Toyota Going Strong Despite Slump in China

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Toyota Motor Corp. (NYSE: TM) continues to do well financially, as shown by its fiscal first-half figures, which cover the period ended September 30.

On a consolidated basis, net revenues for the first half of the fiscal year totaled 10.9 trillion yen, an increase of 36.1 percent compared to the same period last fiscal year. Operating income increased from a loss of 32.6 billion yen to 693.7 billion yen, an increase of 726.3 billion yen, while income before income taxes was 794.5 billion yen. Net income increased from 81.5 billion yen to 548.2 billion yen.

The most notable aspect of the numbers is that the trouble between China and Japan did not hurt Toyota sales enough to badly damage its earnings. Toyota did mention China as a challenge going forward, but management made encouraging comments about the balance of the year:

Although currency fluctuations have continued to affect our profits and the effect of current Japan-China relations on our sales is still unclear, we have revised the forecast we announced at the end of the first quarter to reflect the progress we have been making in our profit improvement activities. We intend to continue strengthening such activities and aim to create a profit structure able to withstand changes in the business environment.

Toyota has benefited from its limited exposure in Europe. However, the much larger factor in its success is that it has regained much of its market share in the United States. American sales for the Japanese company continue to rise more rapidly that any other large manufacturer that sells vehicles in the U.S., a sign that it has overcome supply constraints cause by the Japanese earthquake, as well as reputation issues created by a series of large recalls.

Douglas A. McIntyre

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