Toyota forecasts an 80% decline in its full-year profit as Coronavirus weighs on demand

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on May 12, 2020
  • Toyota says its profit in fiscal 2021 is likely to drop by 80% due to the Coronavirus pandemic.
  • The Japan's largest automaker plans on slashing production in North America by roughly 30%.
  • The car manufacturer took a £1.20 billion hit to its annual profit in the year that ended in March.

In its announcement on Tuesday, Toyota Motor (TYO: 7203) warned that its full-year profit is expected to decline by 80% that will mark the steepest fall in profit for the automaker in almost a decade. Toyota is currently struggling to cushion the economic blow from the Coronavirus pandemic that has brought the global auto industry to a near halt.

COVID-19 had pushed the global automakers into temporarily suspending operations in recent months. While production is now starting to resume, demand remains low as unemployment and an economic downturn continue to keep consumer spending under pressure.

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In a media briefing, President Akio Toyoda of Toyota Motor said:

“The Coronavirus has dealt us a bigger shock than the 2008 global financial crisis. We anticipate a big drop in sales volumes, but despite that we are expecting to remain in the black. We hope to become a leader of the country’s economic recovery.”

Toyota estimates £3.77 billion in operating profit in fiscal 2021

Toyota now estimates £3.77 billion in operating profit in the fiscal year that ends in March 2021. In fiscal 2021, the car manufacturer estimates to sell 8.9 million vehicles globally as compared to 10.46 million that it sold in the recently ended year. The Japanese automaker, however, expressed confidence that sales will recover to pre-virus levels in the second half of 2021.

After the financial crisis of 2008, the two subsequent years posted an 11% decline in annual global sales of vehicles. As per experts, the Coronavirus pandemic is likely to fuel a much greater around 33% decline in global annual vehicle sales.

Toyota’s forecast came on top of its announcement last week that the company plans on slashing its North American production by roughly 30% through October. In the March quarter, Toyota’s sales were around 8% down in North America.

Toyota takes a £1.20 billion hit to its annual profit in fiscal 2020

In fiscal 2020, the carmaker said that its annual vehicle sales were slashed by 127K that resulted in a £1.20 billion hit to its annual profit. Toyota hit a new high of 10.6 million vehicles sold last year.

At £49 per share, Toyota Motor is currently a little under 15% down year to date in the stock market. Owing to the COVID-19 driven downward rally, Toyota has now removed almost all of its gain that it posted in 2019.

Toyota is currently valued at £162 billion and has a price to earnings ratio of 7.55.

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