TOKYO -- Subaru Corp. slumped to an operating loss in the latest quarter as the COVID-19 pandemic broadsided sales and production, especially in the key U.S. market.
In the fiscal first quarter ended June 30, Subaru booked an operating loss of 15.7 billion yen ($146.2 million), reversing an operating profit of 92.2 billion yen ($858.6 million) the previous year. The all-wheel-drive niche player also reported a 7.7 billion yen net loss ($71.7 million), in the three months, down from a 66.5 billion yen ($619.2 million) net profit the year before.
Revenue plunged 45 percent to 457.0 billion yen ($4.26 billion) in the April-June quarter, as worldwide sales, which cover wholesale volume overseas, tumbled 49 percent to 133,100 units.
Subaru had largely escaped the pandemic hit in the January-March period because the outbreak had yet to fully sweep the U.S., which accounts for more than two-thirds of Subaru’s global sales.
But by April, U.S. factories and dealerships were shutting down as the new coronavirus breached American shores. Subaru’s Japan factory suspended operations in early April and its U.S. plant in Indiana shut down in late March. Both returned to mostly normal output only in June.
"The new coronavirus outbreak has significantly affected our production and sales activities across our entire group," CEO Tomomi Nakamura said Aug. 4 while announcing the results.
Despite Subaru’s bruising in the U.S., Nakamura said he expects a steady recovery from now into 2021, citing rapid market share increases in May and June as showrooms reopened.
U.S. market share reached a record 4.7 percent in June, Nakamura said, as competitors lost ground due to falling fleet sales. Subaru has only limited exposure to the fleet market.
The company is targeting U.S. market share of 5 percent, Nakamura said.
But the rebound won’t be enough to offset the overall impact of the pandemic slowdown. Looking forward to the full fiscal year ending March 31, 2021, Subaru predicted operating profit would fall 62 percent to 80.0 billion yen ($744.9 million). Net income is expected to retreat 61 percent, and global sales are predicted to decline 13 percent to 900,000 vehicles.
The pandemic completely derailed the numerical goals of Subaru’s STEP midterm business plan announced in 2018. Subaru had targeted revenue of 10 trillion yen ($93.1 billion) and an operating profit of 950 billion yen ($8.85 billion) in the current fiscal year ending March 31, 2021.
Full fiscal year revenue is now forecast to be 2.9 trillion yen ($27.00 billion).
Under its midterm plan, the company also wanted an operating profit margin of 9.5 percent by March 31, 2021. The current forecast targets an operating profit margin of 2.8 percent.
At the beginning of 2020, Subaru was on path to achieve a remarkable 12th year in a row of record U.S. sales. Instead, Subaru’s U.S. sales fell 21 percent to 267,110 through June.
But Subaru’s decline was more moderate than the overall market’s 23.5 percent fallback, helping the brand boost its market share to 4.1 percent in the first half, from 4.0 percent the year before. In the April-June quarter, Subaru’s U.S. market share rose to 4.6 percent, from 4.1 percent.
In the just-ended fiscal first quarter, U.S. wholesale volume fell 49 percent to 91,100 vehicles. Subaru’s North American operation fell to a 10.2 billion yen ($95.0 million) regional operating loss, from a 23.4 billion ($217.9 million) profit a year earlier, as the company idled production.
Western European wholesale shipments declined 46 percent to 3,200 vehicles. Sales in China, center of the coronavirus outbreak earlier in the year, recovered in the latest quarter, advancing 3.5 percent to 6,000 units, but only from a base of 5,700 vehicles the year before.
Naoto Okamura contributed to this report.
