Toyota's hike in forecasts and biggest quarterly profit in two years on robust Asian sales failed to allay concerns that a strong yen and a faltering US recovery would take a toll in the coming months.
Toyota joined rivals from Ford to Hyundai in posting forecast-beating quarterly results, a big turnaround from six months ago when the world's largest automaker was reeling from its worst safety crisis.
Toyota raised its global sales forecast by 90,000 units to 7.38 million vehicles for the year to March, but like other automakers, warned that the second half would be tough, particularly in crisis-hit Europe where it cut its target.
Sales costs would also increase, it said, as automakers gear up to entice consumers in a tougher environment, further pressuring already weak margins.
Toyota's new guidance for operating profit to total 330 billion yen in the year to March 31, 2011, is still far short of a consensus 527 billion yen in a survey of 21 analysts by Thomson Reuters I/B/E/S.
Toyota was forced to recall more than 10 million vehicles for problems with unintended acceleration and braking issues, which cost the company billions of dollars and tarnished its image.
President Akio Toyoda has vowed to put the recall debacle that has monopolised his first year as chief executive behind him, calling 2010 a fresh "starting line" for the 73-year-old company founded by his grandfather.
"Toyota is losing out to rivals in the US and Chinese markets due to its recalls," said Richard Lin, a Taipei-based analyst at Uni-President Asset Management, whose Asia-Pacific fund recently sold Toyota shares. "Its growth momentum is not as strong as that of Nissan, Hyundai and BMW."
Margins are also a problem, with Toyota offering higher sales incentives to attract US customers. It said it wanted to cut U.S. sales incentives by 10-20 percent in the coming months.
Toyota's first quarter margin was 4.3 per cent, compared with Nissan's 8.2 per cent and Honda's 9.9 per cent.
In the coming quarters, Toyota is set to get the double blow of crumbling domestic sales and a stronger-than-assumed yen, which makes exports less competitive and reduces the value of profits made overseas.
Toyota expects to export around 60 per cent of its Japan-made vehicles this year - a higher ratio than at rivals Honda and Nissan.
Reuters