Toyota Raises Annual Profit Forecast, Announces $6.3 B Share Buyback
Synopsis
Toyota Raises Annual Profit Forecast, Announces $6.3 B Share Buyback
Key Highlights
- Toyota increased its annual operating profit forecast by 13% to ¥3.4 trillion (US$21.6 billion).
- The automaker will buy back up to 1 trillion yen worth of its own shares (US$6.3 billion).
- A 9% decline in first-quarter operating profit was the fifth successive quarterly drop.
Toyota on Tuesday boosted its full-year operating profit forecast by 13% to 3.4 trillion yen (US$21.6 billion) because of a much weaker yen and announced a share buyback of up to 1 trillion yen (US$6.3 billion).
But its operating profit fell 9% in the first quarter, marking a fifth straight quarterly decline that came in slightly below market expectations. The company continues to face pressure from weak sales in China, while the Iran war has weighed on Middle East demand and pushed up raw material and parts costs.
Toyota also said its updated forecast does not include the impact of the deadly earthquake that struck Japan’s Kyushu island last week, which forced production to stop at four domestic plants.
Toyota shares closed 1.5% lower, with analysts pointing to investor disappointment over the size of the share buyback.
Sales Fall in China and the Middle East
Toyota lowered its estimate of the Iran war’s impact on earnings this financial year to 510 billion yen from its previous forecast of 670 billion yen. The estimate reflects higher raw material costs, shipping delays, weaker sales volumes and supplier support costs.
The company has shifted to overland transport routes that avoid the Strait of Hormuz, helping reduce some of the disruption.
Toyota’s global sales declined 3.5% during the quarter, with sales in China plunging 28% as economic growth slowed and competition from domestic electric vehicle makers intensified.
Sales in the Middle East dropped by around one-third because of the conflict. From September, Toyota expects 25% of its exports to the region to be affected, down from its earlier estimate that 50% of exports would be impacted across the full year.
In the United States, Toyota’s largest market, sales increased 1%.
Higher Sales Target and Battery Expansion
Toyota’s share buyback represents up to 4.22% of its outstanding shares. The company also plans to cancel 200 million shares. The automaker lifted its full-year vehicle sales target by 100,000 units to 9.7 million vehicles, supported by solid demand in North America and Europe.
Toyota also plans to increase hybrid vehicle sales by 10% to 5 million units this financial year. The company said it will expand battery production capacity and gradually transition from nickel-metal hydride batteries to lithium-ion technology to improve performance while lowering costs.
Toyota shares have fallen 13% this year as the company continues to deal with the effects of the Iran war and last week’s earthquake.
Source: Reuters
At Inspirepreneurs Magazine, covering entrepreneurship, business failures, and the human stories behind the world's most ambitious founders. She writes at the intersection of strategy and storytelling.
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