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UPDATE 2-Fuji Heavy sees annual profit up 57 pct as costs fall

* Sees 2010/11 op profit at Y43 bln vs consensus Y47 bln

* Sees 2010/11 global vehicle sales at record 630,000 units

* To raise U.S. plant capacity; CEO says may need more

* Shares shave losses after announcement, down 3.7 pct (Adds CEO comments, share price moves)

By Chang-Ran Kim, Asia autos correspondent

TOKYO, May 7 (Reuters) - Fuji Heavy Industries Ltd 7270.T, the maker of Subaru cars, forecast a 57 percent jump in annual operating profit on sales growth in the United States and improvements to its notoriously high cost structure.

Subaru, known for its boxer-engine all-wheel-drive cars such as the Legacy and Forester, was alone with South Korea's Hyundai Motor Co 005380.KS group in posting growth in the world's second-biggest market last year.

To keep pace with the growth, Fuji Heavy said it would lift production capacity at its Lafayette, Indiana factory -- its sole overseas plant -- to 131,000 units a year starting in July, from 100,000 units now. The factory also builds Camrys for Toyota Motor Corp 7203.T, which owns 16.5 percent of Fuji Heavy.

Chief Executive Ikuo Mori said Subaru may need to consider expanding U.S. capacity further if sales kept growing at the current, robust rate.

“It’s not that simple to add capacity, but we may have to consider some steps if sales keep growing at this pace,” he told reporters, adding the Indiana site had room for further expansion.

Shares in Fuji Heavy recovered some ground on the news, trading down 3.7 percent in mid-afternoon trade after closing the morning 6 percent lower as export stocks were hurt by Europe’s deepening debt crisis.

Fuji Heavy is also enjoying surging sales in China, albeit from a low base, and is in the midst of deciding whether local production would make sense. [ID:nT36225]

“We are working on an outline for a new midterm plan, and will announce details when they are ready,” Mori said.

Fuji Heavy said it expects an operating profit of 43 billion yen ($474 million) and a net profit of 23 billion yen in the financial year ending in March. A poll of 14 brokerages by Thomson Reuters I/B/E/S put the average operating profit forecast at 47 billion yen.

In a sign that its capital tie-up with Toyota is beginning to pay off, Fuji Heavy’s profit margins have also improved with the adoption of Toyota’s manufacturing expertise at its factories.

Fuji Heavy’s forecast would put its operating margin at 2.9 percent, up from last year’s 1.9 percent but lagging an original target for 5 percent after the economic crisis and a stronger-than-expected yen disrupted its plans.

In the year that ended on March 31, it posted an operating profit of 27.4 billion yen and a net loss of 16.5 billion yen. The company had flagged the results when it revised its estimates for the year in late April. [ID:nT2624G76X]

Fuji Heavy expects to boost global vehicle sales by 12 percent to a record 630,000 units this financial year, with a rise in all major markets except Japan. North American shipments are expected to grow 8.2 percent to 270,000 units, while in Japan, it expects shipments to drop 5.8 percent to 161,000 units.

Shares of Fuji Heavy have gained 15 percent in the year to date, making it one of the best-performing auto stocks in Japan. Tokyo's transport sector subindex .ITEQP.T lost 2.5 percent in the same period. ($1=90.77 Yen) (Editing by Edwina Gibbs)

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