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Isuzu quarterly profit jumps 30% on Southeast Asian sales

Truck maker enhances margins in Japan by curbing discounts

Isuzu's SUVs and pickup trucks on display at the Bangkok International Motor Show in March. (Photo by Hiroshi Kotani)

TOKYO -- Isuzu Motors likely lifted operating profit about 30% on the year to roughly 50 billion yen ($446 million) for the April-June quarter, thanks to strong truck sales in Southeast Asia and reduced discounts in Japan.

Revenue for the first quarter looks to rise about 10% to 500 billion yen.

The robust performance by small and midsize trucks in Isuzu's key battleground of Southeast Asia offset political instability that put the brakes on markets like the Middle East and Africa. The Japanese company's global unit sales apparently rose from the roughly 114,000 vehicles recorded in the year-ago period.

Isuzu's sales in Thailand benefited from infrastructure development, while pickup trucks enjoyed solid demand as well. Rising transportation demand in urban areas increased sales of small trucks in Indonesia.

Japanese revenue and unit sales apparently slipped due to Isuzu's cutbacks in incentives paid to dealerships since fiscal 2017. Though the company's share of its home market has shrunk slightly as a result, profitability has improved.

Isuzu has turned away from incentive-driven price competition, judging it to be self-defeating in the longer term.

Trucks bring in more revenue from after-purchase services than do passenger vehicles, letting Isuzu maintain a certain level of earnings even when reducing prices for new trucks. But lowering those prices pushes down the price tags of secondhand offerings, often creating a downward spiral that further depresses new truck prices.

Isuzu also expects truck demand to stay tepid for a while following a sales surge in 2015 and 2016, as Japanese businesses normally do not replace trucks for more than a decade. The company seeks to bolster its earnings foundation in Japan while overseas momentum is strong.

A weaker than expected yen provided another tailwind in the first quarter. Isuzu had assumed the Japanese currency would trade for 105 yen per dollar for the current fiscal year. When the yen softens by 1 yen per dollar, Isuzu's annual profit rises by about 600 million yen. Isuzu will release its April-June results Friday.

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