Toyota has raised its net profit forecast for the current fiscal year (ending March next year) for the second time, increasing it from 3 trillion yen to 3.25 trillion yen (approximately $20.6 billion). The upward revision is driven by a weaker assumed yen exchange rate and robust demand for hybrid vehicles.
Despite the improved profit guidance, the world's largest automaker by sales still expects net profit to decline for the third consecutive year on an annual basis. The company projects a 15.5% drop in net profit year-on-year, partly due to the impact of conflicts in the Middle East.
Toyota also raised its operating profit forecast for the fiscal year ending March 2027, to 3.4 trillion yen from the 3 trillion yen announced in May. However, this figure still represents a 9.7% decline from the previous fiscal year. Revenue projections were lifted to 54 trillion yen from 51 trillion yen, which would represent a 6.5% increase year-on-year.
The previous earnings assumptions were based on exchange rates of 150 yen to the US dollar and 180 yen to the euro. These have been revised to 160 yen to the US dollar and 181 yen to the euro. The change in exchange rates is expected to boost operating profit by 480 billion yen. A weaker yen generally increases the value of overseas earnings when converted back to yen.
The company indicated that the anticipated full-year drag on operating profit from Middle East conflicts has been reduced to 510 billion yen from a previous estimate of 670 billion yen, primarily due to the establishment of new alternative logistics routes by businesses.
Toyota stated it is still assessing the impact of last week's magnitude 7.1 earthquake in Kumamoto Prefecture, southwestern Japan, and that losses related to this event have not been included in the current profit forecast. Despite uncertainties in the external environment, including the Middle East situation, Toyota maintains its global production target for the Toyota and Lexus brands at 10 million vehicles.
"This is thanks to our balanced production and sales system, with strong performance in markets like the US offsetting weakness in some regional markets," said Chief Financial and Accounting Officer Takanori Azuma during an online briefing.
Additionally, benefiting from the weaker yen and increased hybrid vehicle sales, Toyota reported a net profit of 1.48 trillion yen for the first quarter (April-June), a massive 75.6% increase year-on-year. Operating profit for the April-June period was 1.06 trillion yen, down 8.8% year-on-year, with conflicts in Iran contributing to a 75 billion yen profit reduction. Revenue grew 10.4% to a record 13.53 trillion yen.
The Toyota Group, including subsidiary Daihatsu Motor, sold 2.71 million vehicles in the quarter, a 4.1% decline year-on-year, partly due to the impact of Middle East conflicts. Notably, the first-quarter data this year no longer includes sales from Hino Motors, which was included in the same period last year. This is because Hino Motors completed its business integration with Mitsubishi Fuso Truck and Bus in April, and is no longer a consolidated subsidiary within Toyota's reporting scope.