The biggest automaker in the world, Toyota Motor Corp., raised its operating profit forecast last Friday which was a move that’s already expected because of the drop in the value of yen which led to an increase in the Toyota motors sales in other countries but a decline of demand in Japan.
For Toyota, the weakening of yen is an advantage as it exports almost half of its products in Japan. What helped the bottom line of the automaker is the cost-cutting the company undertook with the hovering of the year at record high in the past few years.
Toyota is now expecting that it would be able to record earnings of 2.70 trillion yen for the fiscal year that ends March 31. If the company reaches this goal, this profit would be 8% higher than Toyota’s previous forecast of 2.5 trillion yen.
The increased profit outlook puts the company’s new profit margin forecast at 10% from the 9.4% that it previously estimated.
According to Toyota’s managing officer Takuo Sasaki, this higher profit margin forecast is a result of the efforts of the company which started during the era when yen was very strong and it increased its per-vehicle profitability and reduce its fixed costs.
For the fourth quarter of 2014, Toyota’s operating profit increased to 27% or 762.88 billion yen which is higher than the analysts’ estimates of 690.21 billion yen. The company also changed its assumption of its U.S. dollar-yen exchange rates for the current year.
Right now, company watchers are waiting for the end of the 3-year freeze on new factories of Toyota which will be in March of 2016 aimed at avoiding unchecked expansion. Meanwhile, the constraints on capacity are widely expected for the company to keep its sales growth in check.
Last January, Toyota said that it’s expecting a 1% fall in its worldwide sales for the calendar year which is due to the huge sales decline in Japan linked to the lingering effect of last April’s sales drop.