Annual Profit to Dive 20% on Ballooning Materials, Logistics Costs, Toyota Warns

Toyota Motor Corp warned that operating earnings this year could slump by 20% “due to unprecedented increases in materials and logistics costs,” on the back of a 33 per cent slide in fourth-quarter profit, sending its shares down more than 5 per cent.

For the current fiscal year, Toyota forecast operating profit will fall to 2.4 trillion yen from almost 3 trillion yen in the previous year, well below the 3.36 trillion yen expected in a poll of 25 analysts by Refinitiv.

Toyota said it expects materials costs to more than double to 1.45 trillion yen ($11.1 billion) in the fiscal year that started in April.

The world’s biggest automaker by sales, has now joined international peers in slashing production due to the prolonged crunch as well as China’s fresh COVID-19 restrictions.

In the January-March quarter, its profit slumped by a third to 463.8 billion yen, also significantly below an average estimate of 521.1 billion yen.

The yen’s sharp depreciation to two-decade lows has worked in favour of Japan’s export-driven auto industry.

However, the surging raw material costs and global supply chain disruptions exacerbated by China’s tough COVID measures are putting pressure on profitability.

Toyota cut its global production target for May by around 50,000 vehicles to about 700,000 as it plans to suspend operations on 14 lines at eight domestic factories for up to six days this month due to the COVID lockdown in China on Tuesday. The plan follows several cuts in its production plan between April and June, which had frustrated its suppliers.

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