Fuji Heavy’s profit up 21%, may hit target 5 years ahead of schedule

Article by Andrew Christian, on May 11, 2015

Fuji Heavy Industries may reach its sales target in North America five years before schedule as it posted a 21% increase in operating profit during the latest quarter as it benefits from favourable exchange rates and record-breaking earnings. Fuji Heavy, which makes Subaru vehicles, has plans to boost local production capacity in the market.

While announcing financial results for the fiscal year, Fuji Heavy President Yasuyuki Yoshinaga said that its global operating income jumped to 112.9 billion yen ($943.7 million) during the fiscal fourth quarter ended March 31. Earnings were boosted by a windfall gain of 41.6 billion yen ($347.7 million) from the depreciating yen.

It’s likely that operating profit would have dropped without the tailwind since just the foreign exchange gain was more than twice the amount of the climb in quarterly operating profit. Japanese exports are helped by the decline of the yen against the dollar. As a result, the yen-dominated value of dollars that are earned outside of the country rises.

Climbing sales, particularly in North America, also drove up the results with worldwide volume increasing 6.6% to 247,000 vehicles in the first quarter, from 231,700 units the previous year. Its net income in the latest quarter almost tripled to 71.5 billion yen ($597.7 million) after having recorded 25.1 billion yen ($209.8 million) previously.

Its global revenue increased by 17% to 817.2 billion yen ($6.83 billion) from 699.6 billion ($3.50 billion). The outstanding performance in North America was in pace with that of Subaru’s. About 62% of Subaru’s sales were from the U.S. alone.

Sales in the U.S. climbed 12% with 128,900 units in the past quarter. In comparison, Japan sales fell by 1.4% to 56,900, while China volume decreased by 14% to 13,100 vehicles. Yoshinaga mentioned the sharp demand in North America as he mentioned plans to increase production capacity at its assembly plant in Indiana.

He also forecasted that Subaru will be able to reach its regional sales target of 600,000 vehicles in North America 5 years ahead of schedule. For the current fiscal year that ends March 31, 2016, the automaker has set a target of 600,000 units.

Only one year ago, it had sought to sell that number in the U.S. and Canada in the fiscal year that ends March 31, 2021. In the recently ended fiscal year, its sales in North America rose by 19% to 570,000 units.

Last January, Fuji Heavy had forecast that Subaru sales in the U.S. will increase by 5% to 540,000 units in calendar year 2015, setting a record for seven consecutive years. Fuji Heavy now forecasts that it will sell 554,000 vehicles in the U.S. for the current fiscal year that ends March 31, 2016.

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