DEUTSCHE Securities yesterday slashed its forecast for Toyota Motor's operating profit by 84% for the next business year, highlighting the severity of the effect of a historic earthquake that has virtually halted Japanese vehicle production.
The March 11 quake off Japan's eastern coast damaged some assembly and parts factories in the northeastern region, causing an industry- wide production loss of at least 400000 vehicles to date in Japan. Analysts expect the effect to ripple out to overseas production and non- Japanese car makers will also be hit as inventories of parts dry up in the coming months.
Offering the first forecast revisions for Japan car makers since the disaster, Deutsche said it now expects Toyota's operating profit for the business year starting on April 1 to be ¥135bn (1,66bn) versus an earlier forecast of ¥840bn. It also cut forecasts for Nissan, Honda Motor and other Japanese vehicle makers.
Before the disaster, Japan's car makers were battling a rising yen and the removal of government subsidies on low emission vehicles to keep their recovery on track following the brutal financial crisis that battered car sales worldwide.
Deutsche's Tokyo-based auto analyst, Kurt Sanger, however stressed that uncertainty over the depth and duration of the supply disruption meant "we will surely be wrong in our absolute figures".
"Ultimately this is a definable problem with a solution and should be one that the market can look beyond. We expect near-term volatility but we do not see permanent impairment to corporate value," he wrote. He lowered his forecasts for the 2012-13 April-March business year only slightly.
Mr Sanger said he was basing his assumptions on a return to normal production after six months, with energy shortages presenting challenges on top of a broad disruption to the supply chain.
All Japanese car makers have suspended or slowed vehicle and parts production since the earthquake caused hundreds of suppliers' factories to shut down.
Shares in Toyota closed up 0,6% at ¥3,295 yesterday, while Nissan rose 3,5% and Honda put on 2,1% as the dollar strengthened 0,6% against the yen to ¥81,78. Reuters