Toyota's Q1 profit jumps 10%

Toyota sold 5.02 million vehicles in the six months to June 30, but the company has warned that it will be "very difficult" to meet its annual sales target due to weak demand in emerging markets.
Toyota sold 5.02 million vehicles in the six months to June 30, but the company has warned that it will be "very difficult" to meet its annual sales target due to weak demand in emerging markets.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Cost cuts and currency gains offset weaker global sales for giant Japanese carmaker

TOKYO • Japanese carmaker Toyota yesterday warned of tougher competition in China and raised its forecast for Japan sales as it reported a quarterly profit that exceeded analysts' estimates.

The company posted a 10 per cent rise in first-quarter net profit as cost cuts and currency gains made up for weaker global sales.

The April-June profit reached 646.39 billion yen (S$7.1 billion) compared with the 607.5 billion yen average estimate of 11 analysts polled by Thomson Reuters. The carmaker left its net profit forecast for the year ending next March unchanged at 2.25 trillion yen.

Operating profit trailed estimates and Toyota cut its full-year delivery forecast by 30,000 units to 10.12 million. The annual operating profit forecast was left unchanged.

Toyota has outpaced the industry in China this year, boosting deliveries by 11.9 per cent in the world's largest car market even as competitors such as BMW rethink their profitability goals in the face of slowing demand.

CHALLENGE IN CHINA

The sales expenses have gone up and also the sales prices have come down slightly. This is making our business in China quite difficult...

MR TETSUYA OTAKE, managing officer for Toyota

A weaker yen softened the blow to Toyota from falling sales in Japan and South-east Asia, where slumping demand helped Volkswagen inch ahead to become the world's largest carmaker by volume.

"The sales expenses have gone up and also the sales prices have come down slightly," Mr Tetsuya Otake, a Toyota managing officer, told reporters in Tokyo. "This is making our business in China quite difficult. The business environment is getting tougher."

The company said last week that it sold 5.02 million vehicles in the six months to June 30, trailing the 5.04 million that Volkswagen reported weeks earlier. Deliveries declined 1.5 per cent for Toyota and 0.5 per cent for Volkswagen.

The Japanese carmaker still leads the industry in profits. Analysts project the company will earn about US$26 billion (S$35.8 billion) in operating profit this financial year, almost double the US$14.8 billion estimated for Volkswagen.

Toyota had told its workers in Japan in June that it will be "very difficult" to meet its annual sales target due to weak demand in emerging markets.

While company president Akio Toyoda is ending what he described as an intentional pause by building car factories in Mexico and China before the end of the decade, it will take a few years before the new production capacity outside Japan is ready.

Toyota said it will begin production of a new assembly line in Tianjin, China, by mid-2018. While that expansion will allow the company to make another 100,000 vehicles a year, this will be mostly offset by ending output on an existing assembly line in China.

BLOOMBERG. REUTERS

A version of this article appeared in the print edition of The Straits Times on August 05, 2015, with the headline 'Toyota's Q1 profit jumps 10%'. Print Edition | Subscribe