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Japan's Subaru cuts annual profit outlook on yen, typhoon impact

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By Reuters
Japan's Subaru cuts annual profit outlook on yen, typhoon impact
A Subaru logo is displayed at the Tokyo Motor Show, in Tokyo, Japan October 23, 2019. REUTERS/Soe Zeya Tun/Files   -   Copyright  SOE ZEYA TUN(Reuters)

TOKYO (Reuters) – Subaru Corp <7270.T> lowered its annual profit forecast on expectations of a stronger yen and the impact on production from a typhoon last month, driving its shares down as much as 4.5%.

Japan’s smallest major automaker, which is owned a fifth by top-ranked Toyota Motor Corp <7203.T>, cut its forecast for operating profit to 220 billion yen ($2 billion) for the year ending March 2020, from a previous forecast of 260 billion yen.

Subaru revised its forecast for the yen to average 107 versus the dollar over the period, from 110 previously.

A stronger currency eats into profits because cars exported from Japan become more expensive and the value of earnings made overseas decreases.

The United States is Subaru’s biggest market, accounting for about 60% of overall sales.

Typhoon Hagibis forced Subaru to halt production at its factories in Gumna, north of Tokyo, for more than a week in October due to supply chain disruptions.

The stoppage, which lasted until Oct. 25, resulted in lost production of 11,000 vehicles, Chief Executive Officer Tomomi Nakamura told a briefing in Tokyo on Wednesday.

Hagibis was the worst typhoon to hit Japan in decades, leaving at least 80 people dead, according to national broadcaster NHK.

“We have restarted production, but we couldn’t return to full capacity immediately,” Nakamura said.

“Some of our suppliers’ factories were completely submerged.”

Subaru also said vehicle sales rose nearly 20% in the first half of the fiscal year compared with a year earlier, driven almost entirely by an improvement in the United States amid strong demand for the Forester SUV crossover.

Subaru shares were down 1% at 3,102 yen by 0440 GMT, after touching a low of 2,995.5 yen earlier.

(Reporting by Kevin Buckland; Editing by Himani Sarkar and Muralikumar Anantharaman)