Toyota, the world’s biggest car maker, is expected to report its first annual operating loss in 71 years, hit by plunging sales and the soaring yen.
Toyota is set to issue revised forecasts for its core business, excluding truck maker Hino and mini vehicle manufacturer Daihatsu, and consolidated profits for the business year to March 31 2009, at a year-end news conference scheduled today, according to sources in Japan.
Toyota last posted an operating loss at the parent level, which doesn’t include its subsidiaries, in its first year of operation in 1937/38.
A Toyota spokeswoman declined to comment on the reports.
The group, which has reduced output at its UK plant at Burnaston in Derbyshire, made a parent only operating profit of 140 billion yen ($1.6 billion) in the first half of the current year after incurring currency losses of 300 billion yen.
Analysts in Japan say the figures make a full-year loss a near certainty if the current dollar rate of about 89 yen persists.
Toyota is assuming a more favourable dollar rate of 100 yen in the second half, after it averaged 106 yen in the first.
Shares of Toyota lost two per cent on Friday to end at 2,900 yen in mixed trade for auto stocks, as conflicting reports emerged.
The Nikkei business daily predicted that Toyota would also report an operating loss at the consolidated level, including subsidiaries, for the full year, while the Mainichi newspaper said the company would not issue a profit warning this month.
The Nikkei last week incorrectly reported that Japan’s second biggest car maker, Honda, would lower its annual operating profit forecast to about 300 billion yen, instead of the actual 180 billion yen.
“Toyota has been expected to post [(consolidated] losses for the second half, but it would be a surprise if the loss became so big that it would more than wipe out the first-half profits,” said Koji Endo, auto analyst at Credit Suisse.
JPMorgan analyst Takaki Nakanishi, meanwhile, wrote in a note to clients that there was a “strong possibility” that Toyota’s forecasts could prove as grim as the Nikkei preview. Toyota made a consolidated operating profit of 582 billion yen in the first half, and last month slashed its full-year forecast by 1 trillion yen to 600 billion yen.
Auto makers everywhere are under huge pressure to cut costs.
Japanese car makers, while healthier, are feeling the extra pain from a weak dollar/yen. Credit Suisse’s Koji Endo said the pressure would only grow on the auto maker to cut costs, including procurement.
“Negotiations with Nippon Steel and others will begin early next year, and how much [in price cuts] Toyota can secure from raw material suppliers will determine whether it will post losses for the next business year,” he said.
Toyota said in early November it would do everything it could to meet the new group operating profit forecast of 600 billion yen for the year, setting up an emergency profitability improvement committee to secure short-term cash.
But sales trends and currency rates have turned far more severe and unpredictable.
A company source said Toyota may alter its plans and refrain from announcing sales and production forecasts for the 2009 calendar year.
“We can’t even see where demand is headed in the very near term,” the source said.
Toyota had been expected to lower its 2009 global sales forecast to between eight and 8.7 million units, down from the record 9.37 million in 2007.