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Mazda Reports Slip in First-Quarter Profits While Global Sales Climb

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The first quarter of the year has been a bit of a mixed one for Mazda. On the one hand, operating profit was far above the estimates that Reuters-surveyed analysts put forward—the automaker put up profits of 52.4 billion yen ($505 million), above the analysts’ estimate of 35.8 billion yen (a little under $350 million).

This was due to rising sales across the globe, with increases in Europe, China, and other markets (although sales were more or less flat in the US and fell in Japan). This continued a pattern of growth for the automaker as it gradually revamps its lineup and repositions itself as a more premier car brand, a pattern which the company said that it expects to continue as more new models roll out in the coming months, including the facelifted Mazda3 that was leaked a while back.

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However, there is a problem with that operating profit—it represents a 1.7% fall. In fact, the automaker expects the operating profit to slide a full 25% by the end of this year. So, what is the problem?

Currency exchange rates are the problem. The Japanese yen is currently much weaker than the dollar or the euro. So, for each dollar or euro, the automaker makes a lot of yen. That goes away, however, if the dollar or euro decrease in value or the yen strengthens in value. And the yen has indeed been strengthening, surging 19% in value in the first quarter leading up to June, partly due to dissatisfaction with the Japanese central bank’s monetary policy and worries about slower economic growth.

Mazda at the moment relies on good exchange rates, since about a third of its business comes from North America, and it exports all vehicles it sells in its second-largest market, Europe.

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News Source: Reuters