Japan’s Honda Motor, maker of the Fit small car, Asimo robot, and Super Cub motorcycles, reported a sharp rise in operating profit for the December quarter and lifted its annual outlook. The firm has increased its operating profit outlook for the entire year by 4.2%, reaching 1.25 trillion yen ($8.4 billion). This adjustment contrasts with the initial projection of 1.2 trillion yen and falls slightly below the average analyst forecast of 1.27 trillion yen, as indicated by LSEG data.
The carmaker, which has a significant presence in North America and sells many SUVs, said strong sales there helped drive global auto sales in the quarter. It also saw a boost from the weaker yen, making its products cheaper to export than when price they are yen. Honda said it would continue to focus on cost cuts and new models to help boost its margins. Its North American profit forecast rose to $430 million for the fiscal year ending in March 2024, compared with an earlier estimate of $390 million.
In Asia, Honda saw robust demand for its XR-V and Vezel SUVs and popular Civic sedan, which underwent a redesign this year. The company also benefited from lower costs and quality-related expenses. The company said it expects China to remain a robust market, and its forecast for Asian sales climbed 6 percent to 872,000 vehicles for the year through March 2022.
Despite the gains, Honda cut its sales forecast for the United States by 75,000 units to 1.9 million, saying it expected a slower-than-expected recovery from Covid-19. It trimmed its sales forecast in Europe, Brazil, and Mexico but left it unchanged for Japan.
The automaker said it remained committed to its initiatives toward electrification. Still, it was not confident the chip shortage and the continuing spread of the coronavirus in China would allow it to fully recover its manufacturing output in the near term.
Honda, which has a strong position in hybrid cars and plans to launch its first high-volume battery electric vehicle next year, said it remained on track to sell 2 million such vehicles annually by 2025. It also aims to sell 5 million units of hybrid vehicles by the end of the current decade.
In a sign of how much the global economy has recovered from a slump triggered by the spread of the coronavirus, Honda lifted its operating profit forecast for the full fiscal year ending in March 2023 to 930 billion yen, compared with an earlier projection of 810 billion yen. The carmaker said it expected a further rebound in the Japanese economy, a more robust global economy, and a weaker yen. It is also expected to see savings from the weaker yen and lower production costs due to the ongoing chip shortage. A stronger yen, however, would eat into overseas earnings when repatriated to Japan. A weaker yen also would help lower the cost of raw materials for the company’s factories.