Market: Toyota expects 20% drop in profit as raw material costs rise

TOKYO (Reuters) – Toyota Motor has warned that “unprecedented” rises in the cost of raw materials could rob the group of a fifth of its annual profit, a clear sign that the world’s biggest carmaker by sales can no longer escape the supply chain crisis that has rocked the global industry.

The Japanese giant, which also reported a 33% drop in operating profit in the fourth quarter, saw its shares fall more than 5% on Wednesday, before closing down more than 4% – the largest in one day for two months. Tokyo’s benchmark index was up 0.3%.

The maker of the famed Toyota Corolla says it expects raw material costs to more than double to 1.45 trillion yen (10.58 billion euros) in the fiscal year that begins in April . He hopes to compensate for this increase by adopting less expensive materials.

The automaker expects to sell 8.85 million vehicles worldwide in the fiscal year, up 7.5% from last year.

During the same period, Toyota expects operating profit to drop about 20 percent to 2.4 billion yen from nearly 3 billion the previous year. Analysts had expected profit up 12% to 3.36 billion yen, according to a Refinitiv consensus.

On Tuesday, Toyota slashed its global production target for May by about 50,000 vehicles to about 700,000 vehicles. The group plans to suspend the activities of 14 production lines in eight factories for six days in May, due to the confinement in China.

(Satoshi Sugiyama report, French version Augustin Turpin, edited by Kate Entringer)

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