouded Toyota’s outlook in another challenging year that followed millions of safety-related recalls, analysts say.

The firm has been forced to halt operations at its three Thai plants until at least November 12, as a shortage of parts disrupts output at home, in Asia and as far away as North America and South Africa.

The Japanese automaker is seen as likely to lose its crown as world’s biggest automaker this year as competition from the likes General Motors and Volkswagen increases. It only overtook GM in 2008 after the US firm had held the position for decades.

The maker of the Pruis hybrid said first-half net profit tumbled 71.8 percent from a year earlier due to the impact of the March earthquake and tsunami on production, and as a strong yen made its exports less competitive.

On a consolidated basis, net income for Toyota’s fiscal first half from April to September fell to 81.5 billion yen ($1.04 billion at current rates) from 289.1 billion yen a year earlier. Sales fell 17.2 percent to 8.0 trillion yen.

It swung to an operating loss of 32.6 billion yen for the six-month period, compared with a year-earlier profit of 323.1 billion yen.

Global sales of cars, trucks and buses fell 18.5 percent between April 1 and September 30, Toyota said.

“In Japan and North America, vehicle sales decreased severely compared to the same period last fiscal year due to the large impact of the Great East Japan Earthquake,” executive vice president Satoshi Ozawa said in a statement.

Advertisement. Scroll to continue reading.

In the July-September period, Toyota said net profit fell 18.5 percent to 80.4 billion yen as it grappled with the residual effects of the quake on sales and a yen that surged to post-World War II highs versus the dollar.

The yen has also scaled 10-year highs versus the euro in recent months, eroding the repatriated profits of automakers such as Toyota and making their domestically made products less competitive when exported.

The unit has remained high despite attempts by Japan to weaken it through conducting yen-selling market interventions, raising questions as to whether exporters such as automakers should shift more production abroad.

Toyota is seen by ratings agencies as the most exposed among Japan’s big three automakers to currency movements and has fewer near-term options to offset the negative impact of a stronger yen.

Given its established manufacturing presence in Japan, shifting production overseas would take time and be difficult to implement, they say.

The yen has strengthened to levels that could “collapse” Japan’s export-led economy, Satoshi Ozawa, a Toyota executive vice president, said at a press conference.

Toyota has pledged to maintain a domestic production volume of 3 million vehicles a year, but is now looking to reduce its ratio of exports to 50 percent from the current 57 percent, he added.

The results compare unfavourably with those of closest Japanese rival Nissan, whose recovery has outpaced that of Toyota and Honda.

Nissan last week posted a first half net profit of 183.4 billion yen, down 12 percent on-year, but lifted its full-year net profit forecast.

Advertisement. Scroll to continue reading.

“The gap between Toyota and Nissan has narrowed, with Nissan now having more profitability than Toyota,” said Tatsuya Mizuno from Mizuno Credit Advisory.

“Toyota’s overall market position has been weakening, both in developed countries like the United States and in the emerging markets.

“More so than the impact of the quake and the Thai floods, Toyota’s basic market position has changed negatively.”

Shares in Toyota Motor fell 1.68 percent to 2,503 in Tokyo trade ahead of the earnings announcement.

Click to comment

More on Capital Business

Executive Lifestyle

NAIROBI, Kenya, Mar 12 – The country’s super wealthy individuals are increasing their holding of bonds, gold and cash, a new report by Knight...

Ask Kirubi

NAIROBI, Kenya, Mar 9 – Businessman and industrialist Dr. Chris Kirubi has urged members of the public to exercise extreme caution when making any...

Ask Kirubi

NAIROBI, Kenya, Mar 24 – Businessman and industrialist Dr. Chris Kirubi is set to own half of Centum Investment Company PLC, following a go-ahead...

Ask Kirubi

It is without a doubt that the COVID-19 pandemic has caught the whole world by surprise. Although its full impact is yet to be...


NAIROBI, Kenya, Mar 18 – Commercial Banks have been ordered to provide relief to borrowers on their personal loans, with loans eligible from March...


NAIROBI, Kenya, Jun17 – Kenya’s tea leaves manufacturer Kericho Gold, has been awarded the Superbrands Seal by Superbrands East Africa for their quality variety...


NAIROBI, Kenya, Apr 13 – As the local telecommunications industry gears up to roll out 5G networks in the country, the Communications Authority of...


NAIROBI, Kenya, Mar 22 – Airtel Kenya is offering free internet access for students in order to enable continued learning at home in the...