(For accompanying table, double-click on [ID:nT199470]
* Most top automakers seen swinging to Q1 operating loss
* Suzuki seen alone in earning operating profit
* Q1 seen better than Q4, further improvement ahead
Japan's top automakers will report weak first-quarter results hit by a stronger yen and production cutbacks, but most expect a steady improvement in coming quarters helped partly by government programmes to encourage car purchases and progress in cost-cutting.
Toyota Motor Corp (7203.T), Honda Motor Co (7267.T), Nissan Motor Co (7201.T) and Mazda Motor Corp (7261.T) are all expected to swing to a loss for April-June as they sold many vehicles from inventory, keeping factories severely underused.
But the financial first quarter is seen marking a big improvement from January-March, and many automakers have flagged further output increases in the coming months by bringing back idled shifts, adding overtime and hiring back contract workers.
Inventory adjustments appear to be nearing an end, and it looks like production volumes will continue to improve, JPMorgan Securities analyst Kohei Takahashi said, referring to the main North American market.
Suzuki Motor Corp (7269.T) is expected to be alone among Japan's top five carmakers in eking out a quarterly profit thanks to brisk sales in India, its biggest market, and successful cost-cutting measures.
While most industry executives say they do not expect vehicle sales to fall any further, few have yet called a recovery in the major markets of North America, Europe and Japan -- an uncertainty that analysts say will likely keep top automakers from raising their full-year forecasts.
China is a rare bright spot, offsetting part of the sales slide in the United States, Europe and Japan. Nissan has performed particularly well thanks to the introduction of lower taxes on cars with engines smaller than 1.6 litres. In the first half of 2009, Nissan sold more vehicles in China than in Japan.
WAITING FOR RECOVERY
With weak first-quarter results factored in, analysts said investors will be looking for any new signs of improvement in U.S. sales. Consensus forecasts for industry sales in the United States this year are for 10 million vehicles and above, which means the second half would have to be much better than the first.
We think investors should focus for now on short-term factors, including the timing of an upturn in U.S. sales, Nomura Securities analyst Shotaro Noguchi said of Honda, whose North American operations are expected to stay in the black this year, unlike most of its domestic rivals.
Toyota is likely to be quick in benefiting from a demand upturn, with U.S. inventory already at low levels. Also in Japan, the world's biggest automaker is struggling to meet demand for the third-generation Prius, with customers waiting at least eight months for delivery, although its overall domestic sales have yet to turn up from the previous year.
Hybrid cars are already contributing to earnings and Toyota has a significant lead over rivals in this area, NikkoCitigroup analyst Noriyuki Matsushima wrote in a report.
We expect the start of volume production in 2010 to really lift hybrid car earnings of the group.
Analysts expect other longer-term positives from Toyota, including the likely liquidation of a loss-making, unionised plant in California after the share held by joint venture partner General Motors became part of GM assets left in bankruptcy under its U.S. government-guided restructuring. [ID:nT291935]
While liquidation could result in significant one-off charges, it would more or less resolve the problem of overcapacity in North America, analysts said.
Honda and Nissan will be the first to report on Wednesday, followed by the rest in the coming weeks. (Editing by Michael Watson)