Toyota Motor Corp posted a steeper-than-expected fall in quarterly profits after Japan's biggest quake on record hit output, and lamented that making cars at home was tougher than ever now with disasters compounding the impact of a strong yen.

The world's biggest automaker gave no forecasts for the current year due to the continued disruption to production, but said output would begin recovering as much as two months earlier than it had expected as parts makers come back on line.

I expect (profits) to recover in the second half and to grow next year, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. But looking ahead, Toyota's production rate in Japan is high ... and with energy and electricity costs in Japan expected to rise, I think it will be necessary for them to rethink their global production strategy.

Among big carmakers, Toyota is most exposed to Japan, making 38 percent of its cars in Japan compared to 25 percent for Honda Motor Co and Nissan Motor Co.

That has been viewed as the main factor slowing Toyota's recovery down, with the dollar trading around 80 yen, compared with the 85 yen Toyota has said it needs to break even in Japan.

Toyota President Akio Toyoda acknowledged that the headwinds were greater now, with problems of power supply and the risk of aftershocks disrupting the supply chain again, but repeated he remained committed to Japan and protecting its jobs.

The auto industry has a very broad reach, and we have the ability to drive Japan's recovery during these very tough times, he told a news conference.

Toyoda acknowledged that while issues such as the strong yen and power supply made it difficult to justify building cars in Japan, he wanted to do everything possible to help Japan recover from its current difficulties.

Toyota was born in Japan, raised in Japan and is now a global company, he said. I love Japan, and I want to keep the tradition of manufacturing strong here.

Chief Financial Officer Satoshi Ozawa, seated beside Toyoda, stressed that for that to happen, Toyota needed help from the government to level the playing field against global competitors.

As long as the president is saying, 'Let's keep fighting and get through this' we will do that, Ozawa told reporters after the news conference.

But as the one responsible for the coffers, I have to say that the current environment makes it very, very difficult.

PROFIT HALVES

The 9.0 magnitude earthquake that rocked northeastern Japan on March 11 forced Toyota to reduce output at home and abroad as it struggled to secure vital parts. The ensuing nuclear disaster and power shortages have compounded problems.

Toyota's January-March operating profit fell 52 percent to 46.1 billion yen ($570 million), compared with an average estimate of 94.6 billion yen from 17 analysts who revised their numbers after the quake, according to Thomson Reuters I/B/E/S.

Fourth-quarter net profit, which includes earnings made in China, fell 77 percent to 25.4 billion yen.

For the business year to March 2012, analysts forecast an average operating profit of 307.5 billion yen ($3.83 billion), down 34 percent from 468 billion yen last year. Uncertainties over the broken supply chain have yielded a wide range, from a loss of 25 billion yen to a profit of 846 billion yen.

Toyota now sees average output in Japan and elsewhere recovering to about 70 percent of plans before the quake in June, instead of 50 percent in Japan and 40 percent overseas. Previously it had expected domestic production to begin normalizing in July and in August overseas.

Toyota stuck with a forecast for a full return to production for all models and factory lines by November or December.

Toyota's president's saying that the company's production is expected to recover to 70 percent of its pre-quake plan in June is positive, said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

Still, the massive hit to production will almost certainly mean Toyota will fall behind General Motors Co and possibly Volkswagen AG to rank third in global vehicle sales this year.

With inventory tight and supplies short for popular models such as the Prius hybrid, Toyota is losing customers to rivals such as South Korea's Hyundai Motor Co, which has been nipping at its heels for the past several years.

Analysts say the disruption is a temporary one caused by the shortage of supply, not demand, and that Japanese automakers should reverse the trend next business year.

Toyota's shares have led a fall in Japanese auto stocks since the disaster, losing 11 percent compared with 9.9 percent at Honda and 5.8 percent at Nissan as of Tuesday's close. Toyota shares gained 0.6 percent on Wednesday before the company announced its results.

($1 = 80.835 Japanese Yen)

(Editing by Matt Driskill and Lincoln Feast)

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