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Toyota Lowers Annual Profit Forecast After Thailand Floods

December 9, 2011
4 min to read


Toyota Motor Corp., poised to lose its crown as the world's largest carmaker this year, cut its profit forecast 54 percent after Thailand's worst floods in almost 70 years disrupted production.


Net income will fall to $2.3 billion in the 12 months ending March 31, the Toyota City, Japan-based carmaker said in a statement. That's lower than its previous forecast and misses the 393 billion yen average of 21 analyst estimates compiled by Bloomberg. The company also cut projections for operating profit and sales, reported The Detroit News.

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The Thai floods led to component shortages worldwide, disrupting output of Camry and Corolla sedans at plants as far away as the U.S. That compounded the challenges faced by Japanese carmakers in a year marred by the record earthquake and tsunami in March, as well as the surge in the yen.


"While Toyota is gradually building up inventory of its new Camry sedans and its popular models, sales haven't entered a recovery phase yet," said Issei Takahashi, a Tokyo-based analyst at Credit Suisse Group AG. "It will probably be after February that Toyota's sales will begin recovering."


Toyota fell 0.4 percent in Tokyo trading before the company released its forecasts. The stock has fallen 18 percent this year, underperforming Japan's benchmark Nikkei 225 Stock Average.


Toyota delayed the new projections by a month because of the floods. Honda Motor Co., which also pushed back its forecasts because of Thailand, aims to disclose them by the end of January, Chief Financial Officer Fumihiko Ike said last week.


By contrast, Nissan Motor Co., Japan's second-largest carmaker, last month raised its profit forecast after its vehicle sales in China rose and the company recovered faster than Toyota and Honda from the earthquake.

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The maker of the Camry sedan cut its forecast for operating profit 56 percent to 200 billion yen, meaning the company will probably earn less profit than Nissan for the third time in four years. The forecast missed the 405 billion yen average analyst estimate compiled by Bloomberg.


The company, likely to cede its three-year reign as the world's biggest carmaker to General Motors Co. in 2011, also cut its sales forecast to 7.38 million vehicles from an earlier projection of 7.6 million.


In Thailand, the floods created a second wave of factory disruptions for Japanese carmakers such as Toyota, which had taken six months to restore production hobbled by Japan's March 11 natural disaster.


Disruptions from Oct. 10 to Nov. 25 caused 215,000 vehicles in lost production, or 2.8 percent of the annual target. By comparison, Nissan estimates its lost production at 60,000 units, or 1.3 percent of its targeted annual production worldwide.


Toyota probably lost more output than any other carmaker because of the floods, said Masatoshi Nishimoto, a Tokyo-based senior manager at research firm IHS Automotive. Toyota may not be able to make up for lost production of models such as the Vigo SUV until September because the company had procured about 90 percent of the vehicle's parts from Thailand and won't easily find alternate suppliers, Nishimoto said.

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Toyota revised its outlook for the yen against the dollar to 78 from 80. The stronger domestic currency reduces the value of overseas sales.


GM and South Korea's Hyundai Motor Co. have benefited while their Japanese rivals struggled. Detroit-based GM's vehicle sales are poised to overtake Toyota's this year and analysts estimate Hyundai will earn $6.2 billion in profit during 2011, more than double Toyota's.


Still, President Akio Toyoda is aiming to regain lost market share from 2012. At the Tokyo Motor Show last week, the grandson of the founder showed off the company's new 86 coupe, betting the car will widen Toyota's appeal.


The automaker also displayed a plug-in version of its best- selling Prius hybrid that will go on sale from January. The Prius PHV will become a "winner" that will take sales from GM's Chevrolet Volt, according to CLSA Asia-Pacific Markets analyst Chris Richter.


A recovery may already be under way in the U.S. Toyota's November vehicle sales in the country rose for the first time in seven months as supply at dealers recovered and consumer confidence surged the most in more than eight years.

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