Just being the world’s largest automaker isn’t enough, unless you have the profit and cash to back it. But things look bright at Toyota, as the company has raised its full-year profit forecast for the third time in as many quarters and its cash nears the $40 billion mark.
As the yen continues to weaken and demand rises in the US and China boosting earnings from Prius to Lexus vehicles exported from Japan, net income could almost double to a record 1.9 trillion yen ($18.8 billion) in the fiscal year ending March 31. This compares to the previous forecast issued by Toyota, of 1.67 trillion yen.
“Toyota is making a substantial rebound after the recalls and earthquake,” said Peggy Furusaka, an automotive analyst at Moody’s Investors Service in Tokyo. “The yen is a big factor for Toyota’s recovery – they can make their cars more competitive, especially against the Koreans because the won has become more expensive.”
Meanwhile, President Akio Toyoda’s reluctance to spend Toyota’s cash pile has prompted analysts like Takaki Nakanishi, Institutional Investor magazine’s top-ranked Japanese auto analyst say the company should return more money to shareholders or increase capital investments – like building factories where capacity is low.
“Capital efficiency is not improving as fast as the fundamental improvement of Toyota,” said Nakanishi, founder of Nakanishi Research Institute in Tokyo. “So I am not happy, but that’s how Toyota is.”
The Japanese company meanwhile said it will give 30 % of its net income as dividends – a lower payout than at Honda – and it won’t construct any new plants until 2015 as it focuses on improving efficiency at existing facilities.