Toyota profit may slide 20 percent

Toyota Motor Corp's operating profit may decline about 20 percent this fiscal year because of slowing US sales and a stronger yen, the Nikkei newspaper reported.

Japan's biggest automaker may have operating profit of 1.7 trillion yen ($16.7 billion) to 1.8 trillion yen on little- changed sales of 26 trillion yen in the year ending March 31, 2009, the Nikkei reported without saying where it got the information.

Toyota gets more than half its operating profit from the United States, where sales fell 10.3 percent last month as a weakening economy crimped demand for Lexus LS and Avalon sedans. The yen has gained 9.7 percent against the dollar so far this year, eroding repatriated profits.

"Consumer demand in the US has gone ice cold," said Yuuki Sakurai, who helps manage the equivalent of $41.5 billion at Fukoku Mutual Life Insurance Co in Tokyo. "Growth in emerging markets won't be able to cover that drop in earnings."

Toyota spokeswoman Shiori Hashimoto declined to comment. The company is scheduled to give a forecast for the current year on May 8 in Tokyo when it publishes results for last fiscal year.

Toyota shares rose as much as 170 yen, or 3.5 percent, to 5,050 yen and traded at 5,020 yen at the 11 am morning break in Tokyo. The shares have dropped 31 percent in the last 12 months.

"Toyota's possible profit decline is within the range that's already priced into the stock," said Koji Endo, a senior analyst at Credit Suisse Group in Tokyo, who rates the company "outperform". "Investors are relieved."

The Japanese currency traded at 101.9 yen against the dollar as of 11 am in Tokyo. Toyota based its earnings for the first three quarters of last year on an average 117 yen to the dollar. A 1 yen gain in the Japanese currency against the dollar cuts Toyota's annual operating profit by 35 billion yen ($343 million), according to the automaker.

The carmaker's operating profit for the current year will fall 11 percent to 2.1 trillion yen, according to the median of 22 analyst estimates compiled by Bloomberg.

In the US sales of Toyota's premium Lexus brand are falling faster than its less-expensive Toyota-brand cars. Lexus vehicles, which sell for an average of $42,000, can contribute almost half of Toyota's US operating profit in some years, company executives have said.

Agencies

(China Daily 04/18/2008 page16)