Toyota expects earnings to keep rising

Bloomberg NewsNovember 6, 2012 

TOKYO — Toyota raised its profit forecast Monday after earnings in its fiscal second quarter jumped to 548.2 billion yen ($6.9 billion) from 81.5 billion yen in the same quarter a year earlier.

Asia's largest automaker raised its full-year projection for net income to 780 billion yen ($9.8 billion) after the company reduced costs by 230 billion yen during the fiscal first half. That's in contrast to Honda, Japan's third-largest automaker, which last week cut its profit forecast 20 percent, citing concerns about China demand.

For Toyota, its Japanese operations posted their third straight quarter of profit after eight quarters of losses.

In North America, the automaker saw operating income double to 64.9 billion yen, though that was 18 percent below the average estimate in the Bloomberg survey. In Asian markets outside of Japan, earnings rose 32 percent, albeit 10 percent less than the consensus.

"These are positive results and it shows Toyota is doing quite well this year in areas except China," said Manabu Tamaru, a fund manager at Baring Asset Management Co. in Tokyo. "In the U.S., hybrid cars are selling pretty well, the product mix is strengthening and in Southeast Asia, the Toyota brand is making steady progress."

The company is cutting manufacturing costs through a method it calls "Toyota New Global Architecture" by sharing components across platforms and reducing the number of parts used in a car. For example, Toyota has reduced the number of radiator types they buy to about 20 variants, from 100, Executive Vice President Shinichi Sasaki told reporters in April.

"Unless you think the world economy is going to fall apart, and it might, Toyota should do well over the coming few years and looks very undervalued if you can take a one-to-three year view," said Edwin Merner, Tokyo-based president of Atlantis Investment Research Corp. "I assume all the analysts are now going to recommend the stock and it may go up too quickly. But even so it is a company you want to own."

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