Toyota Motor Corp. expects its profits this year to fall by a third because of a massive earthquake and tsunami that struck Japan in March, costing the automaker more than $4 billion.
Toyota doesn't expect to earn money in the first half of its fiscal year, as it scrambles to restore its supply lines in Japan and its global vehicle production, but plans on making up close to half of the lost output in the second half.
The strong Japanese yen also is weighing on the company, which said it expected net profit for the year begun on April 1 to decline 31 percent to 280 billion yen, or $3.4 billion.
Its operating income is forecast to drop 36 percent to 300 billion yen, or $3.7 billion — well below analysts' estimates.
Toyota normally provides an earnings forecast along with its annual results, which it issued May 11. But the automaker said then it was unable to assess the impact of all the disasters.
Japan's other automakers also held off on giving forecasts because of the quake, which damaged and destroyed many suppliers and crippled a nuclear power plant in the northeastern part of Honshu, Japan's largest and most populous island.
The quake and its aftermath is expected to cost Japan between $100 billion and $235 billion, according to World Bank estimates.
The impact on Toyota is estimated at 360 billion yen, or $4.4 billion, Takahiko Ijichi, senior managing director of Toyota's accounting group, said on an investor call.
Toyota, which said the recovery would take until November, seems certain to lose its No.1 ranking this year as the world's biggest automaker.
During the January-March quarter, it sold 1.79 million vehicles worldwide, falling behind not only General Motors Co., which sold 2.22 million vehicles, but also Volkswagen AG, with sales of 1.99 million vehicles.
Toyota was still recovering from a steep global downturn and a damaging recall crisis when the quake struck.
Although the company is restoring production faster than it initially anticipated, its forecasts came in below expectations.
"Toyota typically issues conservative guidance, but we believe the cautious forecasts are likely to leave a negative impression given high market expectations," said Noriyuki Matsushima, a Tokyo-based analyst at Citi Investment Research and Analysis.
Matsushima said the market consensus estimate was for an operating profit this year of 460 billion yen, or $5.6 billion, compared with Toyota's forecast of 300 billion yen.
The heartening news to come out of the forecast is "the confirmation that the recovery is going faster than people thought," said Jeremy Anwyl, chief executive of online research firm Edmunds.com.
He said Japanese auto sales are picking up in the United States this month, as Toyota and other automakers offer incentives to bring customers back after weeks of model shortages.
Ijichi said Toyota was stepping up incentives, but had no intention of compromising profitability to generate sales. New Prius cars and a redesigned Camry should stoke demand this year, he said.
As Toyota and other Japanese automakers strive to restore output in Japan, they still face electricity shortages because of the quake and flood damage to the Fukushima Dai-ichi nuclear plant. Another nuclear plant in the region where Toyota is headquartered is being shut down because of growing concerns about the risks of nuclear power.
Japanese automakers are being asked to reduce their electricity use by 15 percent this summer. Auto workers are being asked to work weekends when demand for electricity is lower.
The industry also is grappling with a strong yen, which increases the relative cost of production in Japan. A dollar now fetches around 80 yen, down from 86 in the last fiscal year and 115 yen in Toyota's peak earning years.
Toyota estimates the exchange rate will average 82 yen to the dollar this year. At that level, analysts say the automaker cannot profitably export vehicles made in Japan.
Toyota estimates that the expense associated with an 82-yen-to-the-dollar rate will negate the savings of its cost-cutting efforts.
