Fading impact of consumer boycott in China

Japanese automakers step on profit accelerator

GMT 12:42 2013 Wednesday ,06 November

Arab Today, arab today Japanese automakers step on profit accelerator

Toyota Motor employee works on assembly line for Corolla Axio
Tokyo - Arab Today

Toyota Motor employee works on assembly line for Corolla Axio Japanese automakers are stepping on the profit accelerator as a weak yen, recovering US demand and the fading impact of a consumer boycott in China boost their bottom line. The sector's buoyant half-year results underscore a firm recovery after the 2011 quake and tsunami devastated sales and production, and highlight a rebound in demand from some key markets.
However a sharp decline in the yen over the past year was the key driver behind bumper profits.
Toyota acknowledged the currency's impact Wednesday as it said net profit in the six months to September soared 82.5 percent.
Japan's most valuable company also raised its annual earnings forecast.
Toyota, the world's biggest automaker, was the last of Japan's major carmakers to publish half-year earnings after Honda last week said its net profit soared on the weaker yen and stronger US demand.
Smaller rivals Suzuki and Mitsubishi Motors also reported upbeat numbers.
Nissan meanwhile said its half-year net profit rose 6.5 percent while sales rose 14.7 percent from a year earlier.
However shares in Japan's number two automaker plunged more than 10 percent Tuesday after Nissan slashed its full-year profit forecast, blaming a sluggish European market and expensive product recalls.
Nissan said sales to China, which accounts for about one-quarter of its revenue, were also down in the wake of a Tokyo-Beijing territorial dispute that sparked a consumer boycott of Japanese brands.
Toyota did not specifically address the issue of China, the world's biggest vehicle market, on Wednesday.
However Japanese automakers' sales in the country were dented in the wake of the diplomatic row, which flared again last year after Tokyo nationalised part of a small East China Sea archipelago also claimed by Beijing, setting off demonstrations across China and the damaging boycott.
Toyota and Honda were less affected by the China sales downturn than Nissan, while the pair benefited more from a slide in the yen, which boosts their competitiveness overseas and inflates the value of repatriated foreign income.
All three have said the damage from the territorial row is fading.
"Japanese automakers have largely benefited from a cheaper yen," said Tatsuya Mizuno, head of Tokyo-based Mizuno Credit Advisory.
"The US market is recovering to levels before Lehman Brothers' collapse, and the sector's presence is also coming back in China compared with a year ago when they were hit hard by the political dispute.
"At home, also, the environment is getting better," he added.
Sales tax hike may boost demand
Japanese manufacturers have benefited from an economic policy blitz launched by Prime Minister Shinzo Abe, with huge monetary easing measures from the premier's hand-picked team at the Bank of Japan helping push down the yen since the start of the year.
Manufacturers are also eyeing a likely pickup in domestic demand before a sales tax rise next year.
But Mizuno warned that any upswing in the yen or setback in the key US and China markets would slam the brakes on growth.
"If currency rates change direction... it would jeopardise the environment. Toyota is especially reliant on overseas markets and is more vulnerable to currency fluctuations," he said.
Toyota on Wednesday cited cost cuts and the weaker currency for inflating its six-month profit, even as global unit sales slipped about 1.0 percent to 4.46 million units.
The company earned 1.0 trillion yen ($10.14 billion), up nearly 83 percent year-on-year, with total revenue of 12.53 trillion yen, up 14.9 percent year-on-year.
The maker of the Camry sedan and Prius hybrid raised its profit forecast for the fiscal year to March to 1.67 trillion yen, from 1.48 trillion yen previously.
"In addition to the impact of the weaker yen, operating income increased due to our efforts with our suppliers and distributors for profit improvement through cost reduction and marketing activities, such as enhancement of the model mix," said Toyota vice president Nobuyori Kodaira.
The company said it still expects to sell 9.1 million vehicles in the year to March 2014.
Source: AFP

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