Toyota Motor, the world's biggest automaker, posted a smaller-than-expected 28 percent drop in quarterly net profit, dented by a strong yen and slumping U.S. sales, and kept its forecasts unchanged for what is set to be its most challenging year in recent memory.
While sales in China, Russia and the Middle East are growing faster than anticipated, Toyota and other automakers face a downward sales spiral in North America, Western Europe and Japan, a weaker dollar that drags on earnings, and dearer raw materials.
"The environment surrounding our business has taken a sharp turn for the worse, leading to a very tough first quarter," Executive Vice President Mitsuo Kinoshita told a news conference. "It will be crucial for us to act quickly and flexibly to overcome this."
Toyota last month cut its 2008 global production and sales forecasts and outlined plans to idle North American factory lines building light trucks such as the Tundra pickup, which it had called its most important product ever for the United States when launched last year.
A slump in demand for gas-guzzlers amid record high fuel prices has also forced top automakers in the United States to set aside big provisions for a slide in the resale value of the unpopular vehicles.
Local rivals Honda Motor and Nissan Motor also blamed those allowances for weighing on their first-quarter results. Toyota's April-June net profit was 353.66 billion yen ($3.23 billion), down from a record 491.5 billion yen a year ago but higher than an average estimate of 319.5
billion yen from seven brokers surveyed by Reuters Estimates.
Operating profit, which excludes earnings in China, fell 39 percent to 412.6 billion yen. Revenue fell 4.7 percent to 6.2 trillion yen.
For the year to the end of March 2009, Toyota kept its forecasts for a net profit of 1.25 trillion yen and operating profit of 1.6 trillion yen, down almost 30 percent from last year and the first fall since 2002.
Consensus forecasts from 19 brokers predict annual net profit of 1.34 trillion yen and operating profit of 1.7 trillion yen.
Drivers looking to make fuel savings have pushed up sales of the Prius hybrid, Yaris compact and other fuel-efficient models but Toyota has been unable to build them fast enough, losing out on potential sales.
But Toyota's Detroit rivals have far bigger worries.
General Motors last week reported a $15.5 billion quarterly loss --
its third-biggest in over a century -- while Ford Motor posted its
worst-ever loss of $8.7 billion. In Europe, BMW and Daimler have both warned of lower annual earnings.
Shares of Toyota, the world's most valuable automaker worth $143 billion, have lost about a quarter of their value so far this year, in line with Tokyo's transport sub-index.
Before the results, Toyota ended down 1.3 percent at 4,580 yen. The sub-index fell 0.6 percent.
"I don't think these numbers are going to put much pressure on the stock price," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
"The fact that they've not revised down their full-year estimates is a big point, I think. The first-quarter numbers are within expectations and beat low-end estimates."