February 8, 2017 / 5:33 AM / 2 years ago

Subaru maker Fuji Heavy raises profit forecast, says watching U.S. policy

TOKYO (Reuters) - Fuji Heavy Industries (7270.T), the maker of Subaru cars, raised its full-year profit forecast on Wednesday, citing a weaker yen, and said it was closely monitoring policy in its biggest market, the United States.

Fuji Heavy Industries Ltd (FHI)'s Subaru logo is seen on a wheel of a car displayed inside a showroom at the company's headquarters in Tokyo, Japan, July 31, 2015. REUTERS/Yuya Shino

Japan’s seventh-largest automaker sells around 60 percent of its cars in the United States, where demand for its Outback, Forester and Impreza models has been strong. In response it increased production capacity last year at its plant in Indiana, where it expects production to more than double by 2018.

Despite the increased production capacity, the automaker still produces the majority of its vehicles in Japan, and more than half of all of its cars sold in the United States in 2016 were imported.

U.S. President Donald Trump has taken issue with the proportion of cars domestic automakers import rather than produce locally, considering the size of sales in the world’s second-biggest market.

Japan’s automotive exports are likely to be high on the agenda when Japanese Prime Minister Shinzo Abe meets with Trump for summit talks in Washington later this week.

“Changes in U.S. trade policy could have a big impact on our business, so we are following developments carefully,” CFO Mitsuru Takahashi told reporters at a briefing, adding the company has yet to make any concrete plans to respond to possible changes.

Fuji Heavy expects net profit to come in at 290 billion yen ($2.58 billion) for the year ending March 31, up from a previous forecast for 278 billion yen, but still down from 437 billion yen last year. Analysts polled by Thomson Reuters I/B/E/S/ have forecast a net profit of 316.5 billion yen.

The new forecast is based on expectations for the yen to average 108 yen to the U.S. dollar and 119 yen to the euro through March, compared with a previous forecast for 104 yen and 115 yen, respectively.

For the third quarter Fuji Heavy posted an operating profit of 98.28 billion yen, down from 150.64 billion yen a year ago and undershooting a median analyst forecast for 109.9 billion yen.

Strength in the domestic currency and increased costs related to air bag recalls weighed on the automaker’s bottom line in the October-December period despite strong vehicle sales.

($1 = 112.2300 yen)

Reporting by Naomi Tajitsu; Editing by Muralikumar Anantharaman

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