Toyota Keeps Conservative Profit Outlook, Shares Decline

Masumi Suga, Bloomberg News

A Toyota Motor Corp. badge on a wheel of a Mirai fuel cell electric vehicle (FCEV) at the company's test driving course in Tokyo, Japan, on Wednesday, Dec. 9, 2020. The second generation of Toyota's hydrogen FCEV allows a 30% increase in it's driving range to around 650 km, according to the company. Photographer: Toru Hanai/Bloomberg , Bloomberg

(Bloomberg) -- Toyota Motor Corp. kept its profit outlook for the current year, underscoring the carmaker’s concerns over its ability to produce vehicles amid parts shortages, rising material costs and pandemic disruptions in China, even as a weaker yen boosts income in its home currency.

Toyota shares fell as much as 3.9% after the world’s biggest automaker kept its forecast for operating profit of 2.4 trillion yen ($18 billion) for the fiscal year through March. Analysts are projecting, on average, for Toyota to achieve a profit of 3.3 trillion yen.

Semiconductor shortages, higher raw material costs and Covid-19-related curbs in China have caused turmoil at auto assembly lines across the globe. Three months ago, Toyota said it would implement an “intentional pause” in output during the April-June quarter to be more “in line with recent realities.”

Toyota is sticking to its plan to assemble 9.7 million vehicles for the fiscal year. Lockdowns in Shanghai and a water supply shortage in Aichi prefecture also dirsupted production over recent months.

While the weaker currency helped to boost reported income by 195 billion yen, soaring material prices had a negative impact of 315 billion yen, according to Toyota.

Toyota updated its foreign exchange assumption to 130 yen to the dollar from 115 yen to the dollar. While the prior outlook accounted for the gap between Toyota’s and analysts’ profit views, the conservative profit estimate suggests that Toyota still sees production challenges in the months ahead. In total, operating profit for the fiscal year will get a 670 billion yen boost from the weaker currency, Toyota said.

One yen of weakness translates into about 45 billion yen in additional profit, according to the company.

For the latest April-June quarter, Toyota reported an operating profit of 579 billion yen on sales of 8.5 trillion yen. That compares with analysts’ average projection for profit of 808 billion yen and revenue of 8.2 trillion yen.

(Updates with shares, impact of currency, material costs.)