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 Detroit's 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 and DaimlerChrysler AG.
Toyota said its group operating profit for the year through March leapt 21 percent to 1.36 trillion yen ($11.68 billion) although that was less than 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.
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.
GRABBING MARKET SHARE
Investors too expressed confidence that Toyota would continue to make gains in the world's biggest vehicle market.
"As far as the U.S. economy goes, the thing is that Toyota tends to grab market share from its rivals even when the economy is weak," said Muneyuki Tsuji, fund manager at Japan Investment Trust Management.
Most analysts expect Toyota's profits to keep rising due to further cost cuts and brisk sales of new models like the RX330 luxury SUV and Sienna minivan in the U.S. market. Last year, cost cuts contributed a whopping 300 billion yen to operating profit.
While Toyota leads the pack in absolute terms, its profitability still lags domestic rivals, with earnings per share much lower than Honda Motor Co. and its operating margin trailing Nissan Motor Co.