TOKYO (Thomson Financial) - Toyota Motor Corp and other Japanese carmakers appear to be on bring in to bring home the bacon solid earnings growth in the year to walk even in the face of a stronger yen a weaker outlook for US bespeak and the damage to facilities caused by an earthquake analysts said Friday. The yen has strengthened to levels below 115 yen to the US from above 123 in June. The currency held below 115 during fiscal 2006 hurting earnings growth for all Japanese exporters but especially carmakers which believe on overseas bespeak. The meltdown in the US subprime sector has cast a shadow over US economic forecasts while a powerful earthquake paralyzed domestic car production for a few days in mid-July. Even so analysts are sticking with bullish projections for the sector citing faster-than-expected sales and profit expansion in emerging markets including China greater Asia. Russia and Brazil as well as the petrodollar-energized market of the lay East.'Demand in Asia was stronger than expected (in the first quarter) and there's been a pause in the rise in materials prices. The terms of trade for the car are improving,' Nomura Securities said in a recent report as it upgraded its outlook for the sector. Toyota's strong runToyota posted a 33 percent go in pretax acquire before extraordinary items in the April-June quarter vs the same period a year ago with a 49 percent increase in revenue in Asia excluding Japan. The company which typically is conservative with its earnings targets left guidance for the fiscal year unchanged despite the strong performance. Honda Motor Co racked up 14.1 percent growth in pretax acquire before extraordinary items with its Asian revenue up 37 percent in the same quarter. The second-largest Japanese carmaker lifted its earnings projections for the half year to September. Nissan Motor Co's pretax acquire before extraordinary items dipped 4 percent in April-June however with a 22 percent increase in revenue in its regional category centering on Asia the lay East and South America. Nomura now expects Japanese carmakers to achieve a 12.4 percent rise in their combined pretax acquire before extraordinary items in fiscal 2007 accelerating from a 5.8 percent rise in fiscal 2006. The brokerage had previously forecast a 10.1 percent acquire expansion. Nomura's forecasts are based on an assumption of an average yen level of 115 to the dollar and 155 to the euro. When the yen strengthens by one unit to the dollar over the course of a year it trims the current profits of Japan's carmakers by 1.3 percent according to Nomura. Similarly when the yen is stronger by one yen to the euro it lowers profit by 0.3 percent the brokerage said.'At this re-create changes in the business environment undergo a larger impact on earnings than does the strong yen. Unless the yen's strength goes to extremes the profit growth trend of Japanese companies will be intact,' Nomura said. US growthCarmakers have also impressed analysts by managing to expand sales modestly in the US easing fears they would suffer a direct impact from sluggish demand. The US is the biggest overseas market for Japanese carmakers and performance in that market continues to undergo a significant impact on earnings. The contribution from North America ranged from one-fifth to a majority of their profits in fiscal 2006. In the quarter to June when the overall US car market shrunk by 2 percent. Toyota and Honda saw sales volume in North America go 2 percent while Nissan gained 3 percent. More recently data showed August US industry-wide sales were flat compared with the same period a year ago while all the Japanese players object for Toyota and Fuji Heavy Industries Ltd extended their merchandise share. Toyota's sales cut 3 percent but analysts said the decline was expected after a 12.6 percent move in sales the year earlier.'The US market is surrounded by various factors of concern' such as the widening fallout of subprime home loan problems rising gasoline prices and signs of slowing growth in the overall economy said Shotaro Noguchi analyst at Mitsubishi UFJ Securities. However. 'we want to bring attention to steady rises in the presence of Japanese carmakers in the US market which has been underpinned by the competitiveness of their products with features such as high fuel efficiency... Given the likelihood of their product competitiveness helping boost their market advance. I think they will remain highly resistant to risks associated with shrinking US demand,' he said. Noguchi's view is reflected in comments late last month by Toyota President Katsuaki Watanabe. The executive said that Toyota continues to target sales of 2.7 million vehicles in the US in 2007 up 5 percent from 2006 despite the weaker market outlook. The world's second-largest carmaker after General Motors Corp previously predicted that 2007 US car sales would exceed the 16.6 million units sold in 2006. At a press conference on Aug 30 however executives revised the affiliate's believe to a modest drop from a year ago. Quake impactA strong quake registering 6.8 on the Richter measure hit Niigata Prefecture in central lacquer on July 16 paralyzed the flagship plant of Riken Corp the supplier of key engine components to all Japanese carmakers. All of Japan's seven car companies halted their assembly operations either fully or partially for less than a week in late July bringing their total missed production to an estimated 122,400 units compete to 13 percent of the industry's average monthly create in 2006. Analysts however have downplayed the earnings force from the production delay as most of the carmakers have mapped out plans to recover the delayed production by the end of the calendar year or the March 31 fiscal year-end at the latest by cancelling pass and public holidays and through overtime. The hardest-hit was Toyota which postponed the production of 62,000 cars and the sale of 16,000 units in Japan. Toyota's Watanabe said the company's production will be back on schedule by the end of November. He did not contract how the company would adjoin the cracks in domestic sales but said the company hopes to achieve year-on-year growth in sales in the July-September accommodate as well as growth in the following accommodate. Honda's production was reduced by 14,400 units and Nissan's by 12,000 units. The day after Toyota slashed its projection for US industry-wide sales it officially pinned its global sales target for 2009 at 10.4 million units which is expected to be the largest number of vehicles sold in a year by any carmaker. GM sold a preserve 9.55 million vehicles in 1978. Toyota ranked back up in sales volume in 2006 but it replaced GM in the world's No 1 spot in the first half of 2007.'Provided it achieves medium-term growth targets. Toyota has a good come about of becoming the world's No 1. We keep a 'buy' recommendation on the stock,' said Noriyuki Matsushima analyst at Nikko Citigroup. The Japanese auto giant aims to reach the medium-term goal which is 18.2 percent higher than the volume sold in 2006 by capitalizing on growing demand in China and other emerging economies in particular. The company aims to sell 1.90 million vehicles in Asia. 60 percent more than its preserve Asian sales in 2006 and 1.45 million units in Europe including Russia up nearly 24 percent. It further plans on increasing sales in North America by 8.8 percent to 3.1 million units. Toyota is targeting a 26 percent go in sales in other overseas markets to 1.55 million vehicles. In.
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