Toyota Earnings: Great Finish to Fiscal 2024 but Large Cost Increases Expected in Fiscal 2025

Toyota finished fiscal 2024 with excellent year-over-year profit growth despite lower unit volumes in Japan following Daihatsu’s safety scandal. We are raising our per share fair value estimates to JPY 3,300 from JPY 3,000 and to $211 from $200 on the time value of money, higher book value for the finance arm, and a weaker average yen aiding profits over our five-year explicit forecast period. Fourth-quarter operating income rose 77.5% to over JPY 1.1 trillion with operating margin up 450 basis points to 10%. A nearly 13% weaker yen against the dollar boosted profit by JPY 200 billion and overall currency benefits to profit growth were JPY 305 billion, nearly two thirds of the JPY 485.7 billion profit increase. Lower material costs and cost-reduction efforts contributed another JPY 185 billion of profit increase and more than offset JPY 100 billion of higher labor costs.