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August 25, 2017

Notice Regarding Recording of Extraordinary Loss
and Revision of Financial Forecasts

Company name: SUBARU CORPORATION
Representative: Yasuyuki Yoshinaga, President and CEO
Code number: 7270 (First Section of Tokyo Stock Exchange)
Contact for inquiries: Katsuo Saito
Corporate Vice President and General Manager of Administration Department,
Corporate Administration Division
Phone: +81-3-6447-8825

Subaru Corporation (the “Company”) hereby announces the recording of an extraordinary loss in its consolidated financial results for the second quarter of FYE2018, as well as the revision of first-half and full-year forecasts for FYE2018 announced on August 3, 2017. Details are set out below.

1. Recording of Extraordinary Loss
On June 26, 2017 the Company issued a notice regarding the “Impact on Subaru of Takata Corporation’s Filing of Petition for Commencement of Rehabilitation Proceedings.” The Tokyo District Court has accepted the petition filed by Takata Corporation in Japan, and TK Holdings Inc. has filed for Chapter 11 proceedings under the Bankruptcy Code in the United States. As a result, the Company expects that in principle it will be unable to make any claims for compensation against Takata Corporation and TK Holdings Inc. (hereinafter referred to collectively as “Takata”).

As of the fiscal year ended March 31, 2017, the Subaru Group had accrued expenses of approximately 73.5 billion yen in undertaking market measures already notified to rectify quality issues with Takata airbag inflators not containing desiccant (hereinafter referred to as “the airbags”). Besides this sum, however, further market measures relating to the airbags to be taken in the current fiscal year and beyond (not yet notified) will incur additional expenses, and other incidental expenses that are expected to arise in association with market measures have been scrutinized. The Company has also prepared proofs of claims relating to rehabilitation proceedings, which will be filed today.

In conjunction with these steps, the Subaru Group has now completed a reasonable estimate of the total loss arising from compensation claims against Takata for quality-assurance expenses related to the airbags, and has thus decided to record in its consolidated financial results for the second quarter of FYE2018 an extraordinary loss amounting to 81.3 billion yen (56.5 billion yen after tax) to account for losses relating to the airbags.

2. Revision of Financial Forecasts
(1) Revision of first-half consolidated financial forecasts for FYE2018 (April 1 to September 30, 2017)

Net sales Operating
income
Ordinary
income
Net income
attributable to
owners of
parent
Net income
per share
Previous forecast (A) Million yen
1,689,000
Million yen
210,000
Million yen
210,000
Million yen
145,000
Yen
189.13
New forecast (B) 1,689,000 210,000 210,000 88,500 115.43
Change (B-A) 0 0 0 (56,500)
Percentage change 0.0 0.0 0.0 (39.0)
For reference:
1st half of FYE2017 results
1,577,652 208,525 227,772 163,837 211.00

(2) Revision of full-year consolidated financial forecasts for FYE2018 (April 1, 2017 to March 30, 2018)

Net sales Operating
income
Ordinary
income
Net income
attributable to
owners of
parent
Net income
per share
Previous forecast (A) Million yen
3,420,000
Million yen
410,000
Million yen
410,000
Million yen
285,000
yen
371.73
New forecast (B) 3,420,000 410,000 410,000 228,500 298.04
Change (B-A) 0 0 0 (56,500)
Percentage change 0.0 0.0 0.0 (19.8)
For reference:
FYE2017 results
3,325,992 410,810 394,330 282,354 365.77

(3) Reason for revisions
As outlined in section 1 above, the revisions are due to the recording of an extraordinary loss. Currency rate assumptions for the first-half and full-year forecasts remain unchanged from those previously announced, as detailed below:
  ・First-half: 110 yen/US$, 120 yen/euro   ・Full-year: 110 yen/US$, 120 yen/euro

Note: Forward-looking statements in this document are based on the information available at the time of the announcement and are subject to various risks and uncertainties that could cause actual results to vary materially.

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