Toyota Motor Corp's new fully redesigned "Land Cruiser" is unveiled during a news conference in Tokyo, September 18, 2007. REUTERS/Yuriko Nakao
updated 11/7/2007 1:32:53 AM ET 2007-11-07T06:32:53

By Chang-Ran Kim, Asia auto correspondent

TOKYO (Reuters) - Toyota Motor Corp <7203.T>, the world's biggest and most profitable automaker, posted a 2.7 percent rise in quarterly operating profit thanks to a weaker yen, cost cuts and stronger sales, and it raised its full-year forecasts.

Toyota, valued at $200 billion -- about 10 times the market capitalization of General Motors Corp -- is on its way to a seventh straight year of record earnings powered by a rapid push into China, Russia and other developing markets with popular models such as the Camry sedan.

For the year to end-March 2008, Toyota lifted its operating profit forecast to 2.30 trillion yen from 2.25 trillion yen and raised its net profit forecast to 1.70 trillion yen from 1.65 trillion.

Consensus forecasts are for a much better 2.5 trillion yen operating profit and 1.83 trillion yen net.

July-September operating profit was 596.70 billion yen ($5.21 billion), up from 581 billion a year ago, when profit jumped 44 percent. The result lagged a consensus estimate of 602 billion yen in a poll of six brokerages by Reuters Estimates.

Toyota's ongoing success contrasts sharply with the troubles facing Detroit's GM and Ford Motor Co , which are mired in losses from restructuring costs and declining sales at home.

GM, due to report results on Wednesday, said a day earlier it would book a staggering $39 billion charge for the third quarter, triggered by the cumulative loss it had posted over the past three years in North America and Germany.

Toyota's sales dipped in North America and Japan last quarter, partly hit by a temporary production stoppage after an earthquake hit a domestic supplier's factory, but its share of both markets has grown amid weaker overall demand.

SPREADING OUT RISK

With lost production due to be made up this quarter and new high-volume models such as the Corolla sedan coming next year, analysts expect sales to recover in the crucial U.S. market, making up for a stubborn fall in Japanese car demand.

More importantly, Toyota is spreading out its source of earnings by beefing up its presence in emerging markets such as the Middle East, helping it rely less on North America, where it makes more than half of its profits.

Second-quarter net profit grew 11.1 percent to 450.90 billion yen, as stronger sales in Europe, Asia and other markets eclipsed the slide in the United States and Japan, Toyota's two biggest markets. Revenue rose 11.2 percent to 6.49 trillion yen.

Domestic rivals Honda Motor Co <7267.T> and Nissan Motor Co <7201.T> also reported bigger quarterly profits last month, fuelled by a softer yen and sales growth.

Analysts said the U.S. subprime loan issue was having no direct impact on Toyota, with the default rate at a fraction of 1 percent, although a tough sales environment overall was forcing most automakers to spend more on profit-eroding sales incentives.

While mainstay models such as the Prius hybrid remain buoyant, quality problems and stiff competition against Ford and GM have forced Toyota to slap thousands of dollar in discounts on the Tundra full-sized pickup truck, which it has billed its most important U.S. product launch ever.

Shares of Toyota have fallen 19 percent so far this year, underperforming Tokyo's transport sub-index, which has lost 12 percent.

Prior to the earnings announcement, the stock ended up 0.8 percent on Wednesday, against a 0.2 percent fall in the subindex.

(Additional reporting by Aiko Hayashi)

(c) Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

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