Mazda, Subaru hike profit outlook as yen weakens
TOKYO -- Among Japanese carmakers, Mazda Motor Corp. and Fuji Heavy Industries Ltd. are in the best position to benefit from the weakening yen, raising their earnings forecasts today as exported goods bring in more cash.
Mazda makes 71 percent of its vehicles in Japan and exports about 80 percent of them, while Fuji Heavy makes about three-quarters of its cars at home, shipping about 67 percent of those.
Their higher domestic production and export ratios than Japan's top three automakers -- Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. -- put them in a strong position to take advantage of a yen that has lost around 20 percent of its value versus the dollar since October.
The two automakers join Toyota in raising their profit projections as the weakening yen makes Japanese products more profitable overseas.
Japan’s exporters are benefiting as the nation's currency touches a 2 1/2 year low as Prime Minister Shinzo Abe pushes for monetary easing to end deflation.
"The companies (Mazda and Fuji Heavy) have restructured themselves while they were struggling from a strong yen, and their reforms have seen much progress," said Mitsushige Akino, a fund manager at Ichiyoshi Asset Management.
"Rather than the yen moves, what matters now are their core strategies, such as how it can become more competitive to boost shares."
Mazda, the fifth biggest Japanese carmaker by sales, raised its operating profit outlook for the year ending in March by 20 billion yen to 45 billion yen ($481.8 million), which would be its highest since the year ended March 2008. The softer yen accounted for an 18.4 billion yen boost.
Mazda said the increase in its profit forecast also reflects demand for fuel efficient vehicles such as the CX-5 sport utility vehicle and new Mazda6 sedan and wagon.
Fuji Heavy, which makes Subaru cars and is seeing strong sales in its biggest market, the United States, lifted its operating profit outlook by 25 billion yen to a record 107 billion yen, with currency moves boosting profit by 23.3 billion yen.
Still, the firms said the currency moves would not change their plans to build more cars in foreign markets where demand is strong, wary of the yen reversing its trend and eating into profits.
"We will absolutely maintain our structural reform, even if the strong yen is being corrected. We do not want to repeat the struggles from recent years," Mazda CEO Takashi Yamanouchi told reporters. Mazda has booked a net loss for the past four years since the global financial crisis in 2008.
The weaker the yen, the more money Japanese companies make when they convert overseas profits back into their home currency, and products exported from Japan can be sold at more competitive prices abroad.
Japanese carmakers with a big domestic production base are more exposed to this move than those who make most of their cars outside Japan.
Fuji said it expects to sell 722,000 vehicles for the full year, an increase of 8,000 units from its previous forecast. The automaker today also raised its projections for revenue. The projections are based on currency assumptions at 82 yen to the dollar and 105 yen to the euro, according to the statement.
“The yen is still making corrections from a high level,” Fuji Heavy CFO Mitsuru Takahashi said in a briefing in Tokyo today. “From a manufacturer’s point of view, we should produce where the goods are sold.”
The automaker didn’t provide an update today on its plan to expand production capacity in the United States to meet rising demand.
U.S. deliveries
In the U.S. market, deliveries will rise an estimated 8.5 percent to 365,000 cars this year, outstripping the capacity of Fuji Heavy’s plant in Lafayette, Ind.
The automaker increased sales 26 percent to 336,441 last year.
The Indiana factory can produce a maximum of 310,000 vehicles annually, based on state air-pollution limits, Jennifer McGarvey, a spokeswoman for the factory, said in December.
Mazda is seeking alliances with other carmakers in product development and production to boost its lineup and increase utilization of plants.
It will build a sub-compact based on the Mazda2 for Toyota at a Mexico plant currently under construction. Production of the vehicle will begin in mid-2015 at a rate of 50,000 units per year, the companies said in November.
The agreement will help Toyota strengthen its lineup in North America and increase production efficiency at Mazda, the companies said at the time.
The carmaker will also produce with Fiat SpA a new Alfa Romeo roadster that will be based on the next-generation Mazda MX-5, at its factory in Hiroshima from 2015, the companies said last month.
Mazda shares are the best-performing among Japanese automakers in the past three months, jumping 167 percent, followed by Fuji Heavy Industries' 73 percent leap, both on expectations the weaker yen would boost their businesses.
Mazda shares ended up 4.4 percent at 283 yen, and Fuji Heavy rose 5.1 percent to 1,371 yen on Wednesday, outperforming a Nikkei index that was up 3.8 percent.
Reuters and Bloomberg contributed to this report