http://biz.yahoo.com/ap/080508/earns_japan_toyota.html
Toyota projects first full-year profit drop in 7 years
Thursday May 8, 9:23 am ET
By Yuri Kageyama, AP Business Writer
Toyota projects first full-year profit drop in 7 years on strong yen,
sluggish US market
TOKYO (AP) -- Toyota said the strong yen and weaker U.S. sales took a
bite out of January-March earnings and projected worse was to come --
a 27 percent plunge in its full-year profit.
It would be the first drop in full-year profit in seven years for the
automaker.
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The results and outlook released Thursday highlight how the tough
North American auto market is hammering profits. Meanwhile,
unfavorable currency swings added to a growing list of problems for
Toyota Motor Corp., including soaring material and energy costs and a
stagnant auto market in its home market of Japan.
"There is no mistake that things are seriously tough -- even for
Toyota," said Tsuyoshi Mochimaru, auto analyst at Lehman Brothers in
Tokyo.
Still, the company appeared to be faring better than its American
rivals. GM lost $3.3 billion in the first quarter. Ford had a surprise
profit of $100 million for the same period but expects to lose money
this year as the U.S. auto market deteriorates.
Honda Motor Co., Japan's No. 2 automaker behind Toyota, said last
month that its January-March profit declined 86 percent compared with
the same period a year ago because of a corporate tax levied on its
Chinese joint venture. Nissan Motor Co. reports earnings next week.
For the fiscal fourth quarter, the automaker reported a 28 percent
drop in net profit to 316.8 billion yen ($3.05 billion). It was the
first decline in quarterly profit since April-June 2005.
Sales rose 3.8 percent in the most recent quarter to 6.567 trillion
yen ($63.14 billion).
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.
For the fiscal year ended March 31, Toyota racked up record profit of
1.72 trillion yen ($16.54 billion) -- up 4.5 percent from the previous
year. That was in line with the projection Toyota gave in February.
Annual sales grew 9.8 percent to 26.289 trillion yen ($252.8 billion),
also a record for the company.
But recent credit woes in North America have dampened sales in recent
quarters.
"We are facing a severe business environment," President Katsuaki
Watanabe said. "Toyota considers this headwind as a valuable
opportunity to turn it into a more flexible and stronger company."
Toyota projects this fiscal year's profit will tumble to 1.250
trillion yen ($12.0 billion), while annual sales are seen falling 4.9
percent to 25 trillion yen ($240.4 billion).
The last time the company's fiscal profit declined was in the fiscal
year ending March 2002; the last time annual sales fell was in the
year ending March 2000, mainly because of a weak dollar.
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.
The recent shift to smaller cars is a crunch for the makers because
those vehicles are cheaper and have smaller profit margins than trucks
and other gas guzzlers.
Toyota has been steadily boosting sales in recent years at a pace some
analysts say is on track to overtake General Motors as the world's No.
1 automaker in annual vehicle sales.
For the fiscal year ended March 31, Toyota sold 8.91 million vehicles
around the world. That was slightly below the 8.93 million vehicles it
had expected to sell for the fiscal year, but still 4.5 percent better
than a year earlier.
North American vehicle sales, which had been strong for Toyota in the
past, fell for the last fiscal quarters, according to the company.
Japanese sales have also been stagnant recently.
Toyota said it expected to sell 9.06 million vehicles globally for the
fiscal year through March 2009, up 1.6 from the year just ended.
Toyota shares slid 1.8 percent to 5,480 yen ($52.7) in Tokyo. The
results were released just as the market closed.
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