NoPistons -Mazda Rx7 & Rx8 Rotary Forum - Mazda Profit Up 40 Percent!

Reuters

UPDATE - Mazda profits surge, sees strong yen capping growth

Thursday May 13, 4:55 am ET

By Chang-Ran Kim, Asia auto correspondent

(Recasts with company, analyst comments, more details)

TOKYO, May 13 (Reuters) - Mazda Motor Corp (Tokyo:7261.T - News), Japan's fifth-largest auto maker, posted a 40 percent jump in profits on Thursday, driven by brisk demand in Europe, but it said the strong yen and higher material prices would cap growth this year.

"This year, we are expecting volume and revenue growth in all regions, and cost cuts will continue to be important," President and CEO Hisakazu Imaki told a news conference.

"But the currency picture is worsening and material costs are rising," he added.

Analysts dismissed the forecasts as typically conservative, saying Mazda should easily beat last year's results given its targeted 10 percent sales expansion worldwide and cautious currency assumptions.

"With sales volumes expected to rise this much, it shouldn't be a problem," said Mitsubishi Securities auto analyst Shotaro Noguchi, who expects operating profit to exceed the company's forecast by at least 10 billion yen this year.

Mazda projected a 0.2 percent fall in operating profit to 70 billion yen ($620 million) for the year to next March, hit by a negative impact of 28.5 billion yen from the strong yen. Analysts on average expect a profit of 74 billion, according to a survey by Reuters Research.

Mazda expects net profit to be flat at 34 billion yen.

It is assuming a transaction rate of 128 yen to the euro and 106 yen to the dollar for this year, compared with current levels of around 135 yen and 114 yen respectively.

After spending much of the last decade in the red, Mazda, owned one-third by Ford Motor Co (NYSE:F - News), has repaired its earnings by focusing on unique, value-added cars such as the RX-8 sports car and Atenza sports sedan.

That formula has turned Mazda into the fastest-growing brand in a tough West European market, and its success there is set to continue following the launch of the hot-selling Mazda3/Axela sports compact last October.

Imaki said Mazda would continue its product-led growth through at least two new models this year, based on the MX-Micro Sport and MX-Flexa concept cars, while achieving more cost savings through increased cooperation with Ford.

North America remains a weak spot for Mazda, with the region swinging into the red last year as marketing costs ballooned.

But Mazda noted that momentum was picking up in the United States, with sales up by double-digits for the last seven months despite a fall in spending on consumer incentives.

HIGHEST PROFIT IN A DECADE

Last year's operating profit was 70.17 billion yen, the highest in a decade. Net profit came to 33.90 billion yen, up 40 percent.

Revenue grew 23 percent to 2.916 trillion yen last year, thanks to robust sales in Europe, Australia and China.

Success in Europe, where Mazda sells about a fifth of its cars, has been a double boon as the buoyant euro raised the value of euro-based earnings. Unlike its domestic rivals, Mazda has a bigger exposure to the euro than to the dollar.

Mazda's overall performance compared favourably with that of rival Japanese car firms that have reported earnings so far.

First and second-ranked Toyota Motor Corp (Tokyo:7203.T - News) and Nissan Motor Co (Tokyo:7201.T - News) both reported smaller double-digit jumps in operating profit, while Honda Motor Co (Tokyo:7267.T - News) posted a 17 percent drop.

Embattled Mitsubishi Motors Corp (Tokyo:7211.T - News), which is due to report later this month, has forecast a big loss.

Shares in Mazda soared 61 percent during the 12-month reporting period, zooming past rivals' shares and the main Nikkei average (^N225 - News), which rose 41 percent.

They ended down 4.7 percent at 327 yen on Thursday, while the Nikkei fell nearly three percent. The results were announced at the end of morning trade.