TOKYO -- Subaru's operating profit more than doubled in the latest quarter as it dodged much of the impact of the COVID-19 pandemic that broadsided sales and production at rivals.
Subaru has only minimal exposure to China, which became the epicenter of the global outbreak in February and March. And the Japanese all-wheel-drive specialist did not suspend factory output in the U.S. until March 23, just days before the quarter ended.
Subaru shut down its factory in Japan on April 11, after the books had closed.
But citing uncertainty about the impact of the pandemic on business going forward, the company withheld its earnings forecast for the current fiscal year ending March 31, 2021. The U.S., which accounts or 70 percent of Subaru's global sales, began to feel the full brunt from April.
In announcing the financial results in a conference call on Monday, CEO Tomomi Nakamura noted that the brand's U.S. strongholds are in the northeast and northwest parts of the country, markets that have been heavily hit by pandemic lockdowns.
In preparation for the belt-tightening ahead, Subaru executives will return portions of their pay through September and up to 30 percent of their performance-linked compensation for the past fiscal year.
"About 60 percent of our retailers are still restricted in their sales operations," Nakamura said. "I don't think we are at a stage where we can predict U.S. demand will go. We are not optimistic about that... I hope the situation will return to normal by early next year."
In the fiscal fourth quarter ended March 31, Subaru's operating profit surged to 57.7 billion yen ($535.2 million), the automaker said in its earnings report on Monday.
Net income nearly doubled to 40.9 billion yen ($379.4 million) in the three months.
Revenue advanced 12 percent to 859.5 billion yen ($7.97 billion) in the just-ended quarter, as worldwide sales, which cover wholesale volume overseas, increased 13 percent to 262,900 units.
Nakamura said profits were buttressed by aggressive cost cutting, increased sales volume and a better mix of higher-margin profit. Incentives also came down from the previous year.
Looking ahead, however, Subaru will not be able to escape a hit from COVID-19. Subaru's assembly plant in Japan and its factory in Indiana both came back online May 11. But the Japan plant lost 19 days of production, and the U.S. operation lost 34 days of output due to suspensions.
Subaru's Gunma plant in Japan is running only its first shift, of two, through June 19. Subaru of Indiana Automotive, which makes the Ascent and Outback crossovers in addition to the Legacy sedan and Impreza small car, is ramping up gradually to normal output in June. The impact of the disrupted output will fall in the fiscal first quarter of the year to March 31, 2021.
Subaru's U.S. sales climbed 2.9 percent to 700,117 in 2019, and before the pandemic, the company had forecast a 4 percent increase to 725,000 units in 2020.
Through February, Subaru's U.S. sales were up 3 percent. But by the end of April, they were down 25 percent for the year as the pandemic shutdown swaths of the economy.
Eking an overall gain in 2020 would represent a remarkable 12th year in a row of record U.S. sales for the Japanese niche player.
In the just-ended fiscal fourth quarter, U.S. wholesale volume increased 11 percent to 181,600 vehicles. Western European wholesale shipments nearly doubled to 11,900 vehicles. Sales in China, center of the coronavirus outbreak, plunged by half, but only from a base of 6,100 vehicles.
Nakamura conceded the pandemic will make it difficult for Subaru to achieve the numerical goals of its STEP mid-term business plan, which include revenue of 10 trillion yen ($92.8 billion) and an operating profit of 950 billion yen ($8.81 billion) in the current fiscal year ending March 31, 2021. The company also wants an operating profit margin of 9.5 percent by then.
For the full fiscal year ended March 31, operating profit increased 16 percent to 210.3 billion yen ($1.95 billion), with a margin of 6.3 percent. Net income rose 7.9 percent to 152.6 billion yen ($1.42 billion). Revenue advanced 6.0 percent to 3.34 trillion yen ($30.98 billion), while worldwide sales expanded 3.3 percent to 1.03 million vehicles.
The pandemic has also caused some delay in product planning with suppliers. But Nakamura said Subaru sees no major disruptions and or big changes to its development plans.
Naoto Okamura contributed to this report
