Bloomberg News

Mitsubishi Motors Says Thai Floods to Hurt Sales, Cut Profit

October 28, 2011

(Updates with comments from executive in fourth paragraph.)

Oct. 28 (Bloomberg) -- Mitsubishi Motors Corp. said the floods in Thailand may cut full-year operating profit by as much as 15 billion yen ($198 million) as factory closures and supply disruptions hurt production and sales.

Mitsubishi reduced its sales forecast for the period to 1.82 trillion yen from 1.95 trillion yen projected in August because of the disaster in Thailand, the Tokyo-based company said today. The carmaker said it expects the effects of the floods to last for about a month and a half, cutting output by an estimated 35,000 vehicles in the year ending March 31.

“We’re very concerned about whether our suppliers will be able to recover,” Managing Director Shuichi Aoto said at a briefing in Tokyo. “The floods in Thailand will reduce our operating profit by 14 billion yen to 15 billion yen.”

Mitsubishi, which makes the Pajero Sport sport-utility vehicle and Lancer in Thailand, has shut its factories in the country since Oct. 13 and hasn’t decided when to resume output. Production in Japan may be suspended for several days depending on shipments of integrated circuit chips and parts from the Southeast Asian nation, President Osamu Masuko said.

“It’s the deliveries of the same parts that caused a bottleneck after the earthquake in March that is disrupting production again,” Masuko said.

Operating profit, or sales minus the cost of goods sold and administrative expenses, will total 50 billion yen this year, unchanged from the earlier forecast, the company said in a statement before Aoto’s comments. Mitsubishi also maintained its forecast for 20 billion yen in net income.

Flood Damage

Mitsubishi rose 2 percent to 103 yen at the close of trading in Tokyo, before the company’s announcement. The benchmark Nikkei 225 Stock Average gained 1.4 percent.

The carmaker said its full-year forecasts are based on an exchange rate of 78 yen to the dollar and 110 yen to the euro, compared with a previously expected 80 yen and 115 yen respectively, according to a statement today.

Mitsubishi said the stronger yen will reduce operating profit by 9 billion yen this fiscal year.

The floods may cause about 140 billion baht ($4.6 billion) of financial damage to manufacturers in seven industrial estates, according to the Thai government’s insurance regulator. Japan’s casualty insurers may face about 190 billion yen in net payouts to cover damages from Thailand’s floods, Deutsche Bank AG said in a report yesterday.

--Editors: Chua Kong Ho, Lena Lee

To contact the reporters on this story: Anna Mukai in Tokyo at amukai1@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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