Weak Yen -Strong US Lexus Sales Helps Toyota To Record Profit

TOKYO, May 13 Reuters reported today that the Toyota Motor Corp,generated record profits last business year fuelled by a weak yen and robust U.S. sales, particularly at its Lexus luxury vehicle division.

Consolidated operating profit for Japan's largest automaker leapt 29.1 percent to a record 1.12 trillion yen ($8.78 billion) in the year that ended in March, in line with analysts' forecasts which had ranged from 1.02 trillion yen to 1.16 trillion yen.

It is the second Japanese firm after mobile phone giant NTT DoCoMo to book an operating profit of one trillion yen for the year. The telecoms giant posted 1.00 trillion exactly and took huge appraisal losses on overseas investments.

The automaker's recurring profit also topped the one trillion yen mark at a record 1.11 trillion yen and net profit increased 30.7 percent to 615.82 billion yen, also its highest ever level. "We had record profits across the board and we are very pleased with the results," Executive Vice President Ryuji Araki, Toyota's highest ranking official in charge of finance, told a news conference.

Toyota, twice as big as its nearest domestic rival, is the third Japanese automaker to report record profits for last business year but it lagged by other yardsticks of efficiency such as operating margin.

Group operating margin was 7.4 percent, against Honda Motor Co's 8.7 percent and Nissan Motor Co's 7.9 percent.

"Toyota needs to use its large cash flow more efficiently and rationalise its platform and models as Honda has done," said Hideo Ueki, executive director at UBS Asset Management (Japan).

Toyota's Araki said, however, that Toyota should not be directly compared to it rivals.

"We are a different type of company. If you look at history, we haven't had the big swings from red to black. We've shown steady growth and that's how investors should look at our stock."

Araki said he wanted to achieve a return on equity level of 10 percent by 2005.

SEEKING SHARE BUY-BACKS

Driving profit growth was a softening in the value of the yen, which inflates the yen value of income earned abroad and makes exports more profitable.

In particular high-margin luxury vehicles such as the Lexus ES 300, which are popular in the United States but are built in Japan, raked in profits.

Unlike most other listed Japanese companies, Toyota does not issue income forecasts for the current business year. But Araki told a briefing it hopes group earnings will set a record again this business year.

Toyota said it expects group vehicle sales, which include minivehicles from Daihatsu Motor Co and trucks from Hino Motors Ltd (Tokyo:7205.T - News), to climb 3.5 percent to 5.98 million units.

"The six million units we once dreamed of has become almost a reality," Araki said.

Toyota also said that it expected to post a 187.02 billion yen extraordinary profit this business year as it plans to stop handling portions of public pensions for employees that it formerly did in-house.

Analysts have said they expect profit to rise further this year on even better U.S. sales and renewed efforts in its home market as rival Honda Motor Co's (Tokyo:7267.T - News) long run of hit products is seen running out of steam.

In the United States, high-volume models such as the Camry and Corolla are expected to contribute strongly to earnings helped by launches such as the remodelled 4Runner sports utility. In Japan, Toyota will be counting on models such as the newly released "ist".

In contrast with the strong earnings performance, Toyota's share price has languished, under pressure from views that financial firms may 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.

But in a move to counter potential over-supply, Toyota said it would seek shareholder approval to buy back up to 170 million of its own common shares or up to 600 billion yen worth.

"This should go a long way to easing market concerns," said Takanori Matsuo, general manager of Toyota's accounting division.

Another Toyota official added that Japan's top banks now held between 15 to 20 percent of the automaker's stock compared to over 20 percent at end-March 2001.

Prior to the buyback announcement, the blue-chip stock closed up 0.85 percent at 3,540, contrasting with a 1.68 percent fall in the benchmark Nikkei average (^N225 - News). Its shares are the worst performing among Japan's big five automakers since September 11, down three percent since then.

Also aiming to please investors, Toyota confirmed that it would begin publishing earnings results on a quarterly basis this business year.