TOKYO – Subaru’s fiscal-year operating profit plunged by more than half as the Japanese automaker battled the pandemic, microchip shortages, foreign exchange losses and rising costs.
Subaru Corp.’s operating profit fell to 102.5 billion yen ($930.2 million) in the fiscal year ended March 31, from 210.3 billion yen ($1.91 billion) the previous year, the company said on Tuesday.
The all-wheel-drive niche player also said net income tumbled by about half to 76.5 million ($694.3 million) in fiscal year. Revenue declined 15 percent to 2.830 trillion yen ($25.68 billion) in the 12-month period. Worldwide sales, which cover wholesale volume overseas, retreated 17 percent to 860,200 vehicles, while U.S. sales fell 13 percent to 611,600 units in the fiscal year.
The U.S. is by far Subaru’s largest market and generated 71 percent of its unit sales in the fiscal year.
The global microchip shortage exacerbated the financial hit. The company said the supply crisis forced it to cancel some 61,000 units of output in the just-ended fiscal year.
Despite the downturn, Subaru forecast a rapid rebound in the current fiscal year ending March 31, 2022, with a 16 percent increase in global sales and a near doubling of operating profit.
Global sales will climb to 1.0 million vehicles, Subaru predicted, as the company rides a recovery in U.S. demand, while putting the pandemic and semiconductor pinch in the rearview mirror. Meanwhile, parent-company operating profit is seen surging to 200.0 billion yen ($1.82 billion).
“For the just-ended year, we saw sales recovery particularly in North America and our sales there in the third quarter surpassed the previous year’s level,” CFO Katsuyuki Mizuma said. “Although we see a continued risk from semiconductor chip shortages, we feel there is strong recovery in demand. We expect demand to rebound solidly, particularly in North America.”
Still, CEO Tomomi Nakamura, citing a more severe and unpredictable economic environment, tempered the company’s midterm business plan that he unveiled in 2018.
The pandemic long ago derailed the midterm goal of achieving revenue of 10 trillion yen ($93.1 billion) and an operating profit of 950 billion yen ($8.85 billion) in the just-ended fiscal year.
And now, Nakamura is also downgrading his operating profit margin goal.
The new target is 8 percent. While that is down from an original goal of at least 9.5 percent, Nakamura said the objective still represents an industry-leading operating profit margin. Subaru achieved an operating margin of just 3.6 percent in the fiscal year ended March 31, which was down from 6.3 percent in the preceding fiscal year.
At the beginning of 2020, Subaru was on path to achieve a 12th year in a row of record U.S. sales. Instead, Subaru’s U.S. sales fell 13 percent to 611,942 vehicles for the 2020 calendar year.
Under the original midterm plan unveiled in 2018, Nakamura aimed to lift global sales to 1.3 million vehicles in the fiscal year ending March 31, 2026. In the U.S., the all-wheel-drive niche player targeted sales of above 800,000 vehicles.
But Nakamura conceded last year that the U.S. sales objective would have to wait.
Subaru now is focused on lifting its U.S. market share to 5 percent through strengthening the retail network and increasing penetration in sunbelt states where it has traditionally been weaker.
Subaru’s U.S. market share hit 4.2 percent for 2020 calendar year.
— Naoto Okamura contributed to this report.
