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Annual Profit Estimates Raised By Toyota, Looking For Alternatives For Parts Sourced From China

Annual Profit Estimates Raised By Toyota, Looking For Alternatives For Parts Sourced From China
Favorable currency rates and better-than-expected vehicle sales prodded Japanese car maker Toyota Motor Corp to raise its annual operating profit forecast by 4.2 per cent. The company however cautioned that the company was finding it difficult to gauge the complete impact of the spread of the new coronavirus in China and thus its impacts have not been factored in yet by the company in its forecasts.
The spread of the virus in China, which has so far caused deaths of almost 600 people in the country, had forced authorities in China to announce closure of manufacturing plants which has affected a number of auto companies and vehicle output at many factories in China has stalled because of suspended operations to prevent the spread of the virus.
Analysts except that the first quarter will see a drastic drop in the auto sale and production in China because of the virus epidemic because it has already disrupted the supply chain for production of parts of some car makers. The impact in China has forced South Korean auto major Hyundai to announce suspension of production in its factories in South Korea.
"We are looking very closely at inventories of components which are made in China and used in other countries, including Japan, and at the possibility of alternative production," Toyota operating officer Masayoshi Shirayanagi told a news conference.
In case of the extension of the shutdowns, it could affect "up to one-half" of vehicle and components that would normally be produced in China, estimated S&P credit analyst Vittoria Ferraris. Currently production has been halted till February 9 at the many factories that manufacture auto and auto components across China, including those of Toyota.
The operating profits for the year to end-March is expected to increase to 2.5 trillion yen (S$31.4 billion) which would be more than the 2.47 trillion yen posted by the company a year ago, said Japan's biggest automaker. The figure is in line with market estimates.
The company said that the rise in forecast is based on the anticipation that the price of the yen will have an average value of 108 yen against the US dollar for the current business year compared to its earlier estimate of 107 yen to a dollar.
However there was a 3.2 per cent decline in the profits of the company for the third quarter which came in at 654.4 billion yen. The company said that this was because of lower vehicle sale. The number however was slightly more than the market expectations. 
Toyota reported a 12.5 per cent drop in sales in Asia while there was a 1.8 per cent drop in the sale of vehicles in Toyota’s largest market - North America, during the third quarter.
However for the entire fiscal year, Toyota anticipates sale of 10.73 million cars which would be a little more than its previous forecast of sale of 10.7 million units.

Christopher J. Mitchell

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