Toyota Motor Corp <7203.T> cut its profit forecast for this business year by more than half on Friday as it continues to suffer from a stronger yen and widespread output disruptions due to Thailand's floods.

Toyota is poised for a record year in production next year, as it rebuilds inventories and puts behind it the natural disasters in Japan and Thailand that hobbled operations and likely knocked it from the top spot into third place at best among global automakers.

But the yen's strength will remain a severe worry.

Toyota is hitting a trough, said Cho Soo-Hong, auto analyst at Woori Investment & Securities in Seoul. Its market share will recover next year with the output normalization and new model launches, but I don't expect too much from Toyota's earnings as the yen is expected to remain strong because of appetite for safe-haven assets.

Japan's top automaker said it expects an operating profit of 200 billion yen ($2.6 billion) in the year to March 31, 2012, down 57 percent from last year and well below a consensus forecast of 419 billion yen in a survey of 23 analysts by Thomson Reuters I/B/E/S.

The company's previous forecast of 450 billion yen, issued in August, was withdrawn last month after Thailand's worst floods in 50 years cut off the supply of parts to factories in 10 countries. The Thai floods are expected to cause a net shortfall of 230,000 vehicles this business year, the company said.

With waters having receded and recovery work under way at Thailand's industrial parks, Toyota has said its production has returned to normal in most regions, leaving just Thailand and South Africa operating at reduced rates.

The company said on Friday that Thai production was expected to return to normal this month.

LOST CROWN

The Thai disaster and Japan's earthquake and tsunami in March have hit Japanese automakers particularly hard. Unable to meet demand, Toyota is set to lose its crown as the world's top seller of automobiles to General Motors Co this year. It will also almost certainly trail Volkswagen AG .

The company said the Thai floods accounted for 120 billion yen of the downward revision to operating profit, while the yen's strength, which hurts the competitiveness of exports and reduces the value of overseas profits when repatriated to Japan, cut another 190 billion. These were offset by 60 billion yen in profit-boosting measures.

Once the supply issues disappear, Toyota will ramp up production to rebuild depleted inventories, likely making 2012 a record year. Its new models, including the Camry sedan, are set to pose tough competition for rival Hyundai Motor Co <005380.KS> next year, analysts said.

But Japanese automakers still have to contend with the yen's persistent strength, which they say is a far bigger problem than the supply chain disruptions. Toyota has said it needs the dollar to rise to at least 85 yen, far from 77-78 yen currently.

(The revision) is partly because Toyota's exposure to currency swings is big, but I think this revision also brought to light the severity of the crisis Japan is in, because the country is founded on its export strength, Toyota's chief financial officer, Satoshi Ozawa, told a news conference.

The automaker projected a net profit of 180 billion yen for the current financial year, down 56 percent from last year and a sharp cut from its previous forecast of 390 billion yen.

Toyota's announcement leaves just Honda Motor Co <7267.T> without annual guidance among Japanese automakers. Honda has been hit the hardest by both disasters, with the only car factory underwater in Thailand and taking the longest to recover from the March 11 disasters.

Honda's chief financial officer has said he expects to provide annual forecasts around the time it reports third-quarter results, usually due in late January.

Toyota's shares have fallen 18 percent in the year to date, in line with Tokyo's main Topix index <.TOPX>. Honda has lost 24 percent.

(Editing by Matt Driskill and Michael Watson)

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