MMC to cut costs after slump in annual profit

TOKYO: Mitsubishi Motors Corp will focus on cutting fixed costs by 20% or more in the next two years after reporting an 89% drop in annual profit, its weakest performance in three years, and skipping its year-end dividend.

The coronavirus crisis has exacerbated MMC’s struggles in a year where Japan’s sixth biggest carmaker was already battling falling sales in China and also Southeast Asia, its largest market which accounts for one-quarter of sales.

MMC also said yesterday that it would focus on growth in Asean countries to survive the aftermath of the pandemic.

“Before the virus we had been mulling which underperforming regions and vehicle segments to cut our exposure to,” chief executive officer Takao Kato told a results teleconference.

“In the wake of the virus, we need to pick up the pace of making these changes. To stay competitive in a post-coronavirus market, we need to immediately shrink our area of focus to regions and segments in which we excel.”

MMC’s operating profit came in at 12.8 billion yen ($119.21 million) for the year to end March, down from 111.8 billion yen a year ago, and its lowest since the year to end March 2017. Profits exceeded a consensus estimate of 9.4 billion yen profit drawn from 15 analysts polled by Refinitiv.

The automaker did not give an earnings forecast for the current business year, and did not issue a year-end dividend, compared with 10 yen per share a year ago.

The junior member of the automaking partnership between Nissan Motor Co and France’s Renault SA, sold 1.13 million vehicles globally in the year ended March, down 9%.

MMC will focus on growth in Southeast Asia as part of the alliance’s plan for each company to expand in their regions of strength.

The alliance is expected to announce a revamped strategy on May 27, when it will pledge to increase cooperation to improve joint operations to remain competitive.