Toyota expects first full-year sales slide in nine years

TOKYO – Battered by a slumping North American auto market and unfavorable currency swings, Toyota is forecasting a double barrel of bad news this fiscal year: its first year-on-year sales slide in nine years and first profit slip in seven years.

The list of problems is growing for Toyota, including soaring material and energy costs and a stagnant auto market in Japan, its home market. A weak dollar, now hovering at about 100 yen compared with nearly 120 yen last year, erodes the income of Japanese exporters like Toyota.

Toyota Motor Corp., the maker of the Prius gas-electric hybrid and Camry sedan, reported today a 28% tanking in net profit for the January-March quarter to 316.8 billion yen ($3.05 billion) – the first quarterly decline in profit since April-June 2005.

Sales rose 3.8% in the most recent quarter to 6.567 trillion yen ($63.14 billion).

“There is no mistake that things are seriously tough – even for Toyota,” said Tsuyoshi Mochimaru, auto analyst at Lehman Brothers in Tokyo.

Mochimaru warned the sales strides Toyota is making in China and other relatively new regions probably won’t be enough to make up for the battering it’s taking in the key North American market.

Like other major automakers, Toyota has been gradually switching its focus to emerging markets, but it still makes about a third of its sales in North America.

Still, Mochimaru noted Toyota tends to be conservative and is mapping out the worst-possible scenario. And it could emerge with better results, as long as exchange rates stay stable, he said.

Toyota had been on a roll with the success of its fuel-efficient models, including the Prius and the Corolla subcompact, which have gotten a boost from rising gas prices. But recent credit woes in North America have dampened sales in recent quarters.

For the fiscal year ended March 31, Toyota racked up record profit of 1.72 trillion yen ($16.54 billion) – an increase of 4.5% over the previous year. The number was in line with the projection Toyota gave in February.

Sales in the just-completed fiscal year grew 9.8% to 26.289 trillion yen ($252.8 billion), a record for the company.

But Toyota projects this fiscal year’s profit will tumble 27% to 1.250 trillion yen ($12.0 billion), while annual sales are seen falling 4.9% to 25 trillion yen ($240.4 billion).

The last time Toyota saw full-year sales drop was in the year ending March 2000, when sales inched down 0.3%, mainly because of a weak dollar. The last time Toyota saw fiscal profit decline was in the year ending March 2002, when net profit slumped 17.5%.

“We are facing a severe business environment,” Toyota President Katsuaki Watanabe said. “Toyota considers this headwind as a valuable opportunity to turn it into a more flexible and stronger company.”

Toyota – the world’s second-biggest automaker after General Motors Corp. – also warned it will need to spend more in technology research and carry out cost cuts to stay competitive.