Toyota Lifts Profit Outlook and Unveils Massive Share Buyback Amid Global Headwinds

The world’s biggest car maker on Tuesday injected a dose of optimism as it lifted its full-year operating forecast and pledged to Really reward shareholders with cash. Toyota now forecasts operating profit of 3.4 trillion yen (approximately US$ 21.6 billion) for the year ending March 2027.

This is an increase of 13 percent on its previous guidance, and largely attributable to the influence of a depressed Yen making Japanese exports more attractive in the world market. This was after Toyota revised its assumed average exchange rate to 160yen per dollar from the previously estimated 150yen. A move of this size can mean hundreds of billions of yen in swings in profit for a company of Toyota’s scale, and management preferred to lock in the gain rather than wait indefinitely to see where the yen was heading. Even after the upgrade, the new target still lagged behind last year by around 10 percent, as a reminder of the tenuous road ahead.

In tandem with this forecast increase, Toyota announced they will implement a share buyback of up to 1 trillion yen (approx. 6.3 billion dollars). As a part of this effort the automaker will repurchase 200 million treasury shares, decreasing the number of outstanding shares by approximately 1.37%. At maximum, this buyback will represent around 4.22% of the total shares outstanding. Toyota holds an enormous cash position, roughly 15 trillion yen (as of the end of 2008, the last reporting year), and has seen portions of this year trade at or below book value.

Though some investors had hoped for a more substantial return of capital, there is no doubt the size is one of the more ambitious shareholder returns in the Japanese industrial landscape. Pre-reporting first quarter figures presented a more mixed picture. Operating profit declined by 9% yoy (and missed consensus by both the most recent quarter and the previous quarter), marking a fifth straight quarterly decline. Global vehicle sales edged down by 3.5% in 2Q. China was Most of all weak, with sales down 28% as local EV makers gained advantage. Middle East volumes were also down by about a third as conflict prevented ships from departing and surged logistics and raw-material costs. Toyota puts the impact of Iran-related shocks at around 510bn yen, down from a previous 670bn yet still a sizeable offset.

North America and Europe provided some offset. Hybrid technology, initiated and driven by Toyota, is still a hit with Americans, that want the benefits of electric driving with lower overall fuel costs of a hybrid but don’t want to be wholly reliant on the network of chargers. U.S. sales grew 1 percent, while a similar growth was also marked in Europe. These areas of strength encouraged the company to up the target for Full Year Vehicle shipment by 100,000 to 9.7 million.