TOKYO (Bloomberg) -- Toyota Motor Corp. had its long-term debt rating cut one step by Standard & Poor's, which cited 'weak' profitability at the Japanese company.
S&P reduced the rating to "AA-," the fourth-highest investment grade, from "AA," saying the outlook on the debt is "stable," according to a statement from the ratings agency today. Moody's Investors Service rates Toyota's debt "Aa2," the third-highest investment grade.
"The downgrade reflects our opinion that Toyota's profitability is unlikely to recover in the next one to two years to a level that we view as appropriate for the rating," S&P said.
Toyota's profit declined 39 percent to 93.63 billion yen ($1.1 billion) in the quarter ended Dec. 31. Last week it recalled 2.2 million vehicles. That followed earlier recalls of more than 8 million cars for repairs related to sudden unintended acceleration.
"We found S&P's downgrade very regrettable," said Kayo Miyata, a Tokyo-based spokeswoman for Toyota. "Toyota prioritizes customers' trust and management will make the greatest effort to get its rating raised."
Last month, Toyota raised its full-year profit forecast by 40 percent, saying net income may more than double to 490 billion yen for the 12 months ending March 31. Toyota followed Honda Motor Co. in boosting its earnings estimates as the global auto industry recovers from the financial crisis.
'The company's profitability is still weak, its pace of recovery is slower than those of Japanese peers, and its profitability might remain under pressure from higher raw material prices and gasoline prices as well as the strong yen," S&P said in today's statement.