Fuji Heavy Industries' operating margin for fiscal year (FY) 2013/14 more than doubled to 13.6%, which is expected to have been the highest among Japanese automakers during this period.
IHS Automotive perspective | |
Significance | Fuji Heavy Industries (FHI), manufacturer of the Subaru brand of vehicles, posted a net profit of JPY206.6 billion (USD2.03 billion) during fiscal year (FY) 2013/14, a 72.8% year-on-year (y/y) jump. The company's operating profit climbed 171.1% y/y to JPY326.5 billion as a result of favourable foreign-exchange rates that offset increases in sales and research and development (R&D) costs, as well as improvements in the unit sales mix/volume, cost reductions, and other factors. FHI generated revenues of JPY2.4 trillion, a rise of nearly 26% y/y. |
Implications | The company's net income during the year included an extraordinary income of JPY47.1 billion from the sale of the stock of Polaris Industries Incorporated and an extraordinary loss of JPY29.7 billion from the allowance for doubtful accounts from a lawsuit that FHI filed against the Japanese government in 2010, seeking JPY35 billion in compensation for initial investments related to AH-64D helicopters supplied to the country's Ministry of Defence. FHI's handsome operating margin of 13.6%, which was more than double the margin for the previous year, is expected to have been the highest among Japanese automakers during FY 2013/14. |
Outlook | With considerable progress having been made during FY 2013/14 and a new ambitious mid-term plan in place, FHI is well set up until 2020. For the current FY ending in March 2015, it projects a net profit of JPY215.0 billion (up 4.1% y/y) and an operating profit of JPY340.0 billion (up 4.1% y/y), on sales revenues of JPY2.72 trillion (up 13% y/y). In terms of global sales volumes, the automaker expects to sell 916,000 units during the year, up 11% y/y, with growth projected in nearly all regions. |
Fuji Heavy's financial results (JPY, bil.) | |||
FY 2013/14 | FY 2012/13 | % y/y change | |
Sales revenues | 2,408.1 | 1,913.0 | 25.9 |
Operating income | 326.5 | 120.4 | 171.1 |
Operating margin (%) | 13.6 | 6.3 | - |
Net profit | 206.6 | 119.6 | 72.8 |
Fuji Heavy Industries (FHI), manufacturer of the Subaru brand of vehicles, today (9 May) released its financial results for fiscal year (FY) 2013/14 that ended on 31 March. The automaker posted a net profit of JPY206.6 billion (USD2.03 billion) for the period, a 72.8% year-on-year (y/y) jump. Meanwhile, the company's operating profit climbed 171.1% y/y to JPY326.5 billion as a result of favourable foreign-exchange rates that offset increases in sales and research and development (R&D) costs, as well as improvements in the unit sales mix/volume, cost reductions, and other factors. FHI generated revenues of JPY2.4 trillion during the 12 months ended in March, a rise of nearly 26% y/y. The company's global sales volumes during the period totalled 825,000 units, a 13.9% y/y increase. By region, unit sales rose 11.3% y/y in Japan to 182,000 units during the year, expanded by 22.4% y/y to 478,000 units in North America, dropped by 23% y/y to 47,000 units in Europe, declined by 10.7% y/y to 45,000 units in China, and rose by 23.3% y/y to 74,000 units in all other regions combined.
FY 2014/15 forecasts
FHI has also issued forecasts for the current FY ending in March 2015, projecting a net profit of JPY215.0 billion (up 4.1% y/y) and an operating profit of JPY340.0 billion (up 4.1% y/y), on sales revenues of JPY2.72 trillion (up 13% y/y). In terms of global sales volumes, the automaker expects to sell 916,000 units during the year, up 11% y/y, with growth projected in nearly all regions.
New mid-term management plan
FHI also released today its new mid-term management vision, "Prominence 2020", covering the 2014–20 period and designed to strengthen its competitiveness and business structure along with ensuring sustainable growth. The new plan has been set out as the company recognises that its strong financial performance last FY was partly boosted by favourable foreign-exchange conditions and it therefore needs to further fortify its business base. Revolving around the two main objectives of "enhancing the Subaru brand" and "building a strong business structure", the new plan seeks to address key issues resulting from the company's faster-than-expected growth as well as changes in its external business environment, such as compliance with future environmental regulations, production capacity shortages, its response to new customers, high sensitivity to currency fluctuations, and challenges to growth of the company's non-automotive businesses.
Outlook and implications
FY 2013/14 proved to be a record year for FHI on the back of the success it enjoyed in the first nine months when its net profit more than tripled y/y (see Japan: 4 February 2014: Fuji Heavy's April–December 2013 net profit more than triples y/y). The small but niche automaker has in recent years been spurred by brisk sales in the United States and Japan, two of its largest markets. Strong sales of the Subaru Forester sport utility vehicle (SUV) and the Subaru Impreza compact sedan kept revenues high in Japan, while US sales were also underpinned by the Forester and the Subaru XV crossover.
The company's net income during the year included an extraordinary income of JPY47.1 billion from the sale of the stock of Polaris Industries Incorporated and an extraordinary loss of JPY29.7 billion from the allowance for doubtful accounts from a lawsuit that FHI filed against the Japanese government in 2010, seeking JPY35 billion in compensation for initial investments related to AH-64D helicopters supplied to the country's Ministry of Defence (see Japan: 5 March 2014: Fuji Heavy cuts FY 2013/14 net profit forecast over rejected lawsuit).
FHI has been managing its operations on the basis of the "Motion-V" mid-term management plan announced in July 2011 for the period ending in March 2016. The company's resurgence can be gauged by the fact that by the end of FY 2013/14, it had accomplished the main targets envisaged under Motion-V ahead of schedule, namely successes in unit sales increases through US-oriented product development, commitment to safety including its highly rated collision safety and "EyeSight" driving assist system, cost-reduction efforts, low-incentive sales, and continuous efforts towards highly efficient production.
FHI's handsome operating margin of 13.6%, which was more than double the margin of the previous year, is expected to have been the highest among Japanese automakers during FY 2013/14. Toyota, which announced similarly robust results yesterday, could only manage an operating margin of 8.9% for the FY.