Toyota managed to pull together a 5% jump in net profits for the third quarter of its fiscal year, despite a tepid global economy and relatively flat sales.
The automaker announced it made 627.9 billion yen, or $5.4 billion, during the October-December period, up from 600 billion yen the year before. Quarterly sales and revenues were up a more modest 2.4%, to $62.7 billion. A weak yen played in Toyota’s favor.
The news came two days after rival General Motors reported record earnings of $9.7 billion – for the full fiscal year. Meanwhile, he world’s second-largest automaker, Volkswagen AG, said on Friday it would delay issuing its fourth-quarter and full-year earnings as it struggles to account for the impact of its ongoing diesel emissions cheating scandal.
(For more on GM’s record earnings, Click Here.)
Toyota ended the calendar year with sales of 10.15 million vehicles worldwide, a slight decline. But that was hardly visible in the third-quarter earnings numbers. Nor was the maker’s decision to kill off its once-popular Scion brand due to steadily weakening demand.
Originally intended to lure in the youthful buyers largely ignoring Toyota products, Scion sales fell by more than two-thirds from their 2006 peak. Sales stood at just 56,167 last year. The Japanese giant plans to drop some current Scion models and rebadge others, including the recently launched iA sedan, as Toyotas.
(For more on the demise of the Toyota brand, Click Here,)
Toyota faced other challenges in recent months, including the weakening Chinese economy. The automaker has struggled for years to catch up with rivals GM and VW in the world’s largest automotive market.
After years of double-digit growth China’s auto market began to slide in mid-2015 and could dip further this year as the country’s economy falters.
That’s one reason Toyota President Akio Toyoda has warned that the maker’s sales could dip slightly in 2016. That could leave it vulnerable to an assault by Volkswagen, the world’s second-largest automaker by volume last year. But it is yet unclear how long VW will be hurt by its emissions scandal.
Toyota is also being hurt by an explosion at a plant operated by supplier Aichi Steel Corp. That is forcing the automaker to shut down its Japanese assembly lines from Feb. 8 until at least Feb. 13.
Despite forecasting a slight dip in sales, Toyota officials on Friday raised the company’s full-year profit forecast to 2.27 trillion yen, or $19.5 billion – almost precisely twice what General Motors made in a record year. The original Toyota estimate was 2.25 trillion yen, or $19.2 billion.
Based on the results, S&P Capital IQ Equity Analyst Efraim Levy lowered the 12-month target on Toyota $10 per share to $130, but raised the full-year earnings estimate for 2016 by 60 cents to $12.35 per share.
“We are more cautious on valuation targets given the aging of the global auto cycle, and Toyota’s reliance on FX to support income,” he said in a statement. “Still, we remain confident on Toyota’s long-term growth potential, supported by its balance sheet strength and product capabilities.”
The automaker is continuing to gain ground in its most critical, and profitable, market, North America, where the Toyota brand is battling Ford’s blue oval for the number one spot in the U.S. market.
(Click Here to check out Toyota’s Urban Utility Concept, the U2.)
After several years of retrenchment following a series of safety problems, CEO Toyoda has laid out a more aggressive growth strategy for both the mainstream Toyota and upmarket Lexus brands.