Deutsche Bank cuts Japan carmakers' forecasts

City A.M. Reporter
Deutsche Securities has slashed its forecast for Toyota’s operating profit for next business year by 84 per cent, underscoring the severity of the impact of a historic earthquake that has ground Japanese auto production to a virtual halt.

The March 11 quake off Japan's eastern coast damaged some assembly and parts factories in the north-eastern region, causing an industry-wide production loss of at least 400,000 vehicles to date in Japan.

Analysts expect the effect to ripple out to overseas production and non-Japanese automakers will also be hit as inventories of parts dry up in the coming months.

In the first forecast revisions for Japan automakers since the disaster, Deutsche now expects Toyota's operating profit for the business year starting on April 1 at 135 billion yen (£1bn) instead of 840 billion yen.

It also cut forecasts for Nissan, Honda and other Japanese automakers.

Before the disaster, Japan's automakers were just returning to a mild recovery track following a brutal financial crisis that battered car sales worldwide.

Deutsche's Tokyo-based auto analyst Kurt Sanger, however, stressed that uncertainty over the depth and duration of the supply disruption meant "we will surely be wrong in our absolute figures."

"Ultimately this is a definable problem with a solution and should be one that the market can look beyond. We expect near-term volatility but we do not see permanent impairment to corporate value," he wrote. He lowered his forecasts for the 2012/13 April-March business year only slightly.

Sanger said he was basing his assumptions on a return to normal production after six months, with energy shortages presenting challenges on top of a broad disruption to the supply chain.

All Japanese automakers have suspended or slowed vehicle and parts production since the March 11 earthquake off Japan's north-eastern coast caused hundreds of suppliers' factories to shut down.

Shares in Toyota closed up 0.6 per cent at 3,295 yen, while Nissan rose 3.5 per cent and Honda put on 2.1 percent.