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Toyota Motor Shifts Focus to Return on Equity
TOKYO (Reuters) – Toyota Motor Corporation is placing greater emphasis on return on equity (ROE) as a key performance indicator. During a recent interview, a senior finance official indicated that the automaker is aiming to increase its ROE to 20%, although they noted that this goal remains a guideline rather than a fixed target.
Masahiro Yamamoto, the chief officer of Toyota’s Accounting Group, acknowledged the limitations of ROE as a measure, emphasizing the importance of consistent performance over arbitrary timeframes. “What’s crucial is not merely hitting a specific percentage by a certain date but ensuring that we maintain that performance consistently,” he stated.
ROE serves as an important metric, evaluating a company’s profitability against its shareholders’ equity. As of April-December 2024, Toyota reported an ROE of 15.6%, which is close to the 15.8% it achieved in the preceding fiscal year. This reflects a significant improvement from 9.0% in fiscal 2022 and 11.5% the year prior, highlighting Toyota’s ongoing efforts to enhance profitability.
The company has strategically concentrated on boosting its profit margins by optimizing production costs, which in turn lowers the break-even point needed for consolidated sales.
Toyota is expected to release its next ROE figure during the second week of May when it typically announces its full-year financial results.
In light of recent developments, including a 25% tariff imposed by the U.S. on imports from Mexico and Canada, Yamamoto stated that the company—operating assembly plants in both regions—would provide updates on how these tariffs could impact its operations once more information is available.
Additionally, last month, Toyota announced that its nearly $14 billion manufacturing facility in North Carolina—its 11th plant in the United States—was prepared to commence production. This site is set to start shipping batteries for hybrid and electrified vehicles as early as April, marking a significant step in Toyota’s commitment to electrification.
Source
finance.yahoo.com