US puts brake on Toyota earnings

Toyota Motor Corp, the world's second-largest automaker, posted its first drop in quarterly profit in almost three years because of a stronger yen and slumping US auto sales. It also said profit will likely fall this fiscal year.

Net income fell 28 percent to 316.8 billion yen ($3 billion) in the three months ended March from 440 billion yen a year earlier, the company said in a statement yesterday. That was lower than the 375.2 billion yen median of six analyst estimates compiled by Bloomberg. Sales rose to 6.57 trillion yen from 6.33 trillion yen.

US drivers bought 5.6 percent fewer Corolla sedans and other Toyota models in the period as a faltering economy and tighter credit damped demand in the world's largest auto market. The yen's 12 percent appreciation in the quarter also cut the value of sales in North America, where Toyota earns about half its operating profit.

"The slowdown in the US really hit Toyota," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd in Tokyo, which oversees $28 billion in assets. "The market has yet to hit bottom."

The carmaker expects annual net income to drop 27 percent to 1.25 trillion yen in the year started April 1, it said yesterday. The stronger Japanese currency will probably trim 690 billion yen from operating profit, it added.

Toyota based its earnings forecast on exchange rates of 100 yen to the dollar and 155 yen to the euro.

Every 1 yen gain against the dollar and euro trims Toyota's annual operating profit by 35 billion yen and 5 billion yen, respectively, according to the company.

Toyota's earnings slump follows rivals Honda Motor Co and Mazda Motor Corp as the overall US market fell 8.1 percent. The price of regular gasoline gained 8 percent to $3.29 a gallon in the period and cost $3.62 a gallon as of Wednesday.

The Toyota City, Japan-based company's shares fell 18 percent in the three months on the Tokyo Stock Exchange, the largest quarterly drop in more than six years.

"I expect more bad news from the industry," said Edwin Merner, president of Tokyo-based Atlantis Investment Research Corp, which manages $2 billion in assets.

Still, "Toyota should come through this period stronger and better" because of its lead in gasoline-electric hybrid technology.

In April, Toyota boosted US retail sales for the first time in five months on demand for the Yaris and the Prius.

US drivers are picking fuel-efficient Toyota models over General Motors Corp and Ford Motor Co pick-ups because of record fuel prices.

Agencies

(China Daily 05/09/2008 page16)