Toyota Motor Corp has raised its annual operating profit forecast by 13% to 3.4 trillion yen (US$21.6 billion), helped by a weaker yen, while announcing a share buyback of up to 1 trillion yen (US$6.3 billion), Reuters reported.
The world’s largest automaker said it now expects the yen to average 160 to the US dollar for the financial year ending March, compared with its previous assumption of 150 yen to the dollar.
However, Toyota’s underlying performance remained under pressure, with first-quarter operating profit falling 9% from a year earlier and coming in below market expectations. The company’s operating profit has now declined for five consecutive quarters.
Toyota’s global vehicle sales fell 3.5% during the April-June quarter, with China proving a major weakness. Sales in the world’s largest car market plunged 28% as Japanese and other foreign automakers faced intensifying competition from domestic electric vehicle manufacturers.
Sales in the Middle East also fell sharply, dropping by about one-third as the Iran war disrupted trade routes and raised costs for raw materials, parts and logistics.
Toyota estimated that the conflict will reduce its earnings by 510 billion yen (US$3.2 billion) during the current financial year, down from its previous estimate of 670 billion yen. The company said the impact includes higher raw material costs, delivery delays, lower sales volumes and support for suppliers.
The automaker has nevertheless been able to reduce some of the disruption by establishing alternative logistics routes to the Middle East. Toyota said vehicles can now be transported overland without passing through the Strait of Hormuz, with the company expecting 25% of exports to the region to be affected from September, compared with its earlier estimate of 50% for the full year.
In China, Toyota is facing a broader shift in consumer demand towards domestic EV brands, which have gained market share with technology-focused features as higher petrol prices further support the appeal of electric vehicles.
The US market provided little relief, with Toyota sales rising just 1% during the quarter. The company lagged competitors including Ford, General Motors and Stellantis, which benefited from stronger demand for higher-margin pickup trucks.
Toyota also raised its annual vehicle shipment target by 100,000 units to 9.7 million, citing solid demand in North America and Europe, among the few regions where it recorded sales growth during the quarter.
The company’s share buyback, meanwhile, will cover up to 4.22% of outstanding shares. Toyota also plans to cancel 200 million shares.
Despite the higher profit outlook, Toyota shares closed 1.5% lower on Tuesday as investors focused on weaker sales and the continued pressure on its core earnings.
The company also cautioned that its revised annual forecast does not include the potential impact of a deadly earthquake that struck Japan’s Kyushu island last week and forced four domestic plants to halt production.
