Toyota Motor to Buy Back Shares as Profit Increases 13% – Bloomberg

Posted: Thursday, November 05, 2015

Toyota Motor Corp. reported profit rose 13 percent in the second quarter and announced a share buyback, as a weaker yen added to earnings momentum ahead of an overhaul of its product lineup starting with the new Prius hybrid.

Net income in the three months through September climbed to 611.7 billion yen ($5 billion), in line with the 611.1 billion yen average of nine analysts’ estimates compiled by Bloomberg. Toyota maintained its full-year profit forecast at a record 2.25 trillion yen. The company will buy back up to 0.72 percent of shares for as much as 150 billion yen, according to a statement.

Japan’s dominant automaker overcame weak domestic demand to reclaim its position as the world’s top-selling carmaker. As Volkswagen AG stumbled and faces a global emissions scandal, President Akio Toyoda is embarking on a revamp of Toyota’s lineup. The new Prius hybrid will start a shift for half of Toyota’s models to cheaper platforms that share more common parts by the end of the decade.

“The Prius can move the needle for Toyota,” Steve Man, an auto-industry analyst with Bloomberg Intelligence in Hong Kong, said before the earnings announcement. “Everybody’s bringing hybrids, electric vehicles or a combination of those, so they need to be at the forefront.”

Sales Target

Toyota cut its global sales target to 10 million units from 10.15 million units citing weak demand in Asia, Africa and the Middle East. The minicar market in Japan remains sluggish, Tetsuya Otake, a Toyota managing officer, said at a press conference in Tokyo Thursday.

The Japanese carmaker’s share buy back announcement comes about four months after the company had said it will purchase stock back from holders for as much as 600 billion yen to avoid dilution from new shares aimed at long-term investors. Shareholders had in June approved a proposal to issue Model AA shares, a move that drew criticism from large foreign investors.

Toyota has sold 7.49 million vehicles this year through September, topping Volkswagen’s 7.43 million, as deliveries for both declined by 1.5 percent during the period. VW is sinking deeper into crisis after saying 11 million vehicles would need to be recalled to fix emissions systems, disclosing Tuesday that more diesel and some gasoline engine cars pollute more than reported.

Redesigned Prius

A key to making the progress sought by the grandson of the company’s founder will be pulling off a smooth introduction of the first redesigned Prius in almost seven years. The world’s top-selling hybrid will boast an improvement in U.S. fuel economy of about 10 percent, while an Eco version will deliver an even bigger boost. Toyota also will offer driver-assist technologies like automatic braking.

The 2016 Prius will be the first model to implement Toyota’s companywide effort to cut development costs by 20 percent through sharing platforms, parts and powertrains across its lineup.

Once all variations of Prius hit the market, including the plug-in version, combined sales of the model family may reach about 600,000 units annually, according to Tatsuo Yoshida, a Tokyo-based equity analyst for Barclays Plc. Prius deliveries peaked at about 577,000 units in 2012, he said in a Nov. 2 report.

Toyota is readying domestic production base to meet strong demand. The company planned to add about 1,400 workers at factories in Japan for ramping up output of the new Prius and its updated Land Cruiser sport utility vehicle, people familiar with the matter said in August.

Exports from Japan of models including Prius and Land Cruiser are benefiting from a weaker yen than Toyota forecast at the beginning of the fiscal year. The yen traded at 121.50 per dollar on Thursday, compared with the company’s assumption for 117 yen per dollar through the first quarter of its fiscal year.

Still, Toyota’s domestic operations could use a boost from the new models. Deliveries have slumped 7.8 percent to 1.65 million vehicles this year, putting the company’s sales on pace for third annual drop in five years. Production fell 6 percent to 3 million units in the year’s first nine months.

After beginning sales in Japan, Toyota will introduce the new Prius to a surging U.S. market, where demand for sport utility vehicles is helping the industry register its best two-month stretch of sales in 15 years.

Rising deliveries of RAV4 and Highlander SUVs and the Tacoma pickup led to a 19 percent jump in the company’s U.S. light truck sales in October. The first full year on the market for the Lexus NX SUV has vaulted the brand back into contention with BMW and Mercedes-Benz to reclaim its position atop the U.S. luxury auto market.

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