Toyota Motor Corp., the world's most profitable car maker, booked a 27 per cent jump in quarterly operating profit as sales charged ahead in North America and Europe, and said it aimed to beat its official forecasts for the full year.
Toyota, whose market value of $188 billion is nearly treble the combined worth of Detroit's Big Three auto makers, is relentlessly attracting customers 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.
With gasoline prices near record highs, demand has concentrated on Toyota and rival Honda Motor Co. especially in the United States, their single-biggest profit source. Both brands marked milestones in July, with Toyota selling more cars in the world's biggest car market than Ford Motor Co., and Honda outselling DaimlerChrysler AG's Chrysler arm.
Toyota's operating profit for the April-June first quarter was 512.42 billion yen ($4.45 billion), as a weaker yen and cost cuts also worked to offset higher spending on raw materials, facilities and research. The result beat a mean estimate of 493.4 billion yen from eight brokerages compiled by Reuters Estimates. Net profit surged 39 per cent to 371.50 billion yen, while revenues grew 13 per cent to 5.638 trillion yen as robust sales in Western markets made up for a slowdown in parts of Asia and sluggish demand in Japan.
"It's a good result," said Christopher Richter, an auto analyst at CLSA Asia-Pacific Markets. "I would imagine Toyota management anticipated this and will be very pleased."
With the yen trading more favourably than it had anticipated, Japan's top auto maker said it would try to outdo its official full-year forecast for an operating profit of a record 1.9 trillion yen ($16.50 billion).
"Toyota is a conservative company so it is difficult to say that we would reach the two trillion yen mark," senior managing director Takeshi Suzuki told a news conference.
"But the yen was weaker in the first quarter and, all else being equal, we will aim to exceed the 1.9 trillion yen forecast as much as possible." The yen averaged 115 yen to the dollar and 144 yen to the euro in April-June, compared with Toyota's assumptions of 110 and 135 yen for the full year. Toyota should make a full-year operating profit of 2.03 trillion yen, according to 18 forecasts compiled by Reuters Estimates.
Toyota repeated its forecast for group-based global vehicle sales to total 8.45 million units in the 2006/07 business year, after sales grew 7.3 per cent to 2.091 million units in the latest quarter.
One weak spot has been Asia, where a slide in overall demand in Indonesia and Taiwan has been hitting all car makers. Toyota said it may fall short of its projection of 850,000 units in the region, but added it would try to exceed its global target with an even bigger contribution from North America.
In an overall US market that shrank 14 per cent last month, Toyota increased its sales by 16 per cent, giving it a best-ever share of 16.4 per cent - beating Ford's 15.3 per cent and well above Chrysler's 10.2 per cent, data showed this week.
"Toyota's strength is that it has been able to take advantage of rising gasoline prices by selling fuel-efficient cars in the United States," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
"It's likely to keep its leading position."
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-sipping 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.
"High gasoline prices are favouring our smaller cars, and that is somewhat pushing down the margins," Mr Suzuki said.