Toyota Motor Corp. on Thursday lifted its net profit forecast for the current business year to 2.36 trillion yen ($17.6 billion), as a greater windfall from a weaker yen is expected to more than offset the impact of higher material costs and production loss from chip shortages.
The new outlook for the year to March 2023 compares with the previously projected 2.26 trillion yen and represents a 17.2 percent drop from the record net profit the previous year.
Sales forecast was raised to 34.50 trillion yen from 33.0 trillion yen and operating profit projection was left unchanged at 2.40 trillion yen.
The upgrade comes as concerns are growing that the global economy could fall into a recession and auto demand in North America -- the biggest market for the Japanese automaker -- may falter just as sales are recovering from the shock of the pandemic.
"A weaker yen has a big positive impact on our sales," a Toyota official said.
The company has now set the dollar rate at 130 yen for the current fiscal year, weaker than the previous assumption of 115 yen against the U.S. dollar, and 140 yen against the euro, compared with 130 yen earlier.
The weaker-than-expected yen boosted its operating profit outlook by 670 billion yen from its earlier forecast. For exporters like Toyota, a weaker yen increases profit earned overseas when repatriated in Japan and also boosts the price competitiveness of Japan-made products abroad.
The effect will be limited on an operating basis, as Toyota has decided to use the currency's benefit to help its suppliers by shouldering part of their heftier input and energy costs.
The company is also considering paying more for their parts to cushion the pain of rising costs, it said.
The world's biggest automaker by volume has been struggling with production as a global chip crunch, along with disruptions in parts procurement from Shanghai's COVID-19 lockdown, keep the company's output behind schedule.
But the carmaker aims to make up for production loss toward the end of the fiscal year, leaving its outlooks for production of Toyota and Lexus brand vehicles and group-wide sales unchanged at 9.7 million vehicles and 10.7 million vehicles, respectively.
In the first quarter ended June, net profit fell 17.9 percent from a year earlier to 736.82 billion yen, the first decline for the April-June period in 2 years. Sales rose 7.0 percent to a record 8.49 trillion yen for the three months, boosted by a weaker yen.
Operating profit slumped 42 percent to 578.66 billion yen, as the yen's depreciation failed to cover rising costs for materials such as steel and aluminum.
Toyota built 2.12 million vehicles in the first quarter, down 6.3 percent from a year earlier and less than one-fourth of the annual target.
"We think we can secure enough" chips, the official said. "Our production will pick up like going up stairs."
The depreciation of the yen boosted profits at other domestic automakers for the quarter.
Subaru Corp. on Wednesday reported a 47.0 percent rise in net profit to 27.2 billion yen and Mitsubishi Motors Corp. said last week net profit jumped more than sixfold to 38.5 billion yen.
Nissan Motor Co. said last week its net profit more than halved to 47.11 billion yen as the negative impacts of a chip shortage and rising material costs outweighed currency gains.