Toyota Motor Corp, the world's second-largest carmaker, may report the smallest profit growth in four quarters because of the rising yen and slowing US demand.

Net income gained 8.2 percent to 461.6 billion yen ($4.3 billion) for the three months ended Dec 31 from 426.8 billion yen a year earlier, according to the average of five analyst estimates compiled by Bloomberg. Sales advanced 7 percent to 6.57 trillion yen, the analysts said.

Toyota increased orders in the United States, its most profitable market, by 1 percent last quarter, compared with a 46 percent surge in China and a 26 percent jump in Russia. The yen gained 4 percent against the dollar in the three months compared with a year earlier, eroding earnings from exports of Prius gasoline-electric hybrid cars and Lexus LS sedans. Toyota's US sales last month declined 2.3 percent, the Toyota City, Japan-based company said on Feb 1.

"The US economy is slowing, and companies like Toyota already have a high market share," said Edwin Merner, who oversees $2 billion as president of Atlantis Investment Research Corp in Tokyo. "It's difficult to increase once you reach a certain size."

Toyota shares slumped 11 percent in the three months, their second-worst quarterly performance in more than four years. The carmaker rose 2.4 percent to 5,920 yen as of 12:31 pm on the Tokyo Stock Exchange.

The company reports earnings at 3 pm in Tokyo today.

Toyota is expanding production in emerging markets including China and Russia. The automaker opened a plant to assemble Camry sedans in St. Petersburg in December, and will start building Yaris compact cars in China this year. Sales in China, the world's fastest-growing major vehicle market, accelerated 62 percent in 2007.

Toyota also builds pickups, minivans and SUVs in Thailand, Indonesia, Argentina and South Africa for sale in more than 140 countries.

The carmaker, led by President Katsuaki Watanabe, surpassed Ford Motor Co in the US but failed to overtake General Motors Corp. in global sales last year. The gap with GM was about 3,000 vehicles.

Still, with gasoline prices in the US near a record $3 a gallon, sales of Toyota's Prius jumped 70 percent to 181,221 in the US last year.

Honda said Jan 30 net income for the three months ended Dec 31 rose 38 percent because of higher sales of fuel-efficient cars in the US and Asia. Nissan Motor Co boosted net income 27 percent in the quarter, it said on Feb 1.

"Fuel-efficient vehicles are the weapon for Toyota to be a winner in the industry," said Hiroyoshi Nakagawa from Societe Generale Asset Management Co in Tokyo.

Toyota opened a plant in Texas in 2006 to make pickup trucks and plans two more factories in North America to reduce exports and lower the impact of currency fluctuations. While US sales of Toyota cars dropped 5.7 percent in January from the year-earlier month, light trucks rose 2.2 percent, helped by a 91 percent increase for Tundra full-size pickups, the company said on Feb 1.

A 1 yen gain in the Japanese currency against the dollar and the euro cuts Toyota's annual operating profit by 35 billion yen and 5 billion yen, respectively, according to the company.

Toyota based its second-half earnings forecasts on exchange rates of 110 yen to the dollar and 155 yen to the euro. The Japanese currency traded at 106.89 yen to the dollar and 158.27 to the euro as of 12:31 pm in Tokyo.

Agencies

(China Daily 02/05/2008 page17)