Toyota Recovers from a Slump to Report a $2.2B Profit

TOKYO — Despite a strong yen and the lingering fallout from recalls, Toyota said it had returned to a profit in the April-to-June quarter because of strong sales in emerging markets and aggressive cost-cutting, reported The New York Times.

Toyota’s net quarterly profit of 190.4 billion yen, or $2.2 billion, was a sharp reversal from a loss of 77.8 billion yen in the period a year ago. The automaker continued to recover from a slump brought on by a global recession and a series of recalls over faulty pedals and inquiries into its safety record.

The company, based in Toyota City, Japan, raised its net profit outlook for the year ending in March 2011 to 340 billion yen, from a 310 billion yen forecast earlier this year, citing a recovery in sales and progress in cost-cutting efforts.

Toyota said it now expected to sell 7.38 million vehicles in the fiscal year, up from the 7.29 million forecast earlier.

But Takahiko Ijichi, senior managing director, said the strengthening yen could cloud the outlook. The yen has risen steadily in recent months, hitting an eight-month high against the dollar in trading Wednesday as concerns over the American economy caused investors to sell the dollar.

A stronger home currency hurts Japanese exporters by making their products more expensive overseas and eroding the yen value of their foreign currency earnings. Toyota said it had based its full-year forecast on exchange rates of 90 yen to the dollar; however, the dollar was selling for around 85 yen in late trading in Tokyo on Wednesday.

Ijichi also warned that a faltering economic recovery in major markets, including the United States, and the expiration of government incentives could also hurt earnings. In Japan, sales are expected to lose steam later this year when the government winds down subsidies for fuel-efficient cars.

Still, revenue at Toyota surged to 4.87 trillion yen in the quarter, an increase of 27 percent from the same period the previous year. The automaker sold 1.82 million vehicles in the quarter — 419,000 more than a year earlier.

Ijichi said that a companywide cost-cutting drive, including efforts to reduce waste in Toyota’s supply chains, had added 50 billion yen to profit.

Toyota said business was brisk in Asia and the Middle East, though Toyota still lagged rivals in China, the biggest market in the world.

The effects of the economic downturn and the pedal recalls were still evident in the United States, although aggressive incentives were helping to lure buyers back. Toyota said Tuesday that its sales in the United States had fallen 3.2 percent in July from the period a year earlier.

“Asia is growing at an incredible rate,” Ijichi said. “We expect this to continue for the time being.”

The outlook for the United States was more uncertain, he said, given mixed signals on the strength of the recovery there. “There are signs that the auto market remains resilient,” he said. Automakers are on track to sell about 12 million vehicles this year in the United States, up from 10.4 million in 2009.

In the business year that ended in March, Toyota earned 209 billion yen. In the previous year, it lost 437 billion yen, its first annual loss in decades.

In the year that ended in March 2008, Toyota’s net profit hit 1.7 trillion yen.