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Toyota reports fiscal-year profit of $2.3 billion

The carmaker rides cost-cutting and a rebounding economy to an annual profit despite an expensive litany of troubles in the last year.

May 12, 2010|By Jerry Hirsch, Los Angeles Times

Massive recalls, federal probes and a record fine — they were all just speed bumps for Toyota Motor Corp.

The world's largest automaker Tuesday reported a profit of more than $2 billion in its latest fiscal year, despite heavy spending on recalls and sales incentives.

Toyota benefitted from cost cutting, an improving global economy and a rebound in the U.S. auto market.

"Toyota's better results were impressive considering all of the external challenges it faced," said B. Craig Hutson of Gimme Credit, a corporate credit research firm.

The company, which makes the popular Prius and Corolla models, earned $2.3 billion for the year ended March 31. That compared to a loss of $4.8 billion in the previous year. Revenue for the year fell almost 8% to $20.9 billion.

For its fiscal fourth quarter, Toyota said it posted earnings of $1.2 billion, compared with an $8.4-billion loss the year before. Quarterly revenue rose 49% to $58.1 billion.

The company issued a rosy outlook predicting higher vehicle sales, revenues and operating income.

American depositary receipts of Toyota rose 72 cents to $77.47 Tuesday.

The company previously estimated that it spent as much as $2 billion on recall expenses during the second half of the fiscal year, including losing nearly 100,000 vehicle sales because consumers were less willing to purchase Toyota products.

U.S. regulators on Monday launched another safety investigation into Toyota, examining whether the automaker delayed disclosing a serious defect in the steering systems of 4Runner sport utility vehicles and T100 trucks.

Toyota is now the subject of at least eight federal safety investigations and reviews. A ninth investigation was closed last month when Toyota agreed to pay a record $16.4-million fine for failing to promptly recall models that had a sticky gas pedal.

It has issued about 10 million recall notices globally over the past year for a variety of safety defects and other issues.

That has prompted the company to spend heavily on special finance and lease incentives to keep cars moving off dealership lots.

In conference calls and meetings with analysts and the media Tuesday, Toyota officials signaled their hope that they can wean the company from the special sales deals.

"We've been using incentives quite significantly in order to promote sales," said Takahiko Ijichi, Toyota's senior managing director.

He noted that the incentives were more generous than what the automaker has offered in previous years.

"At the latest, sometime in fall or towards the end of this year" Toyota plans to return incentives back to "historical levels," he said.

Toyota has spent an average of $2,115 on incentives per vehicle sold in the U.S. through the first part of 2010, up about 24% from the same period a year earlier, estimated auto information company Edmunds.com.

Gimme Credit's Hutson said Toyota had taken positive steps to repair its image, but he warned that the persistent string of negative news about the company — including potential additional recalls — along with the possibility of more federal probes and continuing legal troubles could still take a toll on the automaker.

"Toyota has excellent near-term liquidity to deal with its challenges. But we believe it is too early to claim that Toyota is out of the woods and that the worst is behind it," he said.

Other analysts were also impressed with the results.

Standard & Poor's Equity Research analyst Efraim Levy upgraded the company to a buy from a hold.

"The Toyota brand is strong enough to overcome near-term challenges and will participate in global automotive growth," he said.

James Bell, an analyst with auto information company Kelley Blue Book, said Toyota's incentives were initially designed for "bargain hunters and Toyota loyalists."

But the automaker might have discovered that the investment has worked to attract buyers who otherwise might not have looked at a Toyota product, he said.

jerry.hirsch@latimes.com

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