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Toyota again slashes profit forecast amid slump

(Agencies)
Updated: 2008-12-22 19:29

NAGOYA, Japan -- Hammered by waning global demand and a surging yen, Toyota slashed its earnings forecast again Monday and now expects it will barely break even for the year through March with a net profit of just 50 billion yen ($555 million).

Toyota Motor Co. President Katsuaki Watanabe, center, and four executive vice presidents bow together at the end of the year-end press conference at Japan's leading automaker's office in Nagoya, central Japan, Monday, Dec. 22, 2008. Toyota slashed its profit forecast Monday for the fiscal year to barely breaking even at 50 billion yen ($555 million). [Agencies]

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That's a tiny fraction of the 1.7 trillion yen Japan's top automaker earned last fiscal year.

"The change that has hit the world economy is of a critical scale that comes once in a hundred years," President Katsuaki Watanabe said at the company's Nagoya office. The drop in vehicle sales over the last month was "far faster, wider and deeper than expected."

Sinking sales in the US in the wake of the financial crisis have dealt a heavy blow to Japanese automakers. But Watanabe said that emerging markets, which had held up in the beginning, were also slowing down now.

The surging yen has battered profits as well by eroding overseas earnings when converted back to yen. The dollar has fallen to 13-year lows of about 90 yen recently.

This is the second time Toyota Motor Corp., which makes the popular Camry sedan and Prius gas-electric hybrid, has reduced it annual earnings forecast this year. Initially, it had been projecting 1.25 trillion yen ($13.9 billion) in profit for the year through March 2009, but last month it reduced that to 550 billion yen ($6.1 billion) before chopping it further Monday.

It also lowered the number of vehicles it expects to sell globally this calendar year to 8.96 million, down 4 percent from a year ago, Watanabe told reporters.

Unlike previous years, he gave no goal for vehicle sales for 2009. He also gave no earnings forecast for the following fiscal year, ending March 2010, noting the company didn't have a sales plan yet.

Tsuyoshi Mochimaru, auto analyst for Barclays Capital in Tokyo, said that Toyota will likely continue to struggle next year because US auto sales won't start recovering until toward the end of 2009, and the dollar may also lag.

"The problem is next year," he said, while adding that the latest revisions were within expectations. "It's unmistakable that things are extremely tough for Toyota."

The dramatic revisions are even more stunning because Toyota had racked up a record operating profit for the fiscal year through March 2008.

It is now expecting to bleed red ink in operating income, which shows its core business performance, for the fiscal year ending March 2009, the first time ever for Toyota since it began reporting such numbers in 1941.

In July, Toyota lowered its global vehicle sales target for 2008 to 9.5 million from the initial 9.85 million. Last year, it sold 9.37 million vehicles around the world.

Toyota also lowered its sales forecast for the fiscal year through March to 21.5 trillion yen ($239 billion), down about 18 percent from the previous fiscal year. It had earlier projected 23 trillion yen in sales.

Grabbing attention in recent years has been whether Toyota would dethrone Detroit-based General Motors Corp. as the world's No. 1 in annual vehicles sales.

But the mood was pure gloom at the president's annual year-end event.

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