TOKYO: Toyota Motor Corp. reported a slight decline in first-quarter operating profit Tuesday but raised its full-year earnings forecast and announced a fresh share buyback program, as the automaker leaned on cost cuts, favorable currency swings and strong hybrid sales to offset pressure from Middle East disruptions.
The world’s largest automaker by sales posted operating income of 1.06 trillion yen for the April-to-June quarter, down 102.6 billion yen, or about 9%, from 1.17 trillion yen a year earlier. Sales revenue rose 10% to 13.5 trillion yen from 12.3 trillion yen, lifted by a weaker yen and higher vehicle prices.
Net income attributable to Toyota Motor Corp. climbed 76% to 1.48 trillion yen from 841.3 billion yen, boosted largely by a swing in other income that included gains tied to the company’s equity investments.
Despite the operating profit decline, Toyota executives said the results held up better than expected given a difficult external environment.
“Despite significant changes in the business environment, (we) secured results on par with the previous fiscal year through continuous improvement efforts,” the company said in materials accompanying the results, citing foreign exchange effects, cost reductions, expanded value chain profits and increased sales of hybrid-electric vehicles.
Sales volume slips slightly
Toyota sold 2.395 million vehicles on a consolidated basis in the quarter, down slightly from 2.411 million a year earlier, a decline attributable in part to the prior-year period’s inclusion of Hino-brand vehicles. Total retail sales fell nearly 4% to 2.714 million units.
Electrified vehicles continued to gain ground, accounting for 55.3% of Toyota and Lexus retail sales, up from 47.4% a year earlier. Battery-electric vehicle sales more than doubled to 114,000 units, while hybrid sales rose 7% to 1.238 million units.
By region, Japan sales rose nearly 9% to 524,000 vehicles, while sales in the company’s catch-all “Other” category — which includes the Middle East — tumbled more than 20% to 332,000 vehicles amid regional conflict.
Middle East conflict weighs on results
Toyota said the ongoing conflict in the Middle East cut into both current results and future projections. The company estimated the conflict trimmed 50 billion yen from marketing efforts and 25 billion yen tied to materials pricing and supplier costs in the quarter, contributing to the year-over-year operating income decline.
Looking ahead to the full fiscal year, Toyota said the Middle East situation is expected to have a larger impact, citing a combined hit of roughly 165 billion yen tied to materials and supplier costs and marketing efforts, though the company said it is offsetting some of that drag through new logistics routes to the region.
A separate note in Toyota’s presentation said the financial impact of the 2026 Kumamoto earthquake was still under assessment and had not yet been factored into the company’s forecast.
Full-year forecast raised
Toyota raised its operating income forecast for the fiscal year ending March 2027 to 3.4 trillion yen, up 400 billion yen from its previous guidance of 3 trillion yen. The company also lifted its sales revenue forecast to 54 trillion yen from 51 trillion yen and increased its net income forecast to 3.25 trillion yen from 3 trillion yen.
The revised guidance reflects updated foreign exchange assumptions — Toyota now expects an average rate of 160 yen to the dollar for the year, up from a prior assumption of 150 yen — along with continued cost discipline and marketing efforts.
Even with the upward revision, the new forecast represents a decline from the 3.77 trillion yen in operating income Toyota reported for the just-completed fiscal year ended March 2026, a drop the company attributed primarily to higher supplier and materials costs that outweighed currency tailwinds.
Toyota left its full-year dividend forecast unchanged at 100 yen per share, up from 95 yen the prior year, and maintained its consolidated vehicle sales forecast at roughly 9.6 million to 9.7 million units, revised slightly upward from its earlier projection of 9.6 million.
$6.7 billion buyback authorized
Toyota’s board authorized a share repurchase program of up to 1 trillion yen (about $6.7 billion), to be conducted through open-market purchases, along with the cancellation of 200 million shares of treasury stock, or about 1.37% of shares outstanding.
The company said the buyback reflects its current stock valuation and share price levels and is part of a broader effort to balance growth investment with shareholder returns while improving capital efficiency. The move follows a much larger 3.66 trillion yen buyback in the prior fiscal year that included shares acquired through Toyota’s tender offer as part of the privatization of Toyota Industries Corp.
Manufacturing footprint expands
Toyota also detailed plans to expand global production capacity as part of a broader restructuring effort aimed at strengthening earning power. The company confirmed plans announced in July for a new Texas plant to build the Tacoma pickup, with production of 150,000 units annually slated to begin in 2030, and a fourth plant in India, announced in May, that will add 100,000 units of annual capacity beginning in 2029.
Toyota also said it would begin supplying its newly unveiled Land Cruiser “FJ” model, along with the Noah and Voxy minivans, to the Japanese market from overseas production sites to speed deliveries to customers.
The company is separately investing in next-generation hybrid battery technology, saying it plans to transition roughly 600,000 vehicles’ worth of production capacity to improved batteries in 2027 and 2028 as part of an effort to boost hybrid performance and reduce costs.
Financial services, China business diverge
Toyota’s financial services segment posted operating income of 229.7 billion yen, up from 188 billion yen a year earlier, driven by growth in its loan balance. In China, operating income at consolidated subsidiaries fell to 41.5 billion yen from 55 billion yen, while Toyota and Lexus retail sales in the country dropped 28% to 324,000 vehicles, as the company cited the effects of marketing activities in the increasingly competitive Chinese market.
