Overseas growth powers Toyota results

Toyota Motor warned that profits in the current year would be flat as it reported record sales and profits in the year just ended helped by strong overseas sales, cost cutting and a favourable exchange rate.

Japan’s largest vehicle maker cautioned that the performance for the year to March 2008 would be negatively affected by a potential slowdown in the US, higher raw materials prices and fluctuations in exchange rates.

Sales for this year are forecast to grow 4 per cent to Y25,000bn while operating profits and net profits are expected to be flat at Y2,250bn and Y1,650bn respectively.

The forecast is a stark contrast to results for the year just ended, which highlighted the success of Toyota’s overseas expansion and cost-cutting efforts.

Toyota, which overtook General Motors as the world’s largest auto group in the January to March quarter, expects to sell 9.34m vehicles this year, compared with GM’s 9.2m.

Wednesday it reported a 14 per cent rise in annual revenues to Y23,948bn and a 20 per cent increase in net profits to Y1,644bn.

Operating profits rose 20 per cent to Y2,239bn, making Toyota the first Japanese company to generate more than Y2,000bn in operating profits.

Katsuaki Watanabe, Toyota president, said, “We believe our continuous efforts to support global growth have steadily contributed to our record net revenues, operating income and net income.”

Demand for Toyota vehicles was particularly strong in North America, where new models fuelled sales. Operating income, however, slipped 9 per cent to Y449.6bn as a result, in part, of the start up of a new plant in Texas.

The Japanese carmaker, which faces rising political pressure in the US due to the weak yen, is opening its eighth North American plant in Mississippi in 2010.

Toyota boosted operating income in Europe by 46 per cent to Y137.3bn on the strength of firm demand for models such as the Yaris, Aygo and RAV4.

Operating income generated in Japan also rose, despite the challenging domestic market.

Toyota maintained its leadership position in Japan where its market share rose to a record 45.8 per cent, despite a drop in unit sales of 110,000. Demand in Japan has shifted strongly to mini vehicles.

Mr Watanabe said Toyota would launch more new vehicles and remodeled vehicles in Japan this year to stimulate demand.

Last year, higher materials costs led to a Y200bn increase in costs but this was more than offset by broad-ranging cost cuts, which resulted in a net cost reduction of Y100bn.

Mr Watanabe said Toyota expects to shave expenses further this year in a bid to offset rising materials prices and aims to achieve net cost savings of Y130bn.

He added that Toyota would stand by its goal of achieving a 10 per cent operating margin.

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