Toyota’s operating profit increased 11 percent in the latest quarter as Japan’s biggest automaker cashed in on the growing demand for light trucks and scaled up cost-cutting.
Operating profit rose to $5.09 billion in the second quarter of this fiscal which ended on September 30 while net income grew by 28 percent to $5.15 billion. Revenue increased b 2.3 percent to $64.3 billion. Global retail sales were up by 1.9 percent to 2.68 million vehicles between the July-September period, including figures from its Daihatsu small-car subsidiary and truck-making partner Hino. Global sales volume increased 0.4 percent to 2.18 million.
Announcing the earnings results on Tuesday, Masayoshi Shirayanagi, Senior Managing Director of Toyota, partly credited big gains from a richer mix of more profitable models as the company focuses on meeting the global demand for crossovers, SUVs and other light trucks.
A new generation of vehicles riding on the company’s new modular platform (Toyota New Global Architecture) has raked in higher profits for Toyota. The updrafts offset a $175.9 million hit from foreign exchange rates. Toyota has been battling negative currency rates and stalling demand in its biggest market, the U.S.A., where the company is racing to supply more light trucks to customers abandoning cars.
Speaking at the earnings announcement, Jim Lentz, the Toyota’s CEO for North America, said he is reviewing the entire US lineup focusing on dumping nameplates and models that are falling in popularity. The company will not abandon passenger cars in a manner seen by rivals such as Ford, but is rethinking offerings in some areas like convertibles or coupes. “We are taking a hard look at all of the segments that we compete in to make sure we are competing in profitable segments and that products we sell have strategic value,” Lentz said.
Toyota’s average US outlays are down $145 per vehicle this year and are about $1,200 below the industry average, Lentz continued. “We’re putting dollars where we’re going to get the most bang for our buck. Most importantly today is incentivizing vehicles that are much more profitable.”
While Toyota brand’s incentives on passenger cars fell 16 percent through September, spending on light trucks increased eight percent. North America wholesale deliveries dipped one percent to 665,000 vehicles in July-September. Regional operating profit, on the other hand, rose 12 percent to $518.1 million.
European wholesale volume edged up 4.8 percent to 240,000 vehicles in this quarter, with regional operating profit surging to more than two times to $340.4 million. Citing improved sales footing and a forecast for more cooperative in foreign exchange rates, the company lifted its earnings outlooks for the current fiscal year ending on March 31, 2019.
Toyota now expects operating profit to break even from last year. It had earlier predicted a 4.2 percent decline in full-year operating profit. In net income, Toyota now sees a 7.8 percent decline, which is a less aute decrease than the 15 percent drop it had originally predicted.