Toyota Motor, the world's biggest and most profitable automaker, posted a 2.7 percent rise in quarterly operating profit thanks to a weaker yen, cost cuts and stronger sales, and it raised its full-year forecasts.
Toyota, valued at $200 billion -- about 10 times the market capitalisation of General Motors -- is on its way to a seventh straight year of record earnings powered by a rapid push into China, Russia and other developing markets with popular models such as the Camry sedan.
For the year to end-March 2008, Toyota nudged up its operating profit forecast by 2 percent to 2.3 trillion yen and its net profit forecast by 3 percent to 1.7 trillion yen.
The company's forecasts still lag the consensus among analysts for an operating profit of 2.5 trillion yen and net profit of 1.8 trillion yen.
"Although there were some hopes for a bullish upward revision, the one we got reflects the strong results while still erring on the side of caution," said Atsushi Kawai, an analyst at Mizuho Investors Securities.
Its dollar and euro assumptions for the second half of the business year were a conservative 110 yen and 155 yen, compared with current weaker yen levels of around 114 to the dollar and 166 to the euro.
July-September operating profit was 597 billion yen ($5.2 billion), up from 581 billion a year ago, when profit jumped 44 percent. The result was short of a consensus estimate of 602 billion yen in a poll of six brokerages by Reuters Estimates.
Toyota's ongoing success contrasts sharply with the troubles facing Detroit's GM and Ford Motor, which are mired in losses from restructuring costs and declining sales at home.
GM, due to report results on Wednesday, said a day earlier it would book a staggering $39 billion charge for the third quarter, triggered by the cumulative loss it had posted over the past three years in North America and Germany.
Toyota's sales dipped in North America and Japan last quarter, partly hit by a temporary production stoppage after an earthquake hit a domestic supplier's factory, but its share of both markets has grown amid weaker overall demand.
"Although the North American market has been slightly underperforming as higher oil prices and the subprime problem hit consumer sentiment, our sales have been moving according to our initial forecast, and Toyota's advantage in the market is unchanged," Toyota Senior Managing Director Takeshi Suzuki told a news conference.
Spreading out Risk
With Toyota due to make up lost production this quarter and new high-volume models such as the Corolla sedan coming next year, analysts expect sales to recover in the crucial U.S. market, making up for a stubborn fall in Japanese car demand.
More importantly, Toyota is spreading out its earnings sources by beefing up its presence in emerging markets such as the Middle East, reducing its reliance on North America, where it makes more than half of its profits.
Second-quarter net profit grew 11.1 percent to 451 billion yen, as stronger sales in Europe, Asia and other markets eclipsed the slide in the United States and Japan, Toyota's two biggest markets. Revenue rose 11.2 percent to 6.49 trillion yen.
Domestic rivals Honda and Nissan also reported bigger quarterly profits last month, fuelled by a softer yen and sales growth.
Analysts said the U.S. subprime loan problem was having no direct impact on Toyota, with the default rate at a fraction of 1 percent, although a tough sales environment overall was forcing most automakers to spend more on profit-eroding sales incentives.
While mainstay models such as the Prius hybrid remain buoyant, quality problems and stiff competition with Ford and GM have forced Toyota to slap thousands of dollar in discounts on the Tundra full-sized pickup truck, which it has billed its most important U.S. product launch ever.
Shares of Toyota have fallen 19 percent so far this year, underperforming Tokyo's transport sub-index, which has lost 12 percent.
Prior to the earnings announcement, the stock ended up 0.8 percent on Wednesday, against a 0.2 percent fall in the subindex.