Toyota pushes up profit forecast, details China hit
TOKYO (Reuters) - Toyota Motor Corp (7203.T) nudged its full-year net profit forecast up to $9.7 billion, even as it put the cost of recent anti-Japanese protests and a slowing economy in China, the world's biggest autos market, at lost sales of 200,000 cars.
Sales at Toyota and its two Chinese joint ventures almost halved in September and October amid often violent protests in a dispute over ownership of islets in the East China Sea. Honda Motor's (7267.T) China car sales more than halved last month, while Nissan Motor's (7201.T) fell 41 percent.
Toyota said on Monday the impact of the drop in sales would cost it 30 billion yen off its full-year net profit. It sold around 900,000 vehicles in China last year.
While Honda last week cut its full-year net profit forecast by a fifth to take account of the China damage, and Nissan is expected to follow suit when it releases its July-September results on Tuesday, Toyota has found room to revise its forecasts higher as it traditionally gives more conservative earnings guidance and relies less heavily on China sales.
China accounts for around 12 percent of Toyota's sales, compared to Nissan's 27 percent and Honda's 20 percent. The backlash in China against Japanese goods allowed Hyundai Motor (005380.KS) and BMW (BMWG.DE) to pick up market share.
Toyota increased its net profit forecast for the year to end-March to 780 billion yen, up 2.6 percent from its previous guidance. It said full-year operating profit would be 1.05 trillion yen, up a touch from its earlier forecast for 1 trillion yen.
July-September net profit more than trebled to 257.9 billion yen ($3.2 billion) on solid sales in North America and Southeast Asia, beating an average estimate of 228.8 billion yen from six analysts polled by Thomson Reuters I/B/E/S. A year ago, Japanese manufacturers were still reeling from the March earthquake and tsunami.
"It's uncertain when sales will recover in China. It's unlikely to happen anytime soon ... I think the market hopes for a recovery in January-March, but I don't really see what's going to drive that," said Kei Nihonyanagi, autos analyst at Barclays Securities in Tokyo.
BIG IN AMERICA
In its biggest market, the United States, Toyota's sales rose 16 percent in October from a year ago, giving it and its Lexus luxury brand a 13.9 percent market share, up from 12.3 percent. Toyota said it hopes to sell 2 million vehicles in the United States, a market it sees growing to 14 million vehicles.
The Camry was the third-best selling vehicle in the United States in October after Ford's (F.N) F-Series pickup truck and GM's (GM.N) Chevy Silverado, and led the mid-sized family sedan category ahead of Honda's Accord and Nissan's Altima.
Toyota and its group companies sold a total of 7.4 million vehicles worldwide in January-September, beating GM and Volkswagen (VOWG_p.DE) to be the top selling carmaker. Toyota was the world's biggest automaker from 2008 through 2010, and could this year regain top slot after recovering from a series of crises - from the global financial meltdown and damaging recalls to natural disasters and the China row.
Toyota on Monday trimmed its forecast for global sales in the year to end-March - excluding those at its Chinese joint ventures - to 8.75 million vehicles from a previous 8.8 million.
Shares in Toyota, valued at nearly $135 billion - almost as much as Honda, Nissan and Hyundai combined - are up by a quarter this year, easily outpacing Honda's 4.5 percent gain, while Nissan is flat. Ahead of Monday's results, Toyota rose 2.2 percent to their highest close in 6 weeks.
TIME TO CHANGE
Toyota, which blazed a trail for mass producing quality cars but then tripped up by expanding too fast into the U.S. muscular SUV and truck market at a time when the yen, too, was rising, has been on a relentless cost-paring binge. Investors now want to see real signs that Toyota is fixing its core problem. As the company's president Akio Toyoda puts it: having to make "ever-better cars".
Satoshi Ozawa, an executive vice president, said Toyota expects further cost cuts during the current second half, and predicts a 300 billion yen improvement in profits from the cuts.
While Toyota is again making money, profitability in its core car business is much lower than its financial services unit, which brings in just 5 percent of revenue, but a quarter of operating profit.
"We are changing a lot from what we were. We want to prove how we have changed through our products, and we want to ask everyone to wait a little bit more," another vice president, Mitsuhisa Kato, said in August.
"It's tough for Toyota to dominate the market again with its current product line-up. It needs to improve overall product attractiveness, including design and ride quality," said Masatoshi Nishimoto, autos analyst at IHS Automotive in Tokyo.
One sign of change is Toyota's more controversial designs tested on recent models. For example: the "spindle grille" on some luxury Lexus models - a prominent grille pinched in the middle - gives the car a bolder, more aggressive look.
"We are starting to think about how we can produce cars that stand out, rather than cars that are accepted by everyone but have no unique identity," said Toyota designer Ryo Ikeda.
Another is the Toyota New Global Architecture (TNGA), a new framework to build better cars and cut costs by developing multiple models simultaneously to use more common parts. Shared parts mean suppliers can produce a larger number of fewer parts, cutting the unit price. The framework focuses on three platforms, each carrying 8-10 models, Toyota employees said.
The first car to be fully developed by the TNGA will be the revamped Prius for late-2014 release, followed by the subcompact Vitz and the next generation Camry around 2016, analysts said.
As the global market evolves, Toyota is looking to strengthen its foothold in emerging markets, and plans to double its China sales to 1.8 million cars by 2015. It has positioned Southeast Asia as a "second mother-base" after Japan.
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