Business May. 09, 2008 - 02:06AM JST ( 2 )

TOKYO —

Toyota said the strong yen and weaker U.S. sales took a bite out of January-March earnings but projected worse was to come: A 27% plunge in full-year profit—the first drop in seven years.
 
The results and outlook released Thursday highlight how a tough North American auto market is hammering the Japanese automaker.
 
Unfavorable currency swings are adding to a growing list of problems for Toyota Motor Corp, including soaring material and energy costs and a stagnant auto market in Japan, its home market.
 
“There is no mistake that things are seriously tough—even for Toyota,” said Tsuyoshi Mochimaru, auto analyst at Lehman Brothers in Tokyo.
 
Mochimaru warned the sales strides Toyota is making in China and other relatively new regions probably won’t be enough to make up for weaker revenue from the key North American market, which accounts for about a third of its sales.
 
A weaker dollar, now hovering at about 100 yen compared with nearly 120 yen last year, is eroding the income of Japanese exporters like Toyota.
 
But Mochimaru noted Toyota tends to be conservative and is mapping out the worst-possible scenario. And it could emerge with better results, as long as exchange rates stay stable, he said.
 
For the fiscal fourth quarter, the maker of the Prius hybrid and Camry sedan reported a 28% drop in net profit to 316.8 billion yen—the first on-year decline in quarterly profit since April-June 2005.
 
Quarterly sales rose 3.8% in the most recent quarter to 6.567 trillion yen.
 
Toyota had been on a roll with the success of its fuel-efficient models, including the Prius and the Corolla subcompact, which have gotten a boost from rising gas prices.
 
For the fiscal year just ended in March, Toyota racked up record profit of 1.72 trillion yen—up 4.5% from the previous year. That was in line with the projection Toyota gave in February. Annual sales grew 9.8% to 26.289 trillion yen, also a record for the company.
 
But recent credit woes in North America have dampened sales in recent quarters.
 
“We are facing a severe business environment,” President Katsuaki Watanabe said. “Toyota considers this headwind as a valuable opportunity to turn it into a more flexible and stronger company.”
 
Toyota projects this fiscal year’s profit will tumble to 1.250 trillion yen, while annual sales are seen falling 4.9% to 25 trillion yen.
 

Wire reports