Toyota Motor Corp.’s first-quarter profit decreased worse than anticipated by 42 percent as the Japanese manufacturer struggled with supply shortages and increased costs.
Toyota announced on Thursday that operating profit for the three months ended June 30 fell to 578.66 billion yen ($4.3 billion) from 997.4 billion yen in the same period a year earlier. The COVID-19 restrictions on Chinese factories and the worldwide chip scarcity have caused it to regularly lower monthly output targets.
Analysts surveyed by Refinitiv predicted a 15% decline in earnings, thus the magnitude of the earnings cut was significantly more than anticipated and appeared to catch investors off guard. Toyota, the largest carmaker in the world by sales, had its share price fall by 3%.
Koichi Sugimoto, an analyst at Mitsubishi UFJ Morgan Stanley Securities, described the situation as “very awful.”
Sugimoto noted that some of the higher expenses stuck out, despite the automaker having earlier warned of production bottlenecks.
The car manufacturer claimed that higher material costs cost it 315 billion yen.
The manufacturer maintained its prediction for an operating profit for the entire fiscal year and a commitment to build 9.7 million vehicles this fiscal year in spite of the dismal quarter, citing what it called robust residual demand.
According to a Toyota spokeswoman, the automaker will be able to obtain the production-impairing chips and anticipates that the COVID-19 outbreak-related personnel shortages at several domestic factories will be remedied.
The spokeswoman stated that production would increase in the second part of the fiscal year.
The expert Sugimoto predicted that supply issues would likely improve as the worldwide chip scarcity and the COVID-19 situation in China both eased.
Toyota, like other automakers, is struggling with rising costs and worries that global inflation may slow consumer demand.
Toyota increased its full-year net profit forecast by 4% to 2.36 trillion yen, helped by the weaker yen, which increases the value of sales booked in foreign currencies.
Seiji Sugiura, senior analyst at Tokai Tokyo Research Institute, stated that despite this, the benefit from the cheaper yen was insufficient to completely counteract the effect of growing material costs.
Compared to its prior forecast, Toyota anticipates material costs for the entire year to rise by 17% to 1.7 trillion yen, with the majority of that increase coming from higher steel and aluminum prices.
In contrast to its early success in overcoming supply chain issues during the early phases of the epidemic, Toyota’s present production issues are a significant change.
Due to semiconductor shortages and the effects of COVID-19 lockdowns in China, the automaker reduced its monthly production targets three times during the April–June quarter, falling 10% shy of its original expectations.
Customers throughout the world were waiting for the delivery of their vehicles, and we were unable to create enough, the Toyota official stated.
In contrast to the benchmark Nikkei 225 index, which was marginally higher, Toyota shares, which were down 0.5 percent before to the announcement of the earnings, closed down 3 percent at 2,091 yen.
