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Stacy94PGT · 07-30-2006, 05:51

Mazda operating profit climbs on exports

Reuters

TOKYO -- Mazda Motor Corp. reported a 30 percent rise in quarterly operating profit on Friday as exports to North America expanded, and it kept its forecasts for sharp full-year growth unchanged.

Mazda, one-third owned by Ford Motor Co., is enjoying steady sales momentum in North America and Europe, powered by the Mazda3 compact, MX-5 sports coupe and other well-received products, while also reaping the benefits of a weaker yen.

Analysts expect Mazda's sales to pick up even further from the current quarter, which will get full contribution from the new CX-7 crossover's launch in North America.

Mazda's operating profit totaled $255.7 million (29.61 billion yen) for the three months, up from 22.82 billion yen a year earlier.

The Hiroshima-based carmaker joins domestic rival Honda Motor Co. in reporting a double-digit rise in operating profit for the April-June first quarter. Both are attracting energy-conscious consumers in the United States looking to get more mileage out of their $3-a-gallon gasoline.

"The results show that our business momentum is building according to plan," Managing Executive Officer Keishi Egawa told a news conference.

Net profit was $57.4 million (6.6 billion yen), compared with 419 million yen a year earlier, when it booked 21 billion yen in asset impairment charges. Revenue grew 9.5 percent to $6.39 billion (734.3 billion yen).

A favorable swing in currency rates added $75.7 million (8.7 billion yen) to the operating profit, while sales of higher-margin products and a fall in incentives spending gave a $68.7 million (7.9 billion yen) boost.

But Mazda said it was unable to offset a rise in the cost of raw materials such as aluminum, copper and precious metals through cost cuts, leading to a negative impact of $8.70 million (1 billion yen) at the operating level.

"High commodity prices will continue to pose a big risk for the rest of the year," Egawa said. That factor could cancel out the currency windfall, he added, explaining the decision to stick to its profit forecasts for the year to next March.

Mazda, which relies especially heavily on exports among Japanese automakers, expects 2006/07 operating profit at $1.17 billion (135 billion yen) and net profit of $652.5 million (75 billion yen) -- for rises of 9.4 percent and 12.4 percent, respectively.

DOMESTIC SALES SLUMP BUT US, EUROPE SOLID

Mazda, like many of its domestic rivals, is suffering sliding sales in the lackluster Japanese market, but is enjoying lofty sales in the United States and Europe.

First-quarter retail sales in Japan slumped 6 percent, but grew 3 percent in the United States and 10 percent in Europe.

Mazda said profitability in North America was also improving as it reduces its spending on margin-eroding sales incentives, which averaged around $1,800 per vehicle in the latest quarter, compared with around $2,000 in the year-earlier period.

Sales in China plunged 24 percent partly due to difficult comparisons from the year before when demand surged on a round of price cuts, but also because of suspended local output of the Mazda3 compact car after the government indicated a flaw in the application process for the model's production and sale.

Egawa said it was unclear when production would resume after the stoppage almost four months ago, but added the overall impact on the company's earnings was negligible.