Toyota Profit Increases Sharply

Toyota, the world’s largest automaker by sales in 2012, on Wednesday reported a net profit of ¥962.1 billion, or about $9.7 billion, for the most recent fiscal year, compared with ¥283.5 billion the previous year. Sales came to ¥22 trillion yen, up 18.7 percent. For the January-March quarter, Toyota’s net profit came to ¥313.9 billion, compared to ¥121 billion yen in the same quarter last year.

The automaker, based in Toyota City, Japan, said that it expected net profit for the current fiscal year through March 2014 to rise further, to ¥1.37 trillion. A company-wide cost reduction drive, as well as strong sales — especially in the United States, its biggest export market — would continue to drive its profit rebound, Toyota said.

The yen, which has weakened by almost 30 percent since September, has also given Toyota’s profit a major bump, driving up the value of its overseas earnings in the home currency and making Japan-based production more cost-efficient. For every yen the Japanese currency loses in value against the dollar, Toyota estimates that its operating profit rises by about ¥35 billion yen.

Still, the showing, Toyota’s strongest in five years, offered the latest evidence that the Toyota City-based automaker may finally be shaking off the effects of some of the biggest crises of its 75-year history.

“What an amazing turnaround for Toyota, which started last year after a couple of years of a roller-coaster ride dealing with numerous recalls and the Japanese earthquake,” Alec Gutierrez, a senior analyst at Kelley Blue Book, said in an e-mail. “It’s been a wild ride for Toyota but we’re seeing the fruits of its labor,” he said.

Mr. Gutierrez said that Toyota faced tough competition from familiar competitors like Honda and Nissan in the United States as well as renewed competition from Detroit and Korean automakers, and that gaining market share would be more difficult. But the launch later this year of a completely redesigned version of Toyota’s Corolla, its best-selling compact car, could help bolster sales, while the declining yen would continue to shore up its profitability, he

said.

Toyota had just started to regroup from a historic collapse in sales due to the global financial crisis when reports of unintended acceleration prompted recalls involving almost 10 million vehicles — a scandal that dealt a heavy blow to the company’s sales and reputation in the United States, its biggest export market.

In early 2011, Japan’s auto parts makers suffered great damage from the earthquake and tsunami that ravaged the country’s northeast coast, forcing Toyota to slash production while it scrambled to meet shortages of components. Fears of an electricity shortfall following the Fukushima nuclear crisis added to Toyota’s problems. Later that year, widespread flooding in Thailand paralyzed manufacturing in the Southeast Asian nation, further disrupting Toyota’s global supply chain.

All the while, a strong yen ate into Toyota’s profits, eroding the value of its overseas earnings and making its factories in Japan painfully expensive to maintain. President Akio Toyoda, who took helm of the company in 2009, often spoke of the multiple woes facing Japanese exporters, including the strong yen, energy shortages and other high costs of doing business in Japan.

He also quipped at times that he was not Toyota’s chief executive as much as the company’s chief apologizer for blunders, mishaps and overall sluggish business.

Still, Toyota’s series of setbacks has in many ways made it a leaner, stronger company. To better shield itself from currency fluctuations, Toyota has shifted more production from high-cost Japan to its overseas markets: in 2012, it made almost 20 percent fewer cars in Japan than in 2007, and Mr. Toyoda has said that the weaker yen will not alter that strategy.

Last month, even as the yen weakened, Toyota announced that it would spend $360 million to expand a factory in Georgetown, Kentucky, to bring production of its Lexus luxury sedans to the United States for the first time.

The company has also started to source more of its parts locally in the countries where it manufactures, a move aimed at making its supply chains more resilient to natural disasters and other disruptions. To make up for lost share in the United States, Toyota has started to use bolder designs to woo younger drivers, and has offered higher discounts in a bid to win back market share.

At a press conference in Tokyo on Wednesday, Mr. Toyoda reflected on the company’s recent trials. “We have faced many challenges since 2009 but have learned valuable lessons, including the need for Toyota to maintain sustainable growth,” he said.

Despite its rebound, Toyota’s latest earnings remain far below the heights of the year that ended March 2008, when net profit hit ¥1.7 trillion on record sales of ¥26 trillion. American consumers riding out the last of the credit boom had helped spur global sales to a record 9.37 million cars in 2007. Toyota finally topped that record in 2012, with global sales of 9.75 million cars.

In the contemplative, measured tones that have become Mr. Toyoda’s signature, the chief executive struck a cautious note.

“Have we really turned into a company that will be profitable and continue to grow no matter what happens to its business environment?” Mr. Toyoda asked.

“I am not sure yet, is my honest answer. An unprecedented crisis even beyond the scale of the Lehman Shock may happen again,” he said, using a common Japanese reference to the global economic crisis. “We’ll only know the answer when such events actually happen.”

Article source: http://www.nytimes.com/2013/05/09/business/global/09iht-toyota09.html?partner=rss&emc=rss