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Toyota braced for historic loss

2008-12-22 11:35:24

Japan's biggest carmaker Toyota has forecast its first annual loss in 71 years

due to plummeting sales and a surge in the value of the yen.

The firm said it expected a loss of 150bn yen ( 1.1bn) in yearly operating

profits - from its core operations.

Japan also posted a trade deficit of $2.5bn ( 1.7bn) in November as exports

fell at a record rate.

The rising yen saw export levels down 26.7% from a year earlier, the ministry

of finance said.

The carmaker recorded an operating profit of 2.27 trillion yen last year.

Toyota said it still expected to make a profit on a net level for the year

ended March but has cut its forecast sharply to 50bn yen, down from a previous

estimate of 550bn yen.

It is the second profit warning by Toyota in less than seven weeks.

The latest estimate is far lower than its net profit of 1.7 trillion yen earned

the previous year.

Falling sales

Toyota's president Katsuaki Watanabe said that the company now expected to sell

8.96 million vehicles around the world this year, down 4% from the previous

year.

Unlike previous years, he gave no goal for 2009.

Toyota said in a statement it was cutting its profits forecast because of the

soaring yen "as well as a review of sales plans following a faster than

expected contraction of the auto market".

Japanese carmakers have all been hurt by plummeting car sales in their key

overseas markets, including the US.

The surging yen has eroded their overseas earnings and also hit their profits -

the dollar has fallen to 13-year lows against the Japanese currency.

Honda last week cut its annual profit forecast by 67%, and outlined a list of

counter-measures such as putting off non-urgent investments to prop up its

profitability.

Deteriorating sector

In the United States, President Bush threw the struggling carmakers General

Motors and Chrysler a lifeline of up to $17.4bn to stave off bankruptcy as they

reel under slumping demand.

Commenting on Toyota's latest announcement, analysts said it underlined the

problems now facing Japan's car exporters.

"This is very, very, very bad. There's a chance that they could fall into the

red in the next business year as well," said Koichi Ogawa of Daiwa SB

Investments.

"This is also not just a problem for Toyota. What is good for Toyota is good

for the Japanese economy."

Fujio Ando of Chibagin Asset Management added: "This shows how rapidly and

badly the auto sector has deteriorated."

"Toyota will likely revise down its earnings numbers or sales forecast again in

late January or February as I don't think the business environment will become

any better," he said.

Output slashed

Japan typically runs a trade surplus due to strong demand for its products -

but the surging yen has hit demand for its goods.

Japanese exports fell sharply to all areas but those to the US were worst-hit,

plunging 33.8% - also a record drop.

Shipments to the European Union were down 30.8% while those to China fell

24.5%, the biggest fall since 1995, said Reuters news agency.

Exports to the rest of Asia declined 26.7%.

Imports were also down - 14.4% overall - due in part to lower oil prices.

Japan's economy - the world's second-largest after the US - has slipped into

its first recession in seven years after two quarters of negative growth in a

row.

The government has forecast zero growth in the year ending March 2010.