Toyota Forecasts Profit Will Double to Highest in 5 Years
Toyota Motor Corp. (7203), Asia’s biggest carmaker, forecast profit will more than double to a five-year high as it shakes off last year’s natural disasters and introduces new models to regain market share.
Net income may increase to 760 billion yen ($9.5 billion) in the fiscal year ending March 2013, after falling to 283.6 billion yen, the Toyota City, Japan-based carmaker said today. The profit forecast was 7 percent below the average analyst estimate compiled by Bloomberg, while the company projected higher-than-expected revenue growth.
Chief Executive Officer Akio Toyoda, 56, is rolling out new Prius hybrids, Corolla compacts and Lexus sedans to regain lost ground in what may be his first crisis-free year since becoming president in 2009. While production has returned to normal, the grandson of the founder now faces a reborn General Motors Co. that’s leading the industry in global sales, a rising Hyundai Motor Co. (005380) and a growing Volkswagen AG (VOW) that’s dominating luxury-car sales in China.
The earnings show “they have strong confidence of improving profits and regaining market share, mainly in the U.S. but other markets as well,” said Kunihiko Shiohara, an analyst at Credit Suisse Group AG (CSGN) in Tokyo. “It’s going to give quite a favorable impression on the auto industry as a whole, as well as impressions on the Japanese economy.”
Toyota (TOM) rose as much as 0.8 percent in Frankfurt trading after the revenue forecast of 22 trillion yen was 6 percent higher than the average analyst estimate compiled by Bloomberg. The projection for operating profit of 1 trillion yen was in line with expectations.
The maker of Corolla and Camry sedans said that deliveries -- including those of its Daihatsu Motor Co. (7262) and Hino Motors Ltd. (7205) subsidiaries -- will increase 18 percent to 8.7 million vehicles this fiscal year, led by North America, where sales will climb 26 percent to 2.35 million units. They’ll increase 6.2 percent in Japan, 34 percent in the rest of Asia and 10 percent in Europe Toyota said.
The recovery began last quarter, with net income more than quadrupling to 121 billion yen as Toyota cranked up production 36 percent and the Japanese market became profitable for the first time in more than two years. The yen, which appreciated and eroded the value of Japanese exports during 2010 and 2011, became this year’s worst performer by the end of March.
The rebound wasn’t enough to keep full-year income from tumbling 31 percent as the March 11 Japanese disaster and subsequent floods in Thailand crippled automotive output. Toyota wasn’t alone as Tokyo-based Honda last month reported annual profit fell 60 percent and Yokohama, Japan-based Nissan, which reports May 11, has said since February that net income would slide 7.9 percent in the year ended March 2012.
Toyota, saddled with the highest proportion of Japanese production among the nation’s three largest carmakers, is slower than Nissan and Honda in recovering. While Toyota is forecasting it’s operating profit margin to reach 4.5 percent this fiscal year, Honda expects to reach 6 percent and analysts estimate Nissan to hit 7.2 percent.
“We know Toyota is slow in taking action but it’s about time for them to answer how long they will stick to Japanese production at the expense of being profitable and globally competitive,” said Yuuki Sakurai, chief executive officer at Fukoku Capital Management Inc. in Tokyo. “It’s one lap behind other carmakers.”
Still, Toyota’s projections indicate it will earn more than GM, which last week reported net income fell 61 percent to $1.32 billion on losses and restructuring costs in Europe. Analysts estimate the Detroit-based company will earn $7.38 billion over the next four quarters, excluding preferred dividends, which last year totaled $1.61 billion.
After ceding its title as the world’s largest automaker to GM in 2011, not much is going wrong for Toyota in its two biggest markets this year.
Pent-up demand and government subsidies, which last until January, have helped Japan grow faster than any other major auto market this year. Passenger-vehicle sales in the country have jumped 57 percent during the first four months of 2012, led by Toyota’s Prius hybrids, according to the Japan Automobile Dealers Association. That benefited Toyota as it generated 60 percent of its revenue from Japan last fiscal year.
The reliance on its home market may decline as Toyota forecast its deliveries to North America will overtake those of Japan this fiscal year. Toyota’s sales in the U.S. have increased 12 percent this year -- outpacing GM (GM), Ford Motor Co. (F), Nissan and Honda -- on demand for the Camry sedan and the Prius hybrids, as buyers who put off purchases returned to dealerships to find more fuel-efficient models.
Total U.S. light-vehicle sales, which rose to a seasonally adjusted annual rate of 14.4 million in April, have exceeded analysts’ estimates three out of four months this year.
In Europe and China, where auto sales fell during the first quarter, Toyota has been less vulnerable to slumping demand because it is less reliant on those markets than companies such as PSA Peugeot Citroen (UG) and GM. Toyota, which had a global market share of about 10 percent in 2011, accounted for 3.2 percent of Europe’s market and 4.3 percent in China, according to data compiled by Bloomberg.
Toyota made about half of its vehicles in Japan in the year ended March, making it more vulnerable to a stronger yen than its nearest rivals. Nissan Motor Co. (7201), Japan’s second-biggest carmaker, built a quarter of its vehicles in Japan and Honda Motor Co. about 30 percent.
Toyota is basing this year’s profit forecasts on an exchange rate of 80 yen to the dollar and 105 yen to the euro. The stronger yen cut operating profit by 250 billion yen in the year ended March 31, Toyota said today. The company plans to increase research and development spending 3.9 percent to 810 billion yen and capital expenditure 16 percent.
For Toyoda, the natural disasters followed the crisis he oversaw during 2009 and 2010, when defects related to unintended acceleration led to the recall of more than 10 million vehicles -- more than Toyota has sold in its best year.
“We want this year to be a calm year,” Toyoda said today. “It’s only been five months, but we expect everyone’s efforts to shine this year.”
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