Toyota lifts annual profit forecast, looking at alternate sources for China-made parts

[TOKYO] Toyota Motor Corp raised its annual operating profit forecast by 4.2 per cent on favourable currency rates and better-than-expected vehicle sales, but added that the impact of the new coronavirus was difficult to gauge and has not yet been factored in.

Vehicle output at many factories in China has come to a standstill as automakers have suspended operations in line with government guidelines to prevent the spread of the virus which has led to nearly 600 deaths in the country.

The epidemic is likely to wreak havoc on China auto sales and production in the first quarter, and has disrupted the supply of parts for some car makers with Hyundai Motor Co this week saying it would have to suspend production in South Korea.

"We are looking very closely at inventories of components which are made in China and used in other countries, including Japan, and at the possibility of alternative production," operating officer Masayoshi Shirayanagi told a news conference.

S&P credit analyst Vittoria Ferraris has estimated "up to one-half" of vehicle and components that would normally be produced in China could be affected if shutdowns are extended further. Production at many auto and auto components plants across China, including Toyota's, has currently been halted through to Feb 9.

Japan's biggest automaker said it now expects operating profit for the year to end-March to climb to 2.5 trillion yen (S$31.4 billion), up from 2.47 trillion yen a year earlier and in line with market estimates.

The outlook is based on a new assumption for the yen to average around 108 yen to the US dollar during the current business year versus 107 yen previously.

Third-quarter profit, however, declined 3.2 per cent to 654.4 billion yen on softer vehicle sales, though the result was slightly higher than market expectations.

Sales in Asia tumbled 12.5 per cent while sales in North America, Toyota's biggest market, slipped 1.8 per cent.

But for the full year, Toyota now expects to sell 10.73 million vehicles, slightly higher than a previous forecast for 10.7 million units.

REUTERS