Whopping rebound of profits in Japan

TOKYO — Toyota set a breakneck pace for Japan's rebounding carmakers as it racked up record results in the latest quarter, all but impervious to the global pandemic and microchip shortage.

The country's biggest automaker notched all-time high quarterly operating profit in the April-June period — $9.6 billion — as well as record fiscal first-quarter results for net income, revenue and global retail sales.

The only headwinds for Toyota's performance were persistent COVID-19 outbreaks and the bottlenecks in the global semiconductor supply chain. Production interruptions pinched inventories, curtailing how much Toyota could cash in on zooming demand in the U.S. and elsewhere.

Toyota reckoned it lost 100,000 in worldwide volume in the April-June period. But not even that prevented the carmaker from soaring to its record financial results.

Inventory woes were a common theme as Japan's automakers reported earnings last week for their fiscal first quarter ended June 30. Subaru Corp. bemoaned dropping to a seven-day supply in the U.S., while Honda said it was struggling with ways to get more vehicles onto U.S. dealership lots.

The Japanese automakers said they are using new methods to restock inventories faster, despite factory output crimped by chip shortages. Toyota said it is facilitating the trading and transferring of vehicles directly among dealerships to speed deliveries. The carmaker is also sharing advance information about vehicles being shipped from factories to streamline preordering.

Honda said it is leaning more on digitalization to speed deliveries to dealers.

"Using these new methods, we want to adjust the inventory," Executive Vice President Seiji Kuraishi said while announcing financial results last week. "Unless there's inventory for dealers, it will be a very tough situation. We have to think about how to sell despite tight inventory."

Japanese carmakers are challenged not only by the chip crisis but by work stoppages in parts of Asia where governments have been reinstating lockdowns as the COVID-19 delta variant spreads.

But even ultra-tight inventories had a silver lining for Japan's automakers. They allowed the manufacturers to dial down U.S. incentives and fatten profit margins amid rabid demand for their cars.

Both Subaru and Honda joined Toyota in rocketing past last year's troubles.

Subaru zoomed back to profitability on the back of booming business in the recovering U.S., its traditional earnings engine. Sales to overseas markets soared 32 percent to 175,300 vehicles, which includes U.S. sales that advanced 28 percent to 116,600.

"In the U.S., car demand has been very strong on the back of economic recovery, and our sales have been robust as well," CFO Katsuyuki Mizuma said while announcing financial results at a briefing last week. "We think we could have sold more if there had been more in our inventory."

Subaru's U.S. inventory shrank to just a seven-day supply in the latest quarter, compared with an already tight 18 days at the end of April, Mizuma said.

But that short supply helped Subaru rein in spiffs, he said, cutting average vehicle incentive by $500 from a year earlier, to $1,100.

This saved Subaru some ¥1.5 billion ($13.6 million) in incentive costs.

Subaru said it expects the semiconductor shortage to temper sales for the full fiscal year, lopping about 40,000 off its original volume target for the full year. Subaru expects the chip crunch could begin to ease in the October-March period, bolstering second-half results.

Subaru now expects to sell 960,000 vehicles in the full fiscal year ending March 31, 2022.

That revised target is up from the previous year's total of 860,200, but down from Subaru's original forecast for global wholesale volume of 1 million vehicles.

In its fiscal first quarter ended June 30, Subaru Corp. booked operating profit of $266.8 million, reversing an operating loss of $142.0 million the previous year.

Honda said it expects to lose 150,000 vehicles from production plans in the current fiscal year because of the microprocessor bottleneck. Because chips aren't coming back online as fast as previously expected, Honda trimmed its full fiscal-year sales forecast to 4.85 million vehicles worldwide, down from 5 million.

But even Honda's downward revision would represent an increase over the 4.546 million the carmaker delivered the previous year. And Honda still kept its profit outlook unchanged, saying that cost controls and other factors, such as lower incentives, will help offset the volume hit.

In the latest quarter, Honda's global sales rose 26 percent to 998,000.

Honda reported operating profit of $2.2 billion in the April-June period, also reversing a loss from the year before. It sees full fiscal-year operating profit expanding 18 percent.

But it was Toyota that blasted past the pack.

Its operating profit surged to $9.02 billion in the quarter ended June 30, from a meager $125.7 million the previous year. The results delivered an eye-watering 12.6 percent operating profit margin for the most recent quarter.

Toyota said net income notched a fivefold increase to $8.12 billion in the quarter, as revenue soared 72 percent to $71.82 billion.

Global retail sales jumped 49 percent to 2.76 million.

Still, ever-conservative Toyota kept its outlook unchanged for the current fiscal year, citing lingering uncertainty about the coronavirus pandemic and ongoing kinks in semiconductor supply.

Toyota expects global retail sales to increase 6.4 percent to 10.55 million this fiscal year.

And it said revenues will reach near record levels at $271.36 billion — just shy of the all-time high of $273.17 billion in the fiscal year ended March 31, 2019.

Naoto Okamura contributed to this report.