Toyota Motor Corporation (NYSE:TM) raised its full-year profit forecast by 2.6 percent despite the informal boycott of Japanese vehicles in China and the slowdown in the global economy.
For the Japanese fiscal half-year, Toyota’s net revenues totalled ¥10.9 trillion (£84.84 billion), an increase of 36.1 percent compared to the same period last year. Operating income improved from a loss of ¥32.6 billion (£253 million) to a profit of ¥693.7 billion (£5.38 billion) mainly due to the positive effects from marketing activities of ¥580 billion (£4.50 billion) and cost reduction efforts trimming ¥230 billion (£1.78 billion) in inefficencies. Negative effects of currency fluctuations decreased operating income by ¥60 billion (£466 million).
“For the first six months of this financial year, we have seen a significant increase in production in all regions compared to the same period last year when we suffered parts-supply shortages due to the Great East Japan Earthquake. Our business results on a consolidated basis also show increased profits over the same period last year.” commented Toyota’s executive vice president Satoshi Ozawa.
The automaker’s performance was strongest in the US where sales rose 16 percent year-on-year in the second quarter with Toyota’s luxury brand Lexus grabbing a 13.9 percent market share, up from 12.3 percent last year. TMC said it hoped to sell 2 million vehicles in the States, a market it sees growing to 14 million vehicles.
!m[Strong US Sales and Cost Cuts Offset Losses From Japan-China Row](/uploads/story/718/thumbs/pic1_inline.png)For the January-September period Toyota sold 7.4 million vehicles worldwide, beating American and German rivals GM and Volkswagen as the top selling carmaker. The Japanese company held the crown of the world’s biggest automaker from 2008 through 2010 but lost pole position on the back of a series of crises including the global financial meltdown, the natural disasters and the disputes with China. According to analysts, the company might reclaim its first place this year given the strong performance so far.
Toyota revised its net profit forecast for the full fiscal year up by 2.6 percent to ¥780 billion (£6.05 billion) and operating profit to ¥1.05 trillion (£8.17 billion) from the previously expected ¥1 trillion (£7.76 billion). “Although currency fluctuations have continued to affect our profits and the effect of current Japan-China relations on our sales is still unclear, we have revised the forecast we announced at the end of the first quarter to reflect the progress we have been making in our profit improvement activities.” said Mr Ozawa in the half-year financial results report.
**Japanese Automakers Struggle in China**
The political dispute between Tokyo and Beijing over a group of islands in the East China Sea has led to a consumer backlash in the People’s Republic which continues to hurt Japanese brands.
A month ago Toyota announced it is reducing the output at its car factories in China by more than half and will be suspending exports of the Lexus luxury vehicles to the country. Still the relatively small exposure of TMC to the Chinese market (10 percent of sales) is expected to aid the company in its full-year results.
“It’s uncertain when sales will recover in China. It’s unlikely to happen anytime soon … I think the market hopes for a recovery in January-March, but I don’t really see what’s going to drive that,” opined Kei Nihonyanagi, autos analyst at Barclays Securities. More than a quarter of Nissan’s sales and 20 percent of Honda’s revenue come from China.
If the diplomatic row persists, Toyota might come 150,000 units short of its 1 million vehicles sales target in China. Shares in the company have fallen by 4 percent since 3 August to $77.8 but are expected to rise rallied by today’s upward profit revisions.