(Press release provided by the ratings agency)
TOKYO, Aug 6 - Standard & Poor's Ratings Services said on Wednesday that Toyota Motor Corp.'s weaker first quarter (April-June, 2003) results will not affect the rating on the company (AAA/Negative/A-1+).
Toyota's operating income decreased by 13.2% from the same period last year, and its operating margin dropped to 8.3% from 10.1% a year earlier due to an increase in marketing-related and other expenses and a weaker yen against the U.S. dollar. The falls were only partially offset by cost reductions.
Toyota is facing increasing pressure from competition in the global auto industry, particularly in North America, which Standard & Poor's estimates to account for 70%-80% of its total operating profits.
Intensified pricing pressures resulted in weaker fourth-quarter performance in fiscal 2002, continuing into the first quarter of 2003.
The negative outlook on the rating primarily reflects concerns over this intensifying pricing pressure amid a cyclical weakening of demand in the U.S. and its impact on Toyota's profitability.
Owing to tougher market conditions, Toyota's earnings are expected to deteriorate in fiscal 2003 (ending March 2004) compared to fiscal 2002, but should remain strong.