Toyota is expected to report a fifth straight quarterly operating profit decline, with April-June profit seen at 1.11 trillion yen, down 5% year on year. A 7.1-magnitude earthquake in Kyushu has disrupted production at four domestic plants, compounding weaker sales in China and the Middle East.
Toyota (7203.T) is forecast to post a fifth straight quarterly operating profit decline, with April-June operating profit seen at 1.11 trillion yen, down 5% from a year earlier.
"The first quarter could be a bit tougher than expected," Christopher Richter, autos analyst at CLSA, said, adding that sales volumes appeared weaker than expected during the quarter.
The estimate, equivalent to $7.04 billion, is the median of eight analysts surveyed by LSEG. Global sales of Toyota and Lexus vehicles fell 3% to just over 2.5 million units in the first quarter, dragged down by a 28% decline in China and a one-third drop in the Middle East. Sales in Oceania fell 16% and Central and South America were down 5%, where BYD and other Chinese brands are expanding aggressively. Modest growth in the United States partially offset the declines.
The Middle East conflict, which began in late February, has pushed up prices for materials including aluminum and naphtha and disrupted vehicle shipments to the region. Toyota exports about 500,000 to 600,000 cars to the Middle East annually and expected just under half of those sales to be affected.
Investors will also weigh the fallout from a 7.1-magnitude earthquake that struck Japan's Kyushu island on July 28, killing 34 people. Toyota has suspended production at three plants in the region through Wednesday and halted output at another plant in central Japan through Friday. Two of the four plants are vehicle assembly sites.
Supplier Aisin said it could not say when output at a damaged plant near the quake's epicenter would resume, with about 200 people working on recovery efforts at the site. "Once we confirm that safety and quality are okay, we will resume production as appropriate... this will differ from product to product," Aisin CFO Daisuke Kondo said.
The earthquake also disrupted semiconductor production across Kyushu, with TSMC, Renesas, Sony and Tokyo Electron suspending operations for safety inspections. Renesas said it would resume operations at one Kumamoto plant in phases from August 5, while Sony expects to return to pre-earthquake operating levels by mid-month.
Toyota has also faced pressure on U.S. sales from the transition of its outgoing RAV4 sport utility vehicle to a redesigned version. Richter said investors would be keen to hear details about when the company expects the model's sales to accelerate.
Analysts will look for any change to Toyota's 3 trillion yen operating profit forecast for the current financial year, particularly as higher material costs and earthquake-related disruptions cloud the outlook. The company posted 3.8 trillion yen in operating profit in the previous fiscal year.
The earnings report on Tuesday will test whether Toyota can hold its full-year guidance as supply chain disruptions compound weaker demand in China and the Middle East. Investors will watch for updated production schedules and any revision to the 3 trillion yen forecast.
This article is for informational purposes only and does not constitute investment advice.
