Toyota returns to profit but remains cautious

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Toyota forecast a slower-than-expected recovery in earnings this year as a stronger yen and Europe's debt problems hamper its efforts to undo the damage from the worst recall crisis in its history.

The world's largest car-maker comfortably beat forecasts with a fourth-quarter profit as it cut costs, and its aggressive sales incentives swiftly drew US customers back to its popular Prius hybrid and Corolla sedans in the wake of its recall woes. But its projection for a ¥280bn (£2.05bn) operating profit for the year to the end of March 2011 was little more than half market forecasts.

Toyota had flagged a small operating loss for last year, estimating a $2bn hit from lost sales over the recall. Instead, it yesterday posted an operating profit of ¥147.5bn for the year to 31 March, bouncing back from a loss of ¥461bn in 2008/09.