HMC Honda Motor Co Ltd

Toyota Motor Corp. (TM) broke its silence on sales and earnings outlook for its fiscal year ending March 31, 2012 since the release of its fiscal 2011 results last month. The automaker could not provide any guidance for fiscal 2012 earlier as it needed more time to absorb the adverse impact of production disruptions caused  in its production and sales plans due to the earthquake and tsunami in Japan.

Toyota expects the full year profit to fall 31% to ¥280 billion ($3.5 billion) from ¥408 billion a year ago, driven by lower sales and stronger yen. The company has projected global sales to decrease to 7.24 million vehicles from 7.31 million vehicles in fiscal 2011, which will reduce earnings by ¥120 billion. These figures include sales at truck maker Hino Motors Ltd. and compact car maker Daihatsu Motor Co.

Toyota’s forecast was based on an average dollar to yen exchange rate of ¥82 for the year compared with ¥86 last year. The automaker revealed strong yen to reduce the yearly profit by ¥100 billion.

FY11 Results Review

The Zacks #3 Rank (Hold) company reported a profit of ¥408.18 billion ($5.07 billion) or ¥130.16 ($1.60) per share for the 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. The twin disaster in Japan has also led to a 52% fall in profit during the January-March quarter.

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.

Last month, Toyota revealed that 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. The company now believes that its domestic output will revive by 90% to its normal level this month, while its global production will normalize by December this year.

What about Honda?

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.

Honda would release its earnings guidance for the fiscal year on June 14. The company could not furnish any guidance for the next fiscal six months ending September 30, 2011 or for the fiscal year ending March 31, 2012 probably due to the same reasons cited by Toyota.

 
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