May 11 (Bloomberg) — Toyota Motor Corp., the world’s largest carmaker, forecast profit will rise 48 percent this fiscal year as it recovers from record recalls in North America, its largest market, and boosts sales in Asia outside Japan.
The company may increase net income to 310 billion yen ($3.35 billion) in the year ending in March, from 209 billion yen a year earlier, the Toyota City, Japan-based automaker said in a statement today.
Toyota’s U.S. sales rose 24 percent in April as incentives boosted demand for its Corolla and Prius models and offset the impact of recalls of more than 8 million vehicles worldwide for defects related to unintended acceleration. Toyota’s North American sales may increase 1.5 percent this fiscal year to 2.13 million vehicles, the company said in today’s statement, as the world’s second-largest auto market recovers from a recession.
“North America is the only market that matters” for Toyota’s earnings this year, said Gentoku Kiyokawa, a fund manager in Tokyo at Fortis Investments, which bought Toyota shares in February. “Based on the recent sales numbers, the recalls aren’t posing a problem.”
Toyota’s U.S. sales dropped 20 percent in 2009, as industrywide sales slumped 21 percent to 10.4 million units, the lowest level since 1982.
The company’s sales in the U.S. surged 41 percent in March, after it introduced discounts across its lineup.
50,000 Vehicles
Lost sales due to the recalls for the year ended in March amounted to about 50,000 vehicles, compared with an earlier estimate of 100,000, Toyota Senior Managing Director Takahiko Ijichi said at a press conference in Tokyo today. The cost of the recalls was between 170 billion yen and 180 billion yen, he said.
“We are still in the middle of the storm, but I am feeling that we can see clear skies in the distance,” President Akio Toyoda said.
While Toyota didn’t say by how much the recalls will cut profit this year, related costs, such as a $16.4 million fine from the National Highway Traffic Safety Administration, are included in the forecast for the year ending in March 2011, it said. The company set aside an extra 100 billion yen in provisions for warranties last fiscal year.
Toyota also expects to benefit from cost savings of 290 billion yen, including cuts to executive compensation, Toyoda said. That may help operating profit surge 90 percent to 280 billion during the current financial year, according to today’s statement.
Increasing Competition
Still, the Japanese carmaker must fend off increasing competition in the U.S. from Ford Motor Co. and Hyundai Motor Co.’s new models, said Jessica Caldwell, senior analyst at Edmunds.com., an auto industry researcher.
“This will be a tough year for Toyota,” Caldwell said. “They’ve fallen weak at a time when their competitors are so strong.”
Sales of Hyundai’s revamped Sonata sedan, which was introduced in the U.S. in February, surged 57 percent in April. The model competes with Toyota’s Camry sedan, sales of which gained 10 percent that month. Ford’s April sales rose 26 percent.
Competition in the U.S. is “intensifying” as American competitors have strengthened their passenger car line-ups and Hyundai’s presence is increasing, Honda Motor Co.’s Executive Vice President Koichi Kondo said at the company’s earnings announcement on April 28.
Toyota shares fell 0.7 percent to close at 3,565 yen in Tokyo before the earnings announcement.
Transport Department Investigation
Meanwhile, the U.S. Transportation Department continues to investigate Toyota’s handling of past recalls. NHTSA, which fined Toyota the maximum $16.4 million last month for failing to promptly notify the agency about defects tied to unintended acceleration, yesterday opened an investigation into a 2005 recall for faulty truck steering-relay rods.
Toyota faces potential costs, not included in its profit forecast, from at least 180 consumer and shareholder lawsuits seeking class-action status and at least 57 individual suits claiming injuries or deaths caused by sudden acceleration.
U.S. Transportation Secretary Ray LaHood, speaking to reporters in Toyota City yesterday, didn’t rule out another fine against Toyota, saying it will take a couple of months for staff to complete the review of almost 500,000 documents and determine the next step.
Fourth Quarter Profit
In the fourth quarter, Toyota posted net income of 112 billion yen, compared with a loss of 766 billion yen a year earlier, it said in a statement today. Toyota was projected to post 48.3 billion yen in net income based on the average of four analyst estimates compiled by Bloomberg. Sales for the quarter rose 49 percent to 5.28 trillion yen.
Toyota based its full-year forecast on exchange rates of 90 yen to the dollar and 125 yen to the euro, compared with an average 93 yen against the dollar and 131 yen against the euro last fiscal year.
The automaker predicts sales in Asia excluding Japan will rise 11 percent to 1.09 million vehicles this fiscal year. In Japan, its second biggest market, sales are expected to drop 11 percent to 1.92 million. In Europe, the company forecasts sales of 860,000 vehicles, an increase of 0.2 percent from the last fiscal year.
Toyota plans to review models and improve the efficiency of its production structure in Japan, North America and Europe, the company said in a statement today.
In China, Toyota’s sales may exceed 800,000 units this year, compared with 709,000 units sold in 2009, Masahiro Kato, president of the company’s China business, said at the Beijing Auto Show on April 23.
–Editors: Kae Inoue, Ian Rowley.
