The Hindu : Business : Toyota projects first-ever operating loss

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Toyota projects first-ever operating loss

Unlike previous years, the company gave no earnings forecast for the fiscal year ending March 2010

Surging yen batters profit by eroding overseas earnings
Sinking U.S. sales hit Japanese automakers

— PHOTO: AP

WANING DEMAND: Toyota Motor Corp. President Katsuaki Watanabe ponders before answering a reporter’s question during the year-end press conference at the company’s office in Nagoya, West of Tokyo, on Monday.

NAGOYA, JAPAN: Toyota Motor Corp. slashed its earnings forecast again on Monday, projecting that it would report its first operating loss ever for the fiscal year through March on waning global demand and a surging yen.

“The change that has hit the world economy is of a critical scale that comes once in a hundred years,” President Katsuaki Watanabe said at the company’s Nagoya office. The drop in vehicle sales over the last month was “far faster, wider and deeper than expected”.

Japan’s top automaker forecast an operating loss of 150 billion yen ($1.66 billion) for the fiscal year ending March 2009, the first such loss since Toyota began reporting operating figures in 1941. Operating income reflects a company’s core business performance and does not include taxes and certain other expenses. Last fiscal year, Toyota had an operating profit of 2.27 trillion yen.

Sinking sales in the U.S. in the wake of the financial crisis have dealt a heavy blow to Japanese automakers. But Mr. Watanabe said that emerging markets, which had held up in the beginning, were also slowing down now.

The surging yen has battered profits as well by eroding overseas earnings when converted back to yen. The dollar has fallen to 13-year low of about 90 yen recently.

Japan’s top automaker also lowered its net profit forecast to just 50 billion yen ($555 million) for the year through March 2009, a tiny fraction of the 1.7 trillion yen it earned last year.

Second time

This is the second time Toyota, which makes the popular Camry sedan and Prius gas-electric hybrid, has reduced it annual earnings forecast this year. Initially, it had been projecting 1.25 trillion yen ($13.9 billion) in net profit for the year through March 2009, but last month it reduced that to 550 billion yen ($6.1 billion) before chopping it further on Monday.

It also lowered the number of vehicles it expects to sell globally this calendar year to 8.96 million, down 4 per cent from a year ago, Mr. Watanabe told reporters.

Unlike previous years, he gave no goal for vehicle sales for 2009. He also gave no earnings forecast for the following fiscal year, ending March 2010, noting that the company didn’t have a sales plan yet.

In July, Toyota lowered its global vehicle sales target for 2008 to 9.5 million from the initial 9.85 million. Last year, it sold 9.37 million vehicles around the world.

Toyota also lowered its sales forecast for the fiscal year through March to 21.5 trillion yen ($239 billion), down about 18 per cent from the previous fiscal year. It had earlier projected 23 trillion yen in sales.

Mr. Watanabe and other executives said production expansion plans and other investment would be on hold. — AP

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