Toyota returns to profit despite recalls

Toyota on Tuesday revealed that it managed to make a profit in its fourth-quarter in spite of the crisis surrounding safety problems with millions of its vehicles.

The world’s biggest carmaker reported a Y112bn ($1.2bn) net profit for the three months to March compared with a loss of Y765bn in the same period last year.

Toyota made a much lower than expected forecast of recovery in profit growth in the 12 months to March 2011, an acknowledgement of the continuing legal risks and of the likelihood that its sales margins would remain under pressure for some time.

The company is offering unprecedented discounts and cheap financing in an effort to prevent customers from defecting to rival carmakers. The strategy has boosted sales but at a cost of smaller profits on each vehicle sold.

But analysts said the carmaker had been conservative in forecasting its outlook and was likely to raise its estimates as the year progressed.

Akio Toyoda, president of Toyota since last year, said he hoped the results signalled a “fresh start” for the company and its brand. “I want to lead the company in such a way that this sort of thing never happens again,” he said, referring to the recall of 9m Toyota cars and trucks worldwide since November to fix defective accelerators, brakes and other systems. On Monday, US authorities announced a new investigation into the group over its handling of a steering defect in some US sport utility vehicles in 2005.

Toyota forecast a net profit of Y310bn for the year to March 2011. That would be a 50 per cent increase over last year but still about a third less than analysts’ average projections, and less than a fifth of the company’s peak earnings of 2007-08.

Toyota said it expected to sell 7.29m cars and trucks worldwide in the accounting year to next March, an increase of just 53,000 units in spite of a broad recovery in the US and strong growth in many emerging markets.

Koji Endo, an automotive analyst at Advanced Research Japan, said the projection looked “extra conservative even though there are a lot of reasons [for Toyota] to keep a low key”. He added there was a high probability the company would raise its forecast later in the year.

Toyota fell to its first net loss in six decades in the year to March 2009 amid the financial crisis and global recession, and has relied on drastic cost cuts to drag itself pack to profit. The yen value of its sales fell a further 7.7 per cent in the latest business year due to lower volumes and a rise in the Japanese currency’s exchange rate.

Toyota said it planned to deal with future currency risk and a prolonged decline in sales in Japan by shifting more production overseas. The move will involve building more factories in emerging markets, it said, as well as transferring some research and development functions to North America.