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Honda warns of rising costs, forecasts weaker annual profit

TOKYO: Japan's Honda Motor on Friday (May 13) forecast a steeper-than-expected 7 per cent fall in annual earnings and warned that the long chip crunch and rising raw material costs were hurting profit, echoing comments from rivals Toyota and Nissan.

Global automakers such as Honda have slashed production due to a severe shortage of semiconductors and now face what top automaker Toyota Motor called an "unprecedented" increase in costs as China's COVID-19 curbs have shuttered factories and the war in Ukraine further strains supply chains.

Honda, Japan's second-biggest automaker by sales, forecast operating profit will fall to 810 billion yen (US$6.29 billion) for the current fiscal year that began in April, far below the average 926.3 billion that analysts had forecast, according to Refinitiv.

"Honda is expecting that the external business environment will remain challenging including a further increase in cost," the company said in a statement.

Toyota on Wednesday forecast a 20 per cent slump in profit this year, while Nissan Motor said it expected profit to be flat.

Owner of the best-selling Accord, Honda said on Thursday it would slash production by about a fifth at two of its domestic factories for the rest of May, a month after it cut back production by about a half at one of them.

The company on Friday reported a smaller-than-expected 6 per cent fall in operating profit to 199.5 billion yen (US$1.55 billion) for the quarter ended Mar 31, down from 213.2 billion yen a year earlier.

That beat the 152.2 billion yen profit expected by nine analysts on average, Refinitiv Eikon data showed.

Honda's shares - which closed up 2.2 per cent on Friday amid a 2.6 per cent rise in the broader market - have risen 1 per cent so far this year.

Source: Reuters/gs


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