February 8, 2018 / 5:24 AM / a year ago

Subaru third quarter operating profit slips, weighed by lower-margin sales, U.S. incentives

FILE PHOTO: The logo of Subaru Corp. is displayed at the company's Tokyo headquarters in Tokyo, Japan October 27, 2017. REUTERS/Kim Kyung-Hoon/File Photo

TOKYO (Reuters) - Subaru Corp (7270.T) on Thursday reported a 4.1 percent slide in third-quarter operating profit, weighed by sales of lower-margin models and increased discounting in the United States, the Japanese automaker’s biggest market.

Japan’s sixth-largest automaker posted an operating profit of 94.2 billion yen ($859.80 million) in October-December, down from 98.24 billion yen a year earlier and short of a median forecast of 95.18 billion yen from nine analysts polled by Thomson Reuters I/B/E/S.

During the April-December period, Subaru said it took a 25 billion yen hit from costs stemming from improper inspection procedures at home which it admitted late last year.

It raised its forecast for full-year revenue slightly while keeping expectations for operating profit unchanged at 380 billion yen, which would be the lowest since 2014. Subaru based the estimates on a new forecast for the yen to average around 112 yen to the U.S. dollar.

The automaker has enjoyed years of strong growth due to ballooning U.S. demand for its rugged SUVs and crossovers including the Forester and the Outback, which it has marketed as niche lifestyle products.

But as competition in the U.S. SUV segment has heated up in the past year, Subaru has been increasing discounts to raise sales. That has been weighing on profits in its biggest market which accounts for nearly two-thirds of global unit sales.

In the April-December period, Subaru sold 509,100 vehicles in the United States, up 1.6 percent from a year earlier. Domestic sales rose 12.6 percent to 118,800 units, while they fell 33 percent to 21,500 in China.

In the year to March, Subaru expects to sell 671,300 units in the United States, up from a previous forecast of 668,000 and up 0.5 percent from last year. Globally, its sees sales of 1.0671 million units, up slightly on the year even after a revision from a previous forecast for 1.0679 million units.

Reporting by Naomi TajitsuEditing by Christopher Cushing

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