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Edited Transcript of 7211.T earnings conference call or presentation 31-Jan-20 10:59am GMT

Q3 2020 Mitsubishi Motors Corp Earnings Presentation

Tokyo Feb 4, 2020 (Thomson StreetEvents) -- Edited Transcript of Mitsubishi Motors Corp earnings conference call or presentation Friday, January 31, 2020 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Koji Ikeya

Mitsubishi Motors Corporation - Representative Executive Officer, CFO and EVP of Finance, Controlling & Accounting

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Presentation

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Koji Ikeya, Mitsubishi Motors Corporation - Representative Executive Officer, CFO and EVP of Finance, Controlling & Accounting [1]

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And this is Ikeya speaking. Would you please refer to -- take a look at Slide 3? First of all, in the third quarter of fiscal year 2019 on a year-to-date basis, the net sales decreased by 7% year-on-year to 1,616 -- JPY 1,666.9 billion, mainly due to decline in automotive demand worldwide. Operating profit declined sharply to JPY 3.6 billion from JPY 85 billion year-on-year, mainly due to the decreased unit sales and the impact of currency fluctuations. The OP margin decreased from 4.7% to 0.2%.

Ordinary profit was negative JPY 2.7 billion, mainly due to the impact of foreign exchange losses as nonoperating expenses. And net income amounted to negative JPY 11.8 billion, mainly due to taxes paid by our overseas subsidiaries. Our global sales volume declined by 2% year-on-year to 876,000 units.

Please turn to the next page. The factors behind the year-on-year decline in operating profit are as shown in this slide. Volume/mix decreased by JPY 18.7 billion year-on-year, largely due to the sluggish sales performance in North America, China and other regions despite the solid sales in our mainstay ASEAN region. In terms of cost, we worked to curb sales expenses, procurement costs and the factory-related expenses, resulting in a total reduction of JPY 9 billion. Meanwhile, in other elements, earnings were squeezed significantly by the increased compliance and quality costs as well as by higher R&D and personnel expenses compared with the previous fiscal year.

As for the impact of foreign exchange rate, although the October to December period was relatively stable, Japanese yen appreciated in the first half and also due to stronger Thai baht, resulted in a total deterioration of JPY 34.9 billion.

Please turn to the next page. Sales volume by region are as shown in this slide. Our total sales volume decreased by 2% year-on-year to 876,000 units.

Next page, please. Global automobile demand in 2019 declined for the second consecutive year for the first time since the Lehman crisis. At that time, the sluggish performance of developed countries was offset to some extent by the remarkably growing emerging countries. But this time, sales have also declined in China, ASEAN and other emerging countries. Against this backdrop, we focused on sales in our mainstay ASEAN region and successfully kept the extent of negative impact relatively small.

Please turn to the next page. Now I would like to review sales volume for the major regions. In ASEAN region, high growth in 2 major markets, in particular Indonesia and Thailand, was subdued, and overall automobile demand was sluggish. We were naturally affected by the slowdown in the market. However, our sales were better than the market, thanks to the firm sales of XPANDER and the launch of new versions of Triton, PAJERO SPORT and other models. Although we cannot be optimistic about the future outlook, it goes without saying that ASEAN is the most important region for us. We will continue to strengthen our products, brands and the sales network.

In Japan, total demand fell below the previous year's level as a reaction to the consumption tax hike in October. Despite the launch of new models, we were unable to avoid the impact of price competition and our sales were struggling. We anticipate that this challenging business environment will continue. But we will make every effort to recover by launching new Kei car, SUPER HEIGHT WAGON, eK Space and eK X Space towards the end of the fiscal year.

Please turn to the next page. In the Chinese market, the economy was sluggish due to the prolonged trade friction with the United States. And automobile demand also recorded negative growth for the second consecutive year in 2019. Although Eclipse Cross, which was launched in November 2018, contributed to year-on-year increase in sales, we were unable to achieve the expected growth. Despite the challenging business environment, we are aiming to secure year-on-year growth through expanded sales of Eclipse Cross and the full-fledged contribution of ASX, which was renovated at the end of last year.

In North America, although overall demand began to pick up in the summer due to decreased auto loan interest rate, the competitive environment remained severe, and our sales were sluggish as well. Amid the shrinking market, sales competition is intensifying. And we will strive to secure proper sales while paying close attention to the market situation.

In Australia and New Zealand, the economic slowdown in China, the largest trading partner, caused automobile demand to decline 7% year-on-year. Price competition also intensified. And these harsh environments affected our sales. On the other hand, by focusing on sales of SUV, LCV, which is our strength, we were able to maintain our market shares. Despite the continuing challenging business environment, we will continue to focus on the sales of models which represent our strength in Australia and New Zealand as one of our core markets.

Please turn to the next page. Next, I would like to explain the FY forecast for 2019.

Please turn to the next page. There is no change from the forecast revised at the announcement of first half FY '19 results. Despite the continuing harsh external environment, we will do our utmost to achieve our full year forecast.

Please turn to the next page. Next, we will explain our business highlights in third quarter FY '19.

Please turn to Page 12. Since FY '17, we have launched new cars on an ongoing basis in order to achieve product innovation, one of the goals of the current mid-term plan. In third quarter FY '19, we began sales of the new XPANDER CROSS, MIRAGE and ATTRAGE in November. Soon after, we will launch our new SUPER HEIGHT WAGONs of Kei car, eK Space and eK X Space. Going forward, we will continue to focus our development on segments where we can secure competitiveness. Specifically, we will strive to strengthen and renew our model lineups, such as core products for the ASEAN region and crossover models for the global market.

Please turn to the next page, Page 13. The new eK Wagon and eK X combine MMC's approximately 60 years of mini vehicle manufacturing expertise with Nissan's advanced technologies. This year, we have won high praise, including the RJC Car of the Year and have reaffirmed that the Alliance is an important tool that will produce significant results for us. We will continue to strengthen the Alliance to further increase our competitiveness.

Please turn to the next page. The results of third quarter FY '19 were also severe due to the recent severe external environment. Although it is difficult to expect an immediate upturn in this situation, the small but beautiful direction we should aim for is clear and we are fully aware of what we should do. Specifically, we will strengthen our foundation for sustainable growth by utilizing our limited resources effectively to further advance our competitive-edge technologies in strong regions and by improving profitability. We would like to announce the plan as soon as it is finalized.

Thank you for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]