Toyota Motor Corp. raised its full-year outlook Wednesday due to the windfall from a weaker yen, as it reported record earnings for the first half of the fiscal year on solid post-pandemic vehicle sales in all major markets.
The world's largest carmaker by volume lifted its net profit forecast for the year to March 2024 to a record 3.95 trillion yen ($26 billion) from its previous projection of 2.58 trillion yen. The new figure represents 61.1 percent growth from the last fiscal year.
The operating profit outlook was revised up to an all-time high 4.5 trillion yen from 3 trillion yen, as sales are now seen at a record 43 trillion yen compared with an earlier estimate of 38 trillion yen. Toyota will become the first Japanese company with sales of over 40 trillion yen if the forecast is achieved.
The yen's weakening was a major driver for the upward revisions, boosting the operating profit projection by 1.18 trillion yen from the earlier estimate, the company said.
Toyota said it expects the U.S. dollar to trade at 141 yen on average for the full year, compared with a previous assumption of 125 yen and its recent levels around 151 yen.
Every 1 yen fall against the dollar boosts its operating profit by 50 billion yen, according to Toyota. A weaker yen boosts profits earned overseas when repatriated and makes Japan-built vehicles more price competitive abroad.
In the first half ended September, its net profit more than doubled from a year earlier to a record 2.59 trillion yen on sales of a record 21.98 trillion yen, up 24.1 percent, as vehicle sales grew and price hikes paid off.
Toyota's group vehicle sales in the first half rose 8.3 percent from a year ago to 5.60 million vehicles, led by solid growth in Japan and North America in particular, as it ramped up production to make up for lost output during the coronavirus pandemic, the company said.
"Our profit structure has been improving steadily," Chief Financial Officer Yoichi Miyazaki said at a press conference. "We will make up-front investment in various technologies to create more options in the future."
The automaker had been reeling from supply chain bottlenecks caused by the COVID-19 pandemic and higher raw material costs after the war in Ukraine broke out. The latest earnings show Toyota is back on a steady growth track as the improved supply of chips has allowed the company to catch up with pent-up demand, with the yen's slide providing additional momentum to the bottom line.
Still, Toyota left unchanged its global sales plan for the current fiscal year at 11.4 million vehicles, even as it cut its electric vehicle sales estimate due to tough price competition in China while raising that of hybrid vehicles.
"There is an extremely severe price competition going on in China," Miyazaki said. "We are trying to secure sales volume without being caught up in the competition."
Japanese automakers are struggling with falling sales in China. Mitsubishi Motors Corp. recently decided to exit the market in the face of the rise of local brands.
As part of its drive to beef up its EV segment, Toyota said Tuesday that it decided on an additional spending of $8 billion on a battery plant to be built in North Carolina, bringing the total investment in the factory to $13.9 billion.
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