Subaru quarterly profit rises as production rebounds from microchip shortage

TOKYO — Subaru profit bounded ahead 25 percent in the latest quarter as the Japanese carmaker recovered lost production, ramped up sales and cashed in on favorable exchanges rates.

CFO Katsuyuki Mizuma brushed aside concern about a budding U.S. recession, saying that American demand for Subaru vehicles remains robust and that the company is racing to fill some 50,000 back orders there. Limited output remains Subaru’s biggest hurdle.

“Our inventory continues to be at a four- to five-day supply levels at retailers in the U.S.,” Mizuma said. “Despite concerns over an economic slowdown, there has been no change in sales momentum at our retailers. … If we can produce more cars, that will lead to more sales.”

Subaru Corp.’s operating profit climbed to ¥37 billion ($271.3 million) in the fiscal first quarter ended June 30, Mizuma said Wednesday while announcing financial results. Net income expanded 47 percent to ¥27.2 billion ($199.5 million).

Subaru’s performance was aided by rising sales as the company gradually overcame crimped production from the COVID-19 pandemic and global semiconductor shortage.

Global output increased 12 percent to 205,000 vehicles in the April-June period, helping drive a 12 percent increase in worldwide sales to 196,000 vehicles. The rebound helped Subaru gain its footing after struggling to fill the product pipeline amid strong demand for its products.

Subaru has been struggling to fill ballooning back orders for several quarters. Worldwide, the automaker is sitting on 100,000 back orders, including the 50,000 in the U.S., Mizuma said.

“In the U.S., our retailers carefully control the number of orders they take so that they do not have to cancel any orders,” Mizuma said. “That’s why orders will directly lead to sales.”

The biggest boost to Subaru’s earnings, however, came from a windfall from the Japanese yen’s dramatic weakening against foreign currencies, especially the U.S. dollar.

The bulk of Subaru’s volume comes from the key U.S. market, and when those dollar-denominated sales were repatriated to the Japanese parent company, they added some ¥44.4 billion ($325.6 million) to the carmaker’s balance sheet.

Those pluses were more than enough to offset soaring raw material prices and big increases in fixed manufacturing costs for things such as dies. Rising costs from recalls also dented results.

Subaru kept its forecast unchanged for a big bounce-back in the fiscal year ending March 31, 2023. It sees global sales rebounding 28 percent to 940,000 vehicles.

Operating profit is forecast to more than double to ¥200 billion ($1.47 billion), thanks largely to recovering volume and the tail wind of beneficial foreign exchange rates.

Naoto Okamura contributed to this report.

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