Shares in the world’s second-largest carmaker briefly rose nearly 3 per cent in Tokyo on Thursday following the release of the results, which were backed by a faster than expected recovery in sales in China and years of stringent cost-cuts under chief executive Akio Toyoda.
Toyota maintained its full-year guidance for operating profits and revenue, but cautioned of “the possibility that the business environment will change significantly depending on . . . the future spread of Covid-19 and the state of its containment”. The company recently lost its crown as the world’s most valuable carmaker to US electric vehicle group Tesla.
For the April to June quarter, Toyota reported a 74 per cent year-on-year drop in net profit to ¥158.8bn ($1.5bn). While its operating profits were nearly wiped out, the Japanese group outperformed rivals including Volkswagen, General Motors and Nissan, which all suffered losses during the period.
Toyota delivered profits even as group vehicle sales dropped 32 per cent from a year earlier to 1.8m units due to the pandemic. Losses in the US and Europe were offset by profits in the company’s financial services arm.
The results also showed an unexpected boost from Covid-19 in terms of costs, which fell due to shorter working hours and reduced business travel.
Meanwhile, it upgraded its annual vehicle sales forecast to 7.2m vehicles from the 7m projected in May as the pace of recovery in most regions, led by China, has been faster than expected. During the first quarter, sales in China rose 14 per cent to 482,000 vehicles.
In disclosing its net profit guidance for the first time, the company said it expected a 64 per cent year-on-year drop to ¥730bn for the fiscal year through March 2021.
“The result is reassuring and there is a strong indication of an upward revision [in operating profit] during the fiscal first half,” said Koji Endo, head of equity research at SBI Securities.
Toyota’s performance stands out compared with domestic rivals such as Nissan, which has an alliance with France’s Renault. The company anticipates its biggest ever operating loss this year.
On Wednesday, Honda reported its largest quarterly loss since 2009 and warned of a 64 per cent drop in annual profits as car sales fell in almost all of its main markets.
Honda has historically managed to offset downturns in car sales with its more profitable motorcycle business. But the pandemic also sparked a 62 per cent fall in first-quarter motorcycle sales led by declines in India and Indonesia.
Seiji Kuraishi, Honda’s executive vice-president, said the company aimed to return to profitability for the full year, pointing to a strong recovery of car sales in China and demand for motorcycles in Vietnam and Thailand.