* Net profit seen falling 2.4 pct in current fiscal year
* Year ended March 31 brought record net profit, up 90 pct
* Fading forex boost a new challenge for President Toyoda
(Updates with profit outlook, results, Toyoda comments)
By Yoko Kubota
TOKYO, May 8 Toyota Motor Corp warned
earnings may fall this fiscal year as the export-boosting
tailwind that it and other Japanese carmakers have received from
the yen's sharp depreciation over the past 18 months runs out of
For President Akio Toyoda, the "lull" in prospect offers a
different challenge to the major events that have marked his
five years in charge, like the massive recalls of 2010, Japan's
2011 tsunami and the boycott of Japanese products by Chinese
consumers following a territorial dispute in late 2012.
The world's best-selling automaker said on Thursday it
expects net profit to fall 2.4 percent to 1.78 trillion yen
($17.5 billion) in the financial year to March 2015. That's well
short of the 2.03 trillion yen mean estimate of 24 analysts
surveyed by Thomson Reuters I/B/E/S.
While Toyota typically issues conservative guidance, the
decline is a marked reversal of a near doubling in net profit to
a record 1.82 trillion yen for the year ended on March 31,
buoyed by exports.
As Toyoda briefed reporters in Tokyo, he explained that this
year's earnings may decline as Toyota rides out a shrinking
Japanese auto market, hit by a sales tax hike in April, and a
hiatus in vehicle launches. In future, he said, he wants a
Toyota that can develop stable long-term growth rather than
swinging between extremes of profit, like last year, or loss
after major recalls or natural disasters.
"I want Toyota to be a company that can continue growing,
and that can avoid sharp setbacks or even maintain growth during
times of crisis such as the Lehman shock," Toyoda said, adding
that Toyota will invest more in training its employees as well
as research and development to boost its competitiveness.
"Sustainable growth is our most important goal, so what is
essential is how this lull will lead to growth in the future,"
FIRST FALL IN 3 YEARS
In early reactions, observers described Toyota's projections
in pallid terms.
"In their sales projections, they're showing some confidence
in the North American market where they're projecting growth,
but it remains a market where competition is tough," said
Yoshihiro Okumura, general manager of the research department at
Chibagin Asset Management. "
"The scaled-back plans for Japan probably have factored in
the impact of the increase in the sales tax. However you look at
it, there is little new here to make you want to buy the stock."
This year's forecast marks the first time in three years
that the home of household-name models like the Corolla sedan
and the Prius hybrid expects net profit to drop.
The dollar has risen nearly 30 percent against the yen since
mid-November 2012, when it first became clear that Shinzo Abe,
who has been pledging to boost Japan's economy, would take power
as prime minister with measures that have weakened the domestic
Yet the decline in the value of the yen versus major
currencies like the U.S. dollar and the euro appears to have run
its course, after boosting the profitability of Toyota's export
sales to major markets like the United States. Last year
currency moves boosted Toyota's operating profit by 900 billion
The company this year expects foreign exchange movements to
be a negative factor for its earnings, slicing 95 billion yen
off its operating profit. The company expects a marginal
increase in operating earnings this year, up 0.3 percent to 2.30
"Toyota is temporarily entering a lull this year as it gets
ready for next year and beyond," said Koichi Sugimoto, a senior
analyst at Mitsubishi UFJ Morgan Stanley Securities, speaking
before Thursday's disclosure. Sugimoto said Toyota isn't
expected to launch key new vehicles, including the remodelled
Prius hybrid, until the fiscal year beginning April 2015.
The conservative forecast echoes that of its peers. Rival
Honda Motor Co said late last month that it sees net
profit for this financial year growing just 3.6 percent, with
weaker emerging markets' currencies biting into profits.
Toyota subsidiary Daihatsu Motor Co said it expects
net profit to fall 2 percent this year, while five out of seven
auto parts makers in the Toyota group see profits down this
year, including Denso Corp and Aisin Seki Co.
Toyota has relentlessly cut around 300 billion yen in costs
each year. Unlike rival automakers Nissan Motor Co and
Honda that have been in expansion mode, Toyota has put a freeze
on building new plants for three years since around early 2013.
But for it to bolster growth, analysts say it must now
invest more, especially to increase production capacity and
"Toyota is reaching a turning point at which it will move
from its emphasis on defence to significantly more active
commitment to growth," Jefferies analyst Takaki Nakanishi said
in a report before the Thursday forecasts were issued. Nakanishi
said there's an expectation that Toyota could soon show how it
plans to expand capacity, though executives didn't disclose such
plans on Thursday.
Toyota said its capital expenditure would increase
marginally in 2014/15 to 1.02 trillion yen from last year's 1.0
Toyota expects to sell 2.21 million vehicles in Japan in the
year to March 2015, down 6.6 percent from last year, while
overseas sales were seen growing 2.1 percent to 6.89 million
vehicles. Toyota's group sales figures include Daihatsu Motor Co
and Hino Motors.
($1 = 101.7150 Japanese Yen)
(Reporting by Yoko Kubota; Additional reporting by Hirotoshi
Sugiyama; Editing by Kenneth Maxwell)