TOKYO (Thomson Financial) - Toyota Motor Corp. reported on Thursday a record
operating profit for the fiscal year ended March 31 as strong sales to emerging
markets offset a slowdown in the United States but the leading Japanese
automaker said it expects earnings to fall in the current year.
Toyota, which is set to replace General Motors Corp. as the world's largest
automaker, warned its operating profit will drop due to a strong yen and higher
cost of basic materials. It will mark the first decline in Toyota's operating
income in nine years.
The company posted operating profit of 2.27 trillion yen ($21.7 billion), up
from 2.24 trillion yen a year earlier.
Three analysts polled by Thomson Financial had forecast operating profit of
2.34 trillion yen, on average, for the year.
Net profit rose 4.5 percent to a record 1.72 trillion yen as revenue
increased 9.8 percent to 26.29 trillion yen, also an all-time high.
But Toyota said for the fiscal fourth quarter, operating profit fell to
396.7 billion yen from 570.5 billion yen, as the rapid appreciation of the yen
took 130 billion yen off earnings for the three-month period.
It was the first time that Toyota's profit fell on a quarterly basis since
January-March 2007.
For the current year to March 2009, Toyota has forecast net profit will fall
to 1.25 trillion yen,
operating profit will drop to 1.60 trillion yen on revenue of 25.0 trillion yen.
The automaker has assumed that the dollar will average 100 yen and the euro at
155 yen.
That compared to the export hedging rate of 114 yen to the dollar and 162
yen to the euro in the
past fiscal year.
Toyota said an appreciation of one yen against the dollar can push down
annual operating profit by 35 billion yen while a one yen rise against the euro
can take 5 billion yen off operating income.
Altogether, the company estimates that the foreign exchange factor alone
will slash annual operating profit by 690 billion yen.
"We have implemented various measures, including the construction of plants
in countries where demand is growing in a bid to minimize the impact of
fluctuations in the forex market," Toyota President Katsuaki Watanabe told a
news conference.
"But the faster-than-expected growth in demand in emerging markets where we
do not have production base makes our profit structure vulnerable to forex
movements."
Despite the forecast fall in earnings this year, Toyota's "underlying growth
momentum remains intact," Okasan Securities analyst Yasuaki Iwamoto said.
"When the forex factor wanes in the year to March 2010, Toyota is likely to
return to a growth
path once again," he said.
With demand in Asia and emerging markets strong, Toyota aims to sell 9.06
million vehicles
globally in the current fiscal year, up from 8.91 million sold in the previous
year.
"Japanese autoamakers are generally expecting a steep fall in profits this
year due to the firm
yen and higher material costs, but looking at their relatively bullish
investment plans, they don't
seem worried at all," said Atsushi Kawai, analyst at Mizuho Investors
Securities.
Toyota has allocated 1.4 trillion yen for capital investment and 1.1
trillion yen on research and development this fiscal year, compared to the
previous year's 1.48 trillion yen and 1.04 trillion yen, respectively.
"These investment plans show that automakers are still putting emphasis on
achieving long-term growth, rather than cutting back to prop up short-term
profits," Kawai said.
Asia key driver
For the past year to March consolidated global sales rose to 8.91 million
vehicles from 8.52 million, led by brisk sales in Asia and the Middle East.
The Toyota group includes mini-vehicle maker Daihatsu Motor Co. and truck
manufacturer Hino Motors Ltd.
Sales in Asia rose to 956,000 vehicles from 789,000 on strong demand in
China, lifting operating profit in the region to 256.4 billion yen from 117.6
billion yen.
"Asia is now becoming a key growth driver for our company and we believe
growth in Asia will be sustained," Toyota Senior Managing Director Takeshi
Suzuki said.
Toyota said sales in other markets including the Middle East, South Africa
and Australia,
increased to 1.53 million units from 1.3 million.
Sales in North America rose slightly to 2.96 million vehicles from 2.94
million, helped by steady demand for its environment-friendly vehicles such as
Prius even though the credit crunch and higher gasoline prices slowed consumer
spending.
Toyota said operating profit in North America dropped to 396.7 billion yen
from 474.3 billion yen, reflecting paper losses on its interest rate swap deals.
"I would like to stress that the one-time loss here has nothing to do with
the subprime loan problem," Suzuki said.
"Defaults in our U.S. auto loan business are also gradually rising due to
the subprime problem but because we have been managing new loans conservatively,
and we started to tighten our
lending and screening since last autumn, these efforts will start to yield
effects," he said.
In Europe, sales rose to 1.28 million vehicles from 1.22 million.
But sales in Japan fell to 2.19 million from 2.27 million amid sluggish
demand.
The company has proposed an annual dividend of 140 yen per share, up from
the previous year's payout of 120 yen.
Before the results announcement, Toyota shares closed down 1.8 percent at
5,480 yen.
($1 = 104.90 yen)
yasuhiko.seki@thomsonreuters.com
-- by Yasuhiko Seki --
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