This makes sense.

Toyota's 28% decline still enviable

(DETROIT FREE PRESS) Thursday was a rare bad day for Toyota Motor Corp., the world's second-largest and most profitable automaker.

Toyota, whose US sales and marketing headquarters is in Torrance, reported a 28% decline in fiscal fourth-quarter earnings and saw its stock slide 4% on the day. Toyota's stock closed at $100.56 Thursday, down $4.20 per share.

Toyota's net income fell to 316.8 billion yen -- $3.2 billion -- for the three months ending March 31, based on that day's exchange rates.

The automaker missed the 375.2 billion yen median of six analyst estimates compiled by Bloomberg.

But a bad day for Toyota may still be the envy of the auto industry. For the same 3-month period GM lost $3.3 billion, Ford reported a profit of $100 million and Chrysler LLC, now a private company that does not report results, recently acknowledged that it is not yet profitable.

Like many automakers, Toyota is getting hurt by falling pickup and SUV sales in the United States and rising raw material costs. But unlike the Detroit Three, Toyota is also facing unfavorable currency exchange rates.

"The conditions surrounding Toyota are changing rapidly, with the rise in raw material costs, drastic changes in foreign exchange rates, and more stringent environment regulations worldwide," said Toyota Senior Managing Director Takeshi Suzuki during a conference call Thursday. "We plan to turn all of these challenges into business opportunities."

Toyota also said it expects earnings to drop 27% for its current fiscal year, which runs from April to March. Assuming the yen continues to gain against the dollar and the euro, Toyota expects its operating income will decline by 690 billion yen or $6.9 billion.

"It just shows Toyota is not immune to problems in the economy," said Erich Merkle, a vehicle forecasting analyst for IRN Inc. "They've really been helped by a strong U.S. dollar for a number of years, but now the dollar has gone the other way."

Lehman Bros. equity analyst Tsuyoshi Mochimaru predicted Toyota's dour forecast will continue to depress the company's stock, but also pointed out that Toyota typically provides Wall Street with worst-case scenarios and then outperforms those forecasts.

"We think these are bottom-end targets," Mochimaru said in a research note Thursday. "However, the 30% profit-decline outlook is likely to have a heavy impact on investors."

The last time Toyota's annual profit declined was in the fiscal year ending March 2002; the last time annual sales fell was in the year ending March 2000, mainly because of a weak dollar.

Honda Motor Co., Japan's No. 2 automaker behind Toyota, said last month that its January-March profit declined 86% compared with the same period a year ago because of a corporate tax levied on its Chinese joint venture. Nissan Motor Co. reports earnings next week.

Toyota's full-year results were much better than its fourth quarter. For the year, Toyota said net income increased 4.5% to $1.7 trillion yen ($24.5 billion) this year. Toyota's revenues increased 9.7% from 23.9 trillion yen ($241.4 billion) last year to 26.3 trillion yen ($265 billion).

Toyota reported that sales for the quarter increased 3.7% to 6.6 trillion yen ($66.2 billion).

Toyota also continues to gain market share in the United States and said it reached a record high of 16.3% for the year.

But Merkle said Toyota's problems in North America are significant. Last year, Toyota launched its redesigned Tundra pickup while ramping up output from its new plant that opened in San Antonio, Texas, in 2006.

"It certainly starts to impede profitability when you have a plant that is not operating at full potential," Merkle said.

Toyota's stock is trading at the low end of its one-year range. It is down more than $27 from its 52-week high of $128.33, reached last July. The low over the range was $91.21.

Posted by Muhammed El-Hasan at 10:13 AM | Permalink | Comments (0)

$3.67 is nothing compared to California's gas prices.

Gas jumps above $3.67, oil passes $126 on Venezuela concerns

NEW YORK (AP) -- Oil rose above $126 a barrel for the first time Friday, bringing its advance this week to nearly $10, as investors questioned whether a possible confrontation between the U.S. and Venezuela could cut exports from the OPEC member. Gas prices, meanwhile, rose above an average $3.67 a gallon at the pump, following oil's recent path higher.
On Friday, The Wall Street Journal published a report that suggested closer ties between Venezuelan President Hugo Chavez and rebels attempting to overthrow Colombia's government. Chavez has been linked to Colombian rebels previously, but the paper reported it had reviewed computer files indicating concrete offers by Venezuela's leader to arm guerillas. That appears to heighten the chances that the U.S. could impose sanctions on one of its biggest oil suppliers.

"If we put on sanctions, I'm sure Chavez would threaten to cut off our oil supply," said Phil Flynn, an analyst at Alaron Trading Corp. "Obviously that would have a major impact on oil prices."

Light, sweet crude for June delivery vaulted to a new record of $126.20 in morning trading on the New York Mercantile Exchange before retreating to trade up $1.09 at $124.78 a barrel.

Even if Chavez cut oil shipments to the U.S., Venezuelan oil would still make its way to the U.S. via middle men, who would buy it from Venezuela and resell it to the U.S., Flynn said. But that new layer in the supply chain would bump up costs.

Oil prices also were boosted Friday by the dollar, which declined against the euro. The European Central Bank said it was unlikely to consider interest rate cuts to cool the strong euro against the slumping dollar. Investors often buy commodities such as oil as a hedge against inflation when the greenback falls. A weaker dollar also makes oil less expensive to overseas investors.

Many analysts believe the doubling in oil prices since this time last year has much to do with the dollar's protracted decline. Another school of thought thinks tight global supplies of oil, driven by growing demand in countries such as China, Brazil and India, is the primary factor driving oil higher.

Oil's surge is pushing retail gas prices higher. The national average price of a gallon of regular gas jumped 2.6 cents overnight to a record $3.671 a gallon according to a survey of stations by AAA and the Oil Price Information Service. The Energy Department expects prices to peak at a monthly average of $3.73 in June, though many analysts say national average prices could rise as high as $4. Consumers in many regions, including parts of California and Hawaii, are already paying that much.

Demand for diesel fuel is also growing worldwide, but supplies of distillates, which include diesel and heating oil, fell unexpectedly last week, the Energy Department said Wednesday. That's pushing U.S. diesel prices to record highs and inflating heating oil prices in the futures market; heating oil futures are often viewed as a proxy for diesel.

Heating oil for June delivery rose 7 cents to $3.5798 on the Nymex after earlier setting a trading record of $3.6125. At truck stops, retail diesel prices rose 1.8 cents overnight to a record national average of $4.269 a gallon,

Diesel is used to move most of the world's food, consumer and industrial goods via truck, ship and rail. Skyrocketing diesel prices are part of the reason food and consumer goods prices are so high.

In other Nymex trading Friday, June gasoline futures rose 3.72 cents to $3.175 a gallon, and June natural gas futures rose 13.2 cents to $11.395 per 1,000 cubic feet.

In London, June Brent crude futures rose $1.79 to $124.63 a barrel on the ICE Futures Exchange.

Posted by Muhammed El-Hasan at 8:38 AM | Permalink | Comments (0)