Daily Management Review

Analysts Expect Japan Automakers To Likely Report Fall In Profit But Investors To Focus On Chip Shortage


Analysts Expect Japan Automakers To Likely Report Fall In Profit But Investors To Focus On Chip Shortage
Investors in Japanese auto companies will be looking out for trading cues given by the companies about their assessment of the future impact of the global chip shortage that has forced major auto companies around the world to curb production even as the analysts expect the biggest auto makers of the country to report depressed earnings later this week.
Over the past few months, auto companies globally have been forced to either adjust or suspend production because of the chop shortage globally which was triggered by a sudden surge in demand for electronic devices globally during the pandemic as well as because of sanctions imposed by the United States on Chinese etch companies.  
The global supply crunch has been exacerbated by continued power outages in Texas where factories of a number of chipmakers are located and a devastating fire at the semiconductor making factory of Japan’s Renesas Electronics Corp in Japan.
"The big question will be by how much automakers reduce earnings forecasts due to the slowdown in production and, consequently, lower sales," said analyst Julie Boote at Pelham Smithers Associates. "What should be an otherwise strong (post-pandemic) recovery year could be somewhat dampened by the supply predicament."
At the same time, prices of vehicles are being pushed up by tighter supplies and yet robust auto demand, specifically in the United States, which has helped to offset the hit to company profits from production cuts, said analysts.
According to Refinitiv SmartEstimate estimates based on expectations of 24 analysts, a 12.5 per cent drop in its operating profit at 2.1 trillion yen ($19.30 billion) is expected to be reported by Toyota Motor Corp - the largest auto maker of the world by vehicle sales last year, for its fiscal year ended March 31. Refinitiv SmartEstimate forecasts also showed that profit is likely to rebound to 2.6 trillion yen in the current fiscal year started April 1.
Analysts said that Toyota has so far been largely unscathed by the chip shortage, even as many of the global rivals were forced to cut down production because of the same shortage, which is because of the larger inventory of semiconductors maintained by Toyota.
Data from Refinitiv SmartEstimate showed that an 11 per cent fal in in profit at 560 billion yen is expected ot be reported by Honda Motor Co Ltd while a loss of 142 billion yen, higher than the 40.5 billion yen loss a year prior, is also likely to be reported by Nissan Motor Co Ltd for the entire fiscal year of 2020-21.
Refinitiv SmartEstimate data also claimed that a profit of 791 billion yen is likely to be reported by Honda for the current business year while a profit of 141 billion yen is also expected to be reported by Nissan for the same period.
Nissan is scheduled to report earnings on Tuesday, followed by Toyota on Wednesday and Honda on Friday.