By Daniel Leussink
TOKYO, Aug 4 (Reuters) - Toyota, the world's biggest automaker, on Tuesday raised its annual operating profit forecast by 13% to reflect a much softer yen and announced a share buyback of up to 1 trillion yen ($6.3 billion).
But some fundamentals remained weak with Toyota reporting a 9% slide in first-quarter operating profit, its fifth straight quarter of decline and somewhat below expectations. It has been hurt by slumping sales in China, while the Iran war battered sales in the Middle
East and led to increased costs for raw materials and parts.
Toyota also noted that its upward revision did not take into account the impact of a deadly earthquake that struck Japan's Kyushu island last week, forcing it to halt output at four domestic plants. Shares in the automaker closed down 1.5%.
The Japanese automaker now expects 3.4 trillion yen ($21.6 billion) in operating profit for the current financial year to end-March, after sharply revising its yen assumptions to 160 yen to the dollar from 150 yen.
"In addition to revised foreign exchange assumptions, we steadily accumulated improvements in our marketing efforts, including increased sales supported by the establishment of alternative logistics routes to the Middle East," Toyota said in a statement.
It lowered its estimate of the impact of the Iran war — higher costs for raw materials such as aluminium, delivery delays, lower sales volumes and support for suppliers — to 510 billion yen this fiscal year from its previous forecast of 670 billion yen. Even so, that remains one of the largest hits to earnings from the war disclosed by a global company to date.
CHINA, MIDDLE EAST SALES SLIDE
Overall, Toyota's global sales fell 3.5% during the quarter. It has been hit particularly hard in China, the world's largest car market, where its sales tumbled 28%.
Like many foreign automakers there, it has seen sales suffer on slower economic growth, a marked shift towards domestic electric vehicle brands which have gained the upper hand with snazzy features — one that has only gained momentum as the Iran war pushes gasoline prices higher.
Sales in the Middle East also plunged due to the war, down by a third. But Takanori Azuma, chief officer of Toyota's accounting group, said the automaker was now able to transport vehicles overland without going through the Strait of Hormuz and from September it now expects 25% of exports to the region to be affected, down from an initial estimate of 50% for the full year.
In the U.S., Toyota's biggest market, sales were up a mere 1%, with the automaker lagging Ford, GM and Stellantis, which have benefited from strong demand for high-margin pickup trucks.
Toyota's plans to buy back shares worth up to 1 trillion yen are equivalent to as much as 4.22% of outstanding stock and are on par with a share repurchase agreement announced three years ago. It also plans to cancel 200 million shares.
The automaker raised its annual vehicle shipment target by 100,000 units to 9.7 million, citing solid demand in North America and Europe, among the few markets where Toyota reported sales growth during the April-June quarter.
($1 = 157.4900 yen)
(Reporting by Daniel Leussink; Writing by Miyoung Kim; Editing by Edwina Gibbs)
