Toyota cuts output target amid chip crunch as profit tumbles 25%

  • Q2 profit 562.7 billion yen vs. 772.2 billion yen forecast
  • The production target for the fiscal year has been reduced from 9.7 million units to 9.2 million units
  • Unclear when chip shortage will end – executive
  • Results ‘Very Ineffective’ Considering Positive Factors – Analyst
  • Shares fell 1.9%, with the Nikkei benchmark up 0.3%

TOKYO, Nov 1 (Reuters) – Toyota Motor Corp ( 7203.t ) on Tuesday reported a 25% drop in quarterly profit and cut its annual output target as the Japanese firm grappled with rising material costs and continued semiconductor losses. lack of

The world’s biggest automaker by sales warned that forecasting the future is difficult after posting its fourth consecutive quarterly profit decline, underscoring the strength of the business headwinds it faces.

During the coronavirus pandemic, Toyota fared better than most carmakers in managing supply chains, but it fell victim to prolonged chip shortages this year, repeatedly cutting monthly production targets.

“We’re out of the worst phase, but … it’s not necessarily a situation where we’re fully supplied,” said Kazunari Kumakura, head of Toyota’s purchasing group. “I don’t know when the chip shortage will be solved.”

Operating profit for the three months ended September fell to 562.7 billion yen ($3.79 billion), well below the average estimate of 772.2 billion yen in a survey of 12 analysts by Refinitiv. Toyota sales made a profit of 749.9 billion yen last year and 578.6 billion yen in the first quarter.

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Kumakura said global auto chip shortages persist, as chip makers prioritize supplies of electronics goods such as smartphones and computers, while natural disasters, the COVID lockdown and factory shutdowns have slowed the recovery in auto chip supply.

He also said that supply of older types of semiconductors, which currently attract little capital investment, will remain tight.

Amid the disappointment, Toyota shares closed down 1.9%, compared with a 0.3% rise in the Nikkei (.N225) average.

‘very ineffective’

Some analysts were underwhelmed by the performance, saying other positive factors beyond the chip shortage should be driving the boost.

“The yen is weak in the second quarter, volume in the second quarter is much higher than in the first quarter, and the (COVID) lockdown in China will not affect (volume in the second quarter),” said Koji Ando, ​​an analyst at SBI Securities.

“Considering these points … absolute profit in the second quarter is higher than in the first quarter. This is very ineffective.”

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The Toyota logo is displayed at the 89th Geneva International Motor Show on March 5, 2019 in Geneva, Switzerland. REUTERS/Pierre Albouy/File photo

Production rebounded by 30% in the quarter, but the company warned last week that shortages of semiconductors and other components would hamper output in the coming months.

Toyota expects to produce 9.2 million vehicles this fiscal year, down from an earlier forecast of 9.7 million but still ahead of last fiscal year’s output of about 8.6 million units.

Reuters reported last month that Toyota was setting a global target of 9.5 million vehicles for the current business year to several suppliers and indicated that the forecast could be lowered, depending on the supply of electromagnetic steel sheet.

A muted yen effect

The yen has fallen about 30% against the U.S. dollar this year, but the benefit of a cheaper yen — as sales are higher overseas — is being offset by rising input costs.

A weaker yen boosted profits by 565 billion yen in the first half of this fiscal year, but a 765 billion yen increase in material costs was offset by a cheaper local currency, Toyota said, adding to import costs.

Toyota maintained its conservative profit outlook, sticking to its full-year operating forecast of 2.4 trillion yen for the fiscal year to March 31 – well below analysts’ average estimate of 3.0 trillion yen.

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By comparison, South Korea’s Hyundai Motor ( 005380.KS ) raised its revenue and profit margin guidance last month to reflect a foreign exchange lift.

Toyota, once a darling of environmentalists for its hybrid petrol-electric model, is also under scrutiny from green investors and activists for its slow push into fully electric vehicles (EV).

Just a year into its $38 billion EV plan, Toyota is already considering a reboot to better compete in a market that has outpaced its estimates, Reuters reported last month.

In a notable hit, Toyota had to withdraw and suspend production of its first mass-produced all-electric vehicle earlier this year after two months on the market due to safety concerns. It resumed taking orders for rentals for the domestic market last month.

Toyota reiterated on Tuesday that battery-powered EVs are a powerful weapon for decarbonization, but there are various other options to achieve the goal.

($1 = 148.3100 yen)

Reporting by Satoshi Sugiyama; Written by Miyoung Kim; Edited by Kenneth Maxwell

Our Standards: Thomson Reuters Trust Principles.

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