Toyota expects the yen to appreciate significantly against the dollar.
(Photo: Reuters)
Tokyo At first glance, Toyota’s strength seemed unbroken when the 2021 balance sheet was presented. Sales and profits have risen to a new record. In contrast to its big competitor Volkswagen, Toyota was even able to increase sales by 4.7 percent and, with 10.4 million vehicles sold, broke the ten million mark again.
Financially, things were going well, with sales up 15 percent to 31.4 trillion yen ($250 billion), operating profit up 36 percent to just under 3 trillion yen ($25 billion) and net income up 27 percent to 2, 9 trillion yen (20.8 billion euros). This makes Toyota even more profitable than before the corona crisis.
But doubts are growing on the stock exchange: the share collapsed by 4.4 percent after the presentation of the annual figures. The reason is the poor outlook that the group has given for 2022. Due to the rapid rise in raw material costs, Toyota has lowered its forecast for the fiscal year.
The group now expects purchasing costs to skyrocket by 125 percent to around 11 billion euros in the current year. Although the group predicts more sales and revenue, it expects a 17 percent drop in profits to 2.4 trillion yen (about 17.5 billion euros).
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“In this fiscal year, it is even more difficult than in other years to make a prediction,” said Toyota’s communications chief Jun Nagata when presenting the figures. The group expects better results in China and the USA, but stagnation in Japan and Asia and mainly risks in Europe. “The situation in the corona pandemic and in the Ukraine war can always change quickly,” warns Nagata.
The increase in raw material prices was so rapid and sudden that Toyota could not absorb the costs within a year through savings, the company emphasizes. But communication chief Nagata also described price increases across the board as “very difficult”. Because the customers would have gotten used to a certain level.
The Japanese are also very successful in the USA.
(Photo: dpa)
Toyota traditionally presents conservative forecasts. And it makes no exception: the group bases this on the fact that the yen has risen significantly to 115 yen against the dollar. On Wednesday, however, the dollar was trading at 130 yen.
Many FX analysts believe the yen is likely to fall further as the US Federal Reserve hikes interest rates but the Bank of Japan does not. A fall in the yen would, in turn, be good for Toyota’s balance sheet as the overseas results generate foreign exchange gains when translated into yen. In addition, the predicted profit margin of 7.3 percent is still quite high for a global mass manufacturer. And the group does not want to scale back its massive investments in an electric car offensive either.
Toyota enters commodity inflation with a solid balance sheet
With a profit margin of 9.5 percent, Toyota is still by far the most profitable Japanese automaker. Renault partners Nissan and Mitsubishi Motors celebrate a return to profitability this week. Arch-rival Honda, who, like Nissan, will report on the 2021 fiscal year on Thursday, predicts a profit margin of 5.5 percent.
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The good performance is due to a 13-year-old plan by CEO Akio Toyoda, emphasizes Toyota’s CFO Kenta Kon. After Toyota slipped deep into the red from record profits in the 2008 global financial crisis, Toyoda promised one thing: He wanted to set up the production system so flexibly that the group would not write losses again even in the event of a global crisis. Since then, Toyota has reduced the level of sales needed to make a profit by 30 percent.
With the design strategy, the so-called Toyota New Global Architecture, Toyoda has significantly improved the handling of the Toyota models. Since 2015, the group has increased its market share in 11 out of 15 important markets. Toyota’s farsighted purchasing strategy also ensured that the group had to reduce its production less than many of its competitors.
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