Toyota manages profitable quarter even as it declares biggest profit drop in five years
08 August 2008
Toyota Motor Corp. (TMC), the world's second-largest carmaker, reported the biggest drop in profit in five years as US sales of sport-utility vehicles and trucks plunged.
Net income fell 28 per cent to 353.7 billion yen ($3.2 billion), or 112.28 yen a share, in the three months ended June from 491.5 billion yen, or 153.89 yen, a year earlier, the company said in a statement today. Sales declined 4.7 per cent to 6.22 trillion yen.
Operating profit in North America fell 57 per cent as record gasoline prices cut demand for large vehicles, forcing President Katsuaki Watanabe to halt US production of Tundra pickups and Sequoia SUVs for three months from August. The models eroded gains from fuel-efficient vehicles that spurred an 8.1 per cent increase in net income for Honda Motor Co., which doesn't make full-size trucks. (See: Honda reports strong quarterly results in the wake of increased sales of fuel-efficient cars)
Operating income decreased by 262.9 billion yen, mainly due to the impact of exchange rate fluctuations, such as the appreciation of the yen against the US dollar. The sharp increase of raw material prices exceeded cost reduction efforts by 10.0 billion yen.
These negative results surpassed the positive contributions from marketing efforts. Equity in earnings of affiliated companies increased by 13.2 billion yen to 95.0 billion yen, mainly due to continued strong results of joint venture companies in China.
The Tokyo-traded shares fell 1.3 per cent to 4,580 yen before the earnings announcement. The shares have fallen 24 per cent this year compared with a 14 per cent decline for the Nikkei 225 Stock Average and a 59 per cent decline for General Motors Corp.
General Motors, the world's largest carmaker, and Ford Motor Co., both more dependent on trucks and SUVs, posted losses in the quarter as sales plunged and they wrote down the value of leased vehicles. (See: General Motors announces massive $15.5 billion quarterly loss and Ford announces $8.7-billion quarterly loss, goes for major restructuring)
Commenting on the results, Mitsuo Kinoshita, TMC Executive Vice President, said, "The financial results for this quarter were severe, due to our rapidly changing business environment, including exchange rates fluctuation such as the rise of the yen against the US dollar and soaring raw material prices."