Home Business Toyota warns annual profit to skid 20% on materials

Toyota warns annual profit to skid 20% on materials

Toyota Motor Corp warned that operating earnings this year could slump by a fifth due to unprecedented increases in materials and logistics costs, on the back of a 33% slide in fourth-quarter profit, sending its shares down more than 5%. Toyota said that it expects materials costs to more than double to 1.45 trillion yen ($11.1 billion) in the fiscal year that started in April. The world’s biggest automaker by sales, which fared well during the earlier months of a global chip shortage, has now joined international peers in slashing production thanks to the prolonged crunch as well as China’s fresh COVID restrictions.

For the current fiscal year, Toyota forecast operating profit will fall to 2.4 trillion yen from almost 3 trillion yen in the previous year, well below the 3.36 trillion yen. In the January-March quarter, its profit slumped by a third to 463.8 billion yen. At 0503 GMT Toyota shares were down 4.9%, while the broader Tokyo benchmark was up 0.1%. The yen’s sharp depreciation to two-decade lows has worked in favour of Japan’s export-driven auto industry. But the surging raw material costs and global supply chain disruptions exacerbated by China’s tough COVID measures are putting pressure on profitability.

Toyota’s domestic rivals Nissan Motor Co and Honda Motor Co report earnings. Toyota cut its global production target for May by around 50,000 vehicles to about 700,000 as it plans to suspend operations on 14 lines at eight domestic factories for up to six days this month due to the COVID lockdown in China. The plan follows several cuts in its production plan between April and June, which had frustrated its suppliers.

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