The weakening Japanese yen has proven to be very beneficial to Mazda Motor Corp., as it further boosts the carmaker’s chances of making its first annual profit in five years in 2013. Export-dependent Japanese companies like Mazda pray for the yen to further weaken. A weak yen compared to other national currencies means they would gain more profit from selling their products abroad.
With the yen weakening by as much 16 percent in the past six months, Mazda now just has to sell more vehicles abroad to benefit from the currency situation. Thanks to the weakening yen and internal cost cutting measures, Mazda has seen its shares triple to its highest level since 2008 and it may post a profit this year. Despite that, Mazda still needs to post strong sales for the newest version of its Mazda3 model that is due this fiscal year to prove that it does not need to benefit from the weakening yen just to be able to take on larger rivals.
Ashvin Chotai, London-based managing director of Intelligence Automotive Asia, remarked that the new Mazda3 is very critical to Mazda, as it accounts for around a third of its sales. He added that Mazda is a small company and cannot afford to make any mistakes. Around a year ago, Mazda badly needed cash and so it issued 1.22 billion new shares, equivalent to nearly 70 percent of outstanding stock, resulting to diluted holdings of existing investors.
The new shares also dropped Mazda’s share price to record lows. Now, the weakening yen is helping Mazda chief executive Takashi Yamanouchi in his bid to turn around the loss-making carmaker.
The yen’s weak value – around JPY96 to a US$1 – has allowed Mazda to make its operations in the United States more profitable. Mazda expects to post JPY26 billion ($279 million) in profit for the fiscal year ended March 31, 2013. This is in contrast to the carmaker’s fortunes in the fiscal year ended March 31, 2012, when it posted JPY107.7 billion in losses. Mazda announced it may report earnings at the end of April 2013.