Toyota to post fourth straight quarterly profit drop
Toyota is expected to report a fourth successive year-onyear decline in quarterly operating profit next week, as rising material and labour costs and the impact of U.S. tariffs offset strong demand, particularly for hybrid vehicles. The world’s biggest automaker is forecast to post operating profit of 813 billion yen ($5.17 billion) for the January-March quarter, down 27% from a year earlier, according to the median estimate of seven analysts surveyed by LSEG.
That would bring Toyota’s full-year operating profit to a three-year low of around 4 trillion yen, highlighting the pressure facing the Japanese automaker despite continued high production and sales volumes globally.
Analysts say the rising costs – including higher wages across the supply chain, the impact of U.S. President Donald Trump’s import tariffs, and rising raw material prices linked to the Middle East conflict – could take a toll on the results. Toyota forecast a 3.8 trillion yen operating profit for the financial year just ended, as it continues to benefit from robust demand in key markets such as the United States, where higher-margin hybrids have helped support earnings.
Asia is the most vulnerable region to supply disruption, relying more heavily than others on crude, gas, fuel and other imports from the Gulf. Without these, some businesses are finding it increasingly difficult to operate.
“If the current situation in the Middle East continues, higher aluminium prices would be quite tough to absorb,” said Yuya Takahashi, an analyst at Marusan Securities. While the conflict, which began on February 28, mainly only affected the final month of the quarter, it has already pushed up prices of aluminium, naphtha and other materials, and disrupted car shipments to the Middle East.
Toyota’s sales in the region fell by nearly a third in March, contributing to a second straight monthly decline in global sales, the company said last week. Although the Middle East is a relatively small market for Toyota, with sales of almost 34,000 cars last month, it is known for its demand for higher-margin models.
Attention will also be on how new CEO Kenta Kon handles the earnings report on May 8. Kon, a close ally and former secretary of Chairman Akio Toyoda, became chief executive last month.Kon was a key figure behind the tender offer to take group firm Toyota Industries private, an effort that succeeded in March after drawing opposition from investors, including activist fund Elliott Investment Management.
