Toyota faces a grim fiscal year.
Weeks after company officials expressed their hopes that things were getting back to normal, Toyota officials have issued a bleak forecast that sharply downgrades its earnings for the rest of the fiscal year.
Having earlier cut earnings projections due to the March 11 earthquake and tsunami that devastated Japan – and led to months of automotive production cuts – Toyota now says the strong yen, as well as Thai flooding, will reduce its earnings for the fiscal year, which ends March 31, by more than half.
The maker now anticipates a net profit of 180 billion – or $2.3 billion at the current exchange rate – down from the 390 billion yen it forecast in August. During a conference call this morning it also said revenues will dip from the earlier forecast of 19 trillion yen to just 18.2 trillion, or $234.4 billion.
The full-year forecast was originally planned to accompany the announcement of Toyota’s first-half earnings announcement last month. But the maker cited a variety of factors in explaining the delay.
The March 11 natural disaster will clearly continue to be felt for the rest of the fiscal year. It was the primary reason that the industry giant lost $418 million on an operating basis for the first six months of the year, down from a $4.1 billion operating profit during the same period the year before.
Toyota officials earlier said the maker had lost production of about 700,000 units due to parts shortages caused by the quake. But they had also indicated that by the end of the second quarter Toyota factories were largely back to normal operations and were, if anything, gearing up for hefty overtime to make up some of the lost volume.
But last month’s flooding in Thailand complicated matters. Not only did Toyota assembly operations in the Southeast Asian nation come to a halt but with Thai suppliers integrated into the company’s global production network production has again been lost in markets ranging from Japan to the U.S.
While the impact of the flooding is short-term the shift in exchange rates could be felt for years to come. It resulted in a $1 billion hit to earnings during the second quarter alone, Toyota officials previously reported.
For the full year, the maker today said it expects the Thai flooding to generate a 120 billion yen impact on earnings, with exchange rates costing 190 billion yen.
Toyota now assumes the yen will average 78 to the dollar this year, down from an original 80 yen-to-the-dollar forecast.
The strong yen is forcing Toyota – and its Japanese competitors – to rethink fundamental strategies. In recent weeks, Toyota has announced it will shift production of several models from Japan to the U.S., including both the Sienna and Camry versions earmarked for the Korean market.
Toyota CEO Akio Toyoda has promised not to hollow out the company’s home market production base but it may prove difficult to honor that pledge if the yen continues gaining strength.