Toyota’s Profits Surge; Outlook Sees Records Down the Road

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Though it’s coming off a rather uninspiring month of slower sales, Toyota (NYSE:TM) is still anticipating that 2014 will generate a modest recovery, according to an executive with the company, despite more intense competition than ever before and “eroding profits in its largest market,” Reuters reports.

Simultaneously, the company called for forecasts of record-breaking profits, with 2.4 trillion yen ($23.7 billion) for the year ending in March. Toyota believes that the auto industry in the U.S. will post sales that fall at around 16 million vehicles, up from 2013′s 15.58 million.

Toyota announced on Tuesday that net profits for the third quarter reached 525.4 billion yen, ($5.2 billion), up from 99.91 billion yen a year earlier, as the weaker yen spurred growth by a factor of five. Further, it raised its outlook for net income by almost doublem to a record 1.9 trillion yen ($18.8 billion), against a prior forecast of 1.67 trillion yen and a consensus of 1.87 trillion yen.

However, emerging markets — which account for about 45 percent of Toyota’s business — could form headwinds for the company’s continued pace. Reuters reports that the tapering efforts by the U.S. Federal Reserve are sending international markets into turmoil.

“Because downside risks exist in emerging markets such as the so-called ‘fragile five,’ including Indonesia and Brazil, how Toyota’s sales go in the developed markets will be increasingly important for it to maintain its profitability,” Takumi Hoshi, an automotive sector analyst at Toyo Securities, told Reuters.

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To accommodate for the risk in emerging markets, Toyota can still make some room with its margins in the U.S., which at 5.2 percent, drag Toyota’s global average of 9.1 percent. The States account for roughly 30 percent of its global vehicle sales and about 15 percent of Toyota’s operating profit.

Toyota has remained fairly mute on discussing what it might do with the new profit haul and declined to give commitments for the fresh capital. The company did reiterate that it would not be using it to invest in new plants for the next three years, Reuters noted.

“We believe it is important not to be pulled in different directions by day-to-day conditions, and to think of what we need to do now in order to grow sustainably in the medium to long term,” Toyota Managing Officer Takuo Sasaki said at a news conference.

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