Toyota's April-June profit seen down 5% as sales fall in China, Middle East; earthquake disrupts four domestic plants, clouding outlook.
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Toyota is expected to post a fifth consecutive quarterly operating profit decline this week, hit by weaker vehicle sales and rising costs, with a deadly earthquake in southern Japan adding fresh uncertainty to the outlook. The world's biggest automaker is forecast to report 1.11 trillion yen in profit for the April-June quarter on Tuesday, down 5% from a year earlier, according to the median estimate 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. Sharp declines in China, down 28%, and the Middle East, down one-third, outweighed modest growth in the United States. Sales also dropped 16% in Oceania and 5% in Central and South America.
Analysts said weaker sales volumes in several overseas markets and rising costs across the supply chain linked to the conflict in the Middle East likely weighed on earnings during the period. The conflict, which began in late February, has pushed up prices for materials including aluminium and naphtha and disrupted vehicle shipments to the region.
Investors will also look for clues on the fallout from a deadly earthquake that struck Japan's Kyushu island last week. The quake disrupted production at suppliers and forced Toyota to halt output at four domestic plants. 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.
The uncertainty was highlighted on Friday when supplier Aisin said it could not say when output at a damaged plant near the quake's epicentre would resume. About 200 people were working on recovery efforts at the site.
"The first quarter could be a bit tougher than expected," said Christopher Richter, autos analyst at CLSA. He added that sales volumes appeared weaker than expected during the quarter. Richter said Toyota had also posted weak sales in Oceania and Latin America, where BYD and other Chinese brands are expanding aggressively.
Toyota has also faced pressure on U.S. sales from the transition of its outgoing RAV4 sport utility vehicle to a redesigned version of one of its best-selling models globally. Richter said investors would be keen to hear details about when the company expects the model's sales to accelerate.
Analysts will also be watching 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. For broader context on how earnings reports move markets, see stock market analysis.
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