Top Toyota supplier says bottom line hit already factored in

The news took investors by surprise — shares in Toyota slumped as much as 4.7 percent on Thursday, the most since March 2020 — even though Toyota kept its annual operating profit outlook steady earlier this month, maintaining its forecast for 2.5 trillion yen for the fiscal year through March, versus analysts’ average projection for 2.95 trillion yen.

Stock in Denso decreased 4.3 percent on Thursday and tumbled as much as 9.7 percent on Friday, its biggest intraday drop since March last year, before erasing some of those losses to close down 8.8 percent.

Toyota fell again on Friday, although by a smaller amount to close 4.1 percent lower, and at least one analyst expressed confidence the world’s No. 1 carmaker, renowned for its generally good supply-chain management, can weather the upset.

“Toyota seems to be expecting things to get back to normal in October” even though there’s a possibility the disruption won’t end in September, Koji Endo, an analyst at SBI Securities Co., said. 

“It’s a great time to buy the stock as prices have fallen,” he said. “Generally, output reductions caused by the supply side, not the demand side, won’t impact stock prices in the long run, or if they do, they recover quickly.”

The reaction in credit markets was relatively subdued with the spread on Toyota’s $1 billion dollar-denominated notes due 2026 widening to 41 basis points on Friday, the highest since early May. The cost to insure Toyota’s yen debt rose by 1 basis point Thursday, according to CMA data.

Denso, the world’s second-largest parts and systems provider in terms of sales, said while there are continued risks such as the spread of COVID in Southeast Asia, it has a strong stockpile of inventory it deems risky.

Looking ahead at the months from October through November, Denso isn’t planning to shut any of its plants due to parts shortages, Matsui said.

Denso ranks No. 2 on Automotive News’ list of the top 100 global parts suppliers with an estimated $41.1 billion in sales to automakers in its 2020 fiscal year.

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