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Let's look at the reasons behind the year-on-year increase of 6.7 billion yen in operating income that went from 10.7 billion yen to 17.3 billion yen.
The primary reason for the earnings increase was a gain of 33.4 billion yen due to sales mix variances. This gain can be broken down into the following three areas. First, we saw a gain of 1.7 billion yen in domestic new car sales. Although minicar sales fell, passenger vehicle sales drove overall domestic sales up.
Next, we saw a gain of 25.7 billion yen in overseas new car sales. Healthy sales of the Impreza brought sales for this quarter up, far exceeding sales for the last year's first quarter which saw a slump in production and sales due to the March 11 earthquake.
Then finally, we had a gain of 6.0 billion yen due to inventory adjustments and others.
Another factor behind the jump in operating income was a gain of 4.0 billion yen related to reduction in cost. This includes a gain of 3.7 billion yen generated by FHI as well as a gain of 0.3 billion yen coming from SIA. FHI generated a gain of 2.7 billion yen from cost reductions and another gain of 1.0 billion yen due to lower material prices and better market conditions. SIA yielded a gain of 0.3 billion yen through cost reductions while materials prices, etc. did not cause any year-on-year change in earnings.
The main factor bringing operating income down was a loss of 24.6 billion yen due to increases in SG&A expenses. This overall gain can be broken down into the following three areas.
First, we see that an increase in fixed manufacturing costs generated a loss of 10.8 billion yen, with a loss of 9.3 billion yen coming from FHI and another loss of 1.5 billion yen at SIA. FHI generated a loss of 3.3 billion yen due to increased costs for suppliers' dies and a loss of 6.0 billion yen due to higher fixed processing costs. SIA lost 0.4 billion yen due to higher costs for suppliers' dies and 1.1 billion yen due to an increase in fixed processing costs.
Next we see that an increase in SG&A expenses led to a loss of 12.3 billion yen. FHI experienced a loss of 3.6 billion yen due to transportation and packing costs that rose in tandem with the increasing sales volume as well as an increase in SG&A expenses compared with the same period last year when SG&A expenses declined following on the heels of the March 11 earthquake. The 12.3 billion yen loss also includes a loss of 0.5 billion yen at domestic dealers, a loss of 6.4 billion yen generated at SOA from higher sales promotion costs associated with the increasing sales volume, a gain of 0.3 billion yen at our Canadian subsidiaries, and a loss of 2.1 billion yen from other operations.
The third and last factor includes an increase in costs associated with warranty claims that led to a loss of 1.5 billion yen. This year-on-year loss was due to an allowance for recalls.
Another contributing factor that brought operating income down was a foreign exchange loss of 3.7 billion yen. This includes a loss of 1.8 billion yen due to an approximate 1 yen appreciation against the U.S. dollar, a loss of 1.2 billion yen due to an approximate 11 yen appreciation against the euro, and a loss of 0.4 billion yen due to an approximate 6 yen appreciation against the Canadian dollar. This figure also includes a loss of 0.3 billion yen due to foreign exchange adjustments for transactions between FHI and its overseas subsidiaries.
Finally, an increase in R&D expenses resulted in a loss of 2.4 billion yen.
These factors combined brought consolidated operating income for the first quarter of the fiscal year ending March 2013 up 6.7 billion yen to total 17.3 billion yen.