(Tokyo) Japanese giant Toyota disappointed investors on Wednesday by saying it expected a marked decline in its profits in its new financial year 2024/25 due to heavy investments, eclipsing its record performance over its past financial year.
Its net profit for its 2023/24 financial year ended March 31 doubled year-on-year, reaching a new record level of 4,944.9 billion yen, thanks in particular to the surge in sales of hybrid vehicles and the fall of the yen , which artificially inflates its results abroad.
The world automotive leader also benefited from a very favorable base effect over one year, as its 2022/23 results were disrupted by the global shortage of semiconductors and a surge in raw material costs.
But its net profit is expected to fall by 27.8% in 2024/25, to 3.57 trillion yen. And the group also expects a pronounced decline in its annual operating profit (-19.7%), while this result also almost doubled over its last financial year to around 5,353 billion yen.
Because Toyota plans to invest 2,000 billion yen during its new financial year to support its future growth, in new engines (electric, hydrogen) and digital technology (software, artificial intelligence), as well as in human capital, including for its suppliers and dealers with whom it cultivates very close ties.
Threatened by Chinese disruptors
Its new annual turnover should increase slightly by 2% to 46,000 billion yen. But this would be a sharp slowdown compared to 2023/24, when its sales jumped 21.4% to 45,000 billion yen.
Toyota even expects a slight decline in its global sales in volume (-1.3% over one year to 10.95 million units), in particular because of the expected decline in sales in Japan of its subsidiary Daihatsu, affected since the end of last year by a scandal of irregularities in the certifications of its vehicles on the Japanese market.
In 2023/24, the group (Toyota, Lexus, Daihatsu and Hino brands) sold more than 11 million vehicles (+5% year-on-year), a new record. Driven by its hybrid models, a segment where Toyota excels, its sales were particularly dynamic in North America, Europe and Japan.
In China, where all foreign car manufacturers are struggling to remain competitive against local competitors that have become formidable and electric champions like BYD, Toyota resisted in 2023/24 by achieving a small increase in its volume sales (+1, 4%).
But Toyota feels seriously threatened in China, and this is one of the reasons why it has decided to invest so much in new technologies for its next financial year.
“We have to accept that there are certain areas where we are clearly behind” the Chinese manufacturers, admitted Wednesday at a press conference Yoichi Miyazaki, executive vice-president of Toyota.
“We know that we cannot let this gap widen further,” added Mr. Miyazaki, who also stressed that the price war imposed by Chinese manufacturers “is becoming more and more severe every day”.
XXL share buyback
Although Toyota’s 100% electric global sales have tripled over one year, they still remain modest (around 117,000 vehicles in 2023/24), compared to the 3.7 million hybrid vehicles it sold over the same period.
The group launched into the electric segment later than other major manufacturers and continues to focus on other engines in parallel, to adapt to the different degrees of energy transition in the world.
If this strategy allows it to better diversify risks, it at the same time requires it to continue to invest on all fronts.
To protect its shareholders, Toyota also announced on Wednesday a giant plan to buy back its own shares for a maximum of 1,000 billion yen in 2024/25 and a 25% increase in its dividends for the past financial year, to 75 yen per share.
But that did not prevent its action from ending the session slightly in the red (-0.55%) on Wednesday on the Tokyo Stock Exchange.
reference: www.lapresse.ca