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Toyota profit jumps, sees strong year

Toyota Motor Corp posted on Tuesday a double-digit rise in annual profits as it slashed costs and drove sales higher in every major market, and forecast another strong year as it rolls out one hit model after another.
/ Source: Reuters

Toyota Motor Corp posted on Tuesday a double-digit rise in annual profits as it slashed costs and drove sales higher in every major market, and forecast another strong year as it rolls out one hit model after another.

While an appreciation in the yen is expected to cap growth this year, the maker of the Prius hybrid car said business would continue on a firm track, projecting a 4.5 percent rise in sales to over seven million vehicles worldwide.

"Overall, we're expecting a very strong year again," Executive Vice President Ryuji Araki told reporters. "Every global car we've rolled out has been a hit -- I've never experienced anything like this before."

Armed with a strong brand, Toyota, which overtook Ford Motor in 2003 as the world's second-biggest auto maker measured by global sales, has made steady gains against its goal of owning 15 percent of the world automobile market some time in the next decade.

Araki added, however, that a possible rise in steel and other material prices was a worry, although analysts dismissed such risks as minimal.

Toyota is assuming a weakening in the dollar and euro against the Japanese currency this business year, to 105 yen and 125 yen -- conservative estimates with the currencies now trading near 113 yen and 134 yen

"If we assume 105 yen to the dollar, profits will likely be about flat," said Credit Suisse First Boston analyst Koji Endo. "But with the dollar trading where it is now, there's a big chance profits will grow strongly again."

Toyota, whose stock value of $120 billion exceeds the combined worth of the U.S. "Big Three" -- General Motors, Ford and DaimlerChrysler AG -- does not give forecasts on a consolidated basis.

A survey by Reuters Research put Toyota's operating profit at 1.6 trillion yen ($14.06 billion) for the current business year to March 2005, and net profit at 1.036 trillion yen, both representing a slight decline. Many of those estimates assume conservative currency rates.

"Swings in currency and (U.S.) interest rates pose many uncertainties, but we're determined to match last year's profit of about 1.6 trillion yen, offsetting currency-related losses with cost cuts and increased sales," Araki said.

For the year that ended on March 31, operating profit jumped 31 percent to 1.67 trillion yen ($14.68 billion), a fourth straight term of record highs as pension fund-related gains brought in an extra 107 billion yen.

The result was better than the median estimate of 1.57 trillion yen in a survey by Reuters Research.

In a first for a Japanese company, net profit at Asia's most valuable firm exceeded one trillion yen, totalling 1.16 trillion yen, up 55 percent.

Toyota's growth zoomed past that at smaller domestic rivals Nissan Motor Co and Honda Motor Co, which also reported record net profits but with far smaller gains of 1.7 percent and 8.8 percent, respectively.

With its prowess in efficient manufacturing and its corporate culture of "kaizen", or continuous improvement, Toyota expanded profits in every corner of the world, most notably in Europe, where they grew ninefold.

Analysts said one concern was a possible slowdown in the key North American market.

But Araki said he was confident that Toyota would expand both volume and profit with a wide line of products ranging from crossover vehicles, hybrids, full-size pickup trucks and expansion of the new Scion brand aimed at younger buyers.

"We'll be able to sell more vehicles in the United States this year, even without using as much in sales incentives as last year," he said.

He noted that Toyota's U.S. sales were up by 13 percent in the first four months of this year, adding that it has managed thus far to keep sales incentives at a relatively low $960 per car, versus around $3,400 to $4,000 for the Big Three.

In any case, analysts said any weakness in the United States could be offset by a better model mix in Japan with the remodelled Crown and other high-end sedans, while profits in Europe and Asia would continue to grow on higher sales and improved efficiency.

Toyota forecast sales for the group, which includes minivehicle unit Daihatsu Motor and truck maker Hino Motors, to rise 4.5 percent to 7.02 million units worldwide this year, with a 3.7 percent rise in North America.

Shares in Toyota gained 45 percent to 3,880 yen during the 12 months to March, in line with the broader market's rise.

Boding well for the shares, Toyota said it would seek shareholders' permission to buy back up to 65 million shares, or 250 billion yen worth of its own stock over the next year.