Toyota flags ¥670bn earnings hit from Iran war as profit halves and outlook disappoints

Market Performance

South African Market Summary

South African equities ended weaker on Friday, with the JSE All Share index falling 1.06% to 117,888.93 points, while the Top 40 index declined 1.1% to 110,096.09 points, reflecting a softer local risk tone. On the macroeconomic front, South African Reserve Bank data showed net foreign reserves increased to US$73.76 billion at the end of April, up from US$73.19 billion in March, providing a modestly firmer external buffer. This week, domestic investors will focus on unemployment, manufacturing production and mining output data for further insight into the underlying health of the economy. Political developments also remain in focus after President Cyril Ramaphosa said he respected the Constitutional Court judgment reviving an impeachment process against him.

European Market Summary

European equities closed weaker on Friday as escalating Middle East tensions weighed on risk sentiment, ending a geopolitically driven week on a softer note. The pan-European STOXX 600 fell 0.7% to 612.14 points, although it still recorded a second consecutive weekly gain. Germany’s DAX led regional declines, losing 1.3%. Monetary policy remained in focus after ECB President Christine Lagarde said the central bank was well positioned to respond to any inflation shock, while Isabel Schnabel warned that the Iran war had increased upside inflation risks. Markets are now pricing in at least two ECB rate hikes this year. In the UK, hiring momentum weakened in April as recruiters turned more cautious, while Poland secured €43.7 billion in EU defence financing.

US Market Summary

US equities advanced on Friday, with the S&P 500 and Nasdaq reaching record highs as AI-related stocks continued to lead market momentum. Nvidia rose 1.8%, while Micron Technology and Sandisk each gained more than 15%, supported by strong demand linked to the rapid expansion of AI data-centre infrastructure. Earnings season also remained constructive, with first-quarter S&P 500 earnings on track to rise almost 29% year-on-year, according to LSEG I/B/E/S. Of the 440 companies that have reported, 83% have exceeded earnings expectations, well above the long-term average of around 67%. Stronger-than-expected April employment data and a steady 4.3% unemployment rate reinforced expectations that the Federal Reserve will keep rates unchanged for now.

Asian Market Summary

Asia-Pacific markets opened firmer on Monday, with South Korea’s Kospi reaching a fresh record high as investors weighed rising oil prices and escalating US-Iran tensions. In China, producer inflation accelerated sharply, with the PPI rising 2.8% year-on-year in April, well ahead of expectations and marking a 45-month high, while consumer inflation also strengthened amid elevated global energy costs. Export growth improved as factories moved to meet AI-related demand and stockpiling orders, although China’s widening trade surplus with the US is likely to attract renewed scrutiny ahead of President Donald Trump’s expected visit to Beijing. However, domestic demand remains uneven, with April car sales falling 21.6% year-on-year to 1.4 million vehicles, marking a seventh consecutive monthly decline.

Currency Market Summary

The South African rand strengthened on Friday, supported by a softer US dollar, although investors also assessed domestic political risk after the Constitutional Court revived impeachment proceedings against President Cyril Ramaphosa. Broader currency markets shifted in early Asian trade on Monday, with the dollar advancing against major peers as stronger-than-expected US jobs data and fragile US-Iran ceasefire conditions underpinned safe-haven demand. The dollar index traded at 98.001, supported by Friday’s non-farm payrolls report, which showed the US economy added 115,000 jobs in April, almost double expectations. The resilient labour market reinforced expectations that the Federal Reserve will keep interest rates unchanged for some time, limiting near-term pressure on the greenback.

Commodity Market Summary

Oil prices rose sharply on Monday, gaining US$3 a barrel after the United States and Iran failed to agree on a Washington-drafted peace proposal, leaving the Strait of Hormuz largely closed and global energy supplies constrained. Hopes for an imminent resolution to the 10-week conflict faded after President Donald Trump described Iran’s response to proposed peace talks as unacceptable. Markets will now monitor Trump’s scheduled visit to Beijing on Wednesday, where Iran is expected to feature in discussions with Chinese President Xi Jinping. Gold prices weakened as higher oil prices raised concerns that inflationary pressures could keep interest rates elevated for longer. Separately, China’s first-quarter gold production declined year-on-year after safety inspections forced some smelters to suspend output for maintenance.

Domestic Company News

The Foschini Group Limited (TFG) -3.12%

The Foschini Group reported 7.1% sales growth for FY2026, or 7.7% in constant currency, supported by TFG Africa and the inclusion of White Stuff, although underlying trading remained pressured. TFG Africa sales rose 5.0% for the year, with Q4 improving 7.5%, but constrained consumer spending and earlier margin pressure drove a mid-teens decline in Africa EBIT. TFG London sales increased 29.4% in GBP, largely reflecting White Stuff’s contribution, while sales excluding the acquisition were flat. TFG Australia remained weak, with FY2026 sales down 1.5% in AUD. EPS is expected to decline 55%–65%, impacted by non-cash impairments, while HEPS is expected to fall 30%–40%. Management remains focused on cost discipline, efficiencies and prudent working capital management.

Newpark REIT Limited (NRL) 0.00%

Newpark REIT advised that revised funds from operations per share for FY2026 will be 50.07 cents, ahead of the previously budgeted range of 41.50 to 48.50 cents, supported by lower-than-expected operating costs. Subject to final board approval, the company intends to declare a final dividend of 24.07 cents per share, taking the total dividend for the year ended 28 February 2026 to 50.07 cents per share, representing a full 100% payout of FFOPS. However, the total dividend is still 36.1% lower than in FY2025, highlighting a weaker year-on-year distribution profile. The financial information remains unaudited, with audited results expected on or about 15 May 2026. Newpark also remains under cautionary pending further announcements.

Finbond Group Limited (FGL) 0.00%

Finbond Group issued an initial trading statement for the year ended 28 February 2026, advising shareholders that earnings are expected to improve materially from the prior year. EPS is expected to increase by at least 80% to at least 12.6 cents per share, compared with 7.0 cents per share in FY2025. HEPS is expected to increase by more than 100% to at least 2.9 cents per share, reversing the prior year’s headline loss of 1.9 cents per share. The update points to a meaningful recovery in reported profitability, although final ranges for EPS and HEPS will be provided in a subsequent trading statement. The financial information remains unaudited, with audited results expected on SENS by 29 May 2026.

Global Company News

Toyota Motor Corporation (7203) -2.18%

Toyota warned that the Iran war is expected to reduce earnings by around ¥670 billion, or US$4.3 billion, in the current financial year, reflecting one of the most significant corporate impacts reported from the conflict to date. The world’s largest automaker reported an almost 50% drop in quarterly operating profit to ¥569.4 billion for the three months to 31 March, its weakest quarterly profit in more than three years. Full-year operating profit is expected to fall to ¥3 trillion, well below analyst expectations, as higher material costs, delivery delays and weaker volumes outweigh strong hybrid demand. Toyota still expects hybrid sales to exceed 5 million vehicles for the first time this year, but shares fell 2.2% to their lowest close since mid-October.

Saudi Aramco (2222) +0.81%

Saudi Aramco reported a 25% increase in first-quarter net profit to US$32.5 billion, ahead of LSEG consensus expectations of US$30.95 billion, supported by higher crude, refined product and chemicals prices and volumes. Revenue rose nearly 7% year-on-year to US$115.49 billion, while adjusted net profit reached US$33.6 billion. The group also demonstrated supply resilience amid US-Iran war disruptions, using its East-West crude pipeline at full capacity to mitigate the impact of curtailed Strait of Hormuz shipping. Capital expenditure eased to US$12.1 billion, while free cash flow declined to US$18.6 billion due to higher working capital. Aramco declared a first-quarter base dividend of US$21.9 billion, up 3.5%, although gearing rose to 4.8% from 3.8% at end-2025.

Nintendo Company Limited (7974) +3.55%

Nintendo shares fell 7% in Tokyo on Monday after the company announced price increases for its Switch 2 console, raising concerns over demand elasticity among casual gamers and the strength of its near-term product cycle. The Japanese-language Switch 2 Japan model will increase by ¥10,000 to ¥59,980 from 25 May, while prices in markets including the US are set to rise from 1 September. Although Nintendo delivered robust hardware sales for the financial year ended March, its outlook for the current year disappointed investors, despite the company’s traditionally conservative guidance approach. Market concerns were compounded by a perceived lack of high-profile game releases to support momentum, while rising memory chip prices continue to pressure electronics manufacturers.

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