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Honda raises annual profit forecast after beating quarterly view

Stock Markets Aug 10, 2022 06:21AM ET
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© Reuters. FILE PHOTO: A Honda Crider Sport Hybrid vehicle is seen displayed at the GAC Honda booth during a media day for the Auto Shanghai show in Shanghai, China April 19, 2021. REUTERS/Aly Song
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TOKYO (Reuters) - Japan's Honda Motor Co raised the outlook for its full-year operating profit on Wednesday thanks to weaker yen, but warned against over-optimism as it saw the chips shortage continuing and was concerned about an economic slowdown.

The mixed view from Honda reflected sentiment held widely among Japanese carmakers that although demand is strong and recovery from COVID-19 is underway, they have yet to completely shrug off negative factors hindering operations.

Honda raised its operating profit forecast to 830 billion yen ($6.15 billion) from 810 billion for the year ending March 31.

Like other automakers, Honda's production for the first-quarter was hit by the global semiconductor shortage and China's COVID-19 lockdowns that disrupted supplies of parts.

Still, the impact from the lockdown on production was already taken into account when Honda said at the start of the fiscal year that it aimed to sell 4.2 million automobiles, executive vice president Kohei Takeuchi said.

"The lockdown in Shanghai has been lifted, and in June and July, we saw an increase in output compared to the same month a year ago, so the situation has almost normalized," Takeuchi said.

The chips shortage, though, will continue through this fiscal year even though there are reports of a surplus of semiconductors for computers and cell phones, the executive said.

The Japanese automaker posted a smaller-than-expected 9% drop in operating profit for the three months ended June 30 at 222.2 billion yen, as a weaker yen helped ease some of the pain from curtailed production and increased material costs. The result beat an average estimate of 200.2 billion yen in a poll of 10 analysts by Refinitiv.

In the United States, Honda's key market, retail sales halved for the April-June quarter, plagued by low inventories at dealers despite strong demand.

U.S. dealers only have about 20,000 in inventories, Takeuchi said, adding that clearing a backlog of deliveries to customers was its priority, while it was also monitoring the economic impact of inflation and higher interest rate.

"Even though a considerable number of units have fallen due to the coronavirus, we have set up a system that enables us to secure profits in North America," he said. "We are considering further reduction of fixed costs as a measure if necessary."

Honda's rival Subaru (OTC:FUJHY) Corp said last week it expected strong demand from U.S. car buyers to continue while Suzuki Motor Corp predicted the company would see an operating profit so long as it delivered enough cars to cover a backlog of orders.

($1 = 134.9800 yen)

Honda raises annual profit forecast after beating quarterly view

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