Daily Management Review

Honda Increases Its Yearly Profit Prediction After Exceeding Its Quarterly Target


Honda Increases Its Yearly Profit Prediction After Exceeding Its Quarterly Target
Honda Motor Co upped its full-year operating profit forecast on Wednesday due to a cheaper yen, but warned against over-optimism, citing a continued chip shortage and concerns about an economic slowdown.
Honda's mixed reaction reflected a commonly held perception among Japanese automakers that, while demand is high and recovery from COVID-19 is begun, they have yet to totally overcome unfavourable issues impeding operations.
Honda increased its operating profit expectation for the fiscal year ending March 31 to 830 billion yen ($6.15 billion) from 810 billion.
Honda's first-quarter output, like that of other automakers, was hampered by a global semiconductor scarcity and China's COVID-19 lockdowns, which disrupted part shipments.
Nonetheless, the impact of the production lockout was already factored in when Honda stated at the start of the fiscal year that it expected to sell 4.2 million automobiles, according to executive vice president Kohei Takeuchi.
"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 CEO stated that the chip shortfall will continue throughout the fiscal year, despite indications of a glut of semiconductors for computers and cell phones.
The Japanese carmaker reported a lower-than-expected 9% reduction in operating profit for the three months ending June 30 at 222.2 billion yen, as a weaker yen helped alleviate some of the pain from reduced production and higher material prices. The outcome exceeded the average estimate of 200.2 billion yen in a Refinitiv poll of ten analysts.
In the United States, Honda's main market, retail sales were cut in half for the April-June quarter due to low dealer stocks despite robust demand.
Takeuchi said that U.S. dealers only have approximately 20,000 in inventory, and that it was prioritising clearing a backlog of deliveries to clients while also monitoring the economic impact of inflation and increasing interest rates.
"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 Corp forecast this week that robust demand from US car purchasers would continue, while Suzuki Motor Corp predicted that the business would make an operating profit as long as it produced enough cars to meet an order backlog.