Fuji Heavy says to boost global output capacity, sees yen hitting profit

By: | Published: May 12, 2016 1:45 PM

Fuji Heavy Industries Ltd said on Thursday it will boost global production capacity to meet strong U.S. demand for its Subaru-branded cars, even as it forecast a 26 percent drop in operating profit for the current year, hit by a strong yen.

Fuji Heavy Industries Ltd, Fuji Heavy Industries Ltd Japan, Yasuyuki YoshinagaFuji Heavy last year increased production of its Legacy sedan and Outback wagons at home to export to North America, where its dealers have been struggling to keep up with demand for the popular models. (Reuters)

Fuji Heavy Industries Ltd said on Thursday it will boost global production capacity to meet strong U.S. demand for its Subaru-branded cars, even as it forecast a 26 percent drop in operating profit for the current year, hit by a strong yen.

Japan’s eighth-largest automaker by sales said it will boost global output capacity to 1.13 million vehicles by fiscal 2018, frontloading a previous plan for increasing output to 1.05 million by fiscal 2020.

This is to meet strong demand for its cars in the United States, its largest market, where dealers have been struggling to keep up with demand for the popular models, it said.

“There is really no stock (of Subaru cars) in the U.S.,” President and CEO Yasuyuki Yoshinaga told a results briefing.

“We don’t think our (sales targets) are too high. In fact, I’m worried that (production) won’t be enough,” Yoshinaga added.

Fuji Heavy last year increased production of its Legacy sedan and Outback wagons at home to export to North America, where its dealers have been struggling to keep up with demand for the popular models.

It has already pushed forward plans to nearly double production capacity at its U.S. plant to keep up with demand, while also cutting its exposure to currency fluctuations.

Fuji Heavy became the latest Japanese automaker to detail the impact of a strengthening yen.

After operating profit rose 34 percent to 565.59 billion yen ($5.19 billion) in the 2015/16 financial year, Fuji Heavy said it expected operating profit for the year ending March 2017 to drop to 420 billion yen, far below the average 532.83 billion yen estimate of 24 analysts surveyed by Thomson Reuters I/B/E/S.

Fuji Heavy expects to book 169 billion yen in currency-exchange losses this year, it said. Recall costs related to defective airbags made by Takata Corp are expected to almost double to around 30 billion yen this year, from 17 billion yen in the year ended this March.

Net profit will dip 33 percent this year to 293 billion yen, based on the assumption that the dollar will average 105 yen this year, compared with a more favourable 121 yen for the past year, the company said.

On Wednesday, Japan’s biggest automaker Toyota forecast a 35 percent tumble in net profit this year due to the yen’s strength.

Fuji Heavy also announced a change of name to Subaru Corp effective April 2017 to strengthen the Subaru brand and a plan to buy back up to 1.92 percent of its shares.

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