Toyota expects $4.3 billion hit from effects of Iran war
Toyota's Financial Outlook Impacted by Iran War
By Daniel Leussink
TOKYO, May 8 (Reuters) - Japan's Toyota expects the effects of the Iran war to cost it about $4.3 billion this financial year, in one of the most significant warnings yet by a global company on the wider impact of the conflict.
The world's largest automaker reported an almost 50% drop in quarterly earnings on Friday and said full-year profit is expected to fall by a fifth in the year just started, as rising costs from the war outweigh surging demand for hybrid vehicles.
Breakdown of Financial Impact
The bulk of the 670 billion yen ($4.3 billion) hit will come from higher material costs, with the remainder from delivery delays and lower sales volumes, Toyota's accounting group officer Takanori Azuma told a briefing.
Rising Costs and Supply Chain Disruptions
The impact of the Iran war is being felt in everything from "fuel costs, transportation expenses, and the cost of paint and other materials used at vehicle assembly plants," Azuma said.
Hybrid Vehicle Demand vs. Cost Pressures
Sales of hybrids are expected to exceed 5 million vehicles for the first time this year, said Toyota, whose overall results highlight the lopsided impact of the Iran war, as higher energy prices drive customers to fuel-efficient cars but not enough to offset underlying cost pressures.
Toyota's estimates exceeded those given by many major companies so far, including airlines. Unlike many companies, the Japanese manufacturer has an additional burden as it has pledged to take on cost increases faced by its group suppliers.
Quarterly and Yearly Profit Forecasts
Operating profit totalled 569.4 billion yen for the three months to March 31, from 1.1 trillion yen a year earlier. It was the smallest quarterly profit in more than three years.
For the current fiscal year, Toyota expects an operating profit of 3 trillion yen, well below the 4.59 trillion yen median in an LSEG poll of 23 analysts. Toyota shares ended down around 2.2%, their lowest close since mid-October.
COST-CUTTING CEO
Kenta Kon's Leadership and Strategy
The results were Toyota's first under new CEO Kenta Kon, a former finance chief and onetime secretary to Chairman Akio Toyoda, who has a reputation for keeping a tight lid on costs.
Kon said Toyota would continue to identify waste "one by one", and emphasised its ability to deliver around $24 billion in profit, despite considerable headwinds.
Tariffs and Global Industry Challenges
Kon faces the challenge of steering Toyota through the impact of U.S. President Donald Trump's tariffs, which cost it 1.4 trillion yen in the year just ended.
The recent surge in energy prices heaps further pain on an industry already grappling with Trump's tariffs and the rise of Chinese automakers. Volkswagen CEO Oliver Blume said this week tariffs represent a 5 billion euro ($5.9 billion) a year burden on the German automaker's operating profit.
Toyota said last week its Middle East sales fell sharply in March after shipments to the region were disrupted.
Currency Exchange Rates
($1 = 156.8000 yen)
($1 = 0.8519 euros)
(Reporting by Daniel Leussink; Editing by David Dolan, Tom Hogue and Alexander Smith)
