Now let’s look at the factors behind the projected year-on-year 23.0 billion yen increase in operating income that will take us from 44.0 billion yen to 67.0 billion yen.
Among the factors expected to bring profits up is a good sales mix variance, which will lead to a gain of 51.4 billion yen. This gain can be broken down into the following three areas. First, we will see a loss of 3.3 billion yen in domestic new car sales. This loss will be due to the decline in minicar sales although the sales volume of passenger cars is expected to increase. Next, we will see a gain of 20.5 billion yen in overseas automobile sales. The Impreza and Legacy will be the main sales engines. Finally, we expect a gain of 34.2 billion yen due to inventory adjustments.
Reduced material costs will also have a positive impact on our operating income, generating an overall gain of 21.1 billion yen. This figure includes a gain of 19.0 billion yen coming from FHI and a gain of 2.1 billion yen at SIA. FHI is expected to generate a gain of 14.6 billion yen through cost reduction efforts and a gain of 4.4 billion yen due to lower material costs and other favorable market factors. SIA will also generate a gain of 3.2 billion yen but will lose 1.1 billion yen due to hikes in raw material prices.
Another factor that will bring our operating income up will be a likely foreign exchange gain of 3.1 billion yen. This includes a gain of 7.8 billion yen due to an approximate 1 yen depreciation against the U.S. dollar, a loss of 1.5 billion yen due to an approximate 3 yen appreciation against the euro, and a gain of 0.2 billion yen due to an approximate 1 yen depreciation against the Canadian dollar. The 3.1 billion yen gain also includes a loss of 3.4 billion yen due to foreign exchange adjustments for transactions between FHI and its overseas subsidiaries.
The main factor that will lead to a decrease in operating income will be a loss of 47.7 billion yen due to increased SG&A expenses. This loss can be broken down into the following three areas. First off there will be a loss of 30.5 billion yen in fixed manufacturing costs, including a loss of 28.0 billion yen at FHI and a loss of 2.5 billion yen at SIA. FHI will see a loss of 17.7 billion yen due to a cost increase for suppliers’ dies and a loss of 10.3 billion yen due to higher fixed processing costs, both of which are related to the launching of a series of new models. SIA will see a loss of 2.4 billion yen due to increased costs for suppliers' dies and a loss of 0.1 billion yen due to increased processing costs. Secondly we expect to experience a loss of 25.0 billion yen from increases in SG&A expenses. This loss will include a loss of 7.0 billion yen at FHI, a gain of 1.1 billion yen at domestic dealers, a loss of 13.6 billion yen at SOA, a loss of 1.0 billion yen at our Canadian subsidiaries, a loss of 0.1 billion yen at our European subsidiaries, and a loss of 4.4 billion yen at other operations. The third factor includes a decrease in costs associated with warranty claims that will lead to a gain of 7.8 billion yen.
Another factor that will bring operating income down will be an increase in R&D expenses, which is expected to result in a loss of 4.9 billion yen.
These factors combined will bring operating income for the fiscal year ending March 2013 up 23.0 billion yen to total 67.0 billion yen.