Honda sees annual profit down 65 pc

TOKYO: Honda Motor Co on Tuesday forecast a worse-than-expected 65 percent fall in annual operating profit hampered by lingering disruption from the March 11 earthquake.

Honda, like other Japanese automakers, had delayed providing financial forecasts because of uncertainty over when parts supplies would recover after the magnitude 9.0 quake in Japan's northeast. In late April, it announced a 52 percent drop in January-March operating profit after production came to a virtual halt in the second half of March.

"These figures are pretty bad," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Tokyo, adding they could temporarily push Honda's stock lower.

"They are very, very conservative and come in well below what analysts had expected. Honda had some R&D centres damaged by the quake and I had the impression that its recovery hasn't been as speedy as its peers."

The difficulty in procuring hundreds of components caused Honda to delay by three months the launch of its new Fit Shuttle model. The wagon, which will carry a hybrid option, debuts this week to take on Toyota's new Prius Alpha.

More worrisome is the loss in potential sales of the remodelled Civic in the key US market after its limited launch in April. Honda has said it would not resume full production until sometime in the fall.

It expects net profit, which includes earnings from China, to decline 63 percent to 195 billion yen, assuming an average dollar rate of 80 yen and a euro rate of 110 yen for the year.

Honda said in a statement it expects production in Japan to be "nearly normalised" late this month, while overseas output could take until August or September.

Honda said it expects to sell 3.3 million cars this business year, 6 percent fewer than last year. It expects motorcycle sales to rise 10.5 percent to 12.645 million units.

For the industry as a whole, a recovery in the supply chain has progressed faster than initially feared, prompting some automakers to project a sales increase this year and offer a surprisingly upbeat outlook.

Mitsubishi Motors Corp said on Monday it expects full-year operating profit to rise 25 percent, saying initial concerns over a prolonged supply disruption had been dispelled.

Top-ranked Toyota Motor Corp, however, forecast a larger-than-expected 35 percent fall in annual profit on Friday, saying it still expected a full, unrestricted return to normal production in November.

Having hit multiple-year highs before the March 11 earthquake on expectations for demand growth in its key US market, Honda's shares have shed some 14 percent after the disasters. That compares with Toyota's post-quake fall of 11.5 percent and the Nikkei's slide of 8.5 percent.

Before the forecasts were announced, Honda shares rose 0.7 percent to 2,931 yen.

Copyright Reuters, 2011