Toyota Motor Corp. (TM) announced that it would invest ¥16.5 billion ($200 million) in Indonesia for expanding its automobile production capacity by 40% in order to meet the rising domestic demand.
The automaker will enhance annual capacity from 100,000 vehicles presently to 140,000 vehicles by early 2013 at its Karawang plant, its only plant in Indonesia. It will help the automaker manufacture a new vehicle and employ more workers at the plant.
The plant manufactures Avanza sedan, Kijang Innova, Fortuner sport utility and other bigger vehicles. It exports vehicles to Thailand, the Philippines, South Africa and the Middle East.
Toyota posted a profit of ¥408.18 billion ($5.07 billion) or ¥130.16 ($1.60) per share for its fiscal 2011 ended March 31, 2011 that almost doubled from ¥209.46 billion or ¥66.79 per share a year ago.
The increase in profit was attributable to positive impact of ¥490.0 billion due to marketing efforts and ¥180.0 billion due to cost reduction measures, partially offset by a negative impact of ¥110.0 billion due to the earthquake in Japan and ¥290.0 billion due to unfavorable exchange rates.
Consolidated revenues in the fiscal year rose marginally by 0.23% to ¥18.99 trillion ($235.80 billion) from ¥18.95 trillion, driven by a growth in unit sales in Asia (28%) and Other regions (15%), offset partially by a decline in unit sales in Japan (11.5%), North America (3%) and Europe (7%). Total unit sales increased 0.98% to 7.31 million units during the fiscal year.
Meanwhile, Toyota’s domestic competitor, Honda Motor Co. (HMC) revealed a 38% fall in profit to ¥44.55 billion ($536 million) or ¥24.72 per share (30 cents per share) in the fourth quarter of the fiscal year ended March 31, 2011 from ¥72.18 billion or ¥39.78 per share in the same quarter of prior fiscal year.
The decline in profit was attributable to unfavorable currency translation effects, higher selling, general and administrative expenses and the tsunami and earthquake in Japan. These more than offset the positive impact from cost reduction measures, lower R&D expenses, increase in sales volume (except in the Automobile segment) and model mix, and operating income related to licensing agreements.
Toyota did not provide any guidance for vehicle unit sales, net revenues and earnings for the fiscal year ending March 31, 2012. The company revealed that it needs more time to complete the examination of production and sales plans due to the impact of the earthquake, tsunami and nuclear crisis in Japan.
However, the company believes improving world economy, expansion in the emerging markets such as China, technological development, new product launches and higher demand for fuel-efficient compact cars will positively affect its results. Nevertheless, backlash of the twin disaster in Japan and low employment are some of the headwinds facing the company.
Therefore, the company retains a Zacks #3 Rank (Hold) on its stock for the short term (1 to 3 months) and we reiterate our “Neutral” recommendation on the stock for the long term (more than 6 months).
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