Toyota has announced an eye-watering re-assessment of its fiscal year 2009 profitability after first-half operating and net profits plunged 54.2% and 47.6% respectively.
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The global automaker, which has recently furloughed SUV and truck plants in the US, said today that it now expected consolidated operating income for the fiscal year ending 31 March 2009 would be down a staggering 62.5% to JPY600bn from the JPY1,600bn forecast as recently as early August.
Net income is seen down 56% to JPY550bn versus JPY1,250bn predicted just three months ago. Revenue is forecast to dip a modest 8% to JPY23 trillion as vehicle sales fall 673,000 units to 8.24m.
All of this compares with fiscal 2007/8 revenue of JPY26.3 trillion, operating income of JPY2,270.3bn and net income of JPY1,717.8bn.
TMC executive vice president Mitsuo Kinoshita said: “Currently, the financial crisis is negatively impacting the real economy worldwide, and the automotive markets, especially in developed countries, are contracting rapidly.
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By GlobalData“This is an unprecedented situation, however, we are already taking measures. We have newly established an “emergency profit improvement committee”, with president Watanabe as chairman, to secure profits for FY2009 and FY2010. This committee is working to reduce total costs and maximize revenues. Also, we are thoroughly reviewing production capabilities by re-examining aspects such as the timing and scale of new projects.
“Meanwhile, we remain committed to our strategies for mid-to-long term growth. We will steadily implement these measures, by fully utilising our solid balance sheet. We will respond appropriately to the changes in current market conditions, while taking actions for future growth.”
On a consolidated basis, Toyota’s first half operating income plunged 54.2% to JPY582.0bn and net income was off 47.6% to JPY493.4bn.
First half net revenues fell 6.3% to 12.19 trillion yen.
Toyota said negative factors included JPY300.0bn due to the appreciation of the Japanese yen against the US dollar, JPY90bn due to marketing activities and 40.0bn from cost reduction.
“Negative results are largely due to the appreciation of the yen and the decline in vehicle sales under difficult market conditions in the US and Europe,” Kinoshita said.
Vehicle sales in the first half slipped 51,000 units to 4.25m.
Japanese operating income fell by JPY451.6bn to JPY321.7bn due mainly due to the yen-dollar appreciation.
Exports to Russia and the Middle East increased.
North America operating income fell JPY219.8bn to JPY34.3bn including 68.9bn yen of valuation gains on interest rate swaps.
Toyota said the decline was due to lower sales as the US market tanked, the shift of the market to compact vehicles [which prompted a major production reshuffle and plant furloughs earlier in the year] and reduced production volume.
Nonetheless, it claimed a record high market share of 17.0% for the first half, due to favorable sales of the fuel-sipping Corolla and the Yaris – it has recently added the five-door version of the latter to the US range, bringing it into line with Canada.
“Toyota plans to implement a variety of measures to improve profits,” it said. “These measures include the launching of market-creating new models such as the Venza, in order to stimulate market demand.
European operating income fell JPY59.6bn to JPY8.7bn. Toyota noted that market conditions here in western Europe have “become more difficult” but said sales in eastern Europe, such as Russia, remained strong despite a slowing growth rate, due to “robust” sales of the Land Cruiser and Corolla.
“From this October we have started launching models that will contribute to the reduction of CO2 emissions, in order to increase vehicle sales and improve profit, and this will continue until the end of next year. These will include the new iQ which boasts an innovative compact package and high fuel efficiency,” Toyota said.
On a brighter note, operating income in Asia actually increased by JPY20.5bn to JPY137.2bn with sales of the redesigned Corolla launched at the beginning of the year “continuously brisk” while Avanza and Innova volume, primarily in the strong Indonesian market, also increased. Increased Hilux light truck exports also helped profits.
Operating income also rose in central and south America, Oceania and Africa, by JPY7.4bn to JPY79.1bn. The Corolla, Toyota’s staple model since the late 1960s, again helped in Brazil as the redesign, launched last March, “showed brisk sales and largely contributed to the profits”.
Financial services operating income rose JPY29.4bn to JPY 107.2bn including JPY62.3bn of valuation gains on interest rate swaps but slipped 41.3bn yen if that was excluded. The decline was mainly due to increased reserves for bad debts and residual value losses in the US despite a contribution from the increase in outstanding loan balance and expansion of lending margins.
Despite the profit falls, TMC has declared an interim cash dividend of 65 yen per share for the first half, unchanged from a year ago.
