Subaru profits surge despite pandemic hit

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TOKYO – Profits at Subaru Corp. surged 18-fold in the latest quarter as the automaker rebounded from a year-earlier period when earnings were hammered by huge warranty costs.

The stronger results came even as sales took a hit due to the COVID-19 pandemic, but Subaru showed signs of recovering from that slowdown as well.

Reflecting the improved environment, Subaru lifted its forecasts for profits, sales and revenue in the current fiscal year.

In the fiscal second quarter ended Sept. 30, Subaru’s operating profit soared to 43.6 billion yen ($412.9 million), from 2.6 billion yen ($24.6 million) the previous year.

The all-wheel-drive niche automaker also reported a 17-fold increase in net income to 31.4 billion ($297.3 million) in the three months, from the year before.

Revenue declined 1.4 percent to 761.4 billion yen ($7.21 billion) in the July-September quarter, as worldwide sales, which cover wholesale volume overseas, fell 4.6 percent to 230,300 units.

Subaru’s results reflect a spring back to more normal levels after the company booked hefty outlays to cover quality costs and recalls in the previous fiscal year. The COVID-19 pandemic continued to dent earnings this year, but Subaru is rapidly rebounding from that crisis.

In the U.S., by far Subaru’s biggest and most important market, Subaru of America’s sales dropped 8.8 percent in the third quarter to 169,446 vehicles, but September sales climbed 2 percent to notch the company’s best-ever results for the month. Subaru’s upswing looks set to continue, with sales setting a new October record last month with an 11 percent increase.

“In North America, we are seeing a faster-than-expected recovery trend,” CEO Tomomi Nakamura said on Wednesday while announcing results.

“In April, our inventory was in short supply, but the inventory level has since been recovering, and we believe we can bring that back to an appropriate level by the end of this year,” he said. But there remains much uncertain about the trajectory amid concern about winter wave of COVID-19 outbreaks, he cautioned.

“We are still working out carefully an estimate for the January to March quarter. It is hard to say if we can remain bullish or not,” Nakamura said. “We are not optimistic yet.”

Subaru said it now expects to sell 910,600 vehicles worldwide in the current fiscal year ending March 31, 2021, up from its earlier forecast for sales of 900,000. That target represents a 11.9 percent decline from the previous year, when Subaru sold 1.03 million vehicles globally.

Operating profit is now seen falling 48 percent to 110.0 billion yen ($1.04 billion), a smaller drop than to the previously forecast target of 80.0 billion yen ($757.6 million). Revenue and net income are also expected to drop from the previous fiscal year, but not as far as previously forecast.

In the just-ended fiscal second quarter, U.S. wholesale volume increased 8.2 percent to 169,800 vehicles. But Western European wholesale shipments plunged 63 percent to 2,500 vehicles.

Sales in China, center of the coronavirus outbreak earlier in the year, recovered in the latest quarter, advancing 42 percent to 7,000 units, but only from a base of 5,000 the year before.

Naoto Okamura contributed to this report

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Saurabh Shukla

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