Home >Companies >Mazda, MMC forecast profit jump as sales recover

Mazda, MMC forecast profit jump as sales recover

Mazda, MMC forecast profit jump as sales recover

Tokyo: Mazda Motor Corp and Mitsubishi Motors Corp, Japan’s No.5 and No.6 automakers, forecast a more than trebling in annual operating profit on Tuesday, counting on new models to ride a sales recovery in the United States and other markets.

With Mazda bouncing back from the worst of the financial crisis, analysts are now looking at how quickly the Hiroshima-based company can turn its recent capital boost into sustainable profits.

Late last year, Mazda raised about $1 billion in a share sale to invest in hybrid and other technologies to close the gap with rivals. It agreed with Toyota Motor Corp last month to license hybrid technology with the aim of launching a hybrid model in Japan by 2013 — still later than most.

For the year to March 2011, Mazda, held 11% by Ford Motor Co, expects an operating profit of ¥30 billion ($319 million), short of the average ¥43 billion forecast from 16 analysts polled by Thomson Reuters.

It expects an annual net profit of ¥5 billion, against a loss of ¥6.48 billion in the year ended last month.

Mazda’s operating profit forecast for the new business year is still just a fraction of the pre-crisis ¥162 billion posted in 2007/08, and puts its profit margin at just 1.3% — lower than the last two quarters.

“The way things are going now, the rise in raw materials prices is going to be an issue," Mazda chief executive Takashi Yamanouchi told a news conference.

Mazda said, however, that it wanted to turn 2010/11 into a year of “product-led recovery", forecasting a 6% rise in global vehicle sales to 1.27 million vehicles driven by double-digit rises in North America and China.

Mazda is due to launch the Mazda2/Demio subcompact in North America in July, following rivals into a growing segment of customers looking for smaller, fuel-efficient cars.

Announcing targets for the medium term, Yamanouchi said Mazda aimed to boost global sales to 1.7 million vehicles in the year to March 2016, with a near doubling in US sales to 400,000. He said the sales expansion would be achieved with existing production capacity.

It aims to post a record operating profit of ¥170 billion in that year, with a return on sales of 5%, Yamanouchi said. He repeated Mazda’s stance that it would continue to seek further synergies with Ford to lower its cost structure.

Mazda’s operating profit in the January-March, the business year’s final quarter, was ¥20.4 billion beating an average estimate of ¥17.7 billion in a poll of 16 analysts.

Mitsubishi Motors Seals Another Deal With PSA

Earlier, Mitsubishi Motors forecast a 2010/11 operating profit of ¥45 billion up 223%, counting on new models such as the RVR sport utility vehicle to drive sales volumes.

It expects a 17% rise in global sales volume to 1.121 million vehicles this business year, with growth in all regions.

Mitsubishi Motors has been looking to fill unused production capacity, most notably by sealing project-based supply deals with French partner PSA Peugeot Citroen.

On Tuesday, the two companies said they had agreed a deal under which Mitsubishi Motors would supply compact SUVs based on the RVR — called ASX in Europe — to the Peugeot and Citroen brands from early 2012. Volumes are projected to reach 50,000 units for the two brands a year, they said in a joint statement.

The partners, which last month dropped talks over a potential capital alliance, already have three joint projects, including the supply of an SUV based on the Mitsubishi Outlander, and electric cars based on the Japanese automaker’s i-MiEV.

For 2009/10, Mitsubishi Motors reported an operating profit of ¥13.92 billion, short of its initial forecasts due to a drop in vehicle sales and the failure to fully meet its planned cost reduction.

Shares of Mazda are the best performing among Japanese automakers in the year to date, soaring 28%. Mitsubishi Motors shares have gained 1.6%, while Tokyo’s transport sector subindex fell 1.8% in the same period.

Before the results, Mazda ended up 1.4% at ¥281, while Mitsubishi closed down 0.8% after the results.

Subscribe to newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperLivemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated

My Reads Logout