(Adds analyst and company comment, net profit and unit sales)
By Chang-Ran Kim
TOKYO, April 25 (Reuters) - Mazda Motor Corp said on Friday hefty cost cuts and robust sales in Europe helped annual operating profit soar 77 percent, and projected its highest income in a decade for the current business year.
Mazda, the smallest of Japan's top five automakers, reported preliminary group operating profit for the year ended March 31 of 50.6 billion yen ($422.4 million), which compares with 28.55 billion yen the year before and was in line with expectations.
For 2003/04, Mazda, one-third owned by Ford Motor Co , said it expected to expand operating profit by 28 percent to 65 billion yen, powered by new models like the Mazda6/Atenza sedan.
"The environment for this year is uncertain due to SARS and other factors but we aim to power ahead again this year," Kiyoshi Ozaki, executive officer in charge of finance, told reporters.
He said new models including a replacement for the Familia -- known as the 323 in most overseas markets -- would be the driving force behind the firm's best operating profit in 10 years.
Net profit came in at 24.1 billion yen, nearly three times higher than the previous year's result of 8.83 billion yen but slightly less than the company's forecast of 26.5 billion yen.
The automaker blamed the lower result on changes in corporate taxes that had prompted it to make adjustments in deferred tax assets, or potential future tax refunds.
Mazda, in the midst of a five-year turnaround plan, is counting on models like the award-winning Mazda6/Atenza and Mazda2/Demio subcompact to boost global sales and put the company on a firm recovery track.
It said it expected its global vehicle sales to rise 3.5 percent in the current business year on a wholesale basis with sales in Europe jumping 18.9 percent and those at home up 1.6 percent, but a decline of 3.6 percent in North America.
Ozaki said Mazda expected an improved product mix to lower its spending on U.S. sales incentives from around the $2,000 per-unit level last year.
The Hiroshima-based automaker, which has a relatively big exposure to Europe, is also expected to benefit this year from stronger sales in that region as well as a weaker yen against the euro.
It assumed an average exchange rate of 115 yen to the dollar and 125 yen to the euro for the current business year.
"We see the (profit) forecasts as intentionally a bit conservative, as they are assuming 115 yen and forecasting a four percent decline in North America. We think they can do better than that," said auto analyst Steve Usher at J.P. Morgan.
In morning trade, Mazda's shares were down 1.9 percent at 207 yen. They have fallen eight percent this year. The yen was trading at around 120 to the dollar.
While Mazda's new launches during the past year have fared well overall, some have noted that a sharp drop in sales of older models is offsetting gains and leading to a surge in inventory, posing a risk to the automaker's bottom line. ($1=119.79 yen)