Toyota cautious even as profit booms

Toyota refuses to be tempted away from its low-risk growth strategy, even as the world's bestselling carmaker met its mid-term profit goals in the year ended March, and foresees even higher earnings this fiscal year.

The company has exceeded the target President Akio Toyoda set two years ago: to make 1 trillion yen in annual operating profit, and do so with a 5 per cent margin. Its manufacturing arm in Japan also made a profit for the first time in five years, a symbolic triumph for a titan of Japanese industry.

This year, the company will concentrate on sharpening productivity in order to become more competitive, Toyoda said.

Mindful of lessons learned from huge losses run up in 2008 after a period of boom and rapid expansion, it sees high profits as no reason to launch into a building programme - even as some rivals do exactly that.

“The wind that was blowing against us is calming down, and we can hear some saying that it is the time for us to take the offensive. But I think we are just standing at the startline of sustainable growth”, the 57-year-old grandson of the founder of Toyota’s automotive business told reporters yesterday.

Toyota expects to make operating profit of 1.8 trillion yen ($18.17 billion) in the fiscal year that ends March 2014, which would be below its peak of 2.3 trillion yen in the year ended March 2008.

Powering that will be another year of record group sales in calendar year 2013, the company believes, reaching 9.91 million vehicles. It could become the first carmaker in history to sell more than 10 million vehicles in a year.

Since Toyoda took helm in 2009, when profit margins were thin, the automaker has focused on cutting costs and improving profitability.

Evidence of Toyoda's caution is his fresh policy to build no new factories for the next three years, a sharp contrast with Honda which is rapidly adding to its production power around the world.

“Expansion of volume does not equate to growth. The driving force of sustainable growth comes down to making ever better cars,” Toyoda said.

Toyota posted yesterday an annual operating profit of 1.32 trillion yen with an operating margin of around 6 per cent.

It said it expects to sell 2.2 million vehicles in the United States in 2013, up from about 2.1 million in 2012. The company is expected to release the Corolla compact car in the United States this year.

"While the fierce competitive landscape (in the U.S.) will likely mean that Toyota may see growth taper off in the short term, new product launches later this year should help to give sales a boost," said Alec Gutierrez, senior analyst at Kelley Blue Book.

In Japan, where automotive-related jobs account for 8.7 per cent of the workforce, according to the Japan Automobile Manufacturers Association, it is becoming more profitable to make and export goods as a result of a yen that has weakened by around 15 per cent against the dollar since January.

Toyoda repeated his vow to continue making 3 million vehicles a year in Japan. The company exports 60 per cent of its Japan-made vehicles.