The positive financial results mask the difficulties currently being experienced by Mitsubishi, which is struggling to retain its share in its traditional markets.

The company continues to expand into growth regions, which is underpinning its global performance.

New products to join the Lancer are badly needed if Mitsubishi is to defend its market share in the United States, Japan, and Western Europe and thereby ensure a healthy global sales balance across established and emerging markets.

Mitsubishi Motors Corporation has announced its financial results for the first quarter of fiscal year (FY) 2008/09, reporting a net profit of ¥10.3 billion (US$95.7 million), compared to a loss of ¥8.2 billion for the year-earlier period, despite a fall in sales revenues and the effects of a stronger yen compared to the U.S. dollar. The year-on-year (y/y) comparison was helped, however, by the fact that one-time reorganisation costs were booked in the same quarter of 2007 stemming from the regional integration of Mitsubishi’s domestic consolidated sales companies. The profit came as a result of an improved model mix (adding ¥6.5 billion), lower selling expenses (adding ¥4.0 billion) and cost reductions (adding ¥9.6 billion), according to a company statement. Revenues for the period fell to ¥610.1 billion from ¥630.8 billion, as unit sales volumes fell 7% y/y.

Mitsubishi reported an operating profit during the period of ¥9.9 billion, ¥3.9 billion up on the same period last year, driven by strong European sales, a more profitable model mix in all regions (including an increase in the ratio of built-up vehicle sales to total volumes in Asia and other regions), and the company's efforts to reduce costs, including reductions in sales expenses in the United States that offset the effects of a stronger yen and lower profits from the company's U.S. sales finance operations.

Mitsubishi posted an ordinary profit of ¥16.2 billion—a gain of ¥13.6 billion y/y—thanks to the improvement in operating profit, an upturn in the balance of interest received and paid, and increased gains on foreign-exchange transactions.

Sales Volumes Down
As mentioned above, Mitsubishi's global sales fell 7% y/y in the period to 314,000 vehicles, a fall of 24,000 from the 338,000 sold in the same period of 2007. In its flat domestic market, the company saw sales dwindle 15% y/y to 39,000 vehicles, as sales of sport utility vehicles (SUV) fell in the wake of the surge in global fuel prices. Mitsubishi also cut back low-margin minicar trading.

In North America, sales of Mitsubishi vehicles dropped 23% y/y to 37,000 vehicles, in tough operating conditions. Sales volumes rose in Canada and Mexico, but this failed to offset the significant drop in sales of locally built models in the U.S. market, despite strong sales of the new Lancer.

In Europe, Mitsubishi sold 92,000 vehicles, a 14% y/y increase, driven by continuing growth in the booming Russian and Central European markets, which offset lower sales volumes in Western Europe.

In Asia and other regions, the company saw sales slide 11% y/y to 146,000 vehicles, as lower sales of production parts for local assembly in China and at Proton in Malaysia outweighed robust sales in Brazil, Indonesia, and the Philippines.

Courtesy: Global Insight, Inc

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Posted by Naresh Koshti on 30 July, 2008 6:03:58 PM IST #