Toyota Says Net Profit Jumps to $16 Billion, Raises FY Forecast

By AFP-JIJI
February 05,2016
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(Photo by Shinpei Suzuki)

(AFP)--Toyota on Friday said nine-month net profit jumped nearly 10% to 1.9 trillion yen ($16 billion), despite falling sales in most regions, with the world's top automaker focused on squeezing more productivity out of its plants.

The Corolla and Prius maker also slightly raised its fiscal year profit forecast to 2.27 trillion yen, but unit sales were down in most regions, including Europe and Japan, while North America rose.

The region has stood out for Japanese automakers, with rival Honda last week saying it was a bright spot that helped offset sluggish sales at home.

Toyota and its domestic rivals have benefited from healthy growth in the U.S. where low interest rates proved a boon to consumers, although the slim possibility of rate hikes this year could dampen sales.

Weakening demand in emerging markets such as Thailand and Indonesia, as well as a planned consumption tax hike in Japan next year, could also eat into the market, analysts said.

Sales in China, the world's top vehicle market, ticked up, Toyota said, adding that demand for it its RAV4 sport utility vehicle was strong in North America.

"A further slowdown in emerging economies may affect (Toyota's) sales overseas, and an expected rate hike in the United States would dampen customers' appetite" for new cars, said Shigeru Matsumura, analyst at SMBC Friend Research Center.

The weaker yen has made Japanese automakers relatively more competitive overseas and inflated the value of repatriated overseas profits, although the unit has strengthened recently.

Toyota has said all its domestic parts plants would shut for a full day next week, expanding a production suspension that is set to be its longest since the March 2011 earthquake and tsunami disaster.

Winning Volkswagen customers

 

 

The move was due to a components shortage following an explosion at a supplier.

It was not clear if the temporary production shutdown would affect results in the current quarter.

"We are going to take all the necessary measures for a speedy recovery of production," Toyota managing officer Tetsuya Otake told a news briefing.

"The impact of the suspension is not taken into account in our forecasts -- it is difficult to evaluate for the time being."

Also this week, Toyota said it will drop its Scion brand, the often-quirky line of cars it launched in the United States more than a decade ago targeted at younger Americans.

The company said the move was driven by a market shifting away from small cars and by changes in buying habits.

Friday's report comes after Toyota last month kept the title of world's top automaker for the fourth straight year after saying it sold 10.15 million vehicles globally in 2015, driving past Volkswagen and General Motors.

In the first half of 2015, the German giant, whose other brands include Porsche and Audi, was set to take the crown as it rode momentum in emerging economies.

But then it posted its first drop in annual sales for more than a decade after being hammered by a massive pollution cheating scandal.

"Volkswagen is in a severe situation," said Rakuten Securities analyst Yasuo Imanaka.

"Japanese automakers can take advantage of the slump by winning Volkswagen customers. It could be a plus for Japanese firms."

Toyota has been focusing on squeezing out productivity gains and better using existing plants -- it put on hold building new factories for several years.

The company began operating a new Thai plant in 2013, but then halted investment as the global car market struggled with oversupply and weak demand.

It has since announced it was ending the construction freeze as it unveiled plans for a $1.0 billion plant in Mexico, while it is overhauling its operations in China.

It also wants to overhaul its production methods, vowing to slash development costs to try to offset any downturn in the market.