Toyota Q1 profit jumps as sales gallop
Fri Aug 4, 2006 02:35 AM ET

By Chang-Ran Kim, Asia auto correspondent

TOKYO (Reuters) - Toyota Motor Corp., the world's most profitable car maker, posted a better-than-expected 26.5 percent rise in quarterly operating profit as sales charged ahead in North America and Europe, and kept its forecast for another year of record earnings.

Toyota, whose market value of $188 billion is nearly treble the combined worth of Detroit's big three auto makers, is relentlessly winning drivers around the world with its fuel-efficient cars, and should soon overtake General Motors Corp. as the world's biggest car maker by sales volume.

April-June operating profit at Japan's top auto maker was 512.42 billion yen ($4.45 billion), versus 405.13 billion yen a year earlier, beating a mean estimate of 493.4 billion yen from eight brokerages compiled by Reuters Estimates.

"These are extremely good earnings," said Koji Endo, a Credit Suisse auto analyst. "The yen weakened and the company had considerable sales growth, especially in North America and in Asia."

With gasoline prices near record highs, demand in the United States, the world's biggest car market, has been concentrated on Toyota and rival Honda Motor Co. Both brands marked milestones in July, with Toyota selling more cars in the United States than Ford Motor Co., and Honda outselling DaimlerChrysler AG's Chrysler arm.

In an overall U.S. market that shrank 14 percent last month, Toyota increased its sales by 16 percent, giving it a best-ever share of 16.4 percent -- beating Ford's 15.3 percent and well above Chrysler's 10.2 percent, data showed this week.

"Toyota's strength is that as gasoline prices have risen, it has been able to take advantage of that by selling fuel-efficient cars in the United States," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "It is likely to stay in its leading position."

Net profit grew 39.2 percent in the quarter to 371.50 billion yen, helped by a weaker yen that offset higher raw materials costs.

Revenue rose 13.2 percent to 5.64 trillion yen as robust sales in Western markets made up for a slowdown in parts of Asia and sluggish demand in Japan.

Honda, which introduced the first gasoline-electric hybrid car in the United States in 1999, also reported a double-digit jump in quarterly profit last week, driven by red-hot sales of its Civic and other fuel-efficient sedans.

Analysts cautioned, however, that a heavy shift in demand to smaller cars is putting pressure on profitability even at Toyota.

Margins on cheaper cars such as the Corolla and models in Toyota's youth-oriented Scion brand are thinner than those on larger sport utility vehicles and pickup trucks.

For the year to March, the maker of the Prius hybrid and Camry car has forecast a modest 1.2 percent rise in operating profit to 1.90 trillion yen. Analysts predict 2.03 trillion yen.

Toyota has said it expects its full-year net profit to dip 4.5 percent to 1.31 trillion yen, due to year-earlier one-off valuation gains. Analysts see a slight increase to 1.396 trillion yen, according to 18 forecasts compiled by Reuters Estimates.

Toyota shares fell 6.8 percent in April-June, while the transport sector subindex dropped 8 percent.

Ahead of the results, Toyota closed down 0.5 percent at 6,080 yen on Friday. The transport sector was off 0.35 percent.