Subaru maker Fuji Heavy Q1 profit rises on U.S. sales, cost cuts

TOKYO, July 31 Thu Jul 31, 2014 12:55am EDT

TOKYO, July 31 (Reuters) - Fuji Heavy Industries, the maker of Subaru-brand cars, on Thursday posted a 13 percent rise in April-June operating profit on strong sales of its Forester SUV in the United States, cost cuts and a weaker yen.

Japan's smallest passenger car maker booked 78.7 billion yen ($765.9 million) in first-quarter operating profit, roughly in line with the 80.6 billion yen mean estimate of 11 analysts polled by Thomson Reuters I/B/E/S.

Its operating profit margin was 13.2 percent for the quarter, likely the highest among Japan's eight passenger car makers.

The company, which started as an aircraft and fighter jet manufacturer nearly a century ago, stuck to its record-high annual operating profit outlook of 340 billion yen.

"Because we are already manufacturing vehicles at maximum capacity, there is a limit to increasing the number of vehicles we sell," Chief Financial Officer Mitsuru Takahashi told a news conference.

"In order for our profits to grow, all we can do is cut costs and improve our model mix," he said, referring to the necessity of selling more profitable vehicles such as SUVs.

The company, whose Subaru brand is known for its all-wheel drive vehicles and boxer engines, sold 112,400 vehicles in its biggest market the United States in April-June, up 6 percent from a year earlier.

Sales in Japan dropped 13.5 percent to 27,200 vehicles, due in part to a vehicle launch delay.

Globally, the company sold 193,700 vehicles in the period, up 2.5 percent.

Fuji Heavy is highly reliant on its export business. It makes around three-quarters of its vehicles in Japan of which it exports about 77 percent, making earnings sensitive to the change in the value of the yen.

Fuji Heavy shares were down 2.0 percent at 1:54 p.m. (0454 GMT) after the earnings announcement, compared with a 0.3 percent gain in Tokyo's benchmark Nikkei average.

($1 = 102.7500 Japanese Yen) (Reporting by Yoko Kubota; Editing by Christopher Cushing)

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