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Toyota: Profit booms amid low-risk rules

Last updated on: May 8, 2013 15:26 IST

Toyota: Profit booms amid low-risk rules

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Yoko Kubota in Tokyo

Toyota Motor Corp refuses to be tempted away from its low-risk growth strategy, even as the world's bestselling carmaker met its mid-term profit goals in the year ended March, and foresees even higher earnings this fiscal year.

The company has exceeded the target president Akio Toyoda set two years ago: to make 1 trillion yen in annual operating profit, and do so with a 5 per cent margin.

Its manufacturing arm in Japan also made a profit for the first time in five years, a symbolic triumph for a titan of Japanese industry.

This year, the company will concentrate on sharpening productivity in order to become more competitive, Toyoda said.

Mindful of lessons learned from huge losses run up in 2008 after a period of boom and rapid expansion, it sees high profits as no reason to launch into a building programme - even as some rivals do exactly that.

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Image: Models pose by Toyota cars during the 15th Shanghai International Automobile Industry Exhibition in Shanghai.


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"The wind that was blowing against us is calming down, and we can hear some saying that it is the time for us to take the offensive.

"But I think we are just standing at the startline of sustainable growth", the 57-year-old grandson of the founder of Toyota's automotive business told reporters on Wednesday.

Toyota expects to make operating profit of 1.8 trillion yen ($18.17 billion) in the fiscal year that ends March 2014, which would be below its peak of 2.3 trillion yen in the year ended March 2008

Powering that will be another year of record group sales in calendar year 2013, the company believes, reaching 9.91 million vehicles. It could become the first carmaker in history to sell more than 10 million vehicles in a year.

Since Toyoda took helm in 2009, when profit margins were thin, the automaker has focused on cutting costs and improving profitability.

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Image: A man walks past a logo of Toyota Motor at its dealers shop in Yokohama, south of Tokyo.
Photographs: Toru Hanai/Reuters
Tags: Toyota , Toyoda

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Toyota: Profit booms amid low-risk rules

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Evidence of Toyoda's caution is his fresh policy to build no new factories for the next three years, a sharp contrast with Honda Motor Co which is rapidly adding to its production power around the world.

"Expansion of volume does not equate to growth. The driving force of sustainable growth comes down to making ever better cars," Toyoda said.

Pillar of Japanese industry

Toyota posted on Wednesday an annual operating profit of 1.32 trillion yen with an operating margin of around 6 percent, beating a market that had expected 1.26 trillion yen profit, according to Thomson Reuters StarMine's SmartEstimates. SmartEstimates place emphasis on timely forecasts by top-rated analysts.

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Image: A worker cleans the logo of a Toyota car at dealership store in Taiyuan.
Photographs: Jon Woo/Reuters

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Toyota: Profit booms amid low-risk rules

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It said it expects to sell 2.2 million vehicles in the United States in 2013, up from about 2.1 million in 2012. The company is expected to release the Corolla compact car in the United States this year.

"While the fierce competitive landscape (in the US) will likely mean that Toyota may see growth taper off in the short term, new product launches later this year should help to give sales a boost," said Alec Gutierrez, senior analyst at Kelley Blue Book.

In Japan, where automotive-related jobs account for 8.7 percent of the workforce, according to the Japan Automobile Manufacturers Association, it is becoming more profitable to make and export goods as a result of a yen that has weakened by around 15 percent against the dollar since January.

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Image: Toyota Motor Corp's Executive Vice President Takeshi Uchiyamada poses next to the company's newly developed compact electric vehicle eQ after a news conference in Tokyo.
Photographs: Yuriko Nakao/Reuters

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Toyota: Profit booms amid low-risk rules

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Toyoda repeated his vow to continue making 3 million vehicles a year in Japan.

The company exports 60 percent of its Japan-made vehicles.

Despite building no new plants Toyota, which currently has an annual production capacity of around 9 million vehicles, will still be able to make more cars.

It will stick with pre-existing plans to build new factories such as in Thailand and Indonesia and will also add capacity at plants already running, for example at its Kentucky plant in the United States.

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Image: A logo of a Toyota Prius car is pictured at an exhibition stand of the 'International CAR Symposium' in Bochum.
Photographs: Ina Fassbender/Reuters

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Toyota: Profit booms amid low-risk rules

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After recovering from a damaging safety recall in 2010 and a huge earthquake in 2011 in Japan that disrupted supply chains, Toyota booked record group-wide sales of 9.7 million vehicles in 2012, beating General Motors Co and Volkswagen AG.

Shares in Toyota have risen 37 per cent since the beginning of 2013, outperforming the Nikkei index that has rose about 34 per cent in the same period.

Toyota released its results after the close of trade on Wednesday.

On Wednesday, Fuji Heavy Industries Ltd, which makes Subaru cars, booked record annual operating profit of 120 billion yen for the year ended in March, more than double last year's figure.

The company also announced a plan to spend $400 million on expanding capacity in the United States, its biggest market.

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Image: Cars are inspected at the end of the production line at the Toyota factory.
Photographs: Darren Staples/Reuters

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Sees global sales of 9.1 mn vehicles: Toyota Motor Corp said on Wednesday it sees group-wide global sales of 9.1 million vehicles in the financial year ending March 2014, compared to 8.87 million the previous year.

The Japanese automaker said it is assuming an average dollar rate of 90 yen and a euro rate of 120 yen in the financial year ending March 2014.

Toyota posted on Wednesday an annual operating profit of 1.32 trillion yen ($13.32 billion), with an operating margin of 5.98 per cent, beating a market that had expected 1.26 trillion yen profit, according to Thomson Reuters StarMine's SmartEstimates.


Image: Toyota Land Cruiser.
Photographs: Courtesy, Toyota Motor Corp

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