Mitsubishi Motors (OTC:MMTOF) Corporation (MMC), a well-known automotive manufacturer, has reported a decline in both sales and profit in its first half FY 2024 earnings call. The company, which trades under the ticker symbol 7211 on the Tokyo Stock Exchange, cited an increase in vehicle supply, intensifying competition, and a delay in the macroeconomic recovery in Thailand and Indonesia as factors contributing to a slowdown in automobile demand. Net sales fell by 2% year-on-year to ¥1307.4 billion, while operating profit decreased by 13% to ¥90.7 billion. Ordinary profit saw a significant drop of 43% to ¥69.2 billion, primarily due to Forex losses. Despite these challenges, retail sales saw a 5% increase to 408,000 units.
Key Takeaways
- Net sales decreased by 2% year-on-year to ¥1307.4 billion.
- Operating profit dropped by 13% year-on-year to ¥90.7 billion.
- Ordinary profit fell by 43% year-on-year to ¥69.2 billion, mainly due to Forex losses.
- Retail sales increased by 5% year-on-year to 408,000 units.
- The company maintained its initial forecast for the full year performance of FY 2024.
Company Outlook
- Mitsubishi Motors plans to maintain its initial forecast for the full year performance of 2024.
- The company will respond swiftly and flexibly to future changes in the environment, including the U.S. presidential election in November.
- New model launches such as the Outlander PHEV and XForce are expected to strengthen the brand globally.
Bearish Highlights
- Increased vehicle supply and competition have led to a slowdown in automobile demand.
- The macroeconomic recovery in Thailand and Indonesia has been delayed, adversely affecting demand.
- Sales expenses, particularly higher incentives in the U.S. and Thailand, have negatively impacted operating profit.
Bullish Highlights
- Growth markets such as Vietnam and the Philippines, along with recovery in the domestic market, are positive factors.
- The company has seen an increase in market share in key regions, despite the challenging demand environment.
Misses
- Operating profit was negatively affected by sales expenses and increased R&D expenses.
- Higher personnel expenses and quality costs, along with inflation, contributed to the decline in operating profit.
Q&A Highlights
- The company discussed the impact of Forex, with the Thai baht's negative impact being offset by the U.S. and Australian dollars.
- Mitsubishi Motors highlighted the importance of new model launches and the focus on maintaining market share in various regions.
Mitsubishi Motors Corporation faces a challenging automotive landscape as it navigates a mix of negative and positive factors influencing its business. The company's resilience in maintaining its full-year forecast amidst these conditions reflects its strategic planning and adaptability in a rapidly changing market. With new model launches on the horizon and a focus on key growth markets, Mitsubishi Motors aims to strengthen its global presence and brand reputation in the coming fiscal year.
InvestingPro Insights
Despite the challenges faced by Mitsubishi Motors Corporation (MMC) in its recent earnings report, InvestingPro data reveals some interesting financial metrics that provide additional context to the company's performance.
According to InvestingPro, MMC's market capitalization stands at $4.46 billion USD. The company's P/E ratio of 12.38 suggests that it's trading at a relatively modest valuation compared to its earnings. This is further supported by an InvestingPro Tip indicating that MMC is "Trading at a low earnings multiple," which could be attractive to value-oriented investors.
Another InvestingPro Tip highlights that MMC "Holds more cash than debt on its balance sheet." This strong liquidity position aligns with the company's ability to maintain its full-year forecast despite the current headwinds, as mentioned in the article.
The company's revenue for the last twelve months as of Q2 2025 was reported at $19.25 billion USD, with a revenue growth of 5.15% over the same period. This growth, albeit modest, contrasts with the 2% year-on-year decrease in net sales reported in the article, suggesting some potential for recovery.
It's worth noting that InvestingPro offers 11 additional tips for MMC, providing a more comprehensive analysis for investors interested in delving deeper into the company's financials and market position.
These insights from InvestingPro complement the earnings report analysis, offering a broader perspective on Mitsubishi Motors' financial health and market valuation. As the company navigates the challenges outlined in the article, these metrics may prove valuable for investors assessing MMC's potential in the evolving automotive landscape.
Full transcript - Mitsubishi Motors Corp (MMTOF) Q2 2024:
Unidentified Company Representative: Thank you very much for taking time out of your busy schedule to attend our First Half Earnings Call. In addition to an increase in vehicle supply across the industry, intensifying competition, the delay in recovery of the macro economies, mainly in Thailand and Indonesia, have slowed down the demand for automobiles. As a result, the sales environment surrounding us remains to be seen. As shown in this slide, our results for the first half FY 2024 showed a decrease in both sales and profit on a year-on-year basis. The net sales were ¥1307.4 billion, a drop by 2% year-on-year. The operating profit decreased 13% year-on-year to ¥90.7 billion and the OP margin dropped 0.9-point year-on-year to 6.9%. The ordinary profit decreased 43% year-on-year to ¥69.2 billion, mainly due to the impact of Forex losses and the net income after tax was ¥38 billion. The retail sales increased 5% year-on-year to 408,000 units. Please turn to page four. In this slide, you can see the factors behind the year-on-year changes in operating profit for the first half FY 2024. In terms of volume mix and price, despite an increase in shipment to Japan, North America, and Australia, New Zealand, and other markets, shipments to Europe and the Middle East were controlled according to the plan and inventory adjustments in ASEAN were accelerated. As a result, the operating profit decreased by ¥7.9 billion year-on-year. Sales expenses pushed down the operating profit by ¥27.7 billion, mainly due to higher incentives in the U.S. and Thailand for intensified market condition. Procurement cost shipping cost improved by ¥10.4 billion in total, despite an increase in material costs due to inflation, an increase in plant expenses, and deterioration in transport costs from higher unit price of transportation as well as special vessel arrangements. Activities to reduce material costs offset those negative factors. R&D expenses increased as planned and that reduced the operating profit by ¥8.5 billion year-on-year. Other items, mainly an increase in general expenses such as higher personnel expenses and the impact of inflation, and an increase in quality costs, deteriorated the OP by ¥12.5 billion. Regarding Forex, the negative impact of the cost currency Thai baht was offset by U.S. dollars and Australian dollars and improved the OP by ¥32.7 billion. Please turn to page five. In this slide, you can see the factors behind the year-on-year changes in operating profits for the Q2 FY 2024. In terms of volume mix and price, in addition to the turnaround in profit thanks to contributions from Vietnam and the Philippines, an increase in shipments to Japan and North America and improved mix due to an expansion of new model shipments resulted in improving the OP by ¥4.1 billion. Sales expenses reduced the operating profit by ¥18.3 billion, mainly due to an increase in incentives in the U.S. for the intensified market competition. Procurement costs, shipping costs improved by ¥8.4 billion in total as material costs hiked due to inflation. Factory expenses and increased transportation costs were absorbed by favorable changes in raw material prices and activities to reduce procurement costs. R&D expenses increased as planned, bringing down the operating profit by ¥4.3 billion. Other items deteriorated by ¥1.8 billion due to an increase in personnel expenses and an increase in general expenses due to inflation and an increase in quality costs. Regarding Forex, the negative impact from the cost currency Thai baht was reversed by the U.S. and Australian dollars and improved the operating profit by ¥8.1 billion year-on-year. Please turn to page six. I would like to explain about global sales volume for first half of 2024. Compared with the previous fiscal year, all regions showed an upward trend. Globally, the retail sales increased by 5%. The significant decrease in sales in China and others was due to the impact of structural reforms implemented in FY 2023. Next, I will explain the situation by region. Please turn to page seven. First, I will explain the ASEAN and Oceania regions. In the Philippines, with the robust automobile demands, we maintain the strong sales momentum of existing models and both our sales volume and market share grew significantly. We aim to further increase our sales volume and market share by focusing on new models such as XForce and Triton, which have gradually penetrated into the market since the launch. In Vietnam, where automobile demand is recovering, our sales volume and market share both grew significantly. Going forward, we will expand our sales volume and market share by leveraging the new Triton, which will be launched shortly. In Thailand, the tightening of credit for automobile loans continues and demand for automobiles continues to decline, particularly in the pickup segment. We expanded our market share by accelerating inventory optimization and focusing on Xpander, which is performing well. To prepare for the recovery of demand, we will continue optimizing inventories and firmly maintain measures to expand our market share. Indonesia is also in a severe situation where the total demand has fallen year-on-year for 16 consecutive months since June 2023. Under such environment, our market share is on the increasing trend, thanks to solid sales of the new Pajero Sport and Triton. Going forward, we aim to further expand our market share by expanding the sales of the new XForce, which is gradually increasing sales after its launch. In Australia, which accounts for the great majority of the Oceania region, the total demand for automobile remained almost unchanged from the previous year, despite concerns about the decline in consumer sentiment due to the economic downturn. We increased our vehicle supply year-on-year and increased both sales volume and market share. Please turn to page eight. Next is Latin America and the Middle East and Africa. In Latin America, Brazil is showing a strong recovery. A full-fledged recovery of the economy and gradual reduction of the policy interest rate have increased the total automobile demand by 15% year-on-year. Other major economies are also showing a moderate recovery, but that has not led to a full-fledged recovery of the total automobile demand. Under such environment, we managed to increase sales year-on-year, leveraging the launch of the new L200/Triton and the new Outlander Sport XForce. We will continue to launch these new models to boost sales throughout in Latin America. In the Middle East, we were slightly affected by the Israeli-Gaza conflict that began last fall and restrictions on the Red Sea Route due to ship attacks off the coast of Yemen. Going forward, we will focus on sales of new L200/Triton launched in first half FY 2024 and new Outlander Sport XForce and enhance our brand. Please turn to page nine. Japan, North America, and Europe. In the domestic market, automotive demand decreased year-over-year partly due to the impact of the suspension of shipments of some OEMs, but our sales volume increased along with market share expansion driven by the strong sales momentum of Delica Mini. Going forward, in addition to maintaining sales momentum, the new Outlander PHEV, which has significantly enhanced the product, will be added to the lineup. We will further expand sales volume and market sales by focusing on models that symbolize Mitsubishi motor's net. In the United States, which accounts for the great majority of the North American region, automobile demand itself has generally remained at the same level as the previous year, but competition has intensified as each company has increased sales expenses in line with the increase in vehicle supply. We also increased incentives in line with the market trends to maintain sales momentum. We will continue to monitor market trends and strive to utilize incentives effectively with an emphasis on improving the quality of the sales and customer satisfaction. In Europe, competition remains challenging amid the overall market economic stagnation, but our sales volume increased year-over-year due to increased sales of code. Going forward, in addition to promoting the sales of the new ASX, which went on sale in July, we will also promote pre-order activities for the new Outlander PHEV, which is scheduled to be launched at the end of the current fiscal year and focus on successful launch. Next, Mr. Kato, our CEO, explains the full year forecast for FY 2024. Kato-san, please.
Takao Kato: Please turn to page 11. I will talk about the performance forecast. We were able to secure a certain level of revenues in the first half of FY 2024 in a business environment where the growth of automobile demand in the global market is slowing. The current business environment is a mixture of negative factors such as slowdown in the growth of automobile demand in the global market, a delay in the recovery of demand in Thailand and Indonesia in ASEAN, and sharp rise in incentives due to oversupplied vehicles, particularly in the United States, as well as positive factors such as the driving force of growth markets such as Vietnam and the Philippines and the recovery in our presence in the domestic market and uncertainties such as exchange rate fluctuations, which have both positive and negative effects. Many events are scheduled to come, including the U.S. presidential election in November, and we believe that things will change irreversibly at a faster pace than we can imagine. Based on these business environments and the progress of business performance so far, we have decided to maintain the initial forecast for the full year performance of 2024 and will strive to achieve a plan by responding swiftly and flexibly to future changes in the environment. Next, I will introduce the business highlights for the first half of FY'24. Please turn to page 13. We announced that we will start the sales of a Crossover SUV, Outlander PHEV, that we have significantly improved in Japan from October 31. In order to further evolve the if-you-do-do authentic and majestic product concept, the new Outlander PHEV maximally reflects the product needs of PHEV customers, including a change in the driver's battery to improve the features unique to EVs and an improved texture of the interior. Now that the PHEVs, which combine EV and hybrid, are attracting attention again as the optimal solution for SUVs, we are proud that the new Outlander PHEV is the best ever. Sales will start in the European market from the spring of 2025 and will then be expanded to North America and Australia. We aim to take our brand to a new level and further strengthen the brand by launching the new generation Outlander PHEV globally. Please turn to page 14. The new XForce, which was introduced in Indonesia last year, is now being fully deployed from this year. Launched in Vietnam in the first quarter of FY'24, the product-embodying Mitsubishi Motors-ness has been well-received by many customers. Since its first month of sales, XForce has consistently held the top position in the compact SUV segment, and in July and August, XForce won the top position in all passenger car sales across Vietnam. In the first half of FY24, the sales of XForce and Xpander were in the top three of all models according to our calculation, and we were able to make a significant leap forward in Vietnam. We plan to gradually roll up the XForce to Middle East and South Asia. In the future, we plan to add a hybrid version of the model, aiming to further improve the product's attractiveness, embodying the Mitsubishi Motors Nest, and expand our market share in each region. Please turn to page 15. We premiered the Mitsubishi DST Concept, a midsize SUV concept car, at the 9th Philippine International Motor Show. The Mitsubishi DST Concept is an embodiment of an all-new three-row SUV to be launched during our current Midterm Business Plan Challenge 2025, and the production vehicle will be rolled out primarily in the ASEAN region in FY 2025. We aim to take this all-new SUV, a global strategic model following the Xpander Crossover MT-V that was born in the ASEAN region and grew to become a model beloved by customers around the world, and the XForce compact SUV that has been highly acclaimed since its introduction in FY 2023. Next page, please. The first half of FY2024 was an environment with many unstable factors, such as the prolonged slowdown in the total automobile demand in Thailand and Indonesia and rising incentives in the United States. However, while focusing on optimizing production and inventory, we have been rolling out the new Triton and new XForce in line with the plan. Taking an advantage of the effects of these new models, we have been able to expand our market share in many key regions, even in a difficult demand environment. Looking ahead, however, we expect the economic environment to remain resistant to optimism due to a delayed market recovery in ASEAN, political and economic fluctuations, and the impact of ongoing conflicts around the world. Although this is an unpredictable era in which conventional wisdom is being overturned, we also see it as an era with great potential. While responding to such an era swiftly with a sense of crisis, we will continue to seize new business opportunities and take on challenges through collaboration with various partners. Thank you very much.
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