Weaker yen boosts Toyota's profit forecast

TOKYO — Toyota, Asia's biggest carmaker, raised its profit forecast by 8 percent as the weaker yen bolsters the value of Japanese cars sold overseas.

Net income in the year ending March 2014 will climb to a six-year high of 1.48 trillion yen ($15 billion), the Toyota City, Japan-based carmaker said. Last quarter, profit almost doubled to 562.2 billion yen, or 27 percent higher than the average of four analyst estimates compiled by Bloomberg.

While General Motors outsold Toyota by number of cars, Japan's largest automaker trumped GM's profit last quarter as Prime Minister Shinzo Abe's efforts to weaken the yen bolstered the value of exports. After years of battling a recall crisis, strong yen and natural disasters, analysts project the maker of the Camry sedan has room to raise its projections again.

"They absolutely have the potential to further revise up the forecast," said Takaki Nakanishi, founder of Nakanishi Research Institute Co. and Japan's top-ranked auto analyst this year by Institutional Investor magazine. "Assuming the yen remains at current levels, they have the potential to beat consensus."

The average of 20 analysts' estimates projects Toyota's annual profit will exceed the company's forecast by 15 percent.

Toyota rose 3.4 percent to 6,430 yen at the close in Tokyo trading before the earnings announcement. The shares have climbed 61 percent this year, outperforming all major global automakers, adding almost $84 billion in market value.

Behind Toyota's rising profits is the yen, which has been declining against other currencies since late last year. The yen has weakened about 13 percent against the dollar this year and last week breached 100 versus the greenback. The Japanese currency may weaken further to 105 by the fourth quarter, according to the median of estimates compiled by Bloomberg.

The maker of the Corolla, Toyota's global best seller, raised its 2013 forecast for production — including those of its Daihatsu and Hino units — by about 2 percent to 10.12 million vehicles. If Toyota reaches that target, it would be the first carmaker to make more than 10 million vehicles in a given year.

In North America, the company is facing intensifying competition from U.S. automakers, with GM transforming its lineup into one of the market's newest from one of the oldest.

Toyota's operating profit from North America unexpectedly fell 30 percent to 82.6 billion yen and missed the median estimate of four analysts surveyed by Bloomberg News, which called for little change.

The carmaker's deliveries in the U.S., its biggest overseas market, rose by 3.7 percent — less than half the pace of the industry — and its market share in the country fell to the lowest in five quarters, according to data compiled by Bloomberg. By comparison, GM's market share climbed to the highest in four quarters, while Ford saw its share increase to the highest in six quarters.

GM is preparing to bring 18 new or refreshed vehicles into showrooms this year, including the redesigned Impala, the first car from a U.S. company to be rated best sedan by Consumer Reports in at least 20 years. The automaker reported last week that net income fell 23 percent to $1.4 billion as European operations continued to post losses.

In July, Toyota's U.S. sales growth accelerated to 17 percent, the fastest expansion since January, as the company offered competitive leases and cranked up incentives for its best-selling Camry, whose deliveries rose 16 percent. Toyota also benefited from sales increases of 40 percent for Prius hybrids and 26 percent for Lexus.

Total U.S. sales of cars and light trucks climbed 14 percent last month, keeping the industry on track for its best year since 2007.

In Japan, where Abe is seeking to end 15 years of deflation through monetary easing and fiscal stimulus, Toyota's deliveries fell about 8.8 percent last quarter, as government subsidies for fuel-efficient cars expired in September.

Rebates last year helped provide a temporary boost in an otherwise steady decline in demand since the asset bubble burst in 1989. The world's third-biggest car market has shrunk 8 percent this year and the Japan Automobile Manufacturers Association predicts industry demand will fall 12 percent in 2013 as more Japanese consumers opt to take the subway instead of driving a car.

Toyota's profits in Japan benefited from the weaker yen bolstering the value of exports. About half of Toyota's production occurs at home, making Japan the company's largest export base. Operating income from Japanese operations, including exports, quadrupled to 456 billion yen. That's more than double what analysts surveyed by Bloomberg News were expecting.

In other Asian markets, Toyota's operating income rose 2.5 percent as Japanese carmakers continue to underperform the industry in China, the world's largest auto market. Profit from Asia, excluding Japan, increased to 104.1 billion yen, compared with the 100.8 billion yen median analyst estimate.

In China, where a territorial dispute led to a consumer backlash that cut demand for Japanese products last year, Toyota continued to lose market share to GM and VW. Toyota's deliveries climbed 0.6 percent last quarter, versus growth of 12 percent at GM and 16 percent at VW, according to figures reported by the companies. Toyota's China sales fell almost 5 percent last year, the company's first annual drop, according to records stretching back to 2002.

In Thailand, Toyota's sales fell almost 7 percent to 112,000 vehicles and increased less than 3 percent in Indonesia to 108,000 units, according to the company. Toyota said Friday it expects its sales in Thailand to drop 13 percent because of an industrywide slump in demand in the country.