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Japan’s Toyota raised its full-year forecast on Wednesday as it reported profits more than doubled in its latest quarter, with a weakening yen boosting the value of the carmaker’s strong global sales.
For the three months to September, the world’s largest carmaker by sales said operating profit came in at ¥1.4tn ($9.5bn), a sharp increase from the ¥563bn in the same period a year earlier.
Toyota, which on Tuesday unveiled an additional $8bn investment in its North Carolina battery plant, increased its operating profit forecast for the year to the end of March 2024 by 50 per cent, to ¥4.5tn from ¥3tn.
“Everyone was expecting a big revision, but it was huge,” said Koji Endo, head of equity research at SBI Securities, who had expected an operating profit forecast of just under ¥4tn.
The group’s share price, which has risen 50 per cent so far this year, rose to as much as 6.2 per cent after the results were announced, before closing 4.7 per cent higher.
Toyota’s earnings were boosted by a weak yen magnifying the fact that it sold more cars in every region in the first half of its financial year, compared with the same period in 2022. Its existing range of hybrid and petrol vehicles dominated sales, even as Toyota tries to convince investors that it is serious in its efforts to catch up with rivals such as Tesla in all-electric vehicles.
“For Toyota, hybrids are still the most profitable, stable and sell more, for now at least,” said Endo.
The group is now basing full-year forecasts on an average yen level of ¥141 to the US dollar, versus a previous expectation of ¥125. The yen is currently testing 33-year lows against the dollar, having pushed through the critical ¥150 level due to the widening differential between Japanese and US interest rates.
That suggests, say analysts, that there is room for upside in Toyota’s forecasts. Toyota said that for every ¥1 depreciation against the dollar, it benefits by ¥180bn.
After boosting earnings by ¥260bn in its first half, Toyota expects the benefits to hit ¥1.18tn by the end of the fiscal year. Masahiro Yamamoto, Toyota’s accounting group chief officer, said on Wednesday that he did not consider a weak yen as inherently good or bad, but “a stable yen is something that we do appreciate”.
The Japanese group said it would also carry out a share buyback worth ¥100bn.
The Toyota group, which includes Hino and Daihatsu, still targets 11.4mn vehicle sales for the full year, with an increasing share coming from North America. It sold a record 5.6mn vehicles between April and September.
Toyota is investing heavily in battery technology — both existing lithium-ion batteries and next-generation solid-state ones — and wants to have electrified options available for every Toyota and Lexus model globally by 2025. It has laid out plans to sell 3.5mn battery-powered vehicles every year from 2030.
However, the group now expects to sell just 123,000 pure EVs in its fiscal year, lower than its previous target of 202,000, with the drop driven by lower expectations of demand in China, say analysts.
More broadly, its electrified vehicles, of which hybrids still make up the lion’s share, are expected to account for 37.2 per cent of sales.