Mazda 2010 Annual Report Download - page 42

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Q. What impact did foreign exchange rate movements
have on earnings?
With an export ratio of approximately 80%, Mazda is highly
susceptible to exchange rate movements. For the March
2010 fiscal year, a movement of ¥1 against the U.S. dollar
had a ¥2.3 billion impact on operating income, and against
the euro the impact of a ¥1 movement was ¥1.2 billion.
Mazda uses forward exchange contracts to avoid the risks
of exchange rate and interest rate fluctuations and maintain
a stable cash flow. These transactions are entered into
based on internal regulations, and our policy is to limit these
transactions to actual demand and to hedge 70% of our
exposure up to six months ahead.
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• Sales volume declined on a drop in automotive demand, and although net sales declined as a result, profitability was main-
tained at the operating income level for the full year as a result of inventory adjustments and thorough cost improvements.
• The new Mazda3 was released, and global sales volume totaled 1,193,000 units.
• The residual value of Mazda cars showed a steady improvement in major markets, and brand value continued to increase.
• A transformation was made to a cost structure that can maintain profitability at 80% domestic plant capacity utilization even
in a strong yen environment.
(28.4) +68.0
+22.7
+84.3 9.5
(60.6)
(76.5)
)''0 )'('
(Years ended March 31)
Improvement (Billions of yen)
Deterioration (Billions of yen)
2010 compared with 2009
Change from 2009 +37.8
Volume & Mix
Foreign
Exchange Variable
Costs
Cost improvement totaled ¥175.0 billion
Fixed costs
improvement totaled
¥107.0 billion
Marketing
Expenses
Others
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Q. What was the breakdown of cost improvements?
Cost improvements during the March 2010 fiscal year totaled
¥175.0 billion.
Variable costs improved by ¥68.0 billion, on progress in
strengthening Cost Innovation initiatives and lower prices for
materials. Fixed costs improved by ¥107.0 billion, reflecting
greater efficiency in advertising activities and improvements
in other fixed expenses. As a result, we were able to
transform to a cost structure that can maintain profitability at
80% domestic plant capacity utilization even in a strong yen
environment.
163
105
162
108
127
96
122
94
133
97
134
94
133
90
126
91
U.S. dollar
Euro (Yen)
)''0 )'('
(H )H *H +H (H )H *H +H
(Years ended March 31)
=fi\`^e\oZ_Xe^\iXk\dfm\d\ekj
Q. What is your basic approach toward strengthening the financial base?
During the March 2010 fiscal year, we procured ¥93.3 billion through a capital increase that included a public offering,
and as a result equity as of the fiscal year-end increased ¥95.1 billion. At the same time, an improvement in working
capital led to reduced borrowings, and net interest-bearing debt declined ¥156.8 billion from the previous fiscal year-
end. As a result, the net debt-to-equity ratio at the end of the year stood at 74%, a major 55 percentage point
improvement from the previous fiscal year-end.
Going forward, we will secure long-term, stable funds while working to strengthen the financial base using profits to
bolster equity and positive cash flow to reduce net interest-bearing debt.
40                       