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Stacy94PGT · 04-28-2006, 08:20

Mazda operating profit jumps to record

Reuters

TOKYO -- Mazda Motor Corp. beat expectations on Friday with a 49 percent surge in annual operating profit, riding a softer yen, brisk car sales and cost cuts, and it forecast stronger-than-expected growth fueled by the CX-7 crossover and other new models.

The results far outpaced Mazda's own estimates, lifted just two months ago, and underscored the Hiroshima-based firm's solid product-led momentum as it focuses on beefing up its brand value.

Mazda joins fellow Japanese automakers Honda Motor Co. and Daihatsu Motor Co. in posting a double-digit profit rise, although its sales at home and in the United States have been up and down.

Mazda said domestic retail sales would likely stay flat this year capped by an ageing compact car lineup, but that demand in the United States should zoom ahead as it launches the CX-7 in May and the CX-9 crossover early next year.

The maker of the MX-5 sports coupe forecast global shipments to rise 5.3 percent this business year to 1.21 million units.

That is short of the 1.25 million targeted under its mid-term Mazda Momentum plan, but CEO Hisakazu Imaki stressed that was due to Mazda's choosing to hold back value-eroding sales incentives and shipments to fleet customers.

"Even if we have to deliberately pull back sales, we want to continue building up our brand," Imaki told a news conference. "In the past, we suffered because we sacrificed the brand to chase volumes. We're determined not to repeat that mistake."

He added that Mazda intended to spend less on profit-eroding sales incentives in the United States this year.

The rising fortunes of Japan's carmakers stand in contrast with the difficulties nagging General Motors and Ford Motor Co., which expect to close multiple plants and slash thousands of jobs as they cede sales to Asian rivals.

For the current year that began on April 1, Mazda, in which Ford has a controlling one-third stake, forecast a 9 percent rise in operating profit to $1.18 billion (135 billion yen), against a forecast of 131.4 billion yen by 15 analysts surveyed by Reuters Estimates.

With revenue expected to rise 6.2 percent to $27.13 billion (3.1 trillion yen), its operating margin would improve to 4.4 percent.

Net profit for 2006/07 is expected to rise 12 percent to $656.2 million (75 billion yen).

It made the rosy forecasts despite its assumptions that the yen will strengthen to an average 110 yen against the dollar and 135 yen against the euro, shaving $135.6 million (15.5 billion yen) from operating profit.

Mazda also projected a near $87.5 million (10 billion yen) jump in capital spending for this year to $717.4 million (82 billion yen), mainly to develop new models but also to beef up production of engines and transmissions, as well as expand assembly capacity in Japan.

In the year ended March 31, net profit jumped 46 percent to $583.7 million (66.71 billion yen), while operating profit totaled $1.08 billion (123.44 billion yen). All profits marked record highs.

Mazda has enjoyed particularly robust demand in Europe, where the availability of more diesel engines is fuelling sales, and in China, where it now commands a 3.7 percent share of the passenger car market.

Given the bumper results, Mazda raised its dividend for the just-ended year to 4 cents (5 yen) from a previously forecast 2.6 cents (3 yen). It also projected 4 cents (5 yen) for the current year.