Toyota’s better-than-expected fiscal year results were helped by a strong financial performance during the fourth quarter, London based IHI Global Insight analyst Paul Newton said in a research note distributed on Tuesday afternoon.

For the quarter ended 31 March this year, Toyota posted a net profit of JPY112.2bn, compared with a JPY765.8bn net loss during Q4 2008/9, while operating was JPY95.3bn, compared with a JPY682.5bn operating loss, Newton wrote, noting that quarterly revenues rose 49.3% year on year during the period to JPY5.3 trillion, primarily thanks to strong recoveries across all of its business segments and favourable currency effects.

“The latest results highlight the impact of the global recovery in vehicle demand on Toyota, the largest producer of vehicles in the world. Toyota witnessed a turnaround in its financial performance despite the unfavourable business conditions, which included the recall of around 10m vehicles worldwide since late last year over separate manufacturing defects, declining global vehicle demand over the first two quarters of the year, and a strengthening of the Japanese yen against other global major currencies during the first three quarters,” Newton said.

“A return to the black was also helped by the lower base of comparison provided by the profitability data for FY 2008/09, when Toyota recorded its first ever annual loss. The stabilising yen against other major global currencies towards the end of FY 2009/10 added to the automaker’s gains.”

He acknowledged the recent mult-million-unit recalls in various markets but noted: “Toyota has yet to feel the impact of the recall saga on its global sales; its sales have thus far been unaffected in most of Asia, especially China, Japan, and India, which will potentially help the automaker overcome the crisis in the key markets of the United States and Europe over the months ahead.

“Toyota has been implementing every possible measure to maintain sales momentum, including a hugely successful incentive campaign in the United States and a recently launched EUR20m (US$25.8m) pan-European media campaign. In addition, Toyota is attempting to strengthen its management team amid the need for a greater focus on its quality practices.

“The automaker also recently established a Design Quality Innovation division in an attempt to improve design quality by reviewing product development processes, incorporating customer feedback into designs.”

Acknowledging Toyota is facing 327 separate lawsuits in the United States, and recently agreed to pay a $16.4m fine levied by the US Department of Transportation for transgressions related to its unintended acceleration recalls, Newton said: “It is expected that the impact of the global recall will be reflected in Toyota’s upcoming results.

“Nevertheless, the automaker is optimistic about its production outlook on the back of stronger-than-expected demand for its fuel-efficient vehicles, including the Prius hybrid, in all the major markets. The company reportedly recently raised the 2010 global production target for its own-brand vehicles by almost 180,000 units to 7.57m units [and] is committed to the development of one of the most eco-friendly types of vehicle, the fuel-cell vehicle. Toyota has managed to reduce the unit cost of producing a fuel-cell vehicle by almost 90% from about US$1m in the mid-2000s to almost US$100,000 presently, and now aims to cut this by a further 50% before the planned launch of the first hydrogen fuel-cell model in 2015. In addition, Toyota is also working on further reducing hybrid vehicle production costs through economies of scale.”

Newton added that Toyota is optimistic about the global industry prospects for fiscal 2010/11, following the strong recovery in global vehicle demand but, despite this optimism about its financial performance, has released a conservative sales outlook for FY 2010/11, “reflecting hangover effects from several market support measures and the impact of its massive global recall saga”.