Toyota to hit record profit

TOKYO, May 7 Reuters reported that Toyota Motor Corp is set to cruise to record profit for the past business year, fuelled by a weak Japanese currency and strong U.S. sales at its Lexus luxury vehicle division.

Although rivals have hogged the spotlight, with Nissan Motor Co displaying dramatic restructuring success and Honda Motor Co (Tokyo:7267.T - news) releasing a string of hit products in Japan, analysts say Toyota's results will be nothing to sniff at. A Reuters poll of nine brokerages produced an average estimate of 1.07 trillion yen ($8.42 billion) in consolidated operating profit for the year ended on March 31, a 23 percent climb from the previous year.

If realised, analysts say it would likely be the first time that a non-financial Japanese company has reported operating profit of more than one trillion yen.

Estimates ranged from 1.02 trillion yen to 1.16 trillion yen, with the average forecast for sales at 14.4 trillion yen.

"Toyota has had a stellar performance in the U.S. market and in the Japanese market, even without a lot of new models, they've done a pretty good job of holding their ground," said Christopher Richter, an auto analyst at HSBC Securities.

Net profit for Japan's largest automaker was expected to leap 30 percent to 613 billion yen, with projections ranging from 550 billion yen to 662 billion yen.

Earnings per share were forecast at 168 yen compared with 127.88 yen the previous year.

Toyota is due to announce its earnings on Monday, May 13 at 3.00 p.m. (0600 GMT). Unlike most other listed Japanese firms, it does not give income forecasts for the current business year.

A major driver of profit growth was the softer Japanese currency, which makes exports more profitable and inflates the yen value of income earned abroad.

The yen declined to around an average 125 to the dollar in the past business year compared with 110 for the previous year.

LEXUS TREASURE CHEST

While sales of mainstay vehicles such as the Camry were solid, high-margin Lexus-brand luxury cars like the ES 300 that are made in Japan and exported to the United States will make a particularly large contribution.

"In times of yen weakness, Lexus is just a treasure chest," said Kurt Sanger, an auto analyst at ING.

Despite the rise to record earnings, Toyota's share price has languished, hit hard by worries that financial institutions will unload their holdings in the automaker.

Cross-holdings -- shares traditionally held to cement business ties -- are now subject to mark-to-market accounting rules and banks are scrambling to cut the vulnerability of their bottom lines to stock market swings as well as cover loan losses.

Under mark-to-market rules, companies closing their books must list their stockholdings at market value, departing from book-value reporting.

Goldman Sachs estimates that major Japanese banks still hold 15.2 percent of Toyota's outstanding shares, making for continued pressure on the stock.

The blue-chip automaker's stock, now trading at around 3,380 yen, is the only one of Japan's five main car companies not to have risen above its September 11 level, having sunk seven percent since then.

That compares with a 19 percent rise for Honda and even larger gains for restructuring stocks such as Nissan's 35 percent increase and Mazda Motor Corp's (Tokyo:7261.T - news) 56 percent leap.

"Toyota's fundamentals are good and the floor for the stock has gradually risen reflecting that, but worries over banks' selling mean it has become mainly a safe issue for long-term investors," said Hideaki Aonuma at Tokyo-Mitsubishi Securities.

"It won't go up a lot but it won't go down a lot either."

Stock price woes aside, many analysts see this business year as one in which Toyota will begin to reassert itself domestically as Honda's new product offerings begin to run out of steam, with models like the new "ist" compact leading the charge.

Some analysts add that although the company is more reticent about stating its goals publicly than rivals such as Nissan, Toyota's internal cost-cutting campaign will likely match those of its peers in boosting operating margins. For the year that started on April 1, analysts projected consolidated operating profit at an average 1.21 trillion yen with net profit seen at 693 billion yen. ($1=127.13 yen)