Toyota Motor Corp. is set to announce its results for the April-March financial year on Wednesday, May 11, after market close. Here’s what you need to know.
EARNINGS FORECAST: Toyota is expected to post Yen466.5 billion ($4.3 billion) in fourth quarter net profit according to analysts polled by Thomson Reuters, up about 5% year-over-year. For the April-March financial year, analysts expect Toyota to post its third-straight year of record net profit at Yen2.34 trillion, up around 8% from a year ago.
REVENUE FORECAST: Toyota is likely to book Yen7.0 trillion in revenue for the fourth quarter, down around 2% from a year ago, and Yen28.3 trillion for the full-year, up about 4%, also according to Thomson Reuters.
WHAT TO WATCH:
–Profit peak: For the year that ended in March, Toyota is expected to post its third consecutive year of record profits. But for the current financial year, the world’s best-selling auto maker may forecast a profit decline as it faces a stronger yen, which makes Toyota’s export business less profitable. It also means Toyota has to convert profits made overseas back into the yen at a less favorable rate. President Akio Toyoda told union members back in March that “the tide has changed in terms of the business environment that surrounds us,” according to an internal company document. He cited foreign exchange moves as well as tightening environmental regulations in emerging markets.
–Yen’s rise: The rising yen is likely one of the biggest factors that could dent Toyota’s profits this financial year. Advantageous foreign exchange moves, after the yen started to weaken in late 2012, have helped the auto maker’s profits soar. But the yen is now trading at around Yen107 against the dollar, compared with around Yen120 at the beginning of the year. That trend will bite Toyota–for every one yen decline in the value of the dollar, Toyota expects its full-year operating profit to fall by Yen40 billion.
–Takata air-bag recalls: Globally, around 60 million Takata Corp.-made air-bag inflaters have been recalled, according to Japanese officials. That tally is set to expand. Earlier this month, U.S. regulators ordered car makers to recall up to another 40 million rupture-prone Takata air bag inflaters. To date, Toyota has recalled around 15.3 million Takata inflaters. Toyota executives could comment on whether that would expand and any financial impact.
–Production in Japan: Twice this year, Toyota has been forced to halt vehicle production in Japan due to supplier troubles. Last month, it shut down most of its domestic car assembly lines due to components shortages after a series of strong earthquakes hit southern Japan. Operations have since resumed, but the quake left Toyota lagging behind its manufacturing plans by around 80,000 vehicles, an executive said. The latest shutdowns came as Toyota was trying to catch up on lost production after a week-long operation halt in February following an explosion at a steel supplier. Toyota, along with its subsidiaries Daihatsu and Hino, plans to manufacture 4.1 million vehicles in Japan in 2016.
–U.S. market: The U.S. auto market is on an upswing, but analysts are carefully watching whether growth will cool off. Toyota’s U.S. sales in April rose 3.8% from the same period a month ago, nearly in line with the industrywide growth of 3.6%. Executives could offer an outlook on the U.S. market, the biggest for Toyota.
Write to Yoko Kubota at firstname.lastname@example.org