by Jim Woods | December 9, 2011 2:53 pm
Natural disasters certainly took their toll on a number of companies this year, but perhaps none more so than Japanese auto giant Toyota (NYSE:TM). On Friday, the company announced it had slashed its fiscal year 2011 profit forecast by more than half to 180 billion yen ($2.3 billion).
Toyota said its outlook for the period ending March 31, 2012, is going to fall drastically below its fiscal 2011 profit of 408.1 billion yen ($5.25 billion). Sales also are expected to be lower, as the company forecasts the metric to be about 18.2 trillion yen ($234 billion), down from 19 trillion yen ($244.5 billion) a year ago. The key operating profit metric is expected to decline a whopping 57% to 200 billion yen.
The two culprits cited as an explanation for the detuned fiscal engine were the strength of the Japanese yen and the disruption in the supply lines out of Thailand. Toyota said the currency’s strength cut 190 billion yen off its fiscal year profit forecast, while the worst floods in Thailand in more than 50 years caused a downward revision of 120 billion yen.
Toyota has a production facility in Thailand that was adversely affected by the floods, but it’s not the only automaker to be hurt by the rising Thai waters. Honda (NYSE:HMC) was forced to suspend production at its automobile plant in Ayutthaya, Thailand, due to flood waters. Ford (NYSE:F) and General Motors (NYSE:GM) have production facilities in Thailand, although both have seen little or no flood impact on their respective facilities.
The combination of a strong yen and the Thai floods is likely to dethrone Toyota as the world’s biggest automaker. General Motors and Volkswagen (PINK:VLKAY) are set to swerve into Toyota’s No. 1 lane, as the Japanese company suffered a slowdown earlier this year after the devastating earthquake/tsunami that struck the nation in March.
In terms of share price performance, Toyota has managed to show a lot more horsepower than its rivals. Although the stock is down 15.5% year-to-date, that performance is much better than its peers. So far this year, HMC shares have shed 22.7%, Ford shares are down 37.7%, and GM’s share engine has blown, down 43.4% in 2011.
Given the new lowered forecast for Toyota, you have to wonder how long the company’s share price can hold up. Investors with a penchant for auto stocks might be well served to keep this in mind as they consider which road to travel next.
As of this writing, Jim Woods did not hold a position in any of the aforementioned stocks.
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