Toyota's Forecast: The Tsunami Won't Kill Us, But The Yen Might

Today, Toyota finally delivered its delayed outlook for this fiscal year. It usually is delivered at the annual results conference, but the tsunami had muddled the waters, so to speak. Now, Toyota has a bit more visibility. Today, Toyota did forecast a 35 percent fall in profit for the fiscal year ending March 31, 2012. Toyota expects to end the fiscal with a net income of 280 billion yen ($3.5 billion).

According to Reuters, that’s “well short of the consensus for a 434 billion yen profit in a poll of 23 forecasts by Thomson Reuters I/B/E/S.” I am proud of the optimism of the forecasters. Personally, after looking at the disaster in Japan, I hadn’t expected any profits. Toyota also predicts an operating loss of 120 billion yen ($ 1.5 billion) for the first half of its fiscal (April through September 2011), to be followed by a big 420 billion yen ($ 5.2 billion) operating gain in the second half (October 2011 through March 2012).

Message to all competing companies: Expect the Japanese to come out with guns blazing once the supply lines are back in shape.

Where Toyota sees a loss is in vehicle sales. Toyota closed out the last fiscal with 7.308 million units sold. Toyota lowered its projection for Fiscal 2012 to 7.24 million vehicles. That’s 68,000 units less.

On a calendar year basis, this will look nastier. April through September 2011, Toyota sees 795,000 units less than last year, to be followed by 727,000 units more than in the preceding year for the October 2011 through March 2012 period.

What this means is that Toyota will end the calendar year 2011 in all likelihood in third place behind GM and Volkswagen. The party line at Toyota is “We don’t want to have the most sales, we want to have the most satisfied customers.” But dropping from top to 3 will hurt the pride, even if the face is brave.

The big caveat: The projections are based on an exchange rate of 82 yen to the dollar.

Toyota CFO Satoshi Ozawa, who presented the forecast today in Tokyo, warned again that the strong yen is the biggest obstacle facing Toyota. In the May conference, Ozawa had said that the break even point for profitable production in Japan is 85 yen to the dollar. Today, the dollar already buys 5 yen less. “We are in a situation where it is becoming impossible for Japan’s manufacturing industry to do business,” Ozawa said today.