By Noriyuki Suzuki,
Honda Motor Co. on Friday cut its net profit outlook for the current business year by 17.2 percent to 555 billion yen ($4.9 billion) as a shortage of parts prompted a sharp cut in its auto sales target and surging raw material costs weigh on the bottom line.
Honda's revised forecast from 670 billion yen represents a 15.6 percent year-on-year fall in net profit for the fiscal year ending March 2022. The carmaker also slashed its operating profit projection to 660 billion yen from its earlier forecast of 780 billion yen.
Sales, meanwhile, are now seen at 14.60 trillion yen, down from its earlier estimate of 15.45 trillion yen. The latest sales outlook still represents a 10.9 percent increase from the previous fiscal year.
Honda lowered its annual sales target for cars further by 650,000 to 4.2 million units for fiscal 2021. The figure is lower than the 4.55 million units sold in fiscal 2020.
Honda had initially planned to sell 5 million units but cut the outlook by 150,000 units to 4.85 million in August when the automaker released its first quarter results.
Like other automakers, Honda has been forced to curb production to cope with a shortage of car parts, including semiconductors, after surging COVID-19 cases caused many factories to shut down in Southeast Asia.
Executive Vice President Seiji Kuraishi said the chip crunch is expected to continue for a while.
"We had expected a recovery in semiconductor supply in the third quarter but the impact of lockdowns in Asian nations has been prolonged," Kuraishi said in a briefing.
"The supply recovery is expected in the fourth quarter and we will ramp up production accordingly," he said.
The full-year outlook was cut despite a boost from a weaker yen as rising raw material costs offset that benefit. Honda revised its assumed exchange rate of the Japanese currency to the U.S. dollar for the current fiscal year to 110 yen from 106 yen.
A weak yen serves as a boon to exporters as their overseas profits are inflated when repatriated. If the dollar moves one yen, it would have an impact of around 12 billion yen annually on Honda's operating-level earnings.
Toyota Motor Corp. also faces production cuts and surging material costs, but the weak yen enabled the world's top-selling automaker by volume to raise its full-year net profit outlook on Thursday.
Kohei Takeuchi, Honda's senior managing executive officer, said a "tailwind" from the yen's depreciation against the dollar is expected in the second half.
"We will also have to absorb rising costs from higher raw material prices as much as possible," he told the briefing.
For the fiscal first half, Honda reported a 2.4-fold increase in net profit to 389.21 billion yen, and operating profit gained 2.6-fold to 442.20 billion yen. Sales increased 21.0 percent to 6.99 trillion yen.
Honda saw fewer car sales than a year earlier but those for motorcycles gained. It sold 8.17 million motorcycles, up 29.3 percent, and 1.92 million cars, down 6.4 percent, in the six months to September.
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Weak yen lifts Toyota's FY 2021 profit outlook despite output cuts
Japan automakers' domestic output falls nearly 50% in Sept.
Bank of Japan cuts economic growth, price forecasts, keeps easing policy
