Toyota Sees Profit Jump 39%, Warns of a Slowing
Toyota Motor Corp., continuing to blow past its rivals, posted a 39% increase in profit for its fiscal fourth quarter but warned Wednesday that its explosive global sales growth could slow in the next 12 months as the key U.S. and Asian auto markets cool.
President Katsuaki Watanabe predicted a 6% increase to 8.5 million vehicles for the fiscal year ending in March 2007. The Japanese automaker’s U.S. shares fell 96 cents to $120.85.
“The company may have released a cautious forecast because it doesn’t want to lower it” later, Makoto Kikuchi, chief executive at Myojo Asset Management Japan Co. in Tokyo, told Bloomberg News. “My view on Toyota hasn’t changed, which is Toyota will become the No. 1 automaker in the world.”
Toyota already is the biggest automaker in terms of stock market value and it is close to surpassing troubled General Motors Corp. in total vehicles sold. Detroit-based GM last year sold 9.17 million vehicles worldwide, versus 7.97 million for Toyota.
But Toyota is closing fast, and some analysts believe that the company will overtake GM in both unit sales and revenue as early as 2007 as the U.S. automaker continues to close factories and slash payroll in an effort to reverse years of losses in its North American automotive operations.
For the quarter ended March 31, Toyota reported a record net profit of 404.1 billion yen $3.44 billion), up from 290.7 billion yen a year earlier. The gain was spurred by favorable dollar-yen exchange rates, global cost cutting and increased U.S. sales of the Avalon sedan and the company’s youth-oriented Scion cars.
Revenue for the period rose 18% to 5.75 trillion yen ($48.9 billion).
Toyota’s reputation for building reliable vehicles and fuelefficient gasoline-electric hybrids has helped it grow rapidly in the U.S., which accounts for almost a third of its global sales.
Although Toyota doesn’t break out earnings by region, analysts have estimated that as much as 60% of Toyota’s operating profit comes from North America, where it regularly outperforms most rivals.
In the first four months of this year, Toyota’s U.S. market share grew to 14.2% from 13.3% a year earlier, and its sales volume rose 6.6% to 764,816 passenger cars and light trucks. At the same time, GM saw its U.S. market share decline to 23.8% from 25.4% and its sales volume fall 6.8%.
“Toyota is able to sell well without incentives,” said auto industry analyst George Magliano of Global Insight economic forecasting in New York, and that boosts profit per car. “Early on, they designed cars like the Corolla and Camry that baby boomers wanted, which Ford and GM couldn’t do, and now they can spend time and money to perfect new products.”
Watanabe said Toyota expected to spend 920 billion yen on research and development this year, and an additional 1.55 trillion yen on capital improvements, including new factories scheduled to open late this year in Texas and Canada.
A third generation of Toyota’s Tundra pickup truck -- a new model analysts say is the first from Toyota that matches big American trucks in size and power -- will be built at its new San Antonio plant.
The full-size pickup segment in the U.S. has sustained GM and Ford Motor Co. for years and is the only market in which Toyota hasn’t been much of a competitor.
Although most analysts predict continuing international sales growth for Toyota, some also caution that its blistering pace could slow as a strengthening yen erodes the value of overseas earnings.
On Wednesday, Toyota said it expected profit to fall 4.5% in the current fiscal year to 1.31 trillion yen, despite an anticipated 6% growth in revenue to 22.3 trillion yen.
In the just-ended fiscal year, a favorable exchange rate added 300 billion yen to Toyota’s income, and cost reduction efforts added 130 billion yen more.
