Consolidated Financial Results for the 1st Half of FYE 2019

SUBARU CORPORATION
Toshiaki Okada
Corporate Executive Vice President & CFO
November 5th, 2018https://www.subaru.co.jp/en/ir/

1

NOTE)
This document is an English translation of an original Japanese document. If there areany discrepancies between this document and the original Japanese document, theoriginal Japanese document prevails.

1Summary
Consolidated Financial Results for the 1st Half of FYE 2019
 Net sales declined due to decreased unit sales and other factors.
 While Subaru’s retail vehicle sales in its largest North American market kept strong momentum, all profit
levels declined due to factors such as an increase in quality-related expenses associated with a largescale recall and decreased deliveries of the Forester before the launch of its fully-redesigned version.

Actual results(YoY)

Net sales

OperatingincomeOrdinary
income¥1,486.8bil.
(-121.2bil.)¥55.0bil.
(-157.1bil.)¥60.0bil.
(-152.7bil.)

Net income
attributableto owners of parent

Consolidated
automobile sales¥44.3bil.
(-40.7bil.)

482.1k units(-49.2k units)

Forecast for FYE 2019
 Forecasts for FYE2019 are revised from the previous announcement made on August 6th, 2018, to reflect
factors including a decrease in consolidated units sales and an increase in quality-related expenses
Net sales
Forecasts(YoY)（vs Previous Plan as of Aug. 6th)

¥3,210.0bil.
(-22.7bil.)(-40.0bil.)

Operatingincome¥220.0bil.
(-159.4bil.)(-80.0bil.)

Ordinary
income¥229.0bil.
(-150.9bil.)(-76.0bil.)

Net income
attributableto owners of parent¥167.0bil.
（-53.4bil.)（-53.0bil.)

Consolidated
automobile sales
1,041.1k units（-25.8k units)（-59.3k units）* Changed accounting policies from FYE 2019 (deducting sales incentives from net sales).
The comparative year has been also recalculated under the same conditions.
https://www.subaru.co.jp/en/ir/22

Consolidated Financial Results
for the 1st Half of FYE 2019https://www.subaru.co.jp/en/ir/

33

1st Half :Consolidated Unit Sales（Thousand Units）

Actual Results
1st Half FYE 2018
(a)

Plan
1st Half FYE 2019(as of Aug. 6th)(b)

Actual Results
1st Half FYE 2019(c)Variance(c)-(a)Variance(c)-(b)

Passenger cars

67.3

56.0

52.4

-14.9

-3.6

Minicars

15.1

13.0

12.6

-2.5

-0.4

82.3

68.9

65.0

-17.4

-4.0

US

333.2

313.0

302.2

-31.0

-10.7

Canada

30.7

31.6

31.8

+1.1

+0.3

Russia

3.7

7.0

5.1

+1.4

-1.9

Europe

17.8

20.9

20.6

+2.9

-0.2

Australia

27.7

26.9

23.5

-4.2

-3.4

China

13.8

12.4

9.2

-4.6

-3.2

Others

22.0

25.7

24.6

+2.6

-1.1

Domestic total

Overseas total

448.9

437.4

417.1

-31.8

-20.3

Total

531.3

506.3

482.1

-49.2

-24.2

https://www.subaru.co.jp/en/ir/

4First, we will report on our consolidated financial results for the first half of FYE 2019.
Consolidated unit sales were 482.1 thousand units, a decline of 49.2 thousand units year on year.

In the domestic market, the July launch of the fully redesigned Forester resulted in strong sales, but the effects
of new model launches for the Impreza and the SUBARU XV ran their course, resulting in a year-on-year
decline of 17.4 thousand units, to 65 thousand units.

Overseas, due to declining sales of the Forester ahead of the launch of the fully redesigned version, andinventory adjustments, mainly in local retailer in the U.S., which resulted in lower deliveries, consolidated
unit sales posted a year-on-year decline of 31.8 thousand units, to 417.1 thousand units.

On the other hand, retail sales were generally strong, and in our key market of North America there was acontribution from the Crosstrek, which underwent a full model change in the summer of 2017, and from the
new Ascent, resulting in a continuation of robust unit sales and an all-time record for the 7th consecutive year.
This October marks the 83rd consecutive month of year-on-year growth in sales, so the situation remains
favorable. Retail unit sales in the first half grew 5.9% year on year.

4

1st Half :Consolidated Income Statements（100 Million Yen）

Actual Results
1st Half FYE 2018
(a)

Plan
1st Half FYE 2019(as of Aug. 6th)(b)

Actual Results
1st Half FYE 2019(c)Variance(c)-(a)Variance(c)-(b)Net sales(16,863)

16,08014,63014,868-1,212+238

Domestic(3,286)

3,283

2,670

2,874

-408

+205

Overseas(13,577)

12,797

11,961

11,994-804+33

Operating income

2,121

1,100

550

-1,571-550

Ordinary income

2,127

1,117

600

-1,527-517

Income before taxes
and minority interests

1,285

1,082

630

-655

-452

Net income attributableto owners of parent

850

791

443

-407

-348

¥111/US$¥105/US$¥109/US$-¥2/US$+¥4/US$SUBARU exchange rate

* Changed accounting policies from FYE 2019 (deducting sales incentives from net sales). The comparative year has been also recalculated under the same conditions.
* Figure in ( ) ：Net sales before deducting sales incentives

https://www.subaru.co.jp/en/ir/

5

Next we have the consolidated income statements.
Consolidated net sales declined by 121.2 billion yen year on year to 1,486.8 billion yen, with sales being
pushed down by a currency loss of 6.1 billion yen, a negative impact from lower sales volume & mixture of
100.1 billion yen, and a negative impact of 15.0 billion yen from SUBARU companies, etc.

In addition, with regard to the year-on-year comparison of net sales, due to the adoption of new accounting
policies, the result for the previous fiscal year has been recalculated in accordance with those policies.

With regard to operating income, an increase in quality-related expenses caused mainly by a major recall,falling deliveries for the Forester ahead of a full model change, and other factors, resulted in a year-on-year
decline of 157.1 billion yen, to 55.0 billion yen.
Ordinary income fell by 152.7 billion yen to 60.0 billion yen.
Net income attributable to owners of parent contracted by 40.7 billion yen year on year, to 44.3 billion yen.

5

1st Half :Analysis of Variance in Operating Income (Consolidated)
Fixed Cost : -79 (SUBARU -52, SIA -27)
SG&A : -63 (SUBARU -32, SOA -38, others)
Warranty claims : -771

Domestic : -144
Overseas : -361
Sales incentive : -102
Others : -22

R&D
expenses（100 Million Yen）

US$ : -94
EURO : +9
CA$ : -1
CNY : ±0
Currency exchange adjustment : +49
Unrealized gain : -39

+65
SG&A
expensesand others

SUBARU : +4 (material cost -35)
SIA : -22 (material cost -42)-913
Sales volume& mixtureand others-629
Actual Results
Operating Income
1st Half
FYE 2018-1,571

Loss oncurrency
exchange-76

Cost
reduction-18
Actual Results
Operating Income
1st Half
FYE 2019

https://www.subaru.co.jp/en/ir/

6

Now let us look at the analysis of variance at the operating income level.
Compared to the result for the same period of the previous fiscal year, there has been a decline of 157.1 billion yen, the respective components ofwhich will now be explained.
First, the factors pushing up operating income.
R&D expenses had a positive impact of 6.5 billion yen.
Now we will look at factors pushing down operating income.
<1> The negative impact of SG&A and other expenses was 91.3 billion yen, which can be broken down into the following three factors.
(1) Increases in fixed manufacturing costs had a negative impact of 7.9 billion yen. Of this, SUBARU accounted for -5.2 billion yen. At SUBARU, theimpact of increased costs for supplier dies was -3.6 billion yen, and increases in fixed processing costs came to -1.6 billion yen. SIA accounted for -2.7
billion yen. The impact of increased costs for supplier dies came to -2.0 billion yen, and the impact of increased fixed processing costs was -0.7 billionyen.
(2) Higher SG&A expenses had a negative impact of 6.3 billion yen. Of this, SUBARU accounted for -3.2 billion yen, domestic dealers were -0.1
billion yen, SOA was -3.8 billion yen, the Canadian subsidiary was positive 0.2 billion yen, and others had a positive impact of 0.6 billion yen.
(3) An increase in warranty claims had a negative impact of 77.1 billion yen. These include around 55.0 billion yen in expenses related to the valve
spring recall for which we submitted a notification on November 1, and approximately 6.0 billion yen in additional recall expenses related to final
vehicle inspections.
<2> The impact of Sales volume & mixture and others was negative 62.9 billion yen. This breaks down into the following four areas.
(1)New car sales domestic: -14.4 billion yen.
(2)New car sales overseas: -36.1 billion yen(3)Incentives: -10.2 billion yen. Of which, SOA was -7.1 billion yen.
Incentives per vehicle were 2,200 dollars, an increase of 400 dollars over the previous year’s 1,800 dollars.
(4)Inventory adjustments and other factors: -2.2 billion yen.
<3> Foreign exchange losses were 7.6 billion yen.
The roughly 2-yen appreciation of the yen against the U.S. dollar had a negative impact of 9.4 billion yen. The roughly 5-yen depreciation of the yen
against the euro had a positive impact of 0.9 billion yen. The Canadian dollar was little changed, resulting in a negative impact of 0.1 billion yen.
Foreign exchange adjustments related to transactions between SUBARU and its overseas subsidiaries had a positive impact of 4.9 billion yen, while
unrealized gains on inventory had a negative effect of 3.9 billion yen.
<4>Cost reductions had a negative impact of 1.8 billion yen. Of this SUBARU accounted for +0.4 billion yen and SIA for -2.2 billion yen.
The breakdown of the SUBARU portion was +3.9 billion yen in cost reductions, and -3.5 billion yen from material prices and market conditions, etc.
For SIA the breakdown was +2.0 billion yen in cost reductions, and -4.2 billion yen from material prices and market conditions, etc.
As a result of the above, consolidated operating income for the first half of FYE 2019 fell 157.1 billion yen from the 212.1 billion yen recorded in thesame period of the previous year, to 55.0 billion yen.

6

（Plan as of Aug. 6th vs. Actual Results） 1st Half :Analysis of Variance in Operating Income (Consolidated)（100 Million Yen）

Gain oncurrency
exchange+172

R&D
expenses+66

Cost
Reduction

Fixed Cost : +16 (SUBARU +12, SIA +4)
SG&A : +16 (SUBARU +11, SOA -2, others)
Warranty claims : -807
Domestic : -22
Overseas : -99
Sales incentive：+74
Others : -2

+36

SUBARU : +24 (material cost +21)
SIA : +12 (material cost +23)
US$ : +202
EURO : -2
CA$ : -2
CNY : ±0
Currency exchange adjustment : +37
Unrealized gain: -63

Plan
Operating Income
1st Half
FYE 2019(as of Aug. 6th)
https://www.subaru.co.jp/en/ir/

-550

SG&A
expensesand others-775

Sales volume& mixtureand others-49
Actual Results
Operating Income
1st Half
FYE 2019
7

Here we have the analysis of variance at the operating income level compared to the plans for the first half disclosed at the time the 1Q results wereannounced on August 6.
Profits undershot plans by 55.0 billion yen, and what follows is a discussion of the factors behind this.
There were three factors at work here.
<1> The first is the foreign exchange rate gains of 17.2 billion yen.
The roughly 4-yen depreciation of the yen against the U.S. dollar led to an increase of 20.2 billion yen. The roughly 1-yen depreciation against the euro
resulted in a negative impact of 0.2 billion yen, and the approximately 1-yen appreciation against the Canadian dollar also had a negative effect of 0.2
billion yen.
Foreign exchange adjustments related to transactions between SUBARU and its overseas subsidiaries had a positive impact of 3.7 billion yen, while
unrealized gains on inventory had a negative effect of 6.3 billion yen.
<2> R&D expenses had a positive impact of 6.6 billion yen.
<3> The effect of cost reductions was positive at +3.6 billion yen. Of this SUBARU accounted for +2.4 billion yen and SIA for +1.2 billion yen.
The breakdown of the SUBARU portion was +0.3 billion yen in cost reductions, and +2.1 billion yen from material prices and market conditions, etc.
For SIA the breakdown was -1.1 billion yen in cost reductions, and +2.3 billion yen from material prices and market conditions, etc.
Now we will look at factors pushing down operating income.
<4> An increase in SG&A and other expenses had a negative impact of 77.5 billion yen. This breaks down into the following three areas.
(1) Reductions in fixed manufacturing costs had a positive impact of 1.6 billion yen. Of this, SUBARU accounted for +1.2 billion yen and SIA for+0.4 billion yen.
At SUBARU, the impact of lower costs for supplier dies was +0.2 billion yen, and reductions in fixed processing costs came to +1.0 billion yen.
At SIA, the effects of lower costs for supplier dies came to +0.7 billion yen, while the impact of increases in fixed processing costs was -0.3 billion yen.
(2) Higher SG&A expenses had a positive impact of 1.6 billion yen.
Of this, SUBARU accounted for +1.1 billion yen, domestic dealers were -0.1 billion yen, SOA was -0.2 billion yen, the Canadian subsidiary was
neutral, and others had a positive impact of 0.8 billion yen.
(3) The increase in warranty claims had a negative impact of 80.7 billion yen. This consists primarily of the recall expenses discussed in the previous
sheet.
<5> Sales volume & mixture and others came to negative 4.9 billion yen. This factor breaks down into the following four areas.
(1) New car sales domestic: -2.2 billion yen(2) New car sales overseas: -9.9 billion yen(3) Incentives: +7.4 billion yen. Of this, SOA was +6.5 billion yen.
Incentives per vehicle were 2,200 dollars, undershooting the planned figure of 2,300 dollars by 100 dollars.
(4) Inventory adjustments and other factors were -0.2 billion yen.
As a result of the above, consolidated operating income for the first half of FYE 2019 fell short of plans by 55.0 billion yen, to 55.0 billion yen.

7

（Plan as of Oct. 23rd vs. Actual Results） 1st Half :Consolidated Income Statements（100 Million Yen）

Revised Plan
1st Half FYE 2019as of Oct. 23rd(a)

Actual Results
1st Half FYE 2019(b)

Variance(b)-(a)14,86014,868+8Operating income

610

550

-60

Ordinary income

660

600

-60

Net income attributableto owners of parent

490

443

-47

¥109/US$¥109/US$±¥0/US$Net sales

SUBARU exchange rate

https://www.subaru.co.jp/en/ir/

8Here we have a comparison with the revised consolidated forecasts disclosed on October 23.

With regard to the inappropriate final inspection of vehicles at our Gunma plant,
we took the opportunity of on-the-spot inspections conducted by the Ministry of Land, Infrastructure,
Transport and Tourism from October 16, 2018, to carry out additional internal investigations. As a result, we
implemented further recalls.

The consequence was a provision for an additional 6.0 billion yen in expenses,
which caused the variance from the revised consolidated forecasts announced on October 23.

8

Consolidated Balance Sheets(100 Million Yen)

As of March2018

As of September
2018

Variance

28,66529,351+686

Current assets

17,704

17,810+106

Noncurrent assets

10,960

11,541+580

13,055

13,581

+526

862

498

-364

15,61015,770+160

Retained earnings

12,835

12,726-109

Shareholders’ equity

15,52815,695+167

Ratio of shareholders’equity to total assets

54.2%

53.5%

-

0.06

0.03

-

Total assets

Total liabilities
Interest bearing debts
Net assets

D/E ratio＊Due to partial amendments to Accounting Standard for Tax Effect Accounting, calculation method has been changed from FYE 2019.
The comparative year has been also recalculated under the same conditions.

https://www.subaru.co.jp/en/ir/

9

Next, we will move on to the balance sheet.

Total assets were 2,935.1 billion yen, an increase of 68.6 billion yen from the end of the previous fiscal year.
The main causes of this included an increase of 58.0 billion yen in noncurrent assets; an increase inmerchandise and finished goods of 52.6 billion yen; an increase in work in process of 19.0 billion yen; a risein raw materials and supplies of 15.3 billion yen; and a decline of 76.5 billion yen in combined funds in hand(consisting of cash and deposits in addition to short-term investment securities).

Liabilities were 1,358.1 billion yen, increasing by 52.6 billion yen over the end of the previous fiscal year.
The major component of this was a 44.5 billion yen increase in accrued expenses.

Net assets were 1,577.0 billion yen, an increase of 16.0 billion yen from the end of the previous fiscal year.
The main factors behind this were a rise in the foreign currency translation adjustment of 27.4 billion yen, anda decline in retained earnings of 10.9 billion yen.

The ratio of shareholders’ equity to total assets was 53.5%.

9

1st Half :Consolidated Statement of Cash Flows(100 Million Yen)

Actual Results
1st Half FYE 2018

Actual Results
1st Half FYE 2019

Variance

Net cash provided by (used in)operating activities

2,078

647

-1,431

Net cash provided by (used in)investing activities-1,014-800+214Free cash flows

1,064

-153

-1,217

Net cash provided by (used in)financing activities-1,033-923+110

Effect of exchange rate change
on cash and cash equivalents

27

283

+255

Net increase (decrease)in cash and cash equivalents

58

-794

-852

-5

-

+5

37

-

-37

7,375

6,862

-513

Increase (decrease) in cash and cash
equivalents resulting from change ofscope of consolidation
Increase (decrease) in cash and cash equivalents
resulting from change in fiscal periodof consolidated subsidiaries

Cash and cash equivalents
at end of period
https://www.subaru.co.jp/en/ir/

10

Now we come to the consolidated statement of cash flows.
Net cash provided by operating activities was 64.7 billion yen.
The main components of this included income before income taxes of 63.0 billion yen, depreciation andamortization of 51.4 billion yen, an increase in accrued expenses of 37.9 billion yen, a rise in inventories of74.2 billion yen, and income taxes paid of 50.3 billion yen.
Net cash used in investing activities was 80.0 billion yen.
The main component of this was purchases of non-current assets amounting to 75.8 billion yen.
As a result, free cash flow totaled a negative 15.3 billion yen.
Net cash used in financing activities was 92.3 billion yen.
The bulk of this was accounted for by 55.2 billion yen in expenditures for cash dividends paid, a 19.4 billion
yen repayment of long-term loans payable, and a decrease in short-term loans payable of 16.9 billion yen.
Cash and cash equivalents totaled 686.2 billion yen.

10

1st Half :Operating Results of Subsidiaries in U.S.
（Million US$）

Actual Results
1st Half FYE 2018

Actual Results
1st Half FYE 2019

9,115

8,643

-472

Operating income

278

104

-174

Net income

SOA
Net sales

Variance

177

94

-83

Retail sales(Thousand units)

334.7

350.1

15.4

SIA

Actual Results
1st Half FYE 2018

Actual Results
1st Half FYE 2019

3,901

4,044

+143

Operating income

84

33

-51

Net income

54

28

-26

178.9

172.6

-6.4

Net sales

Production(Thousand units)
https://www.subaru.co.jp/en/ir/

Variance11

Now we will look at the results of the U.S. subsidiary.

SOA retail sales rose 15.4 thousand units year on year to 350.1 thousand units, with a decline in sales of theForester, ahead of a full model change, being offset by the continued strength of the Crosstrek and the volume
contribution from the recently launched new Ascent.

Net sales fell by 472 million dollars year on year to 8,643 million dollars, and operating income decreased by
174 million dollars year on year to 104 million dollars.

The factors behind the change in operating income were a negative impact from sales volume & mixture of
76 million dollars, and a further negative effect from increased SG&A expenses of 98 million dollars, leading
to a year-on-year decline of 174 million dollars and operating income of 104 million dollars.

SIA net sales rose by 143 million dollars year on year to 4,044 million dollars.
At the operating level, the combination of a negative impact from sales mix variances of 7 million dollars, anegative impact from higher costs of 20 million dollars, and a negative impact from higher fixed costs of 24
million dollars, resulted in a total of 51 million dollars, and operating income of 33 million dollars.

11Forecasts for FYE 2019https://www.subaru.co.jp/en/ir/

12

12

Revised plan FYE 2019 :Production plan / Consolidated Unit Sales Plan（Thousand Units）

Actual Results
FYE 2018(a)Previous Plan
as of Aug. 6th(b)Revised Plan(c)

Variance(c)-(a)Variance(c)-(b)

Production in U.S.

348.6

384

379.7

+31.1

-4.3

Production in Japan

701.2

672

656.1

-45.0

-15.9

Total

1,049.7

1,056

1,035.8

-13.9

-20.2

* Domestic production figures include Toyota 86/FR-S.

（Thousand Units）

Actual Results
FYE 2018(a)Consolidated Unit
Sales Total

1,066.9

Previous Plan
as of Aug. 6th(b)1,100.4

Revised Plan(c)

1,041.1

Variance(c)-(a)Variance(c)-(b)

-25.8

-59.3

https://www.subaru.co.jp/en/ir/

13

Next, we will discuss production and consolidated unit sales plans for the full fiscal year ending March 31,
2019.

With regard to production, we have revised our plans downward by 20.2 thousand units from the previous
plan to 1,035.8 thousand units, a year-on-year decline of 13.9 thousand units.

We have reviewed these plans due to a series of cases of inappropriate final inspections, which has led tochanges being implemented in the inspection process and in the operating conditions.

Accordingly, we have revised our consolidated unit sales plans downward by 25.8 thousand units from theprevious plan to 1,041.1 thousand units, a year-on-year decline of 59.3 thousand units.

In terms of units by market, we are still carrying out a detailed investigation of the facts
based on these revised plans, and so on this occasion we are announcing only the total figures.

13

Revised plan FYE 2019 :Consolidated Income Plan
(100 Million Yen)

Actual Results
FYE 2018(a)Previous Plan
as of Aug. 6th(b)Revised Plan(c)

Variance(c)-(a)Variance(c)-(b)Net Sales(34,052)

32,32732,50032,100-227-400

Domestic(6,686)

6,680

6,086

6,173

-507

+87

Overseas(27,367)

25,647

26,41525,927+280-487

Operating Income

3,794

3,000

2,200

-1,594-800

Ordinary Income

3,799

3,050

2,290

-1,509-760

Income before Taxes
and Minority Interests

2,973

2,987

2,290

-683

-697

Net Income Attributableto Owners of Parent

2,204

2,200

1,670

-534

-530

SUBARU Exchange Rate

¥111/US$¥105/US$¥110/US$-¥2/US$+¥5/US$* Changed accounting policies from FYE 2019 (deducting sales incentives from net sales). The comparative year has been also recalculated under the same conditions.
* Figure in ( ) ：Net sales before deducting sales incentives

https://www.subaru.co.jp/en/ir/

14

Next we will look at the consolidated income statements plan.

As a result of incorporating the decline in unit sales and the increase in quality-related expenses and otherfactors, consolidated net sales are forecast to fall by 22.7 billion yen year on year to 3,210.0 billion yen.
Operating income is set to decline by 159.4 billion yen to 220.0 billion yen, while ordinary income and net
income attributable to owners of parent have been revised to 229.0 billion yen and 167.0 billion yen
respectively.

14

Revised Plan FYE 2019 :Analysis of Variance in Operating Income (Consolidated)

R&D
expenses

Cost
reduction

+132

+16

Fixed cost : -186 (SUBARU -114, SIA -72)
SG&A : -213 (SUBARU -79, SOA -90, others)
Warranty claims : -508
Domestic : -236
Overseas : -227
Sales Incentive ：-189
Others : -37

US$ : -168
EURO : +6
CA$ : -14
CNY : +2
Currency exchange adjustment :+92
Unrealized gain : -64

SG&A
expensesand others-907
SUBARU : +36 (material cost -78)
SIA : -20 (material cost -57)

Sales volume& mixtureand others-689
Actual Results
Operating Income
FYE 2018
https://www.subaru.co.jp/en/ir/(100 Million Yen)

-1,594

Loss oncurrency
exchange-146
Revised Plan
Operating Income
FYE 2019
15

Now let us look at the analysis of variance at the operating income level.
Compared to the result for the same period of the previous fiscal year, there has been a decline of 159.4 billion yen, the respective components ofwhich will now be explained.
First, we will explain the two factors that are forecast to push up operating income.
<1> Decline in R&D expenses with a positive impact of 13.2 billion yen.
<2> Positive cost-reduction effects of 1.6 billion yen. Of that, SUBARU accounts for +3.6 billion yen and SIA for -2.0 billion yen.
For SUBARU the breakdown is +11.4 billion yen in cost reductions, and -7.8 billion yen from material prices and market conditions, etc.
For SIA the breakdown is +3.7 billion yen in cost reductions, and -5.7 billion yen from material prices and market conditions, etc.
Next, we will look at factors pushing down profit.
<1> The increase in SG&A and other expenses is expected to push down operating income by 90.7 billion yen. There are three factors behind this, as
follows.
(1) Increases in fixed manufacturing costs have a negative impact of 18.6 billion yen. Of this, SUBARU is slated to see increased costs for supplierdies of 9.3 billion yen, and higher fixed processing costs of 2.1 billion yen, for a total of 11.4 billion yen.
SIA will likely experience a rise in costs for supplier dies of 3.4 billion yen and increased fixed processing costs of 3.8 billion yen, for a total negative
impact of 7.2 billion yen.
(2) Higher SG&A expenses are predicted to have a negative impact of 21.3 billion yen.
Of this, SUBARU is projected to account for -79.0 billion yen, domestic dealers for -1.1 billion yen, SOA for -9.0 billion yen, the Canadian subsidiaryfor -1.0 billion yen, and others for -2.3 billion yen.
(3) An increase in warranty claims is forecast to have a negative impact of 50.8 billion yen.
The previous fiscal year saw the recording of expenses such as those related to recall costs for final inspection issues, and increased provisions for
product warranties. This fiscal year also, expenses are expected to rise due to major recall expenses such as those related to valve springs, andadditional records in relation to final inspection problems.
<2> The negative impact of sales volume & mixture and others is seen at 68.9 billion yen. There are four factors behind this, as follows.
(1) New car sales domestic: -23.6 billion yen(2) New car sales overseas: -22.7 billion yen(3) Incentives: -18.9 billion yen Of which, SOA accounts for 15.0 billion yen.
Incentives per vehicle this fiscal year are forecast to rise 250 dollars year on year from 2,000 dollars to 2,250 dollars.
(4) Inventory adjustments and other factors: -3.7 billion yen.
<3> Finally, foreign exchange losses are estimated to come in at 14.6 billion yen.
We expect the yen to appreciate by around 2 yen against the U.S. dollar, resulting in a negative impact of 16.8 billion yen.
The roughly 1-yen depreciation against the euro is forecast to result in a positive impact of 0.6 billion yen, while the approximately 2-yen appreciation
against the Canadian dollar will likely have a negative effect of 1.4 billion yen, with the impact of the Chinese yuan being positive by 0.2 billion yen.
Others and foreign exchange adjustments related to transactions between SUBARU and its overseas subsidiaries are predicted to have a positive
impact of 9.2 billion yen, while unrealized gains on inventory are forecast to be negative by 6.4 billion yen.
As a result of the above factors, operating income for the full fiscal year ending March 31, 2019 is forecast to decline by 159.4 billion yen from 379.4
billion yen the previous year to 220.0 billion yen.

15

Previous Plan FYE 2019 (as of August 6th) vs. Revised Plan :Analysis of Variance in Operating Income (Consolidated)(100 Million Yen)

Gain oncurrency
exchange

+438

Cost
reduction

+163

R&D
expenses+121
Domestic : -110
Overseas : -553
Sales incentive ：+54
Others : +43

SUBARU : +90 (material cost +60)
SIA : +73 (material cost +90)
US$ : +485
EURO : -3
CA$ : -4
CNY : +2
Currency exchange adjustment : +36
Unrealized gain : -78

Previous Plan
Operating Income
FYE 2019(as of Aug. 6th)

Fixed cost : -50 (SUBARU -29, SIA -21)
SG&A : -56 (SUBARU -45, SOA +7, others)
Warranty claims : -850

-800

SG&A
expensesand others-956

Sales volume& mixtureand others-566
Revised Plan
Operating Income
FYE 2019

https://www.subaru.co.jp/en/ir/

16

Next we will explain the 80.0 billion yen reduction in profit when compared to the previous plans.
First, we will explain the three factors that are forecast to push up operating income.
<1> The first is foreign exchange rate gains of 43.8 billion yen.
The yen is expected to weaken by roughly 5 yen against the U. S. dollar, leading to a positive impact of 48.5 billion yen.
Minor fluctuations in the euro are expected to have a negative effect of 0.3 billion yen, with the impact of the Canadian dollar forecast
to be negative 0.4 billion yen, and the Chinese yuan contributing a positive 0.2 billion yen.
Others and foreign exchange adjustments related to transactions between SUBARU and its overseas subsidiaries are predicted to havea positive impact of 3.6 billion yen, while unrealized gains on inventory are forecast to be negative by 7.8 billion yen.
<2> Cost reductions are seen having a positive impact of 16.3 billion yen. Of that, SUBARU is expected to account for +9.0 billion
yen and SIA for +7.3 billion yen.
The breakdown of the SUBARU portion is +3.0 billion yen in cost reductions, and +6.0 billion yen from material prices and market
conditions, etc.
For SIA the breakdown is -1.7 billion yen in cost reductions, and +9.0 billion yen from material prices and market conditions, etc.
< 3> R&D expenses predicted to have a positive impact of 12.1 billion yen.
Next, we will look at the factors depressing profit.
<1> An increase in SG&A and other expenses pushing down profit by 95.6 billion yen. There are three factors behind this, as follows.
(1) Increases in fixed manufacturing costs with a negative impact of 5.0 billion yen. Of this, SUBARU is to see increased costs for
supplier dies of 1.7 billion yen, and higher fixed processing costs of 1.2 billion yen, depressing operating income by 2.9 billion yen.
SIA is expected to experience a fall in costs for supplier dies of 2.1 billion yen and increased fixed processing costs of 4.2 billion yen,
for a total negative impact of 2.1 billion yen.
(2) Higher SG&A expenses with an estimated negative impact of 5.6 billion yen.
Of this, SUBARU is projected to account for -4.5 billion yen, domestic dealers for -0.9 billion yen, SOA for +0.7 billion yen, theCanadian subsidiary for -0.7 billion yen, and others for -0.3 billion yen.
(3) Increased warranty claims are forecast to have a negative impact of 85.0 billion yen.
<2> The negative impact of sales volume & mixture and others is seen at 56.6 billion yen. There are four factors behind this, as
follows.
(1) New car sales domestic: -11.0 billion yen(2) New car sales overseas: -55.3 billion yen(3) Incentives: +5.4 billion yen. Of which, SOA to account for +3.5 billion yen.
Incentives per vehicle are forecast to rise by 50 dollars from the previous forecast, from 2,200 dollars to 2,250 dollars.
(4) Inventory adjustments and other factors: +4.3 billion yen.
As a result of the above factors, operating income for the full fiscal year ending March 31, 2019 is now expected to be 220.0 billion
yen, 80.0 billion yen lower than the previous plan of 300.0 billion yen.

16Capex / Depreciation / R&D / Interest bearing debt
(100 Million Yen)

Previous PlanFYE 2019(as of August 6th)(b)

Actual Results
1st Half
FYE 2018

Actual Results
1st Half
FYE 2019

Actual Results
FYE 2018
(a)

Capex

545

591

1,414

1,300

Depreciation

421

473

898

R&D

609

545

Interest
Bearing Debt

976

498

Revised PlanFYE 2019(c)

Variance(c)-(a)Variance(c)-(b)

1,300

-114

±0

930

930

+32

±0

1,211

1,200

1,080

-131

-120

862

800

500

-362

-300

* Changed accounting policies from FYE 2019.
The Company and its major domestic consolidated subsidiaries changed depreciation method of certain tangible fixed assets from the declining-balance method to the straight-line method.

https://www.subaru.co.jp/en/ir/

17

Next, we will look at capital expenditures, depreciation costs, R&D expenses, and interest-bearing debt.
Capital expenditures for the first half were 59.1 billion yen, while depreciation was 47.3 billion yen and R&D
expenses came to 54.5 billion.

With regard to full-year plans, there have been no changes from the previously announced figures for capital
expenditures and the depreciation, but R&D expenses have been cut by 12.0 billion yen from the previousplan, to 108.0 billion yen, and interest-bearing debt is now expected to be 30.0 billion yen lower at 50.0
billion yen.

17

Shareholder Returns【Dividend per share】(Japanese Yen)FYE2019
FYE2018
Previous projection

Revised projection

2nd Quarter

72

72

72

Year-end

72

72

72

Annual (Forecast)

144

144

144

https://www.subaru.co.jp/en/ir/

18

Finally, we come to returns to shareholders.

The interim dividend will be 72 yen.

With regard to the year-end dividend, although the level of profits has deteriorated compared to the previous
set of forecasts due to lower unit sales and increases in quality-related expenses etc., the dividend forecast has
been left unchanged.

The remaining pages contain segment information, etc. for your reference.

This concludes the briefing on our financial results for the first half of the fiscal year ending March 31, 2019.
Thank you very much.

18

Appendix• Non-operating income& expenses and extraordinary income & loss (1H)
• Segment information by business & geographic (1H)
• Overseas net sales (1H)
• Non-consolidated unit sales (1H)
• Consolidated income statements (2Q)
• Complete cars production / Retail sales units

https://www.subaru.co.jp/en/ir/

19

19

1st Half :Non-operating Income & Expenses and Extraordinary Income & Loss (Consolidated)(100 Million Yen)

Actual Results
1st Half FYE 2018

Actual Results
1st Half FYE 2019

Financial revenue and expenditure

24

56

+32

FOREX effects

-20

-8

+12

Other

2

2

-0

Total non-operating income & expenses

6

50

+44

Gain on sales of noncurrent assets

2

10

+9

Gain on sales of investment securities

6

36

+29

-29

-25

+4

-813

-

+813

-9

+8

+17

-842

+30

+872

Loss on sales and retirementof noncurrent assets
Loss related to airbags
OthersTotal extraordinary income & loss
https://www.subaru.co.jp/en/ir/

Variance

20

20

1st Half :Net Sales and Operating Income by Business Segment (Consolidated)(100 Million Yen)

Net Sales
Actual Results
1st Half
FYE 2018

Operating Income

Actual Results
1st Half
FYE 2019

Variance

ActualResults
1st Half
FYE 2018

ActualResults
1st Half
FYE 2019

Variance

Automobile(16,000)

15,217

14,164-1,0532,053

500-1,553Aerospace

(680)

680

630

-50

42

30

-12

183

74

-109

24

18

-6

3

3

+0

2,121

550

-1,571(183)

OthersElimination& Corporate
Total(16,863)

16,08014,868-1,212* Changed accounting policies from FYE 2019 (deducting sales incentives from net sales). The comparative year has been also recalculated under the same conditions.
* Figure in ( )：Net sales before deducting sales incentives

https://www.subaru.co.jp/en/ir/

21

21

1st Half :Net Sales and Operating Income by Geographic Area (Consolidated)(100 Million Yen)

Net Sales
Actual Results
1st Half
FYE 2018

Operating Income

Actual Results
1st Half
FYE 2019

Variance

ActualResults
1st Half
FYE 2018

ActualResults
1st Half
FYE 2019

VarianceJapan(4,979)

4,975

4,496

-479

1,586

266

-1,321

North
America(10,927)

10,176

9,553

-623

439

239

-200

Others

(957)

929

820

-110

24

13

-11

72

32

-40

2,121

550

-1,571Elimination&
Corporate
Total(16,863)

16,08014,868-1,212* Changed accounting policies from FYE 2019 (deducting sales incentives from net sales). The comparative year has been also recalculated under the same conditions.
* Figure in ( )：Net sales before deducting sales incentives

https://www.subaru.co.jp/en/ir/

22

22

1st Half :Overseas Net Sales (Consolidated)(100 Million Yen)

Actual Results
1st Half FYE 2018

Actual Results
1st Half FYE 2019

Variance(11,492)

10,741

10,016-725

Europe

(541)

538

629

+91

Asia

(698)

673

538

-136

Other

(846)

844

811

-33

Total

(13,577)

12,797

11,994-804

North America* Changed accounting policies from FYE 2019 (deducting sales incentives from net sales). The comparative year has been also recalculated under the same conditions.
* Figure in ( )：Net sales before deducting sales incentives

https://www.subaru.co.jp/en/ir/

23

23

1st Half :Non-consolidated Unit Sales(Thousand Units)

Actual Results
1st Half FYE 2018

Actual Results
1st Half FYE 2019

Variance

346.2

318.9

-27.2

Domestic sales

85.6

68.9

-16.7

Passenger cars

70.0

56.0

-14.0

Minicars

15.7

12.9

-2.7

Number of exported vehicles

271.3

254.4

-16.9

Components
for overseas production

178.4

190.6

+12.2

Total

535.3

513.8

-21.5

Domestic production* Domestic production figures include Toyota 86/FR-S.
https://www.subaru.co.jp/en/ir/2424

2Q (3 months) :Consolidated Unit Sales(Thousand Units)

Actual Results
2Q (3 months)
FYE 2018

Actual Results
2Q (3 months)
FYE 2019

Variance

Passenger car

34.0

29.5

-4.5

Minicar

7.9

6.6

-1.3

41.9

36.0

-5.8

US

159.3

152.4

-6.9

Canada

15.3

16.1

+0.8

Russia

1.8

2.6

+0.8

Europe

9.4

5.3

-4.1

Australia

13.6

12.6

-1.0

China

5.8

5.8

-0.0

OthersDomestic total

12.8

13.3

+0.4

Overseas total

218.1

208.1

-9.9

Total

259.9

244.2

-15.7

https://www.subaru.co.jp/en/ir/

2525

2Q (3 months) :Consolidated Income Statements(100 Million Yen)

Actual Results
2Q (3 months)
FYE 2018

Actual Results
2Q (3 months)
FYE 2019

Variance

Net sales(8,315)

7,940

7,776

-164

Domestic(1,681)

1,679

1,572

-107

Overseas(6,634)

6,261

6,204

-57

Operating income

928

-25

-953

Ordinary income

935

-1

-935

Income before taxes
and minority interests

103

14

-88

Net income attributableto owners of parent

27

-12

-38

¥111/US$-¥0/US$SUBARU exchange rate

¥111/US$* Changed accounting policies from FYE 2019 (deducting sales incentives from net sales). The comparative year has been also recalculated under the same conditions.
* Figure in ( ) ：Net sales before deducting sales incentives

https://www.subaru.co.jp/en/ir/26

26

2Q (3 months) :Analysis of Variance in Operating Income(Consolidated)
Fixed cost : -60 (SUBARU -53, SIA -7)
SG&A : -40 (SUBARU -7, SOA -21, others)
Warranty claims : -697

(100 Million Yen)

Domestic : -33
Overseas : -25
Sales incentive : -33
Others : -100

R&D
expenses+84

US$ : -4
EURO : -2
CA$ : -2
CNY : +1
Currency exchange adjustment : +2
Unrealized gain: -37

SG&A
expensesand others-797

Actual Results
Operating Income
2Q (3 months)
FYE 2018

https://www.subaru.co.jp/en/ir/

SUBARU : +12 (material cost -9)
SIA : -19 (material cost -33)

Sales volume& mixtureand others

Loss oncurrency
exchange

-191

-42

-953

Cost
reduction-7
Actual Results
Operating Income
2Q (3 months)
FYE 2019
27

27

Complete Cars Production / Retail Sales Units(1,000 units)
Production

300

250

237

Retail Sales

253

244
229

233

242

248

258

249

231

237

245 242264

273 269

280

276
253

276
268

261
249

278

270
257

264
252
241

250

200

150

100

50

0
Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep
2015

2016

2017

2018

※ Production figures include Toyota 86
https://www.subaru.co.jp/en/ir/

28

28

Forward-looking statements including projections and future strategies mentioned in this presentation are based on currently available information andassumptions and are subject to risks and uncertainties. Actual results may vary materially as a result of various factors including, without limitation, economic
conditions, market demand and fluctuations in foreign exchange rates. Investors are asked not to rely solely on the information in this presentation when they
make their final investment decisions.
https://www.subaru.co.jp/en/ir/

2929