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

  • Q2 profit ¥562.7 billion vs. ¥772.2 billion forecast
  • Lowers FY production target to 9.2 million units from 9.7 million
  • It is not clear when the shortage of chips will end – CEO
  • Results ‘very unimpressive’, considering positive factors – analyst
  • Stocks end up 1.9%, benchmark Nikkei up 0.3%

TOKYO, Nov 1 (Reuters) – Toyota Motor Corp ( 7203.T ) posted a worse quarterly profit drop of 25 percent on Tuesday and cut its annual production target as the Japanese company grapples with rising material costs and a steady semiconductor production glut. lack of.

The world’s biggest carmaker by sales also warned that it remains difficult to predict the future after a fourth straight quarter of profit declines, underscoring the business headwinds it faces.

Toyota has fared better than most carmakers in managing its supply chains during the coronavirus pandemic, but this year it has fallen victim to a prolonged chip shortage, repeatedly cutting monthly production targets.

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

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

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Kumakura said the global shortage of auto chips continues as chip makers have prioritized supplies of electronics such as smartphones and computers, while natural disasters, COVID-19 lockdowns and factory disruptions have slowed the recovery of auto chip supplies.

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

Toyota shares fell 1.9% on the gloom, compared with a 0.3% rise in the Nikkei (.N225) average.

‘HIGHLY IMPOSSIBLE’

Some analysts were down on the performance, saying positive factors other than the chip shortage should have provided the 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) lockdown in China does not affect (the volume in the second quarter),” Koji Endo said. Analyst at SBI Securities.

“Given these points … absolute earnings in the second quarter should be higher than in the first quarter. That’s very underwhelming.”

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

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 an earlier forecast of 9.7 million but still ahead of last fiscal year’s production of about 8.6 million units.

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

JEN EFFECT DISABLED

The yen has fallen about 30% against the U.S. dollar this year, but the benefit of the cheap yen, which makes overseas sales more valuable, has been offset by rising raw material costs.

A weak yen boosted profit by 565 billion yen in the first half of this fiscal year, but profit was more than wiped out by a 765 billion yen rise in materials costs, with the cheap local currency pushing up import costs further, Toyota said.

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Toyota kept its conservative profit forecast, sticking to a 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.

By comparison, South Korea’s Hyundai Motor ( 005380.KS ) raised revenue and profit margins last month to reflect foreign exchange gains.

Toyota, once the darling of environmentalists for its hybrid gasoline-electric models, is also under scrutiny from green investors and activists over its slow move toward fully electric vehicles (EVs).

Just a year into its $38 billion EV plan, Toyota is already considering a reboot to better compete in a market that is growing faster than expected, Reuters reported last month.

Reputationally, Toyota was forced to recall its first mass-produced all-electric vehicle after only two months on the market and halt production earlier this year due to safety concerns. Last month, it resumed taking leasing orders for the domestic market.

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

($1 = 148.3100 yen)

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

Our Standards: The Thomson Reuters Trust Principles.

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