The world’s largest automaker, Toyota Motor Corporation, is preparing to announce another quarterly profit decline next week, marking the fourth consecutive period of reduced earnings compared to the previous year.
Financial analysts predict Toyota will reveal operating profits of 813 billion yen (approximately $5.17 billion) for the January through March period, representing a 27% decrease from the same timeframe last year. Seven analysts surveyed by LSEG provided the median forecast.
This anticipated decline would push Toyota’s annual operating profit to its lowest point in three years, reaching approximately 4 trillion yen. The drop comes despite the company maintaining high production levels and strong sales figures worldwide.
Several factors are contributing to the profit squeeze, including increased wages throughout the supply chain, import tariffs imposed by the United States under President Donald Trump’s administration, and elevated raw material costs connected to ongoing Middle East tensions.
Toyota had previously projected operating profits of 3.8 trillion yen for the recently concluded financial year. The company continues to see strong performance in major markets like the United States, where higher-profit hybrid vehicles have helped maintain revenue streams.
The Middle East situation, which escalated on February 28, has particularly impacted aluminum pricing and other essential materials used in vehicle manufacturing. Car shipments to the Middle East region have also faced significant disruptions.
“If the current situation in the Middle East continues, higher aluminum prices would be quite tough to absorb,” stated Yuya Takahashi, who works as an analyst at Marusan Securities.
Toyota’s Middle East sales dropped by nearly one-third during March, contributing to two consecutive months of declining global sales figures, according to company data released last week. While the Middle East represents a smaller market for Toyota with roughly 34,000 vehicles sold monthly, the region typically purchases higher-profit vehicle models.
Industry watchers will be closely monitoring how newly appointed CEO Kenta Kon addresses the earnings announcement scheduled for May 8. Kon, who previously served as secretary to Chairman Akio Toyoda and is considered a close ally, assumed the chief executive role last month.
Kon played a significant role in the successful tender offer to privatize group company Toyota Industries, which concluded in March despite resistance from investors including activist fund Elliott Investment Management.
Takahashi noted that aluminum price increases typically affect automaker costs with approximately a six-month delay, suggesting Toyota and its suppliers may face greater financial impact during the current fiscal year that began April 1.
Despite Toyota’s investments in workforce development and supply chain strengthening over recent years, which have improved resilience against external disruptions, fully offsetting rising material costs may prove challenging, according to Takahashi.
Toyota’s stock performance has suffered significantly, declining more than 20% since late February when the United States and Israel conducted attacks on Iran. Year-to-date, shares have fallen approximately 10%.
On Tuesday, major Toyota suppliers including Aisin, Denso, and Toyoda Gosei issued warnings about increasing uncertainty in their business outlooks. Company executives highlighted potential profit reductions from rising aluminum and petroleum-based input costs.
Financial market observers will pay particular attention to how Toyota plans to address Middle East conflict impacts on vehicle sales volumes and the extent to which increasing material prices might affect profits throughout the current fiscal year.
“The question is to what extent those two factors will be reflected in the guidance,” Takahashi explained regarding investor expectations for the upcoming earnings report.
