Toyota’s first-quarter profit nearly wiped out as coronavirus erodes car sales

However, shares in Japan’s top automaker rose 2.3% in a weaker broader market .N225 as analysts had expected a loss, while comments from a company spokesman on a faster-than-expected sales recovery also provided support.

Toyota’s operating profit plunged 98% to 13.9 billion yen ($131.73 million) for the three months ended June, better than a consensus estimate for a loss of 179 billion yen drawn from a Refinitiv poll of seven analysts.

The sharply lower earnings underlines the challenges the auto industry is facing because of the pandemic that has shuttered factories and kept customers out of dealerships.

But Toyota is weathering the virus outbreak better than many of its rivals. Most global automakers fell into the red in the latest quarter, and many, including Ford Motor Co F.N, Nissan Motor Co 7201.T and Mitsubishi Motors Corp 7211.T, are bracing for full-year operating losses.

Toyota reiterated its annual operating profit forecast of 500 billion yen, its weakest in nine years, arguing that the coronavirus could still hurt its brighter sales outlook.

“The pace of recovery in a number of regions has been faster than we had initially forecast,” a Toyota spokesman said.

“But the virus situation continues to place many uncertainties on the business outlook … and we see a possibility that our forecast could change.”

(For interactive charts on Toyota’s vehicle sales and profit, click)

SALES SEEN AT NINE-YEAR LOW

The maker of the RAV4 SUV crossover and the Prius gasoline hybrid expects global retail sales of 9.1 million cars this year, its lowest in nine years.

That would mark a 13% decline from 10.46 million last year, but is an improvement on a previous outlook for a 15% drop.

Toyota expects to take the most serious hit in North America, its biggest market, accounting for about a quarter of its global sales, and where it sees an annual sales drop of 14%.

A 62% tumble in the region during the first quarter led to a 50% slump in consolidated global sales to 1.16 million units.

But as sales have plummeted in most regions, China has been a bright spot for Toyota. Demand in the world’s biggest car market recovered faster than elsewhere as the tightly controlled state has largely beaten back the pandemic and reopened its economy.

Toyota’s Lexus luxury brand has been a big beneficiary of the return in demand, pushing January-July sales up 7% on the year thanks to online marketing campaigns during the country’s lockdown. Toyota expects global sales to gradually improve through December, returning to normal in January-March 2021 to be up 5% on the year.

Starting in April, Toyota began using the International Financial Reporting Standards to calculate its consolidated financials results.