Japanese OEMs' Financial Outlook for FY 2016: Concerns about second half

Significant increases of 12% in sales and 21% in operating income achieved during 1H of FY 2016



10 Japanese OEMs Consolidated Sales

Operating Income and Operating Margin

 This report consists of the Japanese OEMs' actual financial results for the first half of FY 2016 and their outlook for the entire fiscal year's results.

 The ten Japanese OEMs successfully achieved strong results in the first half of FY 2016. Their sales totaled JPY 34,249 billion, a 12.1% increase year over year (y/y); while their operating income was JPY 3,039.2 billion (up 21.2% y/y). The operating margin also rose, from 8.2%, to 8.9% y/y. The growth in North American sales and the weakening of the Japanese yen against the US dollar helped offset the poor performance in Japan and emerging countries. The OEMs' operating income, thanks to favorable currency translation, increased by JPY 464.4 billion.

 In the first half of FY 2016, global unit sales increased modestly, by 1.2% y/y, to 12.33 million units. By region, sales in Japan decreased 8.1%, and those in Asia and other emerging countries saw a slight increase of 0.8%. North American sales, however, were robust, increasing 6.7% and contributing to the overall increase in sales and operating income.

 In regard to the second half of FY 2016, vehicle markets will remain uncertain in China and other emerging countries and currency translation is predicted to reduce operating income by JPY 376 billion. This is based on using an exchange rate of JPY 116=1 USD for the second half of the fiscal year. Taking these circumstances into consideration, and based on the financial reports of the first half of the fiscal year; we can anticipate a decrease in sales and profits in the second half of this fiscal year in comparison with the second half of FY 2015.

 For all of FY 2016, the amount of increase in operating income is expected to be lower, at JPY 88.4 billion, due to negative currency translation. Sales are forecast to increase 5.2% and operating income to increase 7.3%. Thus, the rate of growth is forecast to decline.

 * The OEM's fiscal year runs from April 1-March 31 of the following year. The first half of fiscal year 2016 covers the six-month period from April 1, 2015-September 30, 2015, while the second half covers the period between October 1, 2015-March 31, 2016.

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