Mitsubishi Motors surprises with profit forecast

TOKYO (Reuters) - Mitsubishi Motors Corp (7211.T) on Monday forecast a surprise profit in the year ahead despite falling into the red in the latest quarter, as it counts on cost cuts to offset a slide in global vehicle sales.

Mitsubishi Motors' sales have plunged at alarming rates -- by 66 percent in the key Russian market last quarter -- interrupting its progress toward sustained growth with the help of sister companies in the Mitsubishi group.

"Recovery is still going to take some time," President Osamu Masuko told a news conference.

"My sense is that our profits will improve not on the back of a growth in sales volumes or revenue, but rather that the emergency cost-cutting measures we started taking last October will help us secure a net profit."

Mitsubishi Motors shared ended up 3.4 percent at 154 yen after its positive forecast.

Masuko added that Russia and Ukraine would no longer be one of Mitsubishi Motors' growth centers. Instead, the automaker will rely more on markets such as Southeast Asia, Canada, Brazil, the Middle East and China.

Defying consensus forecasts, the company, best known for its Pajero and Outlander sport utility vehicles, forecast an operating profit of 30 billion yen ($310 million) and net profit of 5 billion yen for the financial year to the end of next March. It is assuming a tougher dollar rate of 92 yen and euro of 116 yen, versus 101 and 144 last year.

Six analysts had forecast an average operating loss of 43 billion yen, and Mitsubishi Motors' shares ended up 3.4 percent at 154 yen after the news.

COST CUTS KEY

Also on Monday, Toyota Motor Corp (7203.T) unit Daihatsu Motor Co (7262.T) forecast a 56 percent drop in operating profit to 17 billion yen for 2009/10, short of a consensus forecast of 28 billion yen.

Mitsubishi, along with the rest of the industry, is rushing to reduce costs through pay cuts, fewer work days and by shelving certain projects. It also pulled out of the Dakar Rally in February.

Masuko said he expected the environment to remain tough for at least a few months, adding he hoped that discussions over the fate of General Motors Corp (GM.N) and Chrysler would end "in a positive way" to eradicate uncertainty hanging over the sector, economy and consumer sentiment.

The Japanese automaker forecast a 13 percent fall in its global retail sales this financial year to 932,000 vehicles, with 22 percent declines in both North America and Europe.

In Japan, it expects to sell 16 percent more cars, counting on government incentives to drive demand for green cars.

Mitsubishi Motors is looking to strengthen its lineup of small cars to ride a global trend toward fuel-efficient vehicles, such as by developing what it calls a "global small car."

In July, it will roll out the i-MiEV electric car to fleet customers in Japan, taking a lead in the zero-emissions segment that rivals such as Nissan Motor Co (7201.T) are keen to cultivate.

Masuko said, however, that sales in the first year would be limited to a few thousand units, keeping the electric car business in the red.

"We'd have to get up to about 30,000 units a year to make money on them," he said, adding he expected volumes to reach that level around 2013.

For the January-March quarter, Mitsubishi Motors had an operating loss of 16.0 billion yen, compared with a profit of 56.62 billion yen a year earlier, but better than a loss estimate of 21.4 billion yen that was the average estimate of five analysts surveyed by Thomson Reuters.

Its net loss came to 50.1 billion yen, against a profit of 13 billion yen a year earlier. It booked extraordinary losses of 27.5 billion yen for 2008/09 stemming from impairment losses, mainly at its U.S. unit due to the scant prospect of recovery in overall demand in the market.

Revenue fell 57 percent to 315.4 billion yen, as global production during the final quarter of Japan's financial year sank 59 percent.

Shares of Mitsubishi Motors have gained 22 percent in the year to date, lagging a 36 percent rise in Tokyo's transport sector subindex .ITEQP.T.

($1=96.73 Yen)

(Editing by Joseph Radford)