Isuzu (7202) FY16 Q1 Profits Hurt by Currency - Recovery in Thailand, but Other Regions Still Weak
Isuzu’s FY16 Q1 results were depressed by declining overseas commercial vehicle (CV) sales, forex losses, and higher SG&A. Net sales dropped 8.6% YoY to ¥432.5bil and OP fell 25.3% YoY to ¥36.8bil. On the sales side the two worst performing regions were the Middle East/Africa and China; both for CVs and for pick-up trucks (light commercial vehicles, LVCs).
In the Middle East/Africa region the sales drop for LCVs came as no surprise. Private consumption and demand from small businesses is being negatively impacted by political unrest in the region and by the economic consequences of the weak oil price. With regard to CV sales, we mentioned in our July 21 ‘Isuzu (7202) – Recovery in Thailand’ report that we expected to see flat CV sales in FY16, but this has so far not materialised (Q1 shipments for Isuzu are down 28.6% YoY). Our rationale has been based on the following:
- A low base of comparison; this will only become evident in FY16 H2, as the first half base of comparison is still high but it drops substantially in H2; and
- A recovery in the private construction sector. Several large scale projects are under way which should support CV sales growth during FY16. However, if there are delays, the expected stabilisation in CV demand in the region pushes out to later this year or in FY17.
Isuzu Motors is engaged in the manufacture and sale of automobiles. Co. manufactures heavy/medium/light-duty trucks, buses, passenger vehicle engines and industrial-use diesel engines. Co.'s principal products include commercial vehicles including light, medium and heavy-duty trucks and buses; passenger cars including sport utility vehicles and pickup trucks under the name of "Isuzu D-MAX," "Isuzu mu-X" and "Panther;" diesel engines for construction machinery, freezer units and generators; diesel engines for passenger vehicles; and marine engines for commercial boats. In addition, Co.'s subsidiary provides commercial vehicle leasing and maintenance services.
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