Toyota Motor Corp., Japan’s biggest automaker, reported on Tuesday that its profits fell by 18.5 percent in the last quarter, mainly due to sagging demand for automobiles following Japan’s tsunami disaster and a sluggish economy in some of Toyota’s biggest markets.
The company also withdrew its full-year guidance due to flooding in Thailand and a strong yen, which makes predicting year-end results difficult.
Overall, Toyota’s sales dropped nearly 5 percent from the same quarter a year earlier, to 4.57 trillion yen ($59 billion). The sales declines are due to sluggish sales in North America, the company’s biggest market, and in Japan.
Several factors have affected the Japanese automaker. In its home country, sales have floundered in Japan following a strong earthquake and tsunami, which hit the island nation in March 2011.
Then, in July, heavy flooding in Thailand, where Toyota has its Southeast Asian base, is threatening production there. The flooding has gotten progressively worse and has hampered the nation’s capital, Bangkok. Three Toyota operating factories reportedly have been closed due to the flooding.
Competitor Honda Motor Co. has also closed factories in Thailand due to flooding conditions.
Added to this, a strong yen currency is hurting the company’s bottom line. Since Toyota is based in Japan, it must translate its foreign earnings—the majority of its profits are from outside of Japan—back to yen, and a strong yen means that its foreign earnings aren’t worth as much.
All of that has sunk Toyota to No. 3 in global auto rankings in the first six months of 2011, behind Detroit-based General Motors and Germany’s Volkswagen AG, after becoming the world’s biggest automaker last year.
“In Japan and North America, vehicle sales decreased severely compared to the same period last fiscal year due to the large impact of the Great East Japan Earthquake,” said Satoshi Ozawa, Toyota’s executive vice president, in a statement.
In North America, the company sold 689,000 cars in the first two fiscal quarters, which is down 352,000 from the same period last year. From a profitability standpoint, Toyota said that its operations in North America, Europe, and Asia (excluding Japan) are all profit-making, however its Japanese business is in the red.
The ADR shares of Toyota (NYSE: TM) fell 1.3 percent on Tuesday and are down 17.8 percent since Jan. 1. Chief rival Honda Motor Co.’s shares are similarly in the red for 2011, down more than 23 percent since the beginning of the year.
Friends Read Free