Toyota Q4 op profit falls, sees small growth ahead

TOKYO, May 9 (Reuters) Toyota Motor Corp. posted a surprise fall in quarterly operating profit as it booked sales costs and other spending early, and it forecast little growth this year to brace for tougher commodity and currency markets.

Sales of Toyota's cars have been buoyant in the sputtering U.S. and European markets, but a shift towards smaller, lower-margin cars as well as heavy spending on new factories and research and development has kept profit margins in check.

For the current business year to end-March 2008, the world's most profitable carmaker expects global vehicle shipments to rise 4.3 percent to 8.89 million units, fuelling a 4.4 percent growth in revenue to 25 trillion yen (0 billion).

But it forecast nearly flat profits, assuming a 2-yen fall in the dollar to an average 115 yen, higher raw materials costs and a tough product mix.

Joining its local rivals in providing cautious guidance, Toyota forecast a 0.4 percent rise in net profit to 1.65 trillion yen (.8 billion) for 2007/08, below a consensus forecast of 1.736 trillion yen in a poll of 22 brokers by Reuters Estimates.

It forecast annual operating profit to rise 0.5 percent to 2.25 trillion yen, for a seventh straight year of record earnings and a profit-to-sales margin of 9.0 percent, down from 9.3 percent in 2006/07.

''The outlook gives the impression of caution,'' said Kazuhiro Takahashi, general manager of equity marketing at Daiwa Securities SMBC.

''The stock market is, at the very least, not likely to take this as a positive. It is a fact that the North American car market is slowing down, so it is tough for analysts to be bullish,'' he added.

Toyota President Katsuaki Watanabe said he was cautious on the outlook for the overall U.S. market, where Japan's top automakers make the bulk of their money, but added that cost-cutting efforts and aggressive model launches would continue to help its business grow.

''Our profit margin is still quite high,'' he told a news conference.

''With improvements in efficiencies, we expect to continue growing both in size and earnings,'' he said, adding that Toyota was standing by its goal of a stable operating margin of 10 percent. Rivals Honda Motor Co. and Nissan Motor Co. had margins below 8 percent in 2006/07.

Toyota is set this year to end General Motors Corp.'s 76-year reign as the world's biggest automaker after the U.S. group last week forecast global sales of 9.2 million vehicles against Toyota's plan to move 9.34 million.

FUNDAMENTALS INTACT Operating profit for January-March -- a quarter that saw Toyota overtake GM in global sales volume -- fell 2.8 percent to 570.5 billion yen (.76 billion) despite a weaker yen. Consensus estimates had expected a rise.

Senior Managing Director Takeshi Suzuki attributed the drop mainly to the early booking of spending on warranty reserves, sales costs and other investments, as well as difficult comparisons from an especially strong quarter a year before.

''In November we gave an annual operating profit forecast of 2.2 trillion yen (for 2006/07), and at that point we decided to bring forward the necessary spending,'' he told reporters.

Suzuki said Toyota was factoring in a ''rather large'' negative impact from input costs, but said cost-cutting efforts were still expected to add 130 billion yen to operating profit this year.

''Our fundamental strength and ability to expand profits have not changed,'' he said. Profits in North America and Asia, which came under pressure last year, would improve ''beyond doubt'' this year, he said.

Fourth-quarter net profit grew 8.9 percent to 440.1 billion yen, well ahead of an average estimate for 416.1 billion yen.

Revenue rose 10 percent to 6.33 trillion yen.

Excluding China, Toyota's sales in Asia declined last year along with the broader market, but the automaker is set to crank up volumes in 2007 with a new factory in Thailand. Toyota will also open a new plant in China soon to meet surging demand.

Elsewhere, Toyota has added capacity through affiliate Fuji Heavy Industries Ltd.'s Indiana plant, which builds the Camry, the United States' most popular car, with more coming online in Mexico and Russia by the end of 2007.

In the year to end-March, the Toyota group, which includes minivehicle maker Daihatsu Motor Co. and truck maker Hino Motors Ltd., built 9.077 million vehicles worldwide, up 7.3 percent.

Shares in Toyota, whose 6 billion market value is more than 12 times that of GM, fell 5.2 percent in January-March, slightly better than Tokyo's transport sector subindex ITEQP, which fell 6.1 percent, but underperforming a 0.4 percent gain on the main Nikkei average Before the results, Toyota ended down 0.6 percent at 7,200 yen.

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