TOKYO -- Toyota, coming off a year of record profits, shifted into reverse in the latest quarter as supply chain chaos and soaring costs slammed earnings.
The sliding profits in the April-June quarter underscore the challenge that the world’s largest automaker has in sustaining its stellar performance and big margins going forward.
Despite the quarterly retreat, Toyota lifted its full-year guidance -- slightly -- for net income and revenue. But the adjustment comes mainly from a windfall gain on the weakening Japanese yen.
Even with the improved outlook, the latest profit targets still represent a decline from the previous fiscal year. Toyota kept its unit sales and production outlooks unchanged, citing the uncertain outlook amid the COVID-19 pandemic and global semiconductor shortage.
Operating profit tumbled 42 percent to 578.6 billion yen ($4.24 billion) in the company's fiscal first quarter ended June 30, Toyota said in its quarterly earnings announcement on Thursday.
Operating profit margin fell to 6.8 percent, from 12.6 percent the year before. Net income declined 18 percent to 736.8 billion yen ($5.40 billion), while revenue grew 7.0 percent to 8.49 trillion yen ($62.27 billion).
Global sales slipped 6.3 percent to 2.01 million vehicles in the three months. The consolidated figure covers deliveries for the Lexus and Toyota brands, as well as Daihatsu and Hino. Worldwide retail sales fell 7.8 percent to 2.54 million vehicles in the quarter.
The stumble starts a challenging financial period after a fiscal year in which Toyota smashed earnings records. In the year ended March 31, Toyota achieved all-time highs for revenue, operating profit and net income.
But in the latest quarter, production interruptions reduced the supply of new cars and dented sales. Meanwhile, costs spiraled higher as Toyota helped suppliers shoulder the burden for soaring prices of raw materials such as steel and aluminum.
Toyota said earlier this year it would aid suppliers feeling the price pinch.
A tailwind from beneficial foreign exchange rates helped offset a bigger hit from the cost surge.
The yen’s weakening against the U.S. dollar boosts the value of U.S. earnings repatriated to Japan. The Japanese currency has lost 18 percent of its value against the dollar since last year.
Looking ahead to the current fiscal year ending March 31, 2023, Toyota expects operating profit to fall 20 percent to 2.40 trillion yen ($17.9 billion), as net income declines 17 percent to 2.36 trillion yen ($17.6 billion). Toyota is keeping its production plan unchanged at 9.7 million vehicles.
There is too much market uncertainty to warrant a bigger revision right now, it said.
At the same time, Toyota also expects global retails sales to expand 3.1 percent to 10.7 million. If achieved, that would represent a new record for the Japanese carmaker.
Naoto Okamura contributed to this report.