Mazda profit hits eight-year low, inventory build-up hurts cash flow


Mazda Motor Corp signage is displayed outside a dealership at night in Tokyo, Japan, on Sunday May 10. Global car makers and suppliers are on track to get at least $100bn of bank financing as the coronavirus pandemic hammers car sales. Mazda Motor Corp signage is displayed outside a dealership at night in Tokyo, Japan, on Sunday May 10. Global car makers and suppliers are on track to get at least $100bn of bank financing as the coronavirus pandemic hammers car sales.
Image: Toru Hanai/Bloomberg via Getty Images

As annual profit slide to an eight-year low, Mazda Motor Corp says the coronavirus pandemic has resulted in a large build-up in its US car inventories, hobbling efforts to improve its cash flow.

Japan's no. 5 car maker refrained from giving an earnings forecast for this business year and confirmed it had tapped lenders for loans to ride out the outbreak, which has pummelled car demand worldwide.

Annual operating profit almost halved to 43.6 billion yen (roughly R7.58bn) for the year ended March, which includes a 10 billion yen (roughly R1.74bn) virus-related hit. However, that was far better than a Refinitiv consensus estimate of 25.7 billion yen (roughly R4,46bn) in profit.

Shelter-in-place orders in the US, Mazda's biggest market, have left its dealerships unable to sell cars. Shipments from Japan also remain parked at US ports, which need to be sold before production at home can return to pre-virus levels, said Akira Koga, a senior managing executive officer.

"By improving our inventory situation, we need to recover our cash flow position as soon as possible," Koga told a results teleconference.

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Mazda had a negative free cash flow of 92.7 billion yen (R16.1bn) at the end of March, its fourth straight quarter of negative cash flow, albeit an improvement from a negative 139.3 billion yen (R24.19bn) at end-December.

It has sought 300 billion yen (R52.1bn) in loans from Japan's three megabanks and other lenders, a source with direct knowledge of the matter told Reuters last week.

Global car makers have begun to restart vehicle plants after weeks of closures, but anaemic demand, supply chain disruptions and social distancing measures at factories are expected to limit output in the coming months.

Some analysts believe industry-wide global car sales could slump by a third this year - and that any recovery will be slow and patchy - as job losses and reduced incomes weigh on consumer spending.

Mazda had been betting on its new CX-30 compact SUV crossover to freshen up a tired product range in North America and other key markets in the January-March quarter. Instead its global vehicles sales tumbled 20% as many countries put in place lockdown measures.

Its global sales for the past business year dropped 9% to 1.42 million vehicles.

The coronavirus has also delayed construction work at a plant in Alabama to be jointly operated by Mazda and Toyota Motor Corp. Originally slated for the spring of 2021, production is now expected to begin later that year.






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