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Mazda first quarter operating profit up 14.2 per cent

Propelled by a worldwide sales expansion, especially in emerging markets such as China, Japan’s sixth-biggest carmaker is projecting the strongest profit growth of any of the country’s top auto brands this year.

In the April-June first quarter Mazda’s shares cruised past those of rivals, climbing 12.4 per cent to 417 yen against a 0.7 per cent fall in the transport sector subindex ITEQP.

But Mazda, held one-third by Ford Motor Company, lags domestic rivals in terms of profit margin, with its operations in the usually lucrative North American market having just returned to the black in the year ended March 31.

For April-June, Mazda’s overall operating profit totalled 22.82 billion yen ($204.8 million), as massive cost cuts, sales growth and a stronger euro offset higher spending on sales promotion and product development.

The profit was roughly in line with an average forecast of 23.13 billion yen in a survey of four brokerages by Reuters Estimates.

Sales rose 4.4 per cent to 670.78 billion yen, putting its operating margin at 3.4 per cent, up from 3.1 per cent the year before. Rivals Nissan Motor Company and Honda Motor Company, which reported last week, had profit margins of 9.6 per cent and 7.5 per cent, respectively.

As expected, net earnings worsened to a profit of 419 million yen from 11.61 billion yen a year earlier after it booked a one-off loss of 21.2 billion yen, mainly from a regulatory change in the accounting standard for asset impairment.

Global shipments during the quarter expanded 7.8 per cent to 278,000 vehicles thanks to the popularity of models such as the Mazda3 compact car and the remodelled Premacy minivan.

Retail sales were strong in Japan, Canada and other markets such as Australia, but fell in the United States and Europe.

“We’re still pulling back our (low-margin) fleet sales in the United States, aiming to bring the ratio to 10 per cent of total volume this business year,” said Nobuyoshi Tochio, deputy general manager of Mazda’s finance division.

Tochio said its US sales incentives grew slightly during the quarter as an intense price war there showed no sign of cooling, but said Mazda aimed to cap per-vehicle spending at around last year’s level of $2,150 on average this business year.

“The market environment is tougher, but we’ll be rolling out new models like the Premacy and Miata/Roadster, and this should help,” he told reporters.

The maker of the RX-8 sports car left its forecasts for the year to next March unchanged. It expects an operating profit of 90 billion yen, up 8.5 per cent, and a net profit rise of 20 per cent to 55 billion yen.

After hitting a year-to-date high of 473 yen before the results, Mazda shares were down 1.95 per cent at 453 yen by late afternoon, with traders citing a likely dearth of positive news flow after the announcement.

The broad TOPIX index was up 0.23 per cent.