Toyota Stays on Track to Report 3 Trillion Yen in Annual Profit

  • Automaker raised profit forecast as SUV, Lexus sales climb
  • Scion brand shutting down as Daihatsu set for transformation

Toyota Motor Corp. stayed on track to become the first Japanese company to top 3 trillion yen ($25.7 billion) in annual operating profit, buoyed by surging sales of RAV4 sport utility vehicles and Lexus luxury models.

Nine-month operating profit rose 9 percent to 2.31 trillion yen, the company said Friday. Analysts estimate that the world’s largest automaker will earn a record 3.07 trillion yen in operating profit for the fiscal year, though Toyota said its own forecast doesn’t take into account that it’s suspending production in Japan next week.

President Akio Toyoda is steering the maker of Prius hybrids toward its third-straight record year, out-earning all other Japanese automakers combined. With sport utility vehicles drawing unprecedented demand in the U.S., Toyota is positioning its compact RAV4 to supplant the Camry sedan as the new volume leader in its largest market. Lexus had its best year globally in 2015 and finished just behind BMW in the U.S.

“Expectations have been really high for Toyota,” Koji Endo, an analyst with Advanced Research Japan, said by phone. “Even if their profit has to come down next year, their profitability will still be their second-highest anyway. The U.S. market is very strong and the Chinese market seems to be recovering.”

  • Toyota boosted its forecast for net income by 20 billion yen to 2.27 trillion yen, citing better performance in China
  • Third-quarter net income rose to 628 billion yen, beat 619.9 billion yen analyst estimate
  • Quarterly sales climbed to 7.34 trillion yen, topped 7.3 trillion yen analyst estimate
  • Company buying back as much as 0.74 percent of its shares

Toyota’s period of prosperity hasn’t stopped the company from shaking things up. It plans to discontinue the Scion brand that targets young American buyers in August, re-badging all but one model as Toyotas, while buying out Daihatsu Motor Co. for about 389 billion yen in stock to make it a wholly owned subsidiary. The goal will be to transform Daihatsu into a global small-car brand as valued as BMW AG’s Mini.

Toyota also is looking to deepen its partnership with Mazda Motor Corp. The two companies have assembled a panel to study potential alliances for green cars and other technologies, Tetsuya Fujimoto, a Mazda executive officer, said Thursday. Toyota already owns stakes of Subaru maker Fuji Heavy Industries Ltd. and truck makers Hino Motors Ltd. and Isuzu Motors Ltd.

Mirai, Prius

The automaker began California sales of its Mirai fuel cell vehicle and production of a redesigned Prius hybrid in the quarter. Toyota could parlay the heavy investment it’s made in hydrogen fuel cells and gasoline-electric autos into more joint production or development projects to lower costs.

Toyota still faces major challenges as it looks to close out the rest of its fiscal year. It’s shutting down all Japan assembly plants for at least one week after an explosion at affiliate Aichi Steel Corp.’s plant relied on for engine, transmission and chassis components. Trading company Toyota Tsusho Corp. warned the disruption to production could compare with Japan’s earthquake and tsunami almost five years ago.

The company also is among more than a dozen automakers embroiled in an air-bag recall crisis involving Takata Corp. The Japanese supplier is preparing to present a restructuring plan to automakers in early May and is seeking to reach an agreement with Toyota and other customers on the sharing of costs related to the callback of more than 20 million vehicles in the U.S. alone, according to people familiar with the matter.

Toyota said that orders for its new Prius have reached almost 100,000 units. The carmaker said there’s enough reserves for quality-related expenses.

Before it's here, it's on the Bloomberg Terminal.