Toyota, the world’s biggest automaker, forecast profit and sales will climb to the highest in six years as the weakening yen in foreign currency exchange gives it an edge over General Motors and Volkswagen.
Net income will probably increase 42 percent to $14 billion in the year ending March 2014, Toyota said Wednesday.
The projections were based on the yen being valued at higher levels than now, giving Toyota room to beat its forecasts. The improving prospects illustrate how fast companies from Japan have reversed fortunes.
Toyota’s forecasts for net income, operating profit and revenue missed the average analyst estimates compiled by Bloomberg. The projections were based on the yen trading at 90 versus the dollar and 120 against the euro, though the yen is currently trading closer to 100 and 130.
The shares have rallied 91 percent in Tokyo trading since mid-November, more than any major automaker, as Prime Minister Shinzo Abe helped reverse the appreciation of the yen, which had been hobbling exporters almost nonstop for half a decade. The rally has led to $97 billion in added market value.
Behind the rally — Japan’s benchmark Nikkei 225 Stock Average is at its highest since June 2008 — is the yen, which has weakened against every major currency in the past six months, including 20 percent against the dollar.
The Japanese currency will end 2013 at 104 to the dollar and 132 versus the euro, according to the average estimate compiled by Bloomberg.
“The forecast for the Japanese yen is quite conservative on current trend,” said Ashvin Chotai, London-based managing director of Intelligence Automotive Asia. “There’s high likelihood that if the yen hovers around 100 that Toyota will most likely beat its own estimates.”
The weaker yen, which bolsters the value of overseas earnings, helped last quarter’s net income more than double.
By comparison, GM’s profit fell 11 percent and Volkswagen’s net income tumbled 35 percent.
Profit last quarter beat estimates mainly because of earnings from Japan.
Profit last quarter from North America, Toyota’s largest overseas market, was 39 percent below the average estimate of five analysts surveyed by Bloomberg, as the company ceded market share last quarter to Detroit automakers.
In April, Toyota’s sales in the U.S. fell for the first time in 18 months, Prius deliveries tumbled 21 percent and the Camry — America’s top selling car every year since 2002 — was outsold for a second straight month. Among bright spots, sales of the Avalon sedan and the Lexus ES extended gains after both models were redesigned last year. Toyota is counting on models such as the new Lexus IS sedan, which arrives midyear, for entry-level luxury drivers who would otherwise buy German brands.