UPDATE 2-Suzuki, Mazda keep forecasts after Q1 falls in line

(Adds Suzuki's first-quarter sales, Mazda revenues)

By Chang-Ran Kim, Asia Autos Correspondent

TOKYO, July 31 (Reuters) - Suzuki Motor Corp (7269.T) and Mazda Motor Corp (7261.T) reported on Thursday weaker quarterly profits that fell largely within expectations and they kept their forecasts intact, leaving a comfortable currency buffer against looming headwinds.

Despite a downturn in many mature car markets, both tier-two Japanese automakers recorded healthy sales growth globally, although that was not enough to make up for the dollar's sharp fall against the yen and higher steel costs.

April-June operating profit at Suzuki, a maker of compact cars and SUVs, fell 17 percent to 33.80 billion yen ($313.1 million), compared with market estimates of 36.0 billion yen.

First-quarter net profit rose 6.9 percent to 26.03 billion yen on revenue of 910.4 billion yen, up 1.8 percent.

Mazda, owned one-third by Ford Motor Co (F.N), made an operating profit of 28.26 billion yen ($262 million), down 12 percent and spot on against a Reuters poll of eight brokerages.

First-quarter net profit came to 14.98 billion yen against an artificially low 2.48 billion yen last year, before effective quarterly tax rates were normalised under new Japanese accounting rules. Revenue fell 5.2 percent to 711.8 billion yen.

"If you take into consideration yesterday's results from Denso (6902.T) and Aisin Seiki (7259.T) it looks as if things will be very tough for the industry over the next quarter, and this is something that will have to be closely watched," said Takashi Ushio, head of investment strategy at Marusan Securities, referring to downward forecast revisions at the two Toyota group parts companies.

"At least Suzuki has its Indian operations, and Mazda is strong in Europe. This will help minimise the impact of a slowing U.S. economy, especially as compared to Honda (7267.T) and Toyota (7203.T)." Last week, Suzuki's majority-owned Indian unit, Maruti Suzuki India Ltd, reported a better-than-expected 7 percent fall in first-quarter profit, hit by high input costs. India is Suzuki's biggest market.

Suzuki has also been moving upmarket with higher-margin cars such as the Swift and SX-4 models, while expanding sales of cars built for General Motors Corp's (GM.N) Opel and Fiat SpA (FIA.MI). In the first quarter, Suzuki sold 617,000 cars, up 8.2 percent, and 989,000 motorcycles, up 20 percent.

The robust sales have brought production at its plant in Hungary rocketing to a pace of 300,000 units a year, for a rise of 30 percent so far this year.

MAZDA6 SUCCESS SEEN KEY

Hiroshima-based Mazda, meanwhile, has enjoyed strong sales of its Mazda2 and Mazda3 small cars against the backdrop of high fuel prices, while sales in Europe have also been lifted by the new Mazda6 series.

Mazda outpaced the industry in major regions during the quarter, with retail sales growth of 2.5 percent in the United States, 20 percent in Europe and a doubling in China. Globally, sales increased 11 percent to 358,000 vehicles.

Analysts warned, however, that risks remained in the second half of the year depending on how well the new, mid-sized Mazda6 does in the floundering U.S. market as sales begin in a month.

Mazda Executive Vice President Takashi Yamanouchi also said the European market was tough, relying heavily on Russia to pick up the slack in the West.

But if current dollar and euro rates hold, Mazda will have a fairly large cushion against risks of slowing global car demand and higher input costs, having set its exchange rate assumptions at 100 yen versus the dollar and 150 yen per euro for the year.

Every change of 1 yen in the dollar affects Mazda's operating profit by 2.7 billion yen, and the euro by 1.5 billion yen.

For the year to the end of March 2009, Mazda kept its forecast for an operating profit of 115 billion yen and net profit of 70 billion yen, down 29 percent and 24 percent respectively from last year.

FOREX ASSUMPTIONS UNCHANGED

Suzuki will have even more leeway, setting a more cautious 95 yen to the dollar for the second half of the year. Suzuki says every 1 yen move against the dollar has a 1.8 billion yen impact on annual operating profit.

On Thursday, the dollar JPY= was fetching around 108 yen and the euro EURJPY=R was around 168 yen.

For the current business year, Suzuki expects operating profit of 140 billion yen and net profit of 80 billion yen, down 6.3 percent and 0.3 percent from last year.

Still, shares of Suzuki have been battered in the past month on worries about the possibility of a prolonged inflation-driven sales slowdown in India, its biggest market.

The stock is down 29 percent in the year to date, faring worse than Tokyo's transport subindex .ITEQP.T, which dropped 19 percent. In contrast, Mazda has defied the sector's fall with a 12 percent rise.

Before the results, Suzuki ended down 0.6 percent at 2,370 yen, and Mazda rose 0.5 percent to 626 yen. (Additional reporting by Elaine Lies; Editing by Hugh Lawson)