TOKYO -- First-quarter profits at Mazda Motor Corp. put Japan's fifth-largest automaker well on track to meet its cautious full-year forecasts after new cars like the Mazda3 compact were a hit with motorists worldwide.
Operating profit in April-June was 20 billion yen ($178 million), representing 29 percent of its full-year target of 70 billion yen, which would be down 0.2 percent from last year.
Mazda, one-third owned by Ford Motor Co., reported quarterly profits for the first time on Friday and gave no comparisons from the year before.
Despite the strong results and more favorable exchange rates than its assumptions, Mazda stuck to its full-year forecasts, saying margins could fall in the United States if a brutal price war being waged by Detroit's "Big Three" intensifies.
"We recognize that other manufacturers are going to keep the pressure on incentives," said Mazda spokesman Mark Schirmer.
"Our main concern is whether or not our controlled incentive levels will hold for the rest of the year," he added, noting that sales incentives averaged around $2,000 per vehicle during the first quarter.
Most analysts expect Mazda to beat its target, with a median estimate of 20 brokerages putting operating profit at 72.55 billion yen, as the auto maker targets 10 percent growth in sales volume worldwide.
Mazda is in the final year of a five-year turnaround plan during which it has sought to return to the black and secure sustainable growth by carving out a niche in the cut-throat car market with unique models to make up for its small size.
The few cars launched under its so-called "zoom-zoom" product and marketing strategy have been well received, beginning with the Mazda6/Atenza sedan, which has picked up dozens of awards around the world including "Car of the Year" in China last year.
Mazda recently expanded its output capacity for the Mazda3/Axela sports compact, launched late last year, by a third to 320,000 units to catch up with ballooning demand.
With profits comfortably above the break-even point, analysts say Mazda's task now is to bring its low profit margin up to par.
For the latest quarter, its operating margin improved to 3.1 percent from 2.4 percent for the 12 months to March, but that was still much lower than 9.8 percent for Nissan Motor Co. at the top of the range and 7.7 percent for Honda Motor Co., both of which also reported results this week.
Mazda is scheduled to outline its next medium-term business plan in November.
For now, analysts expect the picture to improve in the second half of this year with increased sales of the Mazda3, called Axela in Japan, around the world and a contribution from the new Verisa compact launched recently in Japan.
Quarterly net profit was 11.61 billion yen, versus its 12-month forecast of 34 billion yen. Revenues climbed 12.3 percent to 642.27 billion yen as global shipments grew 5.4 percent to 258,150 vehicles.
During the three months to June 30, Mazda's shares gained more than 10 percent to 347 yen, in line with Tokyo's transport sector index.