Saturday 20 December 2008

Toyota Could Show First Loss in 71 Years

Toyota Motor Corp, the world’s biggest carmaker and Japan’s biggest company, is on track to report its first annual parent-only operating loss since it was established 71 years ago, the media reported yesterday.

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Guanyu said...

Toyota Could Show First Loss in 71 Years

Agencies in Tokyo
20 December 2008

Toyota Motor Corp, the world’s biggest carmaker and Japan’s biggest company, is on track to report its first annual parent-only operating loss since it was established 71 years ago, the media reported yesterday.

The company was set to issue revised forecasts for its parent-only and consolidated profits for the business year to March, on Monday, the Chunichi Shimbun newspaper and Kyodo news agency said.

Toyota last posted an operating loss at the parent level, which does not include its subsidiaries, in its first year of operation in 1937-38.

The company made a parent-only operating profit of 140 billion yen (HK$12.2 billion) in the first half after incurring currency losses of 300 billion yen, making a full-year loss a near certainty if the current US dollar exchange rate of about 89 yen persists.

Toyota is assuming a more favourable dollar rate of 100 yen in the second half, after it averaged 106 yen in the first.

The Nikkei business daily predicted Toyota would also report an operating loss at the consolidated level, including subsidiaries, for the full year, while the Mainichi newspaper said the company would not issue a profit warning this month. A Toyota spokesman said the carmaker had not changed its forecast from last month but declined to deny the Nikkei report of a possible operating loss.

Analysts said they would be surprised to see red ink at the company despite the slump in demand.

“Toyota has been expected to post [consolidated] losses for the second half, but it would be a surprise if the loss became so big that it would more than wipe out the first-half profits,” said Koji Endo, a vehicle analyst at Credit Suisse.

But JP Morgan analyst Takaki Nakanishi, meanwhile, wrote in a note to clients that there was a “strong possibility” that Toyota’s forecasts could prove as grim as the Nikkei preview.

Toyota made a consolidated operating profit of 582 billion yen in the first half, and slashed its full-year forecast last month by 1 trillion yen to 600 billion yen.

Carmakers everywhere are under huge pressure to cut costs as a global recession strangles demand. While Japanese carmakers are in better shape than their US counterparts, the strong yen is eroding profitability.

Mr. Endo said Toyota would face growing pressure to cut costs, including procurement.

“Negotiations with Nippon Steel Corp and others will begin early next year, and how much [in price cuts] Toyota can secure from raw material suppliers will determine whether it will post losses for the next business year,” he said.

Toyota said early last month it would do everything it could to meet the new group operating profit forecast of 600 billion yen for the year, setting up an emergency profitability improvement committee to secure short-term cash.

A company source said Toyota might alter its plans and refrain from announcing sales and production forecasts for next year.

“We can’t even see where demand is headed in the very near term,” the source said. “Is there really any sense in providing projections for 2009?