Toyota on Thursday announced a better than expected fiscal third quarter operating profit on improved revenues but an expected $2bn hit for recall costs is expected to keep it in the red for the full year.
Consolidated net revenues rose 10.2% to JPY5.3 trillion yen and operating income rose from a loss of JPY360.6bn to JPY189.1bn and net income increased from a JPY164.7bn yen to JPY153.2bn of profit.
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With less than two months left in the current financial year, Toyota slashed what most analysts had considered an excessively conservative operating loss forecast to JPY20bn yen (US$220m) from JPY350bn.
A Toyota official told Reuters the new forecasts for the current year took into account up to $2bn lost from the recall – an estimated JPY100bn in costs and a further JPY70-80bn in lost sales, in line with analysts’ estimates.
Toyota’s new forecast for the year to March compares with a JPY38bn yen annual loss forecast in a survey of 19 brokerages by Thomson Reuters I/B/E/S.
Senior managing director Takahiko Ijichi told reporters in Tokyo the company was unsure about the impact beyond the end of this financial year, but investors expressed their concerns.
“The company’s forecast earnings and profitability will surely decrease because of the recall,” Benedicte Mougeot, fund manager of HSBC’s GIF Japanese equity fund in Hong Kong, told Reuters. “Taking into account the increased risk and reduced profitability, we will review our investment.”
Shares in Toyota have lost as much as 23% in the last two weeks since and slid 3.5% to a 10-month closing low of JPY3,280 on Thursday. More than 56m shares were traded, the most in at least a quarter of a century, the news agency noted.
The October-December operating profit of 189bn yen, easily beat a 99bn yen estimated by Thomson Reuters I/B/E/S while its nine-month operating profit of JPY52bn yen implied a JPY72bn yen loss in Q4, the news agency calculated.
Toyota said the operating income rose JPY549.7bn as vehicle sales rose and costs were cut.
Consolidated vehicle sales for the third quarter rose 227,000 units to 2.07m.
Toyota also said it made a year-on-year improvement in all regions for the third quarter – Japanese operating income rose JPY198.1bn to JPY33.9bn, North America increased JPY327.1bn to JPY79.7bn, Asia was up JPY26.6bn to JPY67.1bn and Central and South America, Oceania and Africa operating income rose JPY5.9bn to JPY39.4bn.
Only Europe saw an operating loss but that at least improved JPY22.1bn to negative JPY21.3bn.
Financial services operating income increased by JPY204.5bn to JPY80.6bn.
TMC hiked its consolidated vehicle sales forecast for the full fiscal year ending 31 March, 2010 150,000 units from 7.03m to 7.18m units and boosted financial predictions to consolidated net revenues of 18.5 trillion yen, an operating loss of JPY20bn and net income of JPY80bn yen.
It also revised its target for ’emergency profit improvement’ activities from 1.25 trillion yen to 1.59 trillion yen, up JPY340bn.
In any other circumstances, today’s announcement would be notable for the vast improvement on the gloomy JPY400bn operating loss being talked about seemingly only months ago.
But the recall has soured industry observers’ moods.
“Toyota’s recall this time is unlike any other in auto industry history,” Lee Sung-Jae, an analyst at Kiwoom Securities in Seoul, told Reuters.
“The scale is huge to begin with, and this deals a fatal blow to the very core value Toyota represented – that is the quality of its cars.”
Investors have now turned their focus on how long and far the damage would go, with Toyota’s sales in its most important US market already falling 16% in January – enough to relegate it to third place, below Ford.
