Toyota profits fall as earthquakes and strong yen hurt sales

The Japanese giant has been hit with a double-whammy on earnings and can now see scandal-ridden Volkswagen in its rear-view mirror.

A Toyota FJ Cruiser at the company's showroom in Tokyo, Japan. Profits and sales have declined for the world's biggest car maker. Christopher Jue / EPA

Toyota reported Thursday a 14.5 per cent drop in profit for the fiscal first quarter as sales fell and a strong yen slashed earnings for the Japanese car maker.

Two powerful earthquakes in south-western Kumamoto in April that had disrupted production also hurt results.

Toyota’s April-June profit totaled ¥552.4 billion (Dh19.83bn), down from ¥646.3bn the same period a year earlier. The results were better than the ¥435bn profit that analysts surveyed by FactSet had projected.

Quarterly sales fell nearly 6 per cent to ¥6.59 trillion.

Toyota also lowered its profit forecast for the fiscal year through March 2017, to ¥1.45tn, down from an earlier forecast for a ¥1.5tn profit.

Toyota, which makes the Prius hybrid, Corolla subcompact and Lexus luxury line, had a ¥2.3tn profit for the fiscal year through March.

“They are trying to cut costs, variable costs, overhead cost but there’s not enough to offset the loss from the yen,” said Steve Man, a Hong Kong-based car analyst at Bloomberg Intelligence. “They are the most aggressive in terms of cutting the forecast. They are trying to cut as much as possible to set a lower expectation.”

The Toyota managing officer Tetsuya Otake said cost cuts did not fully offset the negative impact of the yen’s appreciation, which erased ¥235bn from Toyota’s operating profit.

A strong yen erodes the overseas revenue of Japanese exporters such as Toyota when translated into yen. The dollar, which was trading at ¥101.5 Thursday, has plummeted in recent months from about 120 yen a year earlier.

Cost cuts did add ¥90bn to operating income.

Toyota sold 2.17 million vehicles around the world for the quarter. Vehicle sales were up in Japan, the rest of Asia and Europe, but fell in North America.

The recent drop in oil prices tends to work as a minus for Toyota, whose reputation is based on offering gas-sipping compacts and gas-electric hybrids.

Toyota expects to sell 10.15 million vehicles for the fiscal year through March 2017, up from 10.09 million the year before.

Volkswagen, despite being tarnished by an emissions-cheating scandal, could overtake Toyota as the world’s biggest car maker in global vehicle sales this year, as the German company has been closing in on Toyota.

Toyota overtook the US car maker General Motors as the world biggest in 2008, although it relinquished that status for a year in 2011, when Japan was hit by the triple tsunami, quake and nuclear disasters.

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