Subaru maker boosts profit 41% on higher N.A. sales, weak yen

TOKYO -- The maker of Subaru vehicles, Fuji Heavy Industries, reported a 41 percent surge in operating profit in the latest quarter as advantageous exchange rates and surging sales delivered stellar earnings.Global operating income climbed to 150.9 billion yen ($1.26 billion) in the company’s fiscal second quarter ended Sept. 30, Fuji Heavy President Yasuyuki Yoshinaga said today while delivering first-half fiscal year financial results.A 50.4 billion yen ($420.9 million) windfall gain from the depreciating yen helped drive earnings higher.The foreign exchange gain alone exceeded the amount of the increase in quarterly operating profit, indicating that without the tailwind, operating profit likely would have fallen.The yen’s decline against the dollar aids Japanese exports and increases the yen-dominated value of dollars earned overseas.Increasing sales, especially in North America, also fueled the results, with global volume advancing 3.8 percent to 247,000 vehicles in the three months, from 237,900 units a year before.Quarterly net income nearly jumped 79 percent to 109.0 billion yen ($910.2 million), from 60.8 billion yen ($507.7 million).Global revenue rose 17 percent to 836.2 billion yen ($6.98 billion), from 716.8 billion ($5.99 billion).U.S. gainsRobust performance in North America paced Subaru’s march. The U.S. alone accounts for about 61 percent of its global sales.In the latest quarter, U.S. sales rose 9.2 percent to 150,200 vehicles. In Japan, by contrast, sales slid 13 percent to 38,500, while China volume fell 21 percent to 10,900 units.For the year through October, Subaru's U.S. sales grew 15 percent to 480,331 vehicles, well ahead of the U.S. market's overall 6 percent increase. Canada added another 40,000 units in sales this year, up 12 percent.Subaru now targets North America sales of 600,000 units in the current calendar year. That would deliver an eighth straight year of growth and a seventh straight year of record sales.Just last year, it had aimed to sell that many vehicles in the U.S. and Canada in the fiscal year ending March 31, 2021.Subaru sold 556,000 vehicles in North America in the calendar year 2014. For the current fiscal year ending March 31, 2016, Fuji Heavy now predicts North America sales of 624,100 vehicles.U.S. production boostTo supply the upswing, Fuji Heavy is boosting annual production capacity at Subaru's Lafayette, Ind., plant to 394,000 vehicles by the end of calendar year 2016.Yoshinaga today said that it would pull ahead part of that increase to next summer, six months ahead of schedule, to ramp up output of the hot-selling Outback as soon as possible.The company had earlier planned to raise capacity there to 328,000 by the end of next year and possibly lift it again to 400,000 in the fiscal year ending March 31, 2021.That plant will start making the Impreza small car next year.Buoyed by the strong fiscal second quarter results, Yoshinaga lifted his company’s full-year forecasts for revenue, operating profit and net income. He also lifted its sales outlook.On an annual basis, those forecasts target another fiscal year of across-the-board record results, for record unit sales, record revenue, record operating profit and record net income.Achieving the goals would mark the fourth-straight year Fuji Heavy has chalked records in all those categories.Subaru now expects to sell 953,000 vehicles worldwide in the fiscal year ending March 31, 2016. That is up from an early goal of 928,300 and would be 4.6 percent higher than last year.Yoshinaga is pushing an expansion through 2020 that calls for new products, better engines, more production and cost cutting.Starting in 2016, Subaru will introduce a new modularized platform called the Subaru Global Platform that will support every model from the Impreza to the Outback.It will debut in the next-generation Impreza. Among the new products on tap is a seven-seat SUV geared toward the North American market to replace the aging Tribeca.Subaru will also convert all its gasoline engines to direct injection, starting the same year. The technology will be standard in a next-generation boxer engine Subaru will roll out.Subaru will also introduce a plug-in hybrid for North America, to meet zero emissions regulations taking effect in 2018.The mid-term plan aims to shore up profits by slashing unit costs 20 percent by 2020. The savings will largely come through reducing material costs through more efficient vehicle designs, standardized platforms and leaner manufacturing processes.

Subaru maker boosts profit 41% on higher N.A. sales, weak yen

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