TOKYO -- Mazda said operating profit slumped 43 percent in the latest fiscal year, with results broadsided by falling global sales, increased marketing expenses, foreign exchange losses and spiraling costs for increased investment in its U.S. retail network reforms.
Mazda operating profit dropped to 83.01 billion yen ($748.9 million) in the full fiscal year ended March 31, the automaker said on Thursday in its earnings report.
Net income also slid 43 percent, to 63.48 billion yen ($573.0 million) in the 12 months. Revenue increased 3 percent to 3.56 trillion yen ($32.12 billion), as worldwide retail sales declined 4 percent to 1.56 million units, losing ground in North America and China.
Operating profit margin deteriorated to 2.3 percent from 4.2 percent the year before.
In announcing the results, CEO Akira Marumoto outlined a new mid-term business plan that targets lifting operating profit margin to a sustainable 5 percent by the fiscal year ending March 31, 2025. The company also downgraded its long-term sales goal in line with tougher realities.
Mazda now targets global sales of 1.8 million vehicles in the fiscal year ending March 31, 2025. It had earlier wanted to sell 2 million vehicles in the fiscal year ending March 31, 2024
Marumoto said he wanted to alleviate the pressure to use incentives to attain volume targets. He said he also wanted wiggle room to achieve goals if unexpected market conditions arrive.
Financial results in the latest year were hammered by numerous factors. Declining sales were triggered partly by interrupted supply from Japan, where Mazda suspended production last year following heavy rains that caused flooding throughout the region of western Japan where Mazda is based. Mazda said last year it lost production of 44,000 complete vehicles and 23,000 knockdown kits for overseas assembly because of the rains.
Incentives further dented profitability in the latest fiscal year. Mazda is trying to rein in incentive spending as part of a push to boost the brand image. In the first three months of 2019, Mazda scaled back incentives 23 percent, according to figures from Autodata. But in the 2018 calendar year, spiffs increased 11 percent.
Meanwhile, the Japanese yen's appreciation against the U.S. dollar and other currencies took another bite. Exchange rates cut 38.1 billion yen ($343.8 million) off the full-year profit.
Mazda also cited higher outlays for overhauling its U.S. retailing network and for quality costs. Marumoto, who took office in June 2018, says his highest priority is spurring growth in the U.S., the automaker's biggest market. To do that, he wants to focus on strengthening Mazda's U.S. dealer network and making the most of its growing partnership with Toyota.
Mazda is trying to upgrade its dealer network before it opens a new plant it is jointly building in Alabama with Toyota. Slated to open in 2021, the $1.6 billion plant will add 150,000 units of capacity to Mazda -- all of which will be devoted to a new crossover for the U.S. Mazda expects U.S. sales to soar after that, with the plant eventually enabling the automaker to sell 2 million vehicles globally.
Mazda forecast that operating profit will rebound 33 percent in the current fiscal year ending March 31, 2020, while net income increases 26 percent. The automaker sees global sales increasing 4 percent to 1.62 million units.