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Abu Dhabi, UAEWednesday 24 April 2019

Toyota slashes full-year profit outlook as quarterly earnings miss estimates

Overall demand for cars in the North America region has stagnated over the past two years

Masayoshi Shirayanagi, operating officer at Toyota, has warned about Brexit. Bloomberg
Masayoshi Shirayanagi, operating officer at Toyota, has warned about Brexit. Bloomberg

Toyota Motor's quarterly operating profit edged up as continued increase in sales in Asia, including China, offset lower sales in North America, its biggest market.

Japan's largest car maker lowered its full-year net profit forecast to ¥1.87 trillion (Dh62.43 billion) from a previous view of ¥2.3tn, citing unrealised losses on some of its equity investments, but reiterated its annual operating profit projection of ¥2.4tn.

For the October-December quarter, Toyota posted an operating profit of ¥676.1bn, up 0.4 per cent from ¥673.64bn in the same period a year earlier, Reuters eported. This missed an average estimate of ¥680.84bn from 10 analysts polled by Refinitiv.

Its global retail sales rose 2.8 per cent to 2.71 million units in the quarter from 2.63 million units a year earlier, driven by a climb in sales to 464,000 units in Asia including China, from 404,000 during the same period last year.

Sales in North America, which accounts for nearly 30 per cent of Toyota's annual vehicle sales, came in at 680,000 during the quarter, from 735,000 a year before. Overall demand for cars in the region has stagnated over the past two years.

China, however, has been a bright spot for Toyota, partly due to strong demand for its Lexus luxury brand that has helped it buck a wider slowdown in the world's biggest car market.

Toyota senior managing officer Masayoshi Shirayanagi also said there was no way to avoid a negative impact in the event of a no-deal Brexit, AFP said - days after fellow Japanese car marker Nissan announced a cut in production in Britain.

Regarding Britain's exit from the EU, Mr Shirayanagi said: "We cannot avoid the [negative] impact no matter how much we prepare beforehand if Britain leaves the EU with no deal."

He said the firm "will monitor the situation, hoping that it will not happen", adding it was not at the moment considering production changes.

On Sunday, Nissan announced it was cancelling plans to build its X-Trail 4x4 at its plant in northeast England despite Brexit assurances from the government.

Toyota sold 1.47 million vehicles in China in 2018, up 14 per cent on year. It has said it aims to lift sales to 1.6 million in 2019 in the country, even as it and other motor manufacturers brace for another tough year.

Fellow Japanese car maker Honda last week logged a net-profit fall of 34.5 per cent for the nine months to December but revised up its full-year forecasts thanks to strong motorcycle sales.

Nissan is to announce results next week, the first since its former chief executive Carlos Ghosn was arrested on November 19 for financial misconduct.

Car sales in China last year contracted for the first time since the 1990s, hurt by the phasing out of purchase tax cuts on smaller cars and the Sino-US trade war. The world's second-largest economy grew at its slowest in almost three decades in 2018, and the pace is expected to weaken further this year.

For now, lower tariffs on cars made in Japan are helping buffet many of its car makers from the slowdown in China, even as rivals such as Ford continue to post losses there amid China's blistering trade war with the United States.

Warming political ties between Japan and China are also helping Japanese car makers. Last year China and Japan pledged to forge closer ties as they look to deepen their relationship which in the past has hit rocky patches, prompting boycotts of Japanese products including cars.

Updated: February 6, 2019 01:27 PM

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