TOKYO -- Toyota Motor Corp., the world's third-largest automaker, reported record profits for a third straight year on Thursday, powered by cost cuts, strong U.S. sales and a resurgent euro.
It posted the largest ever recurring profit for a Japanese company but analysts say slowing global demand, the risk of a rise in the yen against the dollar and intense competition from the Big 3 mean a tougher year ahead.
Toyota's announcement wrapped up the reporting period for Japan's top automakers. All five increased their profits, mainly by grabbing a bigger share of the U.S. market at the expense of Ford Motor Co., General Motors DaimlerChrysler.
The world's biggest car maker by market capitalization, Toyota said its group operating profit for the year to end-March leapt 21 percent to 1.36 trillion yen ($11.68 billion) although that was below a median forecast of 1.44 trillion yen in a survey of 21 brokerages by Reuters Research.
Toyota scored a 27 percent rise in recurring profit to 1.41 trillion yen, which is pre-tax and excludes extraordinary items.
Reflecting the robust results, it raised its dividend payment for the year to 36 yen per share from 28 yen the year before.
For this year, much depends on the U.S. market and the yen.
"On a consolidated level, the biggest issue for profitability is foreign exchange," Executive Vice President Ryuji Araki said.
Last year, the euro's rise against the yen added 60 billion yen to Toyota's operating profit, while the weaker dollar shaved 20 billion yen.
UBS Warburg estimates that every one-yen fall in the dollar shaves 26 billion yen from Toyota's annual operating profit.
Toyota is assuming an average exchange rate of 115 yen to the dollar and 125 yen to the euro this year, against last year's average of 122 yen and 121 yen respectively.
OPTIMISM ON THE U.S.
Given the glum outlook for global car demand, Toyota said it expected its group sales volume -- including vehicles made by units Daihatsu Motor and Hino Motors -- to rise by just 0.2 percent this year to 6.26 million units worldwide.
The biggest expansion is expected in Europe, with volume seen at 800,000, up 3.1 percent. Domestic sales are forecast to rise 2.8 percent to 2.28 million units, while sales in the key North American market are expected to grow just 0.9 percent to two million units.
Last month, Toyota's U.S. sales fell by 0.9 percent from the previous year but sales are up marginally in the year to date and Araki said the North American forecast may be too conservative.
"We plan to launch many new models in North America, and we were a little conservative with our two-million unit forecast. We might be able to exceed that," he told a news conference.
Araki said car sales were holding up fairly well in the U.S. so far this year despite a wobbly economy and he was confident Toyota would expand its sales partly through the introduction of new models in the new Scion brand geared towards younger drivers.
"We don't expect too much damage from the ongoing price war," Araki said, noting that Toyota, unlike its big rivals, had cut sales incentives last year.