Toyota Q3 Profits Jump

TOKYO February 7, 2006; Chang-Ran Kim writing for Reuters reported that Toyota Motor Corp., the world's most profitable car maker, posted a 14 percent rise in quarterly profit on Tuesday as sales in overseas markets raced ahead and a weaker yen boosted the value of earnings from them.

Brisk demand for cars such as the Prius hybrid -- still in short supply after 2- years -- and cost-cutting efforts helped Japan's biggest auto maker absorb a hefty buildup in capital spending on new and expanded manufacturing facilities around the world after three straight quarters of profit decline.

With key new models such as the Camry and Lexus LS sedans and the Tundra pickup truck to be rolled out in the lucrative U.S. market soon, analysts expect further gains for Toyota as it closes the gap with General Motors Corp., the world's top seller of cars.

"With these results, we managed to expand our profits through the first three quarters (from the year-earlier period) despite the big investment outlays to meet ballooning vehicle demand," Senior Managing Director Takeshi Suzuki told a news conference.

"The weaker yen helped, but all in all I think it was a commendable performance," he said.

Toyota, which the market values at $185 billion -- more than DaimlerChrysler AG, Honda Motor Co. and Nissan Motor Co. combined -- had an operating profit of 482.21 billion yen ($4.05 billion) for October-December, roughly in line with a mean estimate of 485 billion yen in a survey of four brokerages by Reuters Estimates.

Net profit surged 34 percent to 397.57 billion yen thanks to a rise in the value of its stake in former UFJ Holdings after the bank's merger into the Mitsubishi UFJ Financial Group Revenues grew 15 percent to 5.33 trillion yen as global sales volume rose 7.7 percent to 1.98 million units.

Toyota's domestic rivals, Nissan and Honda, also reported better third-quarter earnings last week, helped by the yen's fall against the dollar, euro and other currencies.

Tough competition from Asian brands has sent core automotive operations of GM and Ford Motor Co. reeling under losses, forcing America's top two auto makers to call for massive job cuts and plant closures.

"The operating environment is good for Toyota right now," said Yoshihisa Okamoto, a senior vice president at Fuji Investment Management, adding that the market focus would shift to the outlook for next business year.

"Toyota has been investing in production capacity and I think we can expect them to post solid growth. I think Toyota's stock will rise," he said.

BIG INVESTMENT SPENDING TO CONTINUE

Toyota does not provide group-based profit forecasts but repeated its prediction that it would beat last year's record levels. A consensus forecast of 22 brokerages puts Toyota's group operating profit at 1.75 trillion yen for the year ending in March, up 4.7 percent from last business year.

But Toyota lowered its sales volume forecast for the business year by 80,000 units to 7.95 million vehicles, predicting a shortfall mainly in Japan and Indonesia. It raised its plans slightly for North America.

The company kept its parent-only forecasts unchanged, projecting a net profit of 670 billion yen.

Heavy capital spending is expected to keep profit growth in check compared with revenue expansion.

Suzuki was coy about spending plans for next year, saying that while it would not rise or fall significantly, high commodity prices meant investments could end up being more expensive.

Toyota has estimated capital spending at 1.4 trillion yen this business year, up nearly 30 percent from the year before.

Shares in Toyota climbed 18 percent in October-December, against a 19 percent rise in the Nikkei average and the transport sector's ITEQP.12 percent gain.

(Additional Reporting for Reuters by Nathan Layne)