TOKYO (AP) — Toyota Motor Corporation reported a five per cent jump in quarterly profit yesterday, outpacing expectations as vehicle sales grew in North America and Europe, offsetting a drop in Japan.

The Japanese maker of the Prius hybrid, Camry sedan and Lexus luxury model said April-June profit totalled a record 587.77 billion yen (US$5.7 billion). Quarterly sales rose two per cent to 6.39 trillion yen (US$62.3 billion).

Both were better than projections by analysts surveyed by FactSet, who had expected a one per cent increase in quarterly sales and a 12 per cent drop in profit compared with a year earlier.

Toyota Managing Officer Takuo Sasaki credited cost reduction efforts and a weak yen, which helps Japanese exporters such as Toyota, for the positive results.

But Toyota lowered its vehicle sales forecast for 2014, saying it now expects to sell 110,000 fewer vehicles worldwide than the plan announced in January. Even then, it will still reach the 10 million — vehicle industry milestone at 10.22 million vehicles, up two per cent from 2013.

For the first half of the year, Toyota remained the world’s top-selling automaker, although Volkswagen AG of Germany beat US manufacturer General Motors Corporation to become number two in global vehicle sales.

Toyota’s results outshone General Motors, which last month reported a US$190 million profit for the April-June quarter after incurring US$1.5 billion in recall expenses. The US automaker is grappling with the cost of repairing nearly 30 million cars and setting aside compensation for crash victims.

For the latest quarter, Toyota’s vehicle sales dipped in Japan, where sales got artificially inflated ahead of an April 1 tax hike as buyers sought to avoid the higher tax.

Vehicle sales also dropped in the rest of Asia, but they rose in North America, Europe, the Middle East, South America and Africa.

Demand was strong in the key US market for the RAV4 sport-utility vehicle and the Corolla subcompact. The Corolla was also a hit in Europe, according to Toyota.

Toyota notched up a 30 billion yen (US$293 million) operating income gain from a favourable foreign exchange rate, and added another 40 billion yen (US$390 million) from cost cuts.

Despite the relatively pessimistic projections, Scott Kuensell, portfolio manager at US investment company Brandywine Global, was excited about Toyota, calling its stock “ridiculously cheap”.

Kuensell said Toyota has plenty of cash and boasts a green reputation with a stake in electric carmaker Tesla Motors.

Toyota shares finished flat on the Tokyo Stock Exchange at 6,042 yen (US$59), shortly before earnings were announced.

Toyota stuck to its financial forecasts for the fiscal year through March 2015 at a profit of 1.78 trillion yen (US$17.4 billion), down two per cent year-on-year, on 25.7 trillion yen (US$251 billion) sales, unchanged from the previous year.