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Old 11-02-2006, 11:17   #1 (permalink)
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JP:Mazda lifts forecasts as second quarter profit jumps

Mazda lifts forecasts as second quarter profit jumps

Reuters

TOKYO -- Mazda Motor Corp. posted a 55 percent surge in quarterly operating profit today as a weak yen and sales expansion in the West offset slumping domestic demand, and it bumped up its annual forecasts beyond market projections.

The Hiroshima-based carmaker, one-third held by Ford Motor Co., has been a prime beneficiary of the yen's steep decline because most of the cars it sells overseas are built in Japan.

Fanning profits further, Mazda's sales growth has occurred mainly in North America and Europe recently, and the yen's slide has boosted the value of dollar- and euro-denominated income.

For the fiscal year that ends March 31, Mazda raised its operating profit forecast to $1.26 billion (148 billion yen) from $1.15 billion (135 billion yen), now calling for a 20 percent rise from last year to account for a weaker yen.

Mazda joins other Japanese automakers in posting rosy second-quarter results as they grab a bigger share of the North American and European car markets.

Its fortunes stand in sharp contrast to those of Ford, which posted its largest quarterly loss in 14 years as slower truck sales and restructuring charges took their toll.

Net profit is now seen at $700.6 million (82 billion yen) in 2006/07 instead of $640.8 million (75 billion yen).

Mazda revised its exchange rate assumptions for the year to 113 yen to the dollar and to 143 yen to the euro, from 110 and 135 assumed three months ago -- still a conservative view that leaves room for profits to overshoot the new projections.

For the July-September second quarter, operating profit was $343.0 million (40.15 billion yen), in line with market estimates.

Net profit sank 33 percent to $176.0 million (20.6 billion yen) after Mazda booked big one-off pension-related gains the year before. Revenue grew 16 percent to $6.73 billion (787.15 billion yen).

PROFIT BEFORE SALES

Mazda has won over many customers globally with the popular Mazda3 compact and the Mazda6 sedan before that, and it is hoping to repeat their successes with the new CX-7 and CX-9 crossovers -- strategic, higher-margin products aimed mainly at expanding in North America.

Mazda is in the final year of a mid-term business plan under which it had targeted $854.4 million (100 billion yen) of annual operating profit, a reduction of its debt-to-equity ratio below 100 percent and global shipment of 1.25 million units.

While the first two goals have been achieved, Mazda further reduced its wholesale volume forecast for 2006/07, by 30,000 units to 1.18 million units to account for sluggish demand in Japan and Thailand. That would be up 2.7 percent from last year.

But CFO David Friedman said the revision reflected Mazda's strategy of building a stronger brand by holding down discounts and other incentives even if that meant a fall in sales volume.

Kurt Sanger, an auto analyst at Macquarie Securities, agreed.

"For me, Mazda's story right now is not about impressive volume growth. It's about (product) mix improvement and getting more profit out of existing sales," he said.

Indeed, Mazda said its spending on U.S. sales incentives fell to $1,790 per unit in the first half from $2,260 in the year-earlier period. Still, Mazda's sales in the United States rose 3.0 percent in the first 10 months of this year.

NEW MID-TERM PLAN EYED

With volumes steadily growing, analysts say Mazda's most pressing task now is to expand its output capacity -- now at around 1.45 million units globally -- while reducing its high sensitivity to exchange rate swings through local production.

Friedman said these issues would be "an integral part" of the next mid-term business plan to be announced next spring, declining to provide any hints on where and how Mazda would add capacity.
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