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

  • Q2 profit 562.7 bln yen vs forecast 772.2 bln yen
  • FY production target cut to 9.2 mln units from 9.7 mln
  • It is not known when the chip shortage will end – executive
  • Results ‘very unrepresentative’ considering positive factors – analysis
  • Shares end down 1.9%, benchmark Nikkei up 0.3%

TOKYO, Nov 1 (Reuters) – Toyota Motor Corp ( 7203.T ) on Tuesday posted a worse-than-expected 25% drop in quarterly profit and cut its annual output target, as the Japanese firm addressing the costs of continuous surge and semiconductor materials. scarcity.

The world’s biggest-selling automaker also warned that the future remained difficult to predict after posting its fourth consecutive quarterly profit decline, underscoring the strength of business leaders it faces.

During the coronavirus pandemic, Toyota has fared better than most carmakers in managing supply chains, but has suffered a prolonged chip shortage this year, repeatedly cutting monthly production targets.

“We are out of the worst phase, but … it is not necessarily a situation where we have full supply,” 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 poll of 12 analysts by Refinitiv. Toyota sales reported a profit of 749.9 billion yen a year earlier, and 578.6 billion yen in profit in the first quarter.

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Kumakura said the global shortage of auto chips continues, as chipmakers have prioritized supplies of electronics items such as smartphones and computers, while natural disasters, COVID lockdowns and factory disruptions have delayed a recovery in supplies car chip.

He added that the supply of older-type semiconductors, which currently do not attract much capital investment, would remain tight.

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

‘VERIFICATIONS’

Some analysts were underwhelmed by the performance, saying positive factors other than the chip shortage should have provided a boost.

“The yen is weaker in the second quarter, the volume in the second quarter is much higher than in the first quarter, and the (COVID-19) lockdown in China does not affect (the volume in the second quarter),” said Koji Endo, analyst at SBI Securities.

“Taking these points into account … the total amount of profit in the second quarter has become higher than that in the first quarter. It is very unrepresentative.”

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Production rose 30% in the quarter, but the company warned last week that shortages of semiconductors and other components would continue to limit output in the coming months.

Toyota said it now expects to produce 9.2 million vehicles this fiscal year, down from the 9.7 million previously forecast but still ahead of last financial year’s production of about 8.6 million units.

Reuters reported last month that Toyota had told some suppliers that it was setting a global target for the current business year at 9.5 million vehicles and indicated that the forecast could be lowered, depending on the supply of electromagnetic steel sheets.

YEN INFLUENCE MUTED

The yen has gained about 30% this year against the US dollar, but the advantage of the cheap yen – which makes overseas sales worth more – has been offset by rising input costs.

The weak yen boosted profit by 565 billion yen in the first half of this financial year, but the gain was more than wiped out by a 765 billion yen increase in material costs, with the cheap local currency further increasing import costs, Toyota said. .

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

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

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

Just a year into its $38 billion EV plan, Toyota is already considering restarting it to better compete in a market that is growing beyond its projections, Reuters reported last month.

Famously, Toyota was forced to recall its first mass-produced all-electric vehicle earlier this year after two months on the market due to safety concerns, suspending production. It started taking leasing orders last month for the domestic market.

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

($1 = ¥148.3100)

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

Our Standards: The Thomson Reuters Trust Principles.

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