Toyota bucks trends with higher profits and build plans

Toyota isn’t letting a global slowdown get in the way of its plans to grow, reporting a higher-than-expected quarterly profit and raising its full-year forecast.

Even as a production shutdown in China, the world’s largest car market, has cast a pall over global carmakers already struggling to cope with a downshift in demand and rising costs on next-generation technology, Toyota is betting it can sell more cars.

“The global market in 2020 will be probably lower than what was the market in 2019, but you saw our forecast in terms of sales volume for 2020 and we plan to sell more cars than in 2019 - even if the market is declining,” Didier Leroy, a Toyota executive vice president, said.

Toyota is targeting operating profit of 2.5 trillion yen (€20.6bn) for the full fiscal year through March, up from a previous projection for 2.4 trillion yen and broadly in line with analysts’ expectations.

That contrasts with US rivals General Motors and Ford, both of which lost money in the last quarter of 2019. GM expects earnings to be flat this calendar year while Ford forecast a larger-than-expected drop in profits.

Toyota’s bullish outlook reflects less severe yen appreciation than it had feared, higher profit margins in North America and Europe, and relentless cost cutting -- much of which has been borne by the company’s tight network of suppliers.

Japanese car parts manufacturer Denso last month slashed its profit outlook, and both it and fellow Toyota group components maker Aisin Seiki missed analysts’ forecasts for quarterly earnings. Toyota owns 35% of Denso and 39% of Aisin.

“It’s a very severe situation for our suppliers,” Masayoshi Shirayanagi, Toyota’s operating officer in charge of purchasing, said. He said the carmaker is working to strengthen those ties by taking suggestions for loosening tight specifications and easing exacting standards where possible.

Operating income in the fiscal third quarter, which ended in December, was 654 billion yen, topping the average analyst forecast of 643.8 billion yen. Revenue came to 7.54 trillion yen, compared with the consensus estimate for 7.42 trillion yen.

Despite softening sales in Japan, North America and China, Toyota benefited from steady growth in Europe, where hybrid gas-electric vehicles accounted for 52% of its sales last year.

“Hybrid vehicles are chosen by more than half of our customers and this has boosted our overall sales in Europe,” Mr Leroy said.

Bloomberg