Toyota has posted a 28% fall in quarterly net profit in the fourth quarter of its fiscal year and expects profits to fall this fiscal year.

The Q4 dip in profit reflected the impact of a stronger yen and finance-related losses.

While the fiscal year’s net earnings were another record, along with the company’s revenue, Toyota forecast its first annual profit drop in nine years on the back of a weak US economy, a stronger yen and higher raw material costs.

January-March (Q4 of the fiscal year) profit at Toyota, the world’s biggest automaker, was 316.8 billion yen (USD3.0bn), lagging an average estimate of 342.3 billion yen from 20 brokerages surveyed by Reuters Estimates. The Q4 net profit figure was also 28% below the same quarter last year. 

For the year to March 31, 2009, Toyota forecast net profit to fall 27.2% to 1.25 trillion and operating profit to decline yen 29.5% to 1.60 trillion yen, breaking a seven-year string of record results.

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On a consolidated basis, net revenues for the fiscal year ended March 31, 2008 totalled 26.29 trillion yen, an increase of 9.8% compared to the last fiscal year.

Operating income increased 1.4% to 2.27 trillion yen, and income before income tax, minority interest and equity in earnings of affiliated companies was 2.44 trillion yen. Net income increased 4.5% to 1.72 trillion yen – another record.

Commenting on the results, TMC President Katsuaki Watanabe said, “For this fiscal year, we posted our highest ever results in both revenue and profits. There are two key points for these results. First, our profit structure has become more geographically balanced, with growing contribution from resource-rich countries and emerging countries. We believe our growth strategy of utilizing every opportunity across the full product line-up and in all regions have shown strong results. Second, net income has steadily increased due to the growth of operating profit from global operations and equity in earnings of affiliated companies. Growth of equity in earnings has been particularly strong and has more than doubled over the last four years, mainly due to the rapid growth of Chinese operations.”

TMC also announced a cash dividend for the full fiscal year of 140 yen per share, an increase of 20 yen over the last fiscal year. Watanabe added, “As a result, our dividend payout ratio will improve to 25.9% from 23.4% last year. We will aim to achieve a 30% consolidated dividend payout ratio as well as to strive for continuous growth of dividend per share.”

In fiscal year 2008, Toyota’s consolidated sales reached 8.91 million units, an increase of 389 thousand units over the last fiscal year.

In Japan, vehicle sales decreased by 85 thousand units over the last year, to 2.19 million units. Operating income from Japanese operations was 1.44 trillion yen which was second only to the last fiscal year. Exports increased due to strong demand mainly in resource-rich countries and emerging countries. Toyota group’s market share including mini-vehicles reached a record level of 42%.

In North America, vehicle sales reached 2.96 million units, an increase of 16 thousand units. The new Camry launched in 2006 became the best-selling passenger car for six consecutive years, and sales of the Prius increased due to additional production capacity in Japan. As a result, Toyota’s market share in the US reached a record high of 16.3%.

Toyota said that the dramatic decline in interest rates in the US during this fiscal year resulted in an exceptional increase in valuation losses on interest rate swap transactions. Operating income was 305.3 billion yen for this fiscal year, but on a non-USGAAP basis, excluding the valuation losses on interest rate swap transactions of 91.4 billion yen, was 396.7 billion yen, despite profit decline in the financial business due to a slow down in the economy.

In Europe, operating income increased by 4.2 billion yen, to 141.5 billion yen. In Western Europe, sales of the Auris and Prius were strong although the markets in general saw a sluggish growth rate. Sales in Russia and Eastern Europe showed steady growth due to strong sales of models such as the Camry and Avensis.

In Asia, operating income more than doubled to 256.4 billion yen over the last fiscal year. Improved profitability in Asia has become an important driver for Toyota’s strong growth. Sales of models such as the IMV and Yaris were strong in countries including Indonesia and Thailand. Increase of production capacity in Thailand, in order to meet strong demand for the IMV vehicles from countries outside of Asia, showed steady contributions. Production of the new Corolla which started in Thailand and Taiwan this year, is expected to contribute to profit growth in Asia.

Watanabe commented on the outlook. “We are facing a severe business environment. However, Toyota considers this headwind as a valuable opportunity to turn it into a more flexible and stronger company. To this end, we will aim to eliminate waste and review the process and structure of every aspect of our operations. Through such internal reforms, we will develop human resources and thus work to establish a company with true strength and long-term stability.”