Toyota has announced that its profits in the first half of fiscal year (FY) 2008/09 fell by almost half from the same period a year earlier. Defying the current gloom, however, the automaker has announced that investment in its second facility in India will amount to around US$685 million.

The pressures of the current downturn have weighed heavily on Toyota since the start of the current fiscal year, and it has now been forced to slash its full-year sales revenue and profitability expectations.

Although the company is still investing in developing markets and making changes and launching models in the more depressed mature markets, the business environment remains a concern and could put pressure on Toyota well into next year.

Toyota Motor Corporation has announced its financial results for the first half of fiscal year (FY) 2008/09, showing that its profits plunged by around half, leading it to lower its forecast for the full year significantly. For the six months ending 30 September, the automaker's sales revenues slipped by 6.3% year-on-year (y/y) to ¥12.19 trillion (US$122.8 billion), as the overall number of vehicles sold during the period slipped by 51,000 units to 4.25 million. Operating income tumbled by 54.2% y/y to ¥582 billion, including a ¥300-billion loss as a result of the Japanese yen appreciating against the U.S. dollar, a ¥90-billion downturn as a result of its marketing activities, and a ¥40-billion expenditure as part of its cost-reduction efforts. Net profits for the period also fell, by 47.6% y/y to ¥493.4 billion.

The automaker's executive vice-president, Mitsuo Kinoshita, said that in addition to the reasons already mentioned, its financial results declined as a result of the difficult market conditions in North America and Europe. This was reflected by a decline in operating income in North America from ¥254.1 billion to ¥34.3 billion, although excluding the impact of valuation gains on interest-rate swaps this would have been a loss of ¥34.6 billion.

Toyota was hit by the rapid decline in sales in the U.S. market and the shift towards smaller vehicles, as well as its decision to reduce production as a result. Western Europe led the downturn in the European region and was the primary reason why Toyota's operating income declined from ¥68.3 billion to ¥8.7 billion. Its sales in Japan also continued to be hit badly, its domestic unit seeing a decline in operating profit from ¥773.3 billion to ¥321.7 billion during the six months.

Growing markets in Asia and the rest of the world, comprising Latin America, Oceania, and Africa, contributed some growth in operating income for the automaker: its Asian unit saw a rise of 17.6% y/y to ¥137.2 billion, while the latter unit posted an increase of 10.3% y/y to ¥79.1 billion. Although its financial services arm recorded an increase in income from ¥77.8 billion to ¥107.2 billion, much of this was due to a ¥62.3-billion valuation gain on interest-rate swaps, and had this been excluded operating income would have fallen to ¥36.5 billion. The automaker said that this was a result of an increased number of bad debts and a slump in the residual value of vehicles in the U.S. market.

Toyota Decides Not to Rehire Temporary Workers
A Toyota production unit has meanwhile announced that it will not be rehiring 500 temporary workers that it let go in August. A spokesperson for Toyota Motor Kyushu Inc., which builds vehicles for the Lexus luxury brand, told Kyodo News that the rapid deceleration of global economic activity had made it necessary to carry out larger production cutbacks than it had initially envisioned.

Expenditure on Second Indian Facility Revealed
Despite its contracting finances, Toyota has also announced that it will invest around ¥68 billion in its second facility in Bangalore (India). This will be split between ¥35 billion for the building and basic equipment and a further ¥33 billion for general-purpose and specialised equipment that will be used to manufacture the company's new small car. Production is due to begin in 2010, with annual production of 100,000 units per annum (upa), taking its total capacity in India to 160,000 up

Courtesy: Global Insight Inc

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Posted by Naresh Koshti on 8 November, 2008 11:33:49 AM IST #