Aug. 3 (Bloomberg) -- Toyota Motor Corp., poised to become the world's largest automaker, reported first-quarter profit that beat analysts' estimates as a weaker yen increased revenue from Corolla compacts and Camry sedans.

Net income surged 32 percent to a record 491.5 billion yen ($4.13 billion), or 153.9 yen a share, in the three months ended June 30, from 371.5 billion yen, or 115.2 yen, a year earlier, the Toyota City, Japan-based company said. That was more than the 457 billion yen median estimate of five analysts surveyed by Bloomberg. Sales rose 16 percent to 6.52 trillion yen.

Toyota reiterated its forecast of record full-year earnings after it outsold General Motors Corp. in the first half on demand for small cars. That outlook may be threatened after July sales in the U.S., its most profitable market, dropped the most in three years as falling home prices reduced spending.

``Toyota will probably have another great year with strong sales aided by its fuel-efficient models abroad,'' said Yoshihiro Okumura, who helps oversee the equivalent of $365 million at Chiba-gin Asset Management Co. in Tokyo. ``But there is a risk that needs to be closely watched, and that's how weak the U.S. market can get.''

The company's American depositary receipts gained 31 cents to $118.90 at 4:05 p.m. in New York Stock Exchange composite trading. They have declined 11 percent this year.

Toyota, GM

Toyota's first-half vehicle sales rose 8.1 percent to a record 4.713 million, while GM's sales gained 1.7 percent to 4.67 million. Higher gasoline prices have spurred demand for the Japanese automaker's small cars and made GM's pickup trucks and sport-utility vehicles less popular in its home market.

Toyota posted the equivalent of $54.6 billion in revenue, exceeding GM's $46.8 billion in the April-June quarter. GM earned $891 million in the period. Toyota is valued at $214 billion, more than 11 times more than GM.

In July, after the first fiscal quarter, Toyota's U.S. sales dropped 7.3 percent. Rivals also fell, with declines of 22 percent for GM and 19 percent for Ford Motor Co. Toyota said today that it expects total U.S. demand this year to be little changed from 2006.

The yen was about 5.3 percent weaker against the dollar in the April-June quarter compared with a year earlier, and 11.7 percent weaker against the euro, boosting the value of repatriated profits from the U.S. and Europe.

Currency Gains

The weaker currency added 100 billion yen to operating profit for the quarter or about 15 percent of the total. Toyota's annual operating profit increases about 35 billion yen for every 1 yen that Japan's currency weakens against the dollar, and 6 billion yen for every 1-yen decline against the euro, according to Credit Suisse Group.

``The weaker yen is really helping Toyota's earnings as it sells so many cars abroad,'' said Koichi Takatsuka, who oversees $1 billion at UAM Japan Inc. in Tokyo.

Vehicle sales grew 3.4 percent to 2.16 million units in the quarter. The biggest increase came in Asia, where sales surged 15 percent to 220,000 units, according to a Bloomberg calculation. Sales rose 8 percent in Europe and 2 percent in North America. Toyota said it aims to beat its global sales forecast of 8.89 million vehicles this fiscal year.

Asian Recovery

``The Asian market is recovering,'' Toyota Senior Managing Director Takeshi Suzuki said at a Tokyo press conference. ``Even if the yen gets stronger from the fiscal second quarter, we plan to maintain a double-digit operating margin.''

First-quarter operating profit rose 32 percent to 675.4 billion yen. The operating margin increased to 10.4 percent, from 9.1 percent a year earlier. The carmaker based its first-quarter earnings on 121 yen to the dollar and 163 yen to the euro. In May, it based its full-year forecasts on 115 yen to the dollar and 150 yen to the euro.

The company reiterated its forecast of net income in the 12 months ending March 31 rising 0.4 percent to 1.65 trillion yen.

``Toyota is a very conservative company,'' said Koji Endo, an analyst at Credit Suisse in Tokyo. ``They will probably raise their forecast at the end of the second quarter to reflect the weaker yen and stronger sales.''

Toyota will add shifts on weekends and holidays in September, October and November after an earthquake last month in Japan caused it to lose production of about 60,000 vehicles, Suzuki said.

Toyota's smaller rival Nissan Motor Co. said first-quarter profit fell 16 percent to 92.3 billion yen as domestic demand slumped, it sold fewer light trucks in the U.S. and paid more in taxes.

Honda Motor Co. raised its full-year profit forecast after demand for fuel-efficient models in the U.S. and a weaker yen boosted first-quarter earnings 16 percent.

To contact the reporter on this story: Kae Inoue in Tokyo at kinoue@bloomberg.net; Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net

Last Updated: August 3, 2007 16:11 EDT