Automaker Toyota Boosts Profit Forecast as Sales Rebound

Toyota Motor Corporation upped its profit forecast for this year as sales in Asia climb faster than expected and U.S. demand rebounds after the automaker’s recall of over 11.2 million vehicles worldwide.

Toyota could post a net income of 340 billion yen, or $3.98 billion, for the year concluding in March, compared with its previous estimate of 310 billion yen, the company reported in a statement today. During the first fiscal quarter, the carmaker earned a profit of 190.47 billion yen, or $2.22 billion, from a loss one year earlier.

The carmaker increased its sales outlook for all areas except Europe thanks to a recovery in demand that also spurred rival Honda to raise its profit forecast last week.

Sales in Thailand, Japan, and Indonesia are helping combat the effects of a stronger yen and the remaining consequences of the record vehicle recalls associated with unintended acceleration.

“Toyota is now at a point where they feel comfortable giving good news,” explained Yuuki Sakurai, CEO of Tokyo’s Fukoku Capital Management. “The recall issue has settled down in the U.S. and China.”

In North America, Toyota’s largest market, first-quarter sales rose by 36 percent. Although deliveries dropped 3.2 percent in July, the North American market could improve from the third quarter, according to Toyota’s senior managing director.

Strong Yen

Toyota shares dropped 1.6 percent and closed at 3,090 yen in trading in Tokyo before the profit forecast announcement. The stock has plunged 20 percent so far this year, compared with an 11-percent decline at Honda and a 23-percent increase at Hyundai.

Toyota increased its global auto sales forecast to 7.38 million vehicles for the year concluding in March 2011 from a prior estimate of 7.29 million.

The automaker did not change its forecast for the yen against the American dollar of 90 yen. The stronger yen, which hit an eight-month peak against the dollar today, could cut into profit gains by lowering the repatriated value of foreign sales.

In the meantime, consumer confidence in Europe is waning following the Greek debt crisis, and the trying situation in the area will persist for some time, a Toyota spokesman said.

Profits in the First Quarter

For the three months that ended June 30, Toyota’s profit contrasted with a 78-billion yen loss one year earlier. Sales increased by 27 percent to 4.87 trillion yen from 3.84 trillion yen.

Asian vehicle sales, especially those in Indonesia and Thailand, “are growing with great momentum,” the Toyota rep said. Government subsidies in Japan for fuel-efficient vehicles have also helped the Prius, the best-selling hybrid in the world, become the most popular car of the year in Japan.