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Toyota looks to log record group operating profit

Kyodo

Toyota Motor Corp. is expected to log a record operating profit for the current business year through March aided by the yen’s fall, which boosts export competitiveness, sources said.

The auto giant’s full-year operating profit is likely to reach ¥2.40 trillion or ¥2.50 trillion, eclipsing the previous record of ¥2.27 trillion marked in fiscal 2007 before the global financial crisis that erupted in 2008.

The dollar has been moving in the range higher than the company’s assumed annual exchange rate average of ¥97. Its operating profit rises ¥40 billion for every ¥1 decline against the dollar.

Cost-cutting as well as increased sales are other factors contributing to the robust earnings projection, according to the sources.

The upbeat earnings of Toyota, Japan’s largest automaker, is also contributing to the economic recovery.

In November, the carmaker raised its consolidated operating profit projection for fiscal 2013 from ¥1.94 trillion to ¥2.2 trillion, exceeding ¥2 trillion for the first time in six years.

On Wednesday, Toyota said its global group output in 2013 totaled a record 10.12 million vehicles, making it the world’s first automaker to exceed the 10 million mark.

The number of vehicles produced by Toyota and other group companies — Daihatsu Motor Co. and Hino Motors Ltd. — rose 2.1 percent from the previous year.

Increased production in North and South America, Europe, Asia and Australia more than compensated for an output decline in Japan, Toyota said.

The automaker is expected to lift its operating profit forecast for the full business year to March when it announces its April-December earnings on Feb. 4.

However, in the coming business year through March 2015, domestic sales are expected to drop due to the sales tax hike in April.

China parts sales rising

bloomberg

Tsubakimoto Chain Co., a Toyota Motor Corp. supplier, forecasts China auto parts sales to more than double in four years as carmakers including Volkswagen and General Motors raise orders to diversify supply chains.

The maker of transmission chains and gears expects sales to jump to more than ¥12 billion by March 2018, Toru Fujiwara, managing executive officer, said in a recent interview. The board has approved plans for a new plant in China as early as this year, he said.

Tsubakimoto Chain plans to expand in China, where its auto parts sales are projected to reach ¥6 billion this fiscal year, fueled by GM and VW racing to become the No. 1 carmaker in the world’s biggest auto market.

As the German and U.S. carmakers compete in China, they are diversifying orders to reduce the risk of having just one supplier for each part, Fujiwara said.

“That would be a tailwind for us,” Fujiwara said in Osaka, where the company is based.

Net income will probably jump 25 percent to ¥9.3 billion for the year ending in March, according to the average of seven analyst estimates compiled by Bloomberg. Sales may climb 15 percent to ¥173 billion, the estimates show.

VW has said it will add seven car plants in China and increase production capacity there to 4 million vehicles a year by 2018. GM plans to invest $11 billion in China by 2016 and add four plants that will boost annual capacity to about 5 million units.

“As a global operating company, we work together with global operating suppliers,” said Larissa Braun, a spokeswoman for VW Group China in Beijing. “To secure globally stable and efficient supplier chains, we cooperate with the most competitive and cost-efficient supplier markets to improve continuously our costs.”

Orders from Japanese automakers in China led by Toyota are also expected to rise, Fujiwara said. Demand for Japanese vehicles in China has recovered from a consumer backlash stemming from the Senkaku Islands dispute.

Fujiwara said U.S. sales of auto parts will probably reach ¥17.5 billion in the year ending this March, then expand about 15 percent by March 2017. The company may have to consider adding capacity at its plant in Tennessee or building a new factory in the next three years, he said.

North America accounted for about 17 percent of Tsubakimoto Chain’s total revenue last fiscal year, according to data compiled by Bloomberg.