Toyota cuts output target amid chip crunch as profit tumbles 25%

Date:

  • Q2 profit 562.7 billion yen versus 772.2 billion yen forecast
  • Lowers FY production target to 9.2 million units from 9.7 million
  • Unclear when chip shortage will end – executive
  • Results ‘very uninteresting’ given positive factors -analyst
  • Stocks end 1.9% lower, Nikkei benchmark 0.3% higher

TOKYO, Nov. 1 (Reuters) – Toyota Motor Corp (7203.T) posted a worse-than-expected 25% decline in quarterly profit on Tuesday and lowered its annual production target as the Japanese company battles rising material costs and a persistent semiconductor shortage.

The world’s largest automaker by sales also warned that forecasting the future remains difficult after posting its fourth straight quarterly profit decline, underscoring the strength of the business headwind.

During the coronavirus pandemic, Toyota outperformed most automakers in managing supply chains, but this year it fell victim to the long-standing shortage of chips, which repeatedly lowered its monthly production targets.

“We’re out of the worst phase, but… it’s not necessarily a full-supply situation,” said Kazunari Kumakura, head of Toyota’s purchasing group. “I don’t know when the chip shortage will be solved.”

Operating profit for the three months ended September fell to 562.7 billion yen ($3.79 billion), well below an average estimate of 772.2 billion yen in a poll of 12 analysts by Refinitiv. Toyota sales reported a profit of 749.9 billion yen a year earlier and a profit of 578.6 billion yen in the first quarter.

Kumakura said the global shortage of car chips continues as chip manufacturers have prioritized deliveries for electronic goods such as smartphones and computers, while natural disasters, COVID lockouts and factory outages have slowed the recovery of car chip stocks.

He also said supply of older-type semiconductors, which currently attract little capital investment, will remain tight.

Amid the gloom, Toyota shares closed 1.9%, versus a 0.3% rise in the Nikkei (.N225) average.

‘VERY IMPRESSIVE’

Some analysts were impressed with the performance, saying that other positive factors besides the chip shortage should have boosted it.

“The yen is weaker in the second quarter, the volume in the second quarter is much higher than in the first quarter and the (COVID) lockdown in China will not affect (the volume in the second quarter),” said Koji Endo, an analyst at SBI Securities.

“Taking these points into account… the absolute amount of profit in the second quarter must be higher than that of the first quarter. It’s very uninteresting.”

Production recovered 30% in the quarter, but the company warned last week that shortages of semiconductors and other components would continue to limit production in the coming months.

Toyota said it now expects to produce 9.2 million vehicles this fiscal year, down from the 9.7 million previously forecast, but still ahead of last fiscal year’s production of about 8.6 million units.

Reuters reported last month that Toyota had told several suppliers it had set a global target for the current fiscal year at 9.5 million vehicles and indicated that the forecast could be lowered depending on supplies of electromagnetic steel plates.

MUTED YEN IMPACT

The yen has fallen about 30% against the US dollar this year, but the advantage of the cheap yen – making sales abroad more valuable – has been offset by rising input costs.

The weak yen boosted profits by 565 billion yen in the first half of this fiscal year, but gains were more than offset by a 765 billion yen increase in materials costs, with cheap local currency driving up import costs further, Toyota said.

Toyota maintained its conservative earnings outlook, sticking to its full-year business forecast of 2.4 trillion yen for the fiscal year through March 31 — well below analysts’ forecast of 3.0 trillion yen.

By comparison, South Korea’s Hyundai Motor (005380.KS) increased its sales and profit margin last month due to an increase in exchange rates.

Toyota, once a darling of environmentalists for its gasoline-electric hybrid models, is also being criticized by green investors and activists for its slow move towards all-electric vehicles (EV).

Just a year into its $38 billion EV plan, Toyota is already considering rebooting it to better compete in a market that is growing beyond its projections, Reuters reported last month.

Reputational damage earlier this year forced Toyota to recall its first mass-produced all-electric car after just two months on the market due to safety concerns, and halt production. Last month, it again started taking leasing orders for the domestic market.

Toyota reiterated Tuesday that battery-powered electric cars are a powerful weapon for decarbonization, but that there are several other options to achieve the goal.

($1 = 148,3100 yen)

Reporting by Satoshi Sugiyama; Writing by Miyoung Kim; Editing by Kenneth Maxwell

Our Standards: The Thomson Reuters Trust Principles.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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