After raising its share performance in North America, Japan’s biggest automaker, Toyota, is planning to raise $1.8 billion in a share buyback. It announced this on Thursday after realizing an improved output in its global sales in the second quarter.
The car manufacturer increased its sales volume to $6.1 billion, an increase of 14% for the second quarter of the year. This, according to the company, is the biggest second-quarter sales it has recorded since 2015. The gross profit for this quarter is more than the average gross profit of $5.13 billion estimated for the past nine quarters.
Last year, Toyota sold 2.18 million vehicles, which is lower than the sales of 2.75 million this year already. With this improvement in sales globally, the company is trying to reinvest the extra profit to reposition itself in the car manufacturing industry.
In Asia alone, Toyota’s sales increased by 3.4% while sales in its biggest market, North America, increased by 5.6%. It represents close to 100% increase in the company’s operating profit in the region. And the major reason for this increase is reduced discounting, according to the statement issued by the company.
North America has always been a profitable market
North America’s love for Toyota’s product is unquestionable. The region is the biggest market for the company, even greater than Asia, its headquartered base. North America was quite receptive to Toyota’s new Camry introduced into the market late last year. Even the new Corolla and RAV4 already have wide reception in the region. As a result, the company was able to reduce incentives, which boosted the operating profit, according to Operating Officer Kenta Kon.
The car company has announced that it’s going to buy back 34 million shares before the end of Match next year. The shares represent about 1.8 billion worth of the company’s stock.
With high expectations for the value of Yen to grow, Toyota expects that the operating profit could drop by 2.7% after a steady growth for the past three years.
Similarly, Toyota has reduced the annual forecast for its global car sales to 10.7 million, a 2.7% reduction. The forecast weighted in the company’s declining demand in Thailand, Indonesia, and India.
Even so, Toyota is still expecting a record sales increase by the end of the year.
But other rival companies like Mazda Motors and Mitsubishi are not doing so well compared to Toyota. As a result of declining demand for their cars, they have reduced their yearly projections by 64%. The car companies acknowledged that their investment in electric vehicles and self-driving cars have significantly affected their projections for the year.
Toyota also reiterated that cost-cutting had become a problem because of rising labor costs and improved R&D investment for the next generation of electric cars. Mitsuru Kawai, Toyota’s Executive Vice President, explained that the company is trying to improve efficiency and reduce cost in all its manufacturing units. According to him, it’s the way to go if the company wants to survive the swift change that is coming in the car manufacturing industry.
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