February 4, 2014 7:36 am

Toyota drives up profit outlook for second time on weaker yen

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A weaker yen and recovering US economy prompted Toyota to accelerate its full year profit forecast for the second time in six months.

The world’s biggest automaker by volume on Tuesday said it expected revenue of Y25.5tn ($252bn) in the 12 months to the end of March, up from a previous estimate of Y25tn. Net profit is expected to come in at Y1.9tn, up from Y1.67tn.

Toyota previously raised its full-year profit expectations in November after the weaker yen and stronger US sales pushed up interim net profit.

The carmaker, whose more popular models include the Prius and Yaris, made the announcement as it reported a jump in profits for the nine months to December 31.

The weaker Japanese currency helped it more than double net profit to Y1.52tn, on sales up 17.8 per cent year-on-year to Y19.12tn. Toyota also attributed the rise to a round of cost-cutting and an increased marketing push.

Those efforts helped it increase operating income in Japan and Asia even as vehicle sales in the region edged down slightly year-on-year.

Toyota’s operating margin similarly improved, near doubling for the nine-month period from 5 per cent a year ago to 9.1 per cent.

The Japanese car group has been one of the country’s highest profile beneficiaries of a weaker currency, which has translated into higher revenues from overseas.

Sales were stronger in North America, with an additional 97,000 vehicles sold during the nine-months compared with the same period last year, rising to 1.96m.

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This year has not been kind to the Japanese carmaker, but it has been helped by the weaker yen. However, what happens now the yen effect is about to wear off?

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Toyota shares fell back 5.7 per cent to Y5,500 on Tuesday, amid a wider sell-off of Japanese equities.

Toyota has held its position as world’s biggest carmaker by volume for two years and expects to sell 9.1m cars in its current financial year to March 31.

In Europe, sales edged up 27,000 to 630,000 in the nine months compared with the same period a year ago.

However, the Japanese manufacturer reported a year-on-year drop in the number of vehicles sold in Asia amid intensifying competition in the region, with sales down slightly more than 66,000 units to 1.2m.

With its sprawling global operations Toyota has become one of the biggest beneficiaries of the fall in the yen under the economic and monetary reform drive instigated by Prime Minister Shinzo Abe, dubbed Abenomics.

Meanwhile, analysts are watching whether the carmaker responds positively to Mr Abe’s request for companies to raise wages and invest in Japan and whether Toyota will be hurt by April’s impending rise in Japan’s sales tax from 5 to 8 per cent.

Takuo Sasaki, Toyota managing officer, said it was impossible to predict whether the tax increase would have a negative effect, or result in a last-minute increase in car purchases.

Vehicle sales in Japan were down more than 26,000 to 1.64m in the nine months to December year-on-year.

Mr Sasaki added that Toyota’s unions had not yet presented any official request for wage increases, although Akio Toyoda, Toyota president, has indicated that these would be under consideration given the carmaker’s improved profits.

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