Toyota is forecast to record a fifth straight quarterly fall in operating profit when it releases results for the April-June period on Tuesday, pressured by weaker vehicle volumes in some markets and higher costs across its supply chain.
The median estimate from eight analysts polled by LSEG puts operating profit at 1.11 trillion yen ($7.04 billion) for the quarter, a 5% decrease from the same period a year earlier. That estimate and the drop would mark a continuation of a multi-quarter downtrend in Toyota's operating earnings.
Global deliveries of Toyota and Lexus cars declined about 3% in the first quarter, to just over 2.5 million units. The overall reduction reflected pronounced falls in key regions - notably a 28% decline in China and roughly a one-third slump in the Middle East - which more than offset modest growth in the United States.
Analysts attribute the weaker performance during the quarter to two main factors. First, sales volumes in several overseas markets were softer than anticipated. Christopher Richter, an autos analyst at CLSA, said the first quarter may have been tougher than expected and pointed to weaker-than-forecast volumes. He noted particular softness in Oceania, where Toyota's sales fell 16%, and in Central and South America, which were down 5%. Richter also highlighted intensifying competition from BYD and other Chinese brands in some markets.
Second, rising costs along the supply chain have weighed on the company. Market observers cite the conflict in the Middle East - which began in late February - as a contributor to higher input prices for materials such as aluminium and naphtha, and to disruptions in vehicle shipments to the region. Those cost pressures are among the factors that analysts say likely held back earnings in the quarter.
Compounding the headwinds for the earnings report, investors are watching fallout from a deadly earthquake that struck Japan's Kyushu island last week. The quake damaged supplier facilities and led Toyota to suspend production at four domestic plants, including two vehicle assembly sites. Toyota has suspended production at three plants in the affected region through Wednesday and halted output at another plant in central Japan through Friday.
Supplier Aisin, which has a plant near the quake's epicentre, said on Friday it could not specify when output would resume at the damaged facility. About 200 people were reported to be involved in recovery efforts at that site.
Investors will also be looking for commentary on U.S. sales dynamics, where Toyota has faced pressure tied to the transition of its outgoing RAV4 model to a redesigned successor. Richter said market participants will be keen to hear when Toyota expects sales of the new model to accelerate.
Analysts will pay close attention to any revision of Toyota's operating profit outlook for the current financial year. Management has a 3 trillion yen operating profit forecast for the year, and higher material costs together with the production disruptions from the Kyushu earthquake are clouds on the near-term outlook.
Exchange-rate disclosure used in market reporting: $1 = 157.5700 yen.