Mitsubishi Motor Corp.’s operating profit plunged 94 percent in the latest fiscal year, broadsided by falling sales, foreign exchange losses and costs from a fuel economy scandal.
Operating profit sank to 5.1 billion yen ($45.8 million) in the Japanese carmaker’s fiscal full year ended March 31, from 138.4 billion yen ($1.24 billion) a year earlier.
The company also slumped to a net loss of 198.5 billion yen ($1.78 billion) in the 12 months, from net income of 72.6 billion yen ($652.5 million) the year before, Executive Vice President and Chief Financial Officer Koji Ikeya said while announcing financial results on Tuesday.
Revenue declined 16 percent to 1.91 trillion yen ($17.17 billion), as global retail sales fell 12 percent to 926,000 million vehicles in the fiscal full year.
Mitsubishi’s operating profit was undercut by falling sales in every market except North America, where volume only inched ahead 2 percent to 138,000 vehicles for the year.
Foreign exchange rate losses lopped 77.5 billion yen ($696.6 million) off the company’s full-year operating profit, as the yen appreciated against the U.S. dollar and other currencies.
The carmaker also took a charge of 36.0 billion yen ($323.6 million) in the fiscal year to cover costs associated with improper fuel economy testing of vehicles sold in Japan.
Mitsubishi admitted last year to cheating on fuel-economy ratings for several nameplates sold in Japan. The scandal torpedoed sales in the home market and opened the door for Nissan Motor Co. to take a controlling 34 percent stake in its smaller Japanese rival last autumn.
CEO Osamu Masuko pledged a recovery from the current fiscal year, aided by Nissan.
“What we have to do as a company is recover trust,” Masuko said. “We have to realize a V-shaped recovery… We want to go back to the state before the improper conduct.”
Mitsubishi is already adopting some streamlined management strategies from its new alliance partner, which contributed positively to full-year earnings. The partners have also established 32 cross-company teams to pinpoint areas of cost savings and technology sharing.
Mitsubishi booked 3 billion yen ($27.0 million) in cost reductions in the last fiscal year, thanks to joint purchasing with Nissan, and is targeting 25 billion yen ($224.7 million) in savings in the current fiscal year through cooperating with Nissan, the company said.
Mitsubishi will double down on its sales stronghold in Southeast Asia, tapping a new plant in Indonesia and a new minivan for the market there, to stoke the recovery, Masuko said.
The company is also fleshing out details to a new mid-term plan that targets two goals by the fiscal year ending March 31, 2020. The first goal is a 25 percent increase in global sales to around 1.25 million vehicles. The second is a sustained operating profit margin of 6 percent or above. Mitsubishi’s operating profit margin hovered in that region for the three years preceding the just-ended fiscal year when profits collapsed amid the fuel economy scandal.
“I think we can accomplish that,” Masuko said.
Looking ahead to the current fiscal year ending March 31, 2018, Mitsubishi expects profits to rebound amid the absence of one-off costs tied to the fuel economy scandal.
Rising sales and moderating foreign exchange rates will also underpin growth.
In announcing its full-year outlook, Mitsubishi predicted that global operating income will surge to 70.0 billion yen ($629.2 million), in the current 12-month period. The company is also expected to rebound to a net income of 68.0 billion ($611.2 million) for the fiscal year.
Revenue is seen increasing 5 percent to 2.0 trillion yen ($18.0 billion), as global sales increase 11 percent to 1.03 million vehicles. Sales in North America are expected to advance 3 percent to 148,000 vehicles, while Europe is seen expanding 5 percent to 188,000 vehicles.
N.A., Europe losses
In the last fiscal year, Mitsubishi’s North American business fell to a regional operating loss of 16.6 billion ($149.2 million), from an operating profit of 6.2 billion yen ($55.7 million) the year before. Europe also slumped to an operating loss of 21.6 billion yen ($194.1 million) in the period, compared with a 22.1 billion yen ($198.6 million) operating profit a year earlier.
European sales fell 13 percent to 179,000 units in the outgoing fiscal year.
In the carmaker’s fiscal fourth quarter ended March 31, operating profit dropped 22 percent to 28.3 billion ($254.4 million). Net income, however, rebounded to 14.8 billion yen ($133.0 million), from a net loss of 4.1 billion yen ($36.9 million) a year earlier.
Revenue declined 6.8 percent to 564.8 billion yen ($5.08 billion) in the January-March period, as global retail sales retreated 3.1 percent to 253,000 vehicles.