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Japan-Update

Mazda's profit seen tanking 43% this fiscal year

Weak sales, recall outweigh forex boost

TOKYO -- Poor sales and a recall are taking a toll on Mazda Motor, with operating profit expected to plunge to around 130 billion yen ($1.13 billion) for the year ending in March.

The 43% decline in profit would put the Japanese automaker about 20 billion yen short of guidance.

In the U.S., which accounts for roughly a fifth of new-vehicle sales, the Mazda6 sedan and Mazda3 compact have slumped. However, the weak yen is expected to lift group sales numbers slightly above the projection of a 8% drop to 3.15 trillion yen. 

Mazda is also struggling in the domestic market, owing in large part to a recall that halted sales of a number of models in December. Mazda is also reining in discounts in order to elevate brand value, a move that has driven away customer traffic in the short term.

The yen has depreciated against the dollar and other currencies, propping up earnings to a certain extent. The weak yen will likely provide a nearly 20 billion yen operating profit boost. The assumed exchange rate for the six months ending in March is currently at 102 yen per dollar, but the assumption for the January-March period will be revised to around 110 yen. Mazda exports about 80% of its vehicles.

But lackluster Japanese and American sales, as well as one-time costs associated with the recall, will put the squeeze on profit and more than cancel out the currency windfall.

Operating profit for the nine months to December apparently tumbled 42% on the year to about 100 billion yen. Mazda will report April-December earnings on Thursday. A sales recovery will likely hinge on the success of the completely redesigned CX-5 sport utility vehicle, which rolls out in February.

(Nikkei)  

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