TOKYO -- Toyota Motor Corp. said operating profit in the latest quarter fell 15 percent to 642 billion yen ($6.33 billion) as a strong yen weighed on earnings.
Net income in the three months through June dropped to 552.47 billion yen, the automaker said today. Revenue fell to 6.59 trillion yen.
The yen strengthened about 11 percent against the dollar in the quarter compared with the year-earlier period, making Toyota’s exports less competitive and cutting the value of repatriated earnings.
“Things are moving so rapidly every day,” Tetsuya Otake, managing officer said at a press briefing today, lamenting big foreign exchange rate swings.
Production disruptions have added to Toyota’s challenges. The company said it lost output of about 80,000 vehicles due to earthquakes in Kumamoto prefecture in April, Japan’s most devastating since March 2011. Factories in Japan had already been trying to recover from having to shut down for a week in February due to an explosion and fire at a steel-making affiliate.
Toyota is responding by cutting costs. After Britain voted to leave the European Union in June and investors sought refuge in the yen as a haven currency, Toyota deactivated elevators and bathroom hand-driers and cut back on air conditioning at its offices in Japan.
The automaker said that it would be more aggressive in cutting labor costs and other expenses to offset the bigger currency impact.
The introduction of the redesigned Prius hybrid late last year underscores the challenge Toyota’s having in responding to the whims of consumers across its biggest markets. In Japan, buyers have responded to the improved mileage and higher-tech interior by making Prius the top-selling model each month this year.
The reception in the U.S. is another story. Sales of the Prius sedan model have dropped 11 percent this year through July, and deliveries have plunged 26 percent for the broader line. Toyota said Wednesday it would postpone the start of sales for its Prius plug-in model to the winter, rather than begin Japan deliveries this autumn.
Low gasoline prices also are dragging on the usual stalwarts of Toyota’s car lineup, including the Camry sedan and Corolla compact. The RAV4 and Highlander SUVs are pacing record light truck sales but weak car demand has outweighed light trucks’ strength. The company’s total U.S. deliveries have slumped 2.5 percent this year, trailing the industry’s 1.3 percent rise.
After a three-year streak of foreign exchange rates boosting operating income, President Akio Toyoda said in May that currency tailwinds raised Toyota’s earnings above the level of its “true capabilities.”
Toyoda, 60, is responding by reorganizing the car-making giant into smaller independent units, taking after the Lexus International luxury division carved out within the company four years ago. The aim is to speed up decision-making and respond more quickly to changes in demand.
Toyota lowered its forecast for full-year operating profit, expecting it to slide 44 percent to 1.6 trillion yen, which would be a four-year low. It's most recent forecast was for 1.7 trillion yen. Net income will probably drop to 1.45 trillion yen, the automaker said.
Toyota is budgeting for the yen to trade around 102 yen to the U.S. dollar compared with an earlier estimate of 105 yen. It sees a rate of 113 yen to the euro compared with a 120 yen forecast at the start of the quarter.
Toyota expects that currency moves will impact its full-year operating profit by 1.12 trillion yen from the year just ended, from a previous forecast of 935.0 billion yen.
Reuters and Bloomberg contributed to this report