TOKYO - Toyota Motor Corp. booked a strong quarterly profit on Wednesday thanks to cost cuts, a resurgent euro and a big sales expansion globally, putting the world's No. 3 automaker on track to post record earnings for the full year.
Group net profit for the third quarter through December 2002 nearly doubled from the year earlier to 216 billion yen ($1.8 billion). Operating profit rose 23 percent to 379.44 billion.
"With sales volume expected to grow in every region, we expect full-year profits to surpass last year's record by a big margin," Director Takeshi Suzuki told a news conference.
Toyota, like other Japanese carmakers, has been driving profits higher largely through an all-out attack on Detroit's hegemony in SUVs and other lucrative light trucks in the United States.
Just before releasing its results, Toyota announced that it would build an $800 million plant in San Antonio, Texas, to produce 150,000 Tundra pickups a year from 2006.
The plant, in addition to another pickup truck factory in Mexico to go into production in 2005, will boost Toyota's annual output capacity in North America to 1.65 million units by 2006 from 1.25 million units now.
Armed with popular models like the Matrix, Corolla and Camry in the key U.S. market, Toyota said it now expects to sell 6.22 million vehicles worldwide in the year to March -- 20,000 more than it forecast three months ago.
A stronger than expected performance in North America had also prompted rival Honda Motor Co. to raise its full-year profit forecasts last week.
"I expect Japanese automakers to continue taking market share in the United States. That includes Toyota," said Fumiyasu Sato, chief investment officer at CDC IXIS Asset Management.
COST CUTS, EURO BENEFIT
Toyota and Honda also have kept profit levels buoyant compared to U.S. rivals, which are caught in a fierce price war. Toyota said its U.S. sales incentives averaged $439 per car last quarter, compared with more than $2,000 for the U.S. Big 3-- General Motors, Ford Motor Co. and the U.S. division of DaimlerChrysler.
The strong results for the first three quarters put Toyota just 10 billion yen away from matching last year's record operating profit of 1.12 trillion yen.
Analysts are expecting an operating profit of 1.4 trillion yen for the year to March 31, according to 23 brokerages surveyed by Multex Global Estimates.
"The key element to the strong performance was 70 billion yen in cost reduction benefits," said J.P. Morgan senior analyst Stephen Usher. "This had been the key to the first half performance and it remains the key going forward."
Toyota has been working to slash costs by, for example, using a common production platform for different models and shaving redundant costs from the design stage onwards.
A 12-yen jump in the value of the euro also helped, more than offsetting a slight rise in the yen's rate against the dollar.
Overall, currency fluctuations added 20 billion yen to operating profit last quarter.
UNCERTAINTY IN U.S.
Analysts will now be focusing on whether Toyota can keep cruising at the current rate in 2003.
A major concern is future demand in the United States -- the world's biggest car market, in which Toyota has a 10 percent share -- especially as war with Iraq appears imminent.
"It's very difficult to predict how a conflict in Iraq would affect consumer sentiment," Toyota's Suzuki said.
"But a slowdown in spending is slowly starting to appear, and we expect to be affected by this to some extent."
Analysts and industry executives in Japan have, however, generally dismissed the possibility of a sharp and prolonged drop in car demand even if war breaks out, on the notion that any conflict would be short.
"Assuming it's a relatively short and painless conflict for U.S. and allied troops, the outlook for the U.S. market is relatively benign," J.P. Morgan's Usher said.
Perhaps more troubling is demand at home, which is widely expected to stall this year after a 2 percent drop in 2002.
While raising the sales outlook for all other regions, Toyota lowered the domestic forecast for the year to March by 30,000 units to 2.21 million for the group, which includes minivehicle unit Daihatsu Motor and truckmaker Hino Motors.