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Toyota's 4th-Qtr Profit Rises 39% on U.S. Sales

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Toyota's 4th-Quarter Profit Rises 39% on U.S. Sales

May 10 (Bloomberg) -- Toyota Motor Corp., the world's largest automaker by market value, said fourth-quarter profit climbed 39 percent to a record, buoyed by a stronger dollar and rising U.S. sales of Avalon sedans and Scion compact cars.

Net income rose to 404 billion yen ($3.6 billion) in the three months ended March 31, compared with 291 billion yen a year earlier, Toyota said in a statement today. The company predicted profit of 1.31 trillion yen this fiscal year, down 4.1 percent from last year when it had a gain from the rising value of its stake in Japan's biggest bank.

Toyota President Katsuaki Watanabe, 64, plans to spend almost $1.2 billion a month this year as he completes new plants in Texas and Russia to meet global demand and make earnings less affected by the yen exchange rate. The company's market value surged 70 percent to $218 billion since he took charge in June, 15 times that of General Motors Corp.

``The prospects are so good for Toyota,'' said Graeme Maxton, managing director for Asia at Autopolis, a London-based consulting firm. ``Its major competitor is dying and it is ahead of the others in terms of quality, production and technology.''

Toyota, based in central Japan's Aichi Prefecture, sold 7.97 million vehicles in the year ended March 31, up 7.6 percent from the previous 12 months. Sales may rise 6 percent to 8.45 million vehicles this fiscal year, excluding sales by ventures in China and Indonesia. The forecast is within 500,000 units of surpassing GM as the world's biggest carmaker by that measure.

Raising Dividend

Toyota said it would pay a second-half dividend of 55 yen a share, raising the year's total payout to 90 yen, or a yield of 1.35 percent relative to its share price. Nissan Motor Co., Japan's second-biggest carmaker, paid 29 yen a share, a yield of almost 2 percent. Toyota may join Honda Motor Co. in paying quarterly dividends.

Toyota's operating margin may be kept at about 9 percent, Watanabe said. The automaker plans to raise its annual dividend payout ratio to 30 percent in the next three to five years, from last year's 21.3 percent.

Toyota shares fell 0.7 percent to 6,680 yen in Tokyo before the earnings report was released. In German trading, Toyota shares traded at the equivalent of 6,680 yen as of 11:31 a.m. in Frankfurt.

The carmaker said it would buy back up to 200 billion yen of its own shares by June 2007.

Profit Forecast

Net income may drop to 1.31 trillion yen this year as it increases spending by 1.3 percent to a record 1.55 trillion yen, Toyota said. The forecast, the first by Toyota, is based on a yen exchange rate of 110 per U.S. dollar, compared with an average rate of 113 yen in the past fiscal year.

``Earnings could disappoint in the short term'' because of a changing U.S. market, stalled growth in Japan and Europe, said Edwin Merner, who oversees $1 billion of assets as president of Atlantis Investment Research Corp. in Tokyo. ``Life may be made difficult by the strong yen.''

Current profit in the year ended March 31 was also boosted by a 143 billion yen gain in the value of Toyota's stake in Mitsubishi UFJ Financial Group Inc. Stripping out the one-time gain, Toyota said its net income was 1.3 trillion yen.

Sales this year may rise 6 percent to 22.3 trillion yen, Toyota said. Detroit-based rival GM is trying to cut costs and increase sales after reporting a $10.6 billion net loss last year.

Toyota's operating profit, or sales minus expenses and the costs of goods sold, may rise 1.2 percent to 1.9 trillion yen this year. Current profit, or pretax earnings from operations, may fall 5.6 percent to 1.97 trillion yen, the carmaker said.

Increase Earnings

``We hope to be able to increase earnings by the end of the year'' ending in March 2007, said Toyota Senior Managing Director Takeshi Suzuki at a Tokyo press conference today. ``Our cost reduction efforts have been offset by rising material costs.''

Toyota's cost cut fell to 130 billion yen in the year ended March, from the previous year's 160 billion yen because higher prices of rubber, steel and other materials increased cost by more than 100 billion, Toyota said.

Toyota's sales rose 18 percent in the fourth quarter to 5.75 trillion yen. Full-year revenue climbed 13 percent to 21 trillion yen, while operating profit rose 12 percent to 1.88 trillion yen.

New Models

The company may release at least nine models in the U.S. this year, including a redesigned Camry sedan introduced in March and the Tundra pickup truck.

``Record oil prices push consumers to switch to fuel- efficient vehicles sold by Japanese carmakers, such as Toyota,'' said Yasuhiro Matsumoto, an analyst at BNP Paribas Securities Japan Ltd. in Tokyo.

It spent 1.53 trillion yen last year to expand in markets including Japan, China and Canada. A new factory in San Antonio, Texas, is set to open this year and Toyota's first Russian plant will be completed in 2007.

Watanabe, who cut costs by 1 trillion yen in five years as head of purchasing, was promoted to president after his strategy of scrutinizing the price of every Toyota part, eked out savings.

His new plan, dubbed `Value Innovation', lumps engines, brakes and steering systems into modules, simplifying an engine that typically has 600 parts to reduce its cost. Toyota's redesigned Corolla will be one of its most profitable models when it reaches Japanese dealers this fall, with the engine block 30 percent cheaper to make.

Toyota Special?

``The cost reduction plan does make Toyota special,'' said Atsushi Osa, who helps oversee $4.1 billion in investments at Sumitomo Mitsui Asset Management Co. in Tokyo. ``The company and its affiliates have a close relationship that helps Toyota to make one of the most cost-competitive, high-quality products in the industry.''

Toyota today promoted Vice Chairman Fujio Cho to chairman and made Chairman Hiroshi Okuda its adviser. Watanabe said the automaker plans to appoint a senior managing director who will be responsible for maintaining its quality. The appointments take effect after a shareholders meeting next month.

Toyota is basing its forecasts on 135 yen per euro for the year ending March 31, 2007.

A stronger yen would erode profit in the U.S., where Toyota overtook DaimlerChrysler AG last month as the third-biggest carmaker. The yen weakened to an average 116.9 per dollar in the three months ended March from 104.55 last year.

Toyota's full-year operating profit falls 20 billion yen for every 1 yen that the Japanese currency gains against the dollar, according to a February estimate by Credit Suisse Group's Tokyo- based auto analyst Koji Endo.

The favorable currency rate added 300 billion yen to its operating profit in the year ended March, Toyota said.

``The only issue on Toyota's horizon is the exchange rate, which was in its favor this year,'' Maxton said.

To contact the reporter on this story:

Kae Inoue in Tokyo at kinoue@bloomberg.net

Last Updated: May 10, 2006 05:34 EDT

Link: http://www.bloomberg.com/apps/news?pid=100...id=avTJrtkfjWwE

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Toyota's full-year operating profit falls 20 billion yen for every 1 yen that the Japanese currency gains against the dollar, according to a February estimate by Credit Suisse Group's Tokyo- based auto analyst Koji Endo.

The favorable currency rate added 300 billion yen to its operating profit in the year ended March, Toyota said.

At today's exchange rate, isn't that about $2.7 Billion?

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At today's exchange rate, isn't that about $2.7 Billion?

Yes, and that's a rediculous advantage, especially considering GM is at a $1500/car disadvantage to begin with before the exchange rate.

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``The prospects are so good for Toyota,'' said Graeme Maxton, managing director for Asia at Autopolis, a London-based consulting firm. ``Its major competitor is dying and it is ahead of the others in terms of quality, production and technology.''

That's painful to see in print.

Graeme Maxton's email address is gpmaxton@autopolis.com if you care to respond.

Edited by ellives

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I just skip over these articles. I can't read them, what with all the cheering and bands playing and all.

Anybody out there read "The End of Detroit?" I picked up that waste of cellulose the other day for $5.99 in a dust bin at the book store (where it belongs). I made it through about 20 pages before I put it away. Micheline Maynard is an old hag, who should pass up the dessert cart more often, by the looks of her picture.

Some of the gems that made me gag before I threw it down:

1) On page 16, she claims that the luxury car market hasn't been led by Cadillac or Lincoln since 1986. ???WTF??? Isn't that the year the Legend came out? And she is saying that since that first shot, Cadillac and Lincoln were no longer #1?

2) She says the '98 Odyssey turned upside down the minivan market. More total BS. For Honda, it was a much better vehicle than the POS it replaced, but it was a flop on the market. The Caravan/Voyager, Windstar and even the Venture way outsold it. Now, the newer Odyssey is formidable, but the '98 was small, underpowered and over priced. That book reads like one, long PR piece for HOnda and Toyota. I wonder what service advisor pissed her off with her '86 Regal (just guessing).

Anyway, my blood is already racing and I've barely finished my morning coffee. I don't know if Bloomberg owns a lot of stock in Toyota, but when their article starts of by saying that Toyota is the largest auto manufacturer by market value, you know the slant is going to be to slam GM all the way.

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Yeah, I caught that initial volley. It's like an advertisement. I hope they got their money's worth out of it. I just wish somebody would start posting some good (and feasible) ideas here as to what can be done about it. Is this all there is? Commiserating on a web forum?

 

  Anyway, my blood is already racing and I've barely finished my morning coffee.  I don't know if Bloomberg owns a lot of stock in Toyota, but when their article starts of by saying that Toyota is the largest auto manufacturer by market value, you know the slant is going to be to slam GM all the way.

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At today's exchange rate, isn't that about $2.7 Billion?

This gets too much play.

They made that many more yen relative to USD, but the yen is worth that much less in terms of USD. It works out to no gain at all.

Plus, we should be looking at this as a positive. Think of how many more yen GM's 1Q profit is thanks to the exchange rate. :AH-HA_wink:

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toyota can make money but the cars they put out have no passion. sadly, it seems like most of America has no passion either these days so its a good match.

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This gets too much play.

They made that many more yen relative to USD, but the yen is worth that much less in terms of USD.  It works out to no gain at all.

Plus, we should be looking at this as a positive.  Think of how many more yen GM's 1Q profit is thanks to the exchange rate.  :AH-HA_wink:

I can't agree that it gets "too much play" when it's due to an artificial exchange rate... artificial exchange rates don't wash out... hence the addition to operating profit due to the exchange rate. It's also based on a quote from Toyota:

The favorable currency rate added 300 billion yen to its operating profit in the year ended March, Toyota said.

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