Business / Corporate

Toyota slashes net profit forecast due to market turbulence

by Kazuaki Nagata

Staff Writer

Dragged down by recent stock market turbulence, Toyota Motor Corp. slashed its net profit forecast for the current business year on Wednesday and now estimates the figure will be down by 25 percent compared to fiscal 2017.

Despite record sales of ¥22.47 trillion and increased operating profit of ¥1.93 trillion for the April-December period, net profit decreased to ¥1.42 trillion, down 29.3 percent from the same period the previous year. Toyota revised down its net profit forecast to ¥1.87 trillion from ¥2.3 trillion. The firm saw profit of ¥2.49 trillion in fiscal 2017.

The decline is mainly caused by the equity-market rout in December, which inflicted about ¥310 billion damage in shares of nongroup companies that the automaker holds, said executive Masayoshi Shirayanagi.

Since this is because of the fluctuating valuation of shares, “it’s not that the profit fall reflects our competitiveness,” Shirayanagi said during a news conference at Toyota’s Tokyo headquarters.

During the nine-month period, the Toyota group sold 8 million vehicles, an increase of 153,000, thanks to growth in Asian countries, although sales in the Japanese and U.S. markets declined. Shirayanagi said the performance in the U.S. market needs to be improved.

The sales and operating profit forecasts for the full year ending in March remain unchanged at ¥29.5 trillion and ¥2.4 trillion, respectively. The firm also expects to sell 10.5 million units worldwide.

Asked how prepared Toyota is in the event the U.K. does a “hard Brexit,” Shirayanagi said even if the automaker does everything it can, “the impact will be unavoidable.”

Toyota operates two plants in the U.K. and one of them produces about 600 vehicles daily. Nearly 90 percent of those are shipped to other member countries of the European Union, while the plant also gets about 2 million parts delivered every day, many of which are from countries outside of the U.K.

The manufacturing operation is run according to a just-in-time system, so “if we don’t receive even a single part, we’ll have no choice but to halt the operation of the plant,” said Shigeki Tomoyama, executive vice president of Toyota.

“From our standpoint, we sincerely hope that (the U.K.) will manage to avoid a no deal Brexit,” he said.

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