Toyota Forecasts Profit Decline on Stronger Yen

May 12, 2016

Toyota forecasted a lower net income for the first quarter of 2016 as the Japanese authorities haven’t taken necessary measures to address the previous strength of the yen.

The automotive manufacturer predicted that the revenue will fall 7 percent while the net income may slip 35 percent to 1.5 trillion yen, the first time in five years. The Bank of Japan has left the negative interest rate unchanged, thus, banks can lend more as the consumers spend more.

Relatively, the deliveries of Toyota’s Volkswagen fell 2.3 percent to 2.46 million units from January to March. Aside from that, the company has been betting on artificial intelligence and robotics as it venture on self-driving vehicles. Toyota was also set to open car factories in China and in Mexico.

Since the strength of the yen, exports became expensive in overseas markets and the company thought this condition might persist in the long run.

“We believe that we have built up the strength to take on these challenges. However, our initiatives are still in the implementation phase,” President Akio Toyoda said in an interview recently.

Before, Toyota gained as the yen stayed on the downside. The sales of Japan-exported Corolla compacts and Lexus RX SUV’s overseas significantly rallied.

Toyoda confirmed that the company benefited from the exchange rate tailwind which had helped raise their earnings above the level of their true capabilities. Further, Toyota predicted that foreign-exchange rate changes may reduce operating profit around 935 billion since April 1.

For the last four years, Toyota has been named as the top-selling carmaker worldwide. In 2014, the company was able to sell 10.23 million cars and in the following year around 10.15 million were sold.

Last month, the company temporarily stopped its production line for a week after the two-massive earthquakes in Kumamoto. In 2011, Toyota lost approximately 80,000 vehicles after the most devastating earthquake, but it has managed to recover.

Earlier today, the shares of Toyota changed hands lower at 5,634.000 yen, down by 0.76 percent. Currently, the stock has a market capitalization of 18.81 trillion and a price earnings ratio of 7.62 while its dividend yield stood at 3.99 percent.

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