Japan’s Subaru books worst quarterly profit in five years on sales slump

The logo of Subaru Corp. is pictured at the 45th Tokyo Motor Show in Tokyo, Japan. (Reuters pic)

TOKYO: Subaru Corp on Monday reported its lowest quarterly profit in over five years due to a general decline in global sales, particularly in the United States, while US sales incentives also weighed on the automaker’s bottom line.

Operating profit at the smallest of Japan’s major automakers was 57.6 billion yen (US$517.38 million) in April-June, down 51.8% from 119.3 billion yen a year prior.

The result compared with a 63.6 billion yen average of seven analyst estimates compiled by Thomson Reuters I/B/E/S, and was Subaru’s weakest quarterly profit since January-March 2013.

The automaker said sales in the United States, which comprise more than 60% of its overall sales, fell 13.9%, pushing global sales 12.3% lower to 237,900 vehicles.

Subaru has been increasing buying incentives in the United States, including for the Outback sport utility vehicle (SUV) crossover and Forester SUV, as it tries to expand in the world’s second-largest vehicle market in the face of competition with much bigger rivals.

The automaker has been increasing vehicle production at its US plant, but it still imports roughly half of the cars it sells in the country from Japan.

As a result, a rise in auto import tariffs in the United States – as advocated by the US President Donald Trump – could have a significant impact on Subaru as it would raise the cost of selling vehicles in the market.

Subaru maintained its forecast for full-year profit to slide 21% to 300 billion yen in the year through March, due to the impact of a strong domestic currency and higher US marketing expenses.

In April, the automaker admitted that employees had manipulated mileage readings on vehicles for the Japanese market, which followed the surfacing of domestic compliance failings last year. The latter incident prompted Subaru to decide in March to strip Yasuyuki Yoshinaga of his role as president.