Mazda’s first-quarter profit slumps on weak sales in U.S. and China

TOKYO — Mazda reported a 79% drop in quarterly operating profit, falling significantly short of estimates, as it continues to struggle with declining U.S. and Chinese sales, while a strengthening yen also cut into its bottom line.

Operating profit at Japan’s No.5 automaker was 7.0 billion yen ($64 million) in the first quarter ended June, versus around 33 billion yen a year ago and less than half of an average forecast for 18.5 billion yen from analysts polled by Refinitiv.

Mazda, however, reiterated its forecast for a 33% rise in operating profit to 110 billion yen in the year ending March.

Thursday’s profit announcement marks Mazda’s poorest first-quarter operating performance since the June 2012 quarter.

The automaker has been struggling with falling demand for its cars over the past year or so, while it is also recovering from flood-related damage to its factories in Japan that led to a quarterly loss in the July quarter of 2018.

The Nikkei business daily on Wednesday had reported that operating profit at the company would fall around 70% for the quarter due to lower sales in the United States.

Mazda posted global sales of 353,000 units for the quarter, down 12% from a year ago. Its sales in the United States, its biggest market, fell 15% to 68,000 units, while in China, Mazda sold 54,000 vehicles, down 21% on the year.

A trade war between the top two economies and slowing growth in China, the world’s biggest auto market, have prompted a broad-based sales downturn in the global auto sector.

Automakers are grappling with easing demand for cars just as they must invest heavily in new technologies including electric cars, autonomous driving technologies and ride-sharing services to survive a major industry shift away from car ownership.

Many of Mazda’s rivals at home and abroad have been reporting disappointing quarterly results, with Nissan and Ford also announcing job cuts and possible plant closures earlier this month.

The United States is a key source of revenue for Mazda, but it imports all its vehicles sold there, exposing it to a threatened hike in U.S. tariffs on imported cars from Japan.

To limit its vulnerability to possible tariffs and currency fluctuations, Mazda is investing in a new plant in the U.S. state of Alabama, a joint project with Toyota.