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From the Detroit Free Press:

Toyota 2004/05 profits flat, sees tough year ahead

Reuters / May 10, 2005

TOKYO -- Toyota Motor Corp. eked out a smaller-than-expected gain of less than 1 percent in annual profits even as sales jumped in all major markets, and forecast a tough year ahead as it boosts spending to expand output globally.

Japan's top automaker does not provide group-based profit forecasts, but indicated on Tuesday that earnings could fall this year taking into account an assumed weakening in the dollar and bigger spending on factories and r&d to keep up with rising demand for its cars.

"There's bound to be a pause as we invest more for expansion and r&r to secure future growth," President Fujio Cho told a news conference, referring to the fall in fourth-quarter profits.

Domestic rivals Nissan Motor Co. and Honda Motor Co. also reported profit growth in 2004/05 but are expected to struggle to match last year's pace as a weaker dollar, high steel prices and tough competition take their toll.

Toyota said it would try in the year to March 2006 to match last year's record profits, excluding the negative impact from an assumed 3 yen weakening in the dollar, suggesting earnings would contract if the currency factor were included.

Group operating profit for the year ended March 31 inched up 0.3 percent to 1.67 trillion yen ($15.80 billion) against an estimate of 1.744 trillion yen in a survey of 21 analysts by Reuters Estimates.

Net profit rose 0.8 percent to 1.17 trillion yen, falling short of a mean estimate by analysts of 1.203 trillion yen. But revenue grew 7.3 percent to 18.55 trillion yen as sales volume jumped 10 percent to a record 7.408 million vehicles worldwide.

On a parent-only basis, Toyota forecast a 5.5 percent drop in net profit to 500 billion yen for the year to next March, hit by hefty r&d spending.

STILL ENVIABLE

Despite the softer outlook, Japanese carmakers are faring much better than U.S. rivals as they roll out more SUVs and other light trucks in the U.S. market, their main cash cow.

Toyota, the world's most profitable automaker and the second-biggest by sales volume behind General Motors, has expanded its presence in every major market thanks to the Prius hybrid sedan and other popular cars as it marches toward its goal of selling 8.5 million vehicles in 2006.

In the past month alone, the maker of the Camry sedan has announced plans to build new factories or expand existing ones in Russia, Thailand and Indonesia, and is mulling a seventh North American plant even as local makers cut back their production.

While executives have been mindful that Toyota's runaway success in the United States could trigger a political backlash as homegrown brands struggle, the Japanese automaker forecast a 7 percent surge in North American sales to 2.43 million this business year.

Toyota is also looking for sales expansions in Europe, Japan and elsewhere, with total global sales expected to rise 6 percent to 7.85 million units in the year to March 31, 2006.

"It's clear that there's strong demand for Toyota's cars considering that it's planning more factories overseas," said Fujio Ando, senior managing director at Chibagin Asset Management. "I'm not worried about their growth prospects."

In the January-March final quarter, Toyota's operating profit was 383 billion yen ($3.62 billion), lagging market estimates of 454.71 billion yen. Net profit fell 17.2 percent to 290.7 billion yen hit mainly by smaller one-off pension-related gains versus last year.

In an attempt to please shareholders, Toyota said it would aim to gradually boost its consolidated dividend payout ratio from 18.3 percent in the year ended in March, when it raised the per-share dividend by 20 yen to 65 yen.

Cho said Toyota had no specific target for the ratio but cited 30 percent as one general yardstick at Western companies.

Toyota also said it would seek approval to buy back up 250 billion yen worth of its own shares at a shareholders' meeting next month.
 
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