Emerging markets lift Toyota profits; outlook cautious

By Chang-Ran Kim, Asia auto correspondent

TOKYO (Reuters) - Toyota Motor Corp reported a 7.5 percent rise in quarterly profit as it sold more cars in fast-growth emerging markets from China to Russia, but it kept a cautious outlook due to a weak U.S. auto market and a firmer yen.

Toyota, the world's most profitable automaker, has seen its momentum stall in the United States as the economy slows, and said its current quarter earnings were likely to fall due to a sharp decline in the dollar.

"The company is taking a cautious view for two main reasons: the possibility of the U.S. economy falling into recession, which will hurt consumption, and the stronger yen," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

But growth in oil-rich regions and other developing markets, along with strong sales of its higher-margin Lexus luxury sedans and the fuel-efficient Prius hybrid as oil hit $100 a barrel, helped Toyota boost third-quarter earnings.

October-December net profit at Toyota, valued at $196 billion -- about 12 times the market capitalization of General Motors Corp -- was 458.7 billion yen ($4.3 billion), slightly higher than an average estimate of 455.4 billion yen from six brokers surveyed by Reuters Estimates.

Operating profit, which excludes earnings made by Toyota's Chinese joint ventures, grew 4.7 percent to 601.6 billion yen, although unfavorable currency swings shaved off 20 billion yen. Revenue grew 9.2 percent to 6.71 trillion yen.

For the full year to end-March, Toyota kept its forecasts for net profit of 1.7 trillion yen and operating profit of 2.3 trillion yen -- record results for a seventh straight year.

Consensus forecasts from 22 brokerages call for net profit of 1.82 trillion yen and operating profit of 2.46 trillion yen.

STRONG YEN WEIGHS

Senior Managing Director Takeshi Suzuki predicted profits in the current fourth quarter would fall from last year due to an assumed 14-yen drop in the dollar, but said Toyota's fundamental ability to expand profits remained intact.

"We're determined to meet our annual targets, even with the tough currency. I don't see this as a sign of a decline in Toyota's profit power," he told reporters.

Domestic rival Honda Motor Co raised its profit forecast last week, but Nissan Motor Co warned the weak dollar and U.S. woes would make for a tough 2008.

Toyota announced share buybacks worth up to 120 billion yen and plans to cancel 4.5 percent of its outstanding stock -- the first time in almost six years that it is eliminating part of its sizeable treasury stock -- to make better use of its capital.

Toyota will keep roughly 300 million of its own shares and cancel anything above that level, Suzuki said.

GROWTH ENGINE TO CONTINUE