THE JAPAN NEWS

 

TOKYO (Reuters) — 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 automaker said on Wednesday profit for the year ending in March 2017 will fall to ¥1.5 trillion from ¥2.31 trillion in the prior year, and far short of the average ¥2.25 trillion for the current year estimated by 28 analysts, according to Thomson Reuters I/B/E/S.

Lower profits 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 driverless and alternative-energy vehicles.

Toyota said it was assuming the dollar would average ¥105 this year, versus a far more favorable ¥120 last year. Foreign exchange losses would therefore have a negative impact of ¥935 billion on operating profit this year, it said.

“Earnings results in the past few years have been largely helped by foreign exchange rates,” said Toyota’s President and Chief Executive Akio Toyoda at an earnings briefing, describing the yen’s weakness as “tailwind.”
“But since the start of this year the tide has changed.”

The yen’s sudden strength is creating a tough business environment for Toyota. Volatility in the yen’s value can have a major impact on Toyota’s earnings, as it exported nearly half of its domestic production in the past year. Each 1 yen move in the dollar/yen rate affects its operating profit by ¥40 billion.

Toyota did not mention any specific measures to counter the strengthening yen, but said it will continue to invest in growth.
There is “no clever scheme” or “magic wand” to counter forex headwinds, said Executive Vice President Takahiko Ijichi.

The company expects operating profit, which excludes earnings in China, will drop 40 percent this year to ¥1.7 trillion. That does not take into account any impact caused by production stoppages that followed the deadly earthquakes in the Kyushu region 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.