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Japan:Mazda lifts full-year forecasts after first half profit jump

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Mazda lifts full-year forecasts after first half profit jump

Reuters

TOKYO -- Mazda Motor Corp. posted a 53 percent jump in half-year operating profit and raised its full-year forecasts to what would be a record as sales of the Mazda3 and other cars soared in Europe.

Outlining a new medium-term plan, the maker of the RX-8 rotary-engine sports car said on Tuesday it aimed to boost profits by at least another 28 percent in two years by adding 16 new models to its lineup and lifting shipments by 10 percent.

Mazda, held one-third by Ford Motor Co., reported a profit for the April-September first half of 43.52 billion yen ($412.5 million) -- better than an average forecast by five brokerages of 37.9 billion yen -- as cost cuts exceeding 26 billion yen also helped.

It now expects an operating profit of 78 billion yen for the full year to March 31, up from a May forecast of 70 billion yen.

"We're by no means satisfied with our current performance," President and Chief Executive Officer Hisazaku Imaki told a news conference.

"But frankly, until now, we could only think about the immediate future. Now we are gaining momentum and we're able to map out a long-term vision and strategy," he said.

Mazda said it would aim to further strengthen its brand and boost operating profit to more than 100 billion yen in the year ending in March 2007, increasing global vehicle shipments to 1.25 million from the 1.13 million units forecast this year.

This year marks the final leg of a five-year turnaround plan during which Mazda has sought to return to the black and secure sustainable growth by carving a niche in the cutthroat car market with unique models to make up for its small size.

The few cars launched under its new product offensive, starting with the Mazda6/Atenza sedan in May 2002, have been generally well received, although sales in North America are still sluggish.

Thanks to the popularity of the Mazda3 compact, called the Axela in Japan, Mazda said it would probably raise the model's output capacity further next year after having already lifted it by 28 percent to 320,000 units this year.

Its first-half net profit rose 68 percent to 18.73 billion yen as a resilient euro cushioned the blow from a weaker dollar. For the full year, it expects a net profit of 37 billion yen, up from its previous forecast of 34 billion yen.

Revenues grew by 9.2 percent to 1.321 trillion yen, aided by continued strength in Europe, where Mazda is still one of the fastest-growing brands with a rise in unit sales of 20 percent.



OPERATING MARGINS STILL SUB-PAR

With profits comfortably above break-even, analysts said Mazda must now raise its low profit margin to a level at par with Japan's competitive car makers.

Mazda said it wants to lift its operating margin to more than 6 percent some time over the next decade, up from 3.5 percent in the July-September quarter and 2.4 percent last business year.

"I think it's commendable that Mazda managed such strong results despite the yen's rise," said Noriyuki Matsushima, an auto analyst at Nikko Citigroup Securities.

"But in this day and age, 6 percent (operating margin) is the absolute minimum for a Japanese auto maker," he said, adding that Mazda would have to beef up its North American and Asian operations to achieve that target.

Top Japanese car maker Toyota Motor Corp. had a margin of 9.2 percent in the latest quarter, while second-ranked Nissan Motor Co.'s was around 10 percent.

Stephen Odell, a director and senior managing executive in charge of marketing and sales at Mazda, said in an interview that the automaker would aim to reach 6 percent in closer to two years than 10.

To that end, he said Mazda was laying the groundwork in weak spots such as North America and Southeast Asia by strengthening distribution networks and planning profitable product launches.

In the United States, Mazda said it would accelerate the pace of converting more dealerships into exclusive Mazda showrooms to boost sales, bringing forward its target of having 50 percent exclusivity by one year to 2006, up from 30 percent now.

Mazda also said it would aim to become more cost-efficient and competitive by stepping up cooperation with Ford, expanding the ratio of vehicles built with shared technology to 80 percent of all of its vehicles by the 2006-2007 fiscal year, up from 50 percent this year.
 
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