Toyota profits driven off track by strong yen but it lifts full-year forecast after cost-cutting

Rebecca Smith
New Toyota Production Line Opens
The company's keeping an eye on Volkswagen creeping up in its rear view mirror (Source: Getty)

Toyota looks to have set its sights on long-range electric cars for 2020, and in its latest results, the car firm dropped a heavy hint that's the direction it's going in.

But first, it needs to fend off a strong yen that's impacting profit.

The figures

For the July-September period operating profit fell 43 per cent to 474.6bn yen compared with a year earlier.

Second quarter net income dropped 36 per cent to 393.7bn yen, though that beat analysts’ expectations.

Profits took a hit due to a stronger yen, as well as a shift by buyers in the US towards truck and sport-utility vehicles. Demand for the new Prius hybrid remains underwhelming.

Toyota trimmed its global sales target for the year: it expects to sell 10.1m vehicles worldwide through March 2017, down from 10.15m.

Toyota has said it will buy back as much as 1.31 per cent of shares for 200bn yen.

Why it's interesting

Toyota’s been battling a sales slowdown, which had been threatening to topple it from its spot as the world’s top seller. Volkwagen’s global vehicle sales surpassed Toyota’s in the first half of the year, despite the hefty scandal over cars it rigged to cheat on diesel emissions tests.

It has raised its full-year profit forecast though, after the buoyant yen stopped shy of the levels the car company predicted. Ongoing cost-cutting is also playing a part. Operating profit will be 1.7 trillion yen (£13.1bn) for the year ending March 2017 (compared with the 1.6 trillion yen forecast from August).

But that’s still down on the 2.3 trillion yen earned last year.

What the company said

“Going forward, our external environment is likely to remain challenging with the yen appreciation and ongoing changes in market conditions," executive vice president Takahiko Ijichi said in a press conference.

He also responded to reports that Toyota is planning on mass-producing long-range electric vehicles (EVs) for 2020.

"We still believe that fuel cell vehicles are the best option for eco cars, and our product strategy will continue to reflect this direction," Ijichi said. "But we would like to consider a range of eco cars, including hybrids, plug-in hybrids and also EVs." The company wants to have the option of developing full-sized passenger EVs.

In short

The strong yen is having a bruising impact on Toyota's profits, but it's taking action with cost-cutting to lift its full-year profit forecast.

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