Japanese automaker, Toyota Motor has been expecting a small quarterly profit increase amid the soaring costs of parts and materials dampening its sales and in production.
The world’s biggest automaker by sales said its global production rebounded by 30 percent in the quarter that ended in September, but warned shortages of semiconductors and other components would continue to constrain output in coming months.
A gradual improvement in the auto chip shortage situation should help raise output in the second half of the current fiscal year, but investors’ focus will shift to the demand outlook, other potential disruptions in the supply chain and its electric vehicle strategy when Toyota reports earnings.
“The point to look out for is why there has been such a gap in the supply chain process,” said Kohei Takahashi, an analyst at UBS Securities Japan, noting improvement in chip supplies.
“It has been too long for the same reason, so something new must be emerging,” he said.
Toyota warned earlier this month that it is unlikely to meet its 9.7 million vehicle production goal for this financial year due to a scarcity of chips. It did not provide a new forecast.
The company is expected to report a 3 percent increase in July-September operating profit to 772.22 billion yen ($5.3 billion), its highest since the December quarter, according to the average estimate in a poll of 12 analysts by Refinitiv.
It will be the first profit increase in three quarters and mark a big improvement from a sharper-than-expected 42 percent plunge in June quarter profit, partly helped by the yen which has further extended its loss.
The yen plunged around 30% this year against the U.S. dollar, boosting the value of Toyota’s overseas sales.
Toyota adjusted its yen forecast for the year to 130 yen from 115 yen following the first quarter results, but the currency is now trading much lower at around 146 to the dollar.
The benefits of the cheap yen have been offset by soaring input costs. Toyota estimated in August material cost for the full year to be 1.7 trillion yen, a 17 percent increase.
Toyota’s shares are down about 2 percent this year, compared with the roughly 4 percent drop in the Nikkei average.
Toyota and its major Japanese rivals, Nissan Motor and Honda Motor, are also grappling with longer-term challenges including their slow push into electric vehicles.
It also had to recall its first mass-produced all-electric vehicle after just two months on the market due to safety concerns earlier this year. It restarted taking leasing orders this month.
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