Toyota Motor Corp. is projecting a 35 percent plunge in profit for the fiscal year through March 2017, as the perks of a favorable exchange rate fade, and it reported a 4 percent drop in profit for January-March on-year at 426.6 billion yen ($3.9 billion).
The Japanese automaker is expecting 1.5 trillion yen in annual profit, a retreat after three straight years of record profits. That number could be worse as it doesn’t account for recent production stops over supply shortages caused by a major earthquake in southwestern Japan.
Toyota, which makes the Prius hybrid, Camry sedan and Lexus luxury models, said the perks from a weak currency that are a boon for Japan’s exporters like Toyota have dwindled in recent months, not only against the U.S. dollar but also against currencies in emerging markets.
For the fiscal year ended March, Toyota’s profit totaled 2.3 trillion yen, up 6.4 percent from the previous year, when it had recorded a 2.2 trillion yen profit.
January-March sales fell 2 percent to 6.9 trillion yen. Sales for the fiscal year gained 4 percent to 28.4 trillion yen.
Toyota Executive Vice President Takahiko Ijichi said cost cuts and a cheap yen had helped results for the fiscal year through March this year, offsetting falling vehicle sales, labor costs and research expenses.
“The record profit is something that, in the main, Toyota owes to the strong dollar rather than having done anything amazing, so with the expectation that the dollar will weaken results are likely to drop dramatically next year,” said Christian Stadler, professor of strategic management at Warwick Business School in Coventry, Great Britain.
Toyota is headquartered in central Japan but Kyushu, the main island in southwestern Japan, is a hub for its manufacturing. The region was struck by a magnitude 6.5 quake April 14, and by a 7.3-magnitude temblor barely two days later.
Toyota suspended production on most of its assembly lines in Japan between April 15 and 23 because of parts shortages. Some production resumed later in April, and all operations had resumed as of May 6, following national holidays that lasted about a week, according to Toyota.
Toyota Managing Officer Tetsuya Otake said the lost production for the supply disruptions totaled 80,000 vehicles, and the company will make up for the loss in coming months. It was unclear when, and whether that will have any impact on first-half earnings.
“We want to do our best to minimize the effects,” he said in a conference call with U.S. analysts.
Toyota, the No. 1 automaker in global vehicle sales, sold 8.7 million vehicles for the fiscal year through March, down from nearly 9 million vehicles the previous fiscal year. Sales fell in Japan, the rest of Asia and Europe, with North American the only major market to see rising vehicle sales.
The company expects its global vehicle sales to recover in the fiscal year through March 2017 to 8.9 million vehicles.
Toyota was in a neck-and-neck race against Volkswagen AG for the crown of world’s biggest automaker until Volkswagen was hit by an emissions-cheating scandal last year. U.S. rival General Motors Co. led the industry for more than seven decades until Toyota surpassed it in 2008.