Toyota in reverse as profits head in wrong direction

Japanese car maker, the world's biggest, posts earnings for second quarter that are down not far off 50 per cent as strong yen hits results but it raises forecast for full year.

oyota vehicles on display at the company's Tokyo headquarters. A strong yen and falling US sales have hammered profits. Franck Robichon / EPA

Toyota Motor on Tuesday reported a 43 per cent slide in second-quarter operating profit as the car maker continued to smart from a strong yen.

Operating profit at the world’s top-selling motor manufacturer was ¥474.6 billion (Dh16.71bn) in the July-September period, compared with ¥827.4bn a year earlier.

The result was about in line with the ¥476.26bn average of 12 estimates from analysts surveyed by Reuters.

Toyota changed its full-year budgeted yen rate to 103 versus the US dollar and 114 to the euro, from 102 and 113, respectively.

It said its first-half April-September net profit fell 25 per cent, as North American vehicle sales fell again, but it upgraded its full-year outlook.

Toyota reported a net profit of ¥946.1bn in the first half of its fiscal year, down from €1.25 trillion in the same period last year.

Operating profit fell nearly 30 per cent to €1.11tn, while revenue was off 7.2 per cent at ¥13.07tn.

However, the Japanese car maker boosted its full-year to March net profit forecast to ¥1.55tn from an earlier ¥1.45tn estimate.

“Despite the positive factors such as cost reduction and marketing efforts, operating income was down … due to the significant impact of yen appreciation,” Toyota said.

The decline in Toyota’s profits underscore the negative impact that a resurgent currency has had on firms doing a lot of business abroad.

Japan’s exporters reaped windfall profits over the past few years as government efforts to kickstart the world’s third-biggest economy sharply weakened the yen.

That was good for firms such as Toyota and rivals Honda and Nissan because repatriated foreign profits were worth more when the yen was weak and because it boosted their competitiveness overseas.

But the currency has rallied since the start of the year as volatile equity markets and Britain’s vote to exit the European Union boosted demand for a unit widely seen as a safe investment.

* Agencies

Follow The National's Business section on Twitter