Toyota Narrows Loss Forecast as Stimulus Spurs Sales

Aug. 4 (Bloomberg) — Toyota Motor Corp., the world’s largest automaker, narrowed its full-year net loss forecast as government stimulus measures boost demand in its largest markets.

The company expects a net loss of 450 billion yen ($4.7 billion) in the year ending March, compared with an earlier forecast of 550 billion yen, it said in a statement today.

Toyota joined Honda Motor Co. in raising its forecast as government measures to spur car demand took effect. The U.S., Germany, Japan and China offered consumers credits, tax breaks and subsidies for trading in old cars as the worst slump in decades for the car industry forced Chrysler LLC and General Motors Corp. into bankruptcy.

“There is a huge possibility that Toyota will become profitable next fiscal year,” said Hitoshi Yamamoto, chief executive officer of Tokyo-based Fortis Asset Management Japan Co., which manages $5.5 billion in Japanese equities. “Up until now, they’ve been quite pessimistic.”

The company had a first-quarter loss of 77.8 billion yen, compared with a net profit of 353.7 billion yen a year earlier, it said in a statement today. The Toyota City, Japan-based automaker was projected to make a 184 billion yen loss based on the median of five analyst estimates compiled by Bloomberg. Sales slipped 38 percent to 3.8 billion yen.

‘Worst is Over’

“It seems like the worst is over,” said Masayuki Kubota, a senior fund manager in Tokyo at Daiwa SB Investments Ltd., which oversees the equivalent of $37 billion in assets. “Automakers have more fixed costs than other industries and in recessions their performances plunge, but in recoveries they do very well.”

The carmaker narrowed its full-year operating loss forecast to 750 billion yen from 850 billion yen previously. Toyota didn’t include the effect of government incentives in its forecast given in May.

The automaker fell 1.5 percent to 4,030 yen at the 3 p.m. close on the Tokyo Stock Exchange. The earnings announcement came after the end of trading.

Toyota expects to boost sales in Japan for the first time in five years, helped by government support for sales of fuel- efficient vehicles. The company had received 245,000 orders for the new Prius hybrid in Japan as of July 24. It had a monthly sales target of 10,000 units.

Prius Sales

“The Prius is selling way beyond expectations,” said Yamamoto. “Even if the profit margins are small, it’s having a positive impact on the overall performance.”

President Akio Toyoda will introduce four new gasoline- electric hybrid models in Japan and three overseas by the end of March. Vehicle sales in the quarter ended June fell to 1.4 million from 2.19 million a year earlier.

In the U.S., which is traditionally Toyota’s biggest market, a “cash for clunkers” program to spur new car sales was suspended because it ran out of money six days after it began. The program helped slow Toyota’s sales decline to 11 percent in July compared with a 32 percent decline in June.

The measures “have begun to trigger a revival,” Takahiko Ijichi, senior managing director, said today in Tokyo.

Toyota based its full-year forecast on exchange rates of 92 yen to the dollar and 131 yen to the euro, compared with 95 yen against the dollar and 125 yen against the euro in May.

To contact the reporter on this story: Kae Inoue in Tokyo at kinoue@bloomberg.net; Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net

Last Updated: August 4, 2009 03:02 EDT

By Kae Inoue and Tetsuya Komatsu/Bloomberg