Tokyo
Toyota Motor Corp forecast a bigger-than-expected 35 percent tumble in net profit for the current year due to the sharp appreciation of the yen, ending three straight years of record profits driven in part by a weak currency.
The Japanese automaker said on Wednesday profit for the year ending in March 2017 will fall to 1.5 trillion yen ($13.81 billion) from 2.31 trillion yen in the prior year, far short of the average 2.25 trillion yen for the current year estimated by 28 analysts, according to Thomson Reuters.
Lower profits forecast under the weight of a strengthening yen will make it harder for Toyota, the world's most valuable automaker, to keep investing in new technologies and products even as competition intensifies in areas such as autonomous and alternative-energy vehicles.
Each 1 yen move in the dollar/yen rate affects its operating profit by 40 billion yen. Toyota's smaller domestic peers Nissan and Honda are relatively less impacted by the yen's moves because a greater chunk of their production is done outside Japan. Nissan and Honda are reporting results later this week.
'NO MAGIC WAND'
Toyota Executive Vice President Takahiko Ijichi said the company plans to keep investing in technologies and expects fixed costs, which include investments, to remain at similar levels as the recent past.
He reiterated Toyota's goal of maintaining an operating margin of 5 percent and posting an operating profit even if the yen rises to 85 per dollar or 100 per euro.
There is no "clever scheme” or “magic wand” to counter forex headwinds, said Ijichi, noting Toyota now has the experience of overcoming erratic currency swings through cost-cutting and other efficiency-boosting measures.
The company expects operating profit, which excludes earnings in China, will drop 40 percent this year to 1.7 trillion yen. That does not take into account any impact caused by production stoppages that followed the deadly earthquakes in southwestern Japan last month, it said.
Toyota, which was eclipsed by Volkswagen as the world's top-selling car maker in the first quarter, said it expected global sales to inch up to 10.15 million vehicles in the year to March, from 10.094 million last year.
Toyota shares have lost about a quarter of their value in 2016. In a bid to support them, Toyota announced a share buyback of up to $4.6 billion.
