Tokyo: Toyota Motor Corp trumped market estimates with its best quarterly operating profit in two years and lifted its cautious forecasts despite a sluggish US recovery and a stronger yen.
Toyota joins rival automakers from Ford Motor Co to Hyundai Motor Co which have also posted strong, forecast-beating quarterly results, although executives have been united in their cautious view of the global economy for the rest of the year.
After the financial crisis hammered car demand globally, the world’s largest automaker has been plagued with excess production capacity, putting pressure on margins.
The crisis that forced Toyota to recall more than 10 million vehicles for problems with unintended acceleration and braking issues compounded those woes, costing the company billions of dollars and tarnishing its image.
President Akio Toyoda has vowed to put the recall debacle that has monopolised his first year as chief executive behind him, calling 2010 a fresh “starting line” for the 73-year-old company founded by his grandfather.
But in the coming quarters, Toyota is set to get the double blow of crumbling domestic sales and a stronger-than-assumed yen, which makes exports less competitive and reduces the value of profits made overseas.
Toyota expects to export around 60% of its Japan-made vehicles this year -- a higher ratio than at rivals Honda Motor Co and Nissan Motor Co.
While higher than its earlier forecast, Toyota’s new guidance for operating profit to total 330 billion yen ($3.85 billion) in the year to 31 March 2011, is still far short of a consensus 526.5 billion yen in a survey of 21 analysts by Thomson Reuters I/B/E/S.
Japan’s incentives to replace old cars with fuel-efficient ones have shored up domestic production in the past year, but those subsidies will expire in September. Toyota has been a major beneficiary since the subsidies favour hybrid cars like its best-selling Prius.
And with a US sales recovery looking slower than anticipated, Toyota has said it may be a few years before its operations in Japan could break even.
Toyota’s US sales in July slipped 3 percent, albeit from strong results a year earlier, and trailed a 5 percent rise in overall sales, data on Tuesday showed.
For the April-June quarter, the maker of the Corolla sedan reported an operating profit of 211.7 billion yen thanks to a sharp rise in vehicle sales, swinging from a loss of 194.9 billion yen a year ago.
Toyota is still suffering from the impact of its safety recalls, with profit margins also under pressure because of higher sales incentives to attract US customers.
Toyota’s first quarter margin was 4.3%, compared with Nissan’s 8.2% and Honda’s 9.9%.
First-quarter net profit, which includes earnings made in China, was 190.5 billion yen, compared with a loss of 77.8 billion yen a year earlier.
Shares of Toyota have fallen about 22% in the year to date, faring worse than Tokyo’s main TOPIX index, which lost 17% in the same period.
Toyota’s shares closed down 1.6% before the results were announced on Wednesday, against a 2.1% fall in the broader Tokyo market.