Toyota Motor Corp, with soaring costs of parts and materials nearly offsetting the benefits from the plunging Japanese yen and a rebound in production is expected to report a small quarterly profit increase on Tuesday.
The automaker last week saw its global production rebounded by 30 per cent in the quarter that ended in September. However, the company also warned that the shortage of semiconductors and other components will persist and continue to strain the output in coming months.
While Toyota expects a gradual improvement in the auto chip shortage to help raise output in the second half of the current fiscal year, the automakers point out that the investors’ focus will shift to demand outlook, other potential disruptions in the supply chain and its electric vehicle strategy when Toyota reports earnings.
“The point to look out for is why there has been such a gap in the supply chain process. It has been too long for the same reason, so something new must be emerging ”Kohei Takahashi, an analyst at UBS Securities Japan, noting improvement in chip supplies.
Earlier this month, the automaker warned that the scarcity of chips makes it unlikely to meet its 9.7 million vehicle production goal for this financial year. A new forecast was not provided by the company.
The company is expected to report a 3 per cent increase in July-September operating profit to 772.22 billion yen ($5.3 billion), its highest since the December quarter, according to the average estimate in a poll of 12 analysts by Refinitiv. This will mark the first profit increase in three quarters and a huge improvement from a sharper-than-expected 42 per cent plunge in June quarter profit, partly helped by the yen which has further extended its loss.
The yen plunged around 30 per cent this year against the US dollar, boosting the value of Toyota’s overseas sales.
Following the first quarter results, Toyota has adjusted its yen forecast for the year to 130 yen from 115 yen, but now the currency is now trading much lower at around 146 to the dollar.
Toyota is yeliding the benefits of the cheap by soaring input costs. The auto manufacturer in august had estimated its material cost for the full year to be 1.7 trillion yen, a 17 per cent increase.
This year, Toyota’s has seen a 2% drop in its shares, compared with the roughly 4 per cent drop in the Nikkei average.
The company is grappling with longer term challenges including their slow push into electric vehicles. Just a year into its $38 billion EV plan, Toyota is already considering rebooting it to better compete in a market growing beyond its projections, Reuters reported this month.
It also had to recall its first mass-produced all-electric vehicle after just two months on the market due to safety concerns earlier this year. It restarted taking leasing orders this month.