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Subaru sees flat profit this year on higher costs, below expectations
May 9, 2017 / 4:48 AM / 7 months ago

Subaru sees flat profit this year on higher costs, below expectations

TOKYO, May 9 (Reuters) - Subaru Corp on Tuesday forecast a flat operating profit this year, undershooting market estimates and sending its share price lower, as the Japanese automaker expects rising incentive-related costs and research expenses to offset higher sales.

Subaru, which changed its name from Fuji Heavy Industries in April, said it expected operating profit to ease 0.2 percent to 410.0 billion yen ($3.62 billion) in the year to March. That was below a mean estimate of 538.5 billion yen from 19 analysts polled by Thomson Reuters I/B/E/S.

Shares in Japan’s No. 7 automaker fell 4.2 percent after the announcement, hitting their lowest in nearly two weeks.

Subaru posted an operating profit of 410.8 billion yen in the year ended March, down 27.4 percent on the year, as higher costs from the recall of Takata Corp’s air bags and a stronger currency offset a jump in sales.

Subaru said it expected net profit of 285.0 billion yen this year, up 0.9 percent from last year.

It expects to sell around 1.11 million vehicles globally this year, a record high and up from around 1.07 million in the year just ended. The automaker sees a 3 percent rise in sales in the United States, where the automaker has carved out a niche in family cars.

The maker of the Outback SUV crossover and the Legacy and Impreza sedans has ramped up production of its cars in the United States, where it sells around 60 percent of its global production.

Subaru is assuming an average dollar rate of 110 yen for the current year, anticipating a stronger yen over the year compared with the currency pair’s trading rate of around 113 yen on Tuesday.

While the automaker has been increasing localised production in the United States, it continues to produce the majority of its vehicles in Japan, making it vulnerable to currency swings. ($1 = 113.2400 yen) (Reporting by Naomi Tajitsu; Editing by Randy Fabi)

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