Toyota Seen Earning Record Half-Year Profit on Abenomics Lift

Toyota Motor Corp., the world’s largest automaker, will probably deliver record semiannual profit when it reports earnings tomorrow, as the weaker yen bolsters the value of Japanese cars sold overseas.

Net income in the fiscal first half ended Sept. 30 climbed 74 percent to 955.3 billion yen ($9.7 billion), according to the average of five analyst estimates compiled by Bloomberg. For the quarter, profit probably jumped to 444.7 billion yen, more than the combined earnings at General Motors Co. and Volkswagen AG.

Behind Toyota’s earnings bonanza is the yen, which has declined against all major currencies in the past year, benefiting the country’s exporters and reviving an economy that’s been through three recessions in five years. Japan’s biggest company is on pace to outsell all other carmakers for the second straight year.

“The weaker yen and cost-cutting efforts are the two major factors explaining the surge in domestic profit,” said Yusuke Miura, an analyst at Tokai Tokyo Securities Co. “Toyota will probably continue to be good for the time being if the yen stays at the current level and cost-cutting efforts are executed continuously.”

Toyota’s shares have risen 58 percent this year, outperforming Honda Motor Co. and Nissan Motor Co. The Nikkei 225 Stock Average has gained 37 percent in 2013.

Yen Impact

Thanks to Prime Minister Shinzo Abe’s monetary-expansion policies, the yen has fallen about 12 percent against the dollar in 2013, trading at an average of 99 yen last quarter, down 20 percent from a year earlier.

The company now forecasts profit of 1.48 trillion yen for the 12 months ending March 31, based on a level of 92 yen to the dollar and 122 yen to the euro. That compared with the record 1.82 trillion yen expected based on the average of 22 analyst estimates compiled by Bloomberg.

Eiji Hakomori, an analyst with Daiwa Securities Group Inc. in Tokyo, expects Toyota to raise its profit forecast depending on the company’s currency predictions for the second half, given the “favorable earnings” in the July-to-September quarter, he wrote in a report dated Oct. 22.

Toyota’s results come amid waning optimism over Japanese carmakers. Last week, Honda reported second-quarter earnings that missed analysts’ estimates and Nissan cut its annual profit forecast.

Global Sales

In North America, Toyota probably reaped 96 billion yen in operating profit last quarter, an increase of 48 percent, according to the average estimate of four analysts surveyed by Bloomberg.

In the U.S., deliveries rose 12 percent in the period as the weaker yen gave Toyota room to offer higher incentives for its best-selling Camry model. The company outsold Ford Motor Co. for the first time in 15 quarters.

Operating profit in Europe probably rose 9.8 percent to 9.5 billion yen, the analysts’ estimates show, amid mounting signs that the region is recovering from its record six-quarter recession. In September, European car sales rose the most in more than two years.

Toyota’s operating profit in Japan, including income from exports, probably more than doubled to 363.3 billion yen the last quarter as the weaker yen boosted the value of overseas sales, according to the Bloomberg survey.

Japan Tax

The automaker is also getting a short-term boost in Japan as consumers rush to buy cars before an increase in the consumption tax in April, according to Koji Endo, an auto analyst at Advanced Research Japan in Tokyo.

In the rest of Asia, operating profit probably fell 6.9 percent to 86.5 billion yen, dragged down by a slump in demand Thailand and India.

Toyota sales in China rose at the fastest pace in five quarters as it rebounded from last year, when nationwide protests erupted in opposition to Japan’s purchase of a group of islands claimed by both countries.

“There’s some room for upward surprise in China, as long as there’s no escalation of tensions,” said Ashvin Chotai, managing director of Intelligence Automotive Asia in London. “The overall market is growing faster than people expected in the beginning of the year so the pie is bigger. Still, for Japanese carmakers there’s a long road ahead.”

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