Toyota says operating earnings could fall by a fifth this year

Business

The world’s largest car-maker has warned that its operating earnings could fall by a fifth this year due to “unprecedented increases in materials and logistics costs”.

Toyota said operating profit will fall from almost 3trn yen (£18.6bn) in the previous year to 2.4trn yen (£14.9bn) in the current fiscal year, well below analysts’ expectations.

The Japanese car-maker also announced a 33% slide in fourth-quarter profit – news which sent its shares down more than 5% early on Wednesday.

It said it expected the cost of materials to more than double to 1.45trn yen (£9bn) in the fiscal year that started last month.

The company fared well during the early months of the global chip shortage that has hampered many of its rivals, but it has now become the latest to slash production, particularly due to problems in China.

Toyota, which had already cut six production lines at a total of four plants, revealed on Tuesday that a total of 12 factories would now be affected as supply chains are delayed by the effects of China‘s COVID pandemic curbs.

Shanghai is in its sixth week of heavy restrictions on movement that has not only affected factory output but also shipments to and from its bustling port, China’s largest by cargo volumes.

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Toyota said that 14 more production lines would be affected by the suspension, for up to six days this month.

It would mean, the company said, that around 40,000 vehicles faced delays and wider disruption would result in the group’s global production target falling by 50,000 to 700,000 vehicles for the month.

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