Toyota flags third year of record profit on strong U.S. sales, cost cuts

[May 08, 2015]  By Chang-Ran Kim

TOKYO (Reuters) - Toyota Motor Corp said it will crank net profit up to a third straight record this year as cost cuts and rising U.S. sales offset weaker business elsewhere, building on bumper earnings last year powered largely by foreign-exchange gains.

Reporting net income jumped 50 percent in the quarter ended March, the world's top-selling automaker said on Friday it expects net profit to rise 3.5 percent to 2.25 trillion yen ($18.75 billion) in the year that began in April.

The forecast assumes the dollar will be worth 115 yen on average this year. That's conservative compared with 120 yen currently, implying Toyota's net profit for the year may yet come closer to the 2.44 trillion yen average estimate of 27 analysts polled by Thomson Reuters.

For the past few years, President Akio Toyoda has called an "intentional pause" for the company founded by his grandfather. The strategy seeks to ensure sales growth stays at a sustainable pace, free of the overcapacity and quality problems that plagued the company in previous years.

"I think we are at a stage where we can move on to putting into practice what we have been preparing during the intentional pause," Toyoda said at a news conference in the capital.

Toyota is looking to overhaul the way it designs and manufactures cars under a new initiative called Toyota New Global Architecture (TNGA), which aims to slash development and production costs and allocate part of the savings to making its cars more appealing. Advanced safety devices would be among features it plans to add to cars.

The first car developed under TNGA specifications - widely expected to be the next-generation model of the Prius sedan - is due for launch later this year. The first full-scale "simple and slim" TNGA factory will be built in Mexico in 2019.

The forecast for earnings growth this year came as Toyota projected overall vehicle sales will drop 0.8 percent to 8.90 million. But it expects lucrative sales in North America to grow 4.2 percent to 2.83 million, cushioning the blow of weaker sales in Asia, as well as Russia and the Middle East, which have been hit by falling oil prices.

Toyota expects operating profit to edge up 1.8 percent this year to 2.80 trillion yen, giving an operating margin of 10.2 percent - among the highest in the industry.

It expects cost cuts to contribute 265 billion yen, while currency losses will knock off 45 billion yen as a weaker Brazilian real and Russian rouble offset windfalls from a stronger dollar, which boosts the value of U.S.-based earnings when converted back into yen.

(Editing by Kenneth Maxwell)

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