Toyota drives towards record profit

Toyota said it was driving towards a third consecutive year of record profit, propelled by robust sales in the US and cost cutting efforts.

Akio Toyoda, the president of the world's biggest carmaker by global sales, said the 2015-16 financial year would be "an important turning point" for Toyota after years of attempts to boost productivity and improve its reputation in the wake of multiple vehicle recalls.

Toyota has forecast 3.5 per cent growth in net profit to Y2.25tn ($18.7bn) for the 12 months to April 2016 - a marked slowdown on the 19 per cent growth it recorded in financial year that recently ended.

The carmaker's forecast falls short of analysts' consensus forecasts for a profit of Y2.44tn, although the company is renowned for offering conservative guidance at the start of each year.

Toyota said it expected revenues to grow 1 per cent to Y27.5tn in the current financial year, including the sale of 2.83m vehicles in North America, up 4.2 per cent from the previous fiscal year.

"After a period of intentional pause, we are now entering a phase of implementation," Mr Toyoda said.

After an aggressive expansion policy led to quality lapses, the company has focused on generating stable profits, and has revamped its production plants to become leaner and more flexible in adjusting to vehicle demand, it said.

Toyota said it planned to roll out new products that use a more cost-efficient manufacturing platform and technologically advanced components. Last month, it revealed plans to spend $1.4bn to build new plants in Mexico and China, lifting its three-year moratorium on factory building.

The Japanese carmaker said that these efforts would steadily expand its profits, even as global sales volumes are expected to decline as growth slows in emerging economies.

The Toyota group, including its Daihatsu and Hino subsidiaries, expects to sell 10.15m vehicles in the current financial year - down from 10.17m units last year - with sales expected to decline in Japan, other parts of Asia, Russia and the Middle East.

Some analysts expect Volkswagen, the world's second ranked carmaker by global sales, to overtake Toyota this year, but the German group is also cautious about volumes amid slowing demand in Russia and Brazil.

"Toyota is deliberately moving forward at a slow pace. Vehicle volumes are slowing elsewhere and the global auto market in general is not very strong," said Takaki Nakanishi, a former Merrill Lynch analyst who runs his own research group.

In spite of Toyota's cautious outlook, investors are likely to welcome its plans announced on Friday to buy back up to 1.27 per cent of its shares for as much as Y300bn.

Japanese companies, such as robot maker Fanuc and camera group Canon, have promised higher shareholder returns amid Prime Minister Shinzo Abe's push to improve corporate governance. Mr Toyoda said that the carmaker would continue to pay stable dividends "while flexibly considering share buybacks".

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