Subaru braces itself for Covid-19 impact after full-year profit rises

Tokyo

SUBARU on Monday posted a 15.7 per cent rise in annual operating profit in the year that ended in March as it recovered from a raft of product recalls last year, but warned that sales of its cars would take a hit from the novel coronavirus outbreak.

Profit rose to 210.3 billion yen (S$2.8 billion) for the year just ended, from 181.7 billion yen a year earlier under international financial reporting standards. It exceeded a consensus estimate of 204.7 billion yen profit drawn from 17 analysts polled by Refinitiv.

Global vehicle makers are struggling to recover from Covid-19, which has pummelled car sales as shelter-in-place orders in many countries clobbered car demand, while plant workers had been left unable to commute to work.

Though Subaru and its rivals have begun to restart vehicle factories, anaemic demand, supply chain disruption and social distancing measures at factories are expected to limit output in the coming months.

"We saw a limited impact of the novel coronavirus on our results for the year just ended," CEO Tomomi Nakamura said. "But although we have resumed production this month, we are only operating one shift in Japan, and the pace of US output has slowed significantly . . . we see many uncertainties related to the virus." As a result, the carmaker declined to give an earnings forecast for the current business year, while it slashed its year-end dividend for the year just ended by 61 per cent to 28 yen per share.

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Some analysts believe industry-wide global vehicle sales could slump by a third this year and that any recovery will be slow and patchy as job losses and reduced incomes weigh on consumer spending.

Subaru, which earns two-thirds of its vehicle sales from the United States, acknowledged that it may take a hit in the coming months as its biggest market struggles get the Covid-19 pandemic under control.

The carmaker saw a 3 per cent rise in global vehicle sales in the year to March to 1.03 million units, bouncing back from last year, when a defective steering component and measures to improve inspection tests had stopped output for two weeks at its sole assembly plant in Japan.

The process to restart its US plants would take time, Subaru said, and it expects to produce only around 5,000 units this month, a fraction of last year's 40,000. The virus would result in a global production hit of around 150,000 units, it added.

Subaru said it had secured a 200 billion yen credit line from its lenders to see it through the Covid-19 outbreak. It has been improving its free cash position over the past year, but warned that its coffers would take a hit through June. REUTERS