Honda Forecasts Annual Profits to Fall 65%
Honda Motor Co on Tuesday forecast a worse-than-expected 65 percent fall in annual operating profit as it struggles to recover 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 U.S. market after its limited launch in April. Honda has said it would not resume full production of the best-selling model until after summer.
Japan's third-biggest automaker said on Tuesday it expects an operating profit of 200 billion yen ($2.49 billion) in the business year to March 31, 2012, lagging by far a consensus forecast of 407.2 billion yen, according to a post-quake survey of 20 analysts by Thomson Reuters I/B/E/S.
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 -- worse than the 86 yen and 114 yen averaged last year.
A rise in raw material prices and an estimated cost of 40 billion yen to repair damages to facilities will also pressure profits this year, Honda said.
Honda said it expects production in Japan to be "nearly normalised" late this month, while overseas output could take until August or September.
It expects to sell 3.3 million cars this business year -- 6 percent fewer than last year -- and projected a 10.8 percent drop in North America due to a dearth of vehicle supply.
"The new Civic was supposed to contribute a big sales push for the full year, so the disruption is going to hurt quite a bit," said Barclays Capital auto analyst, Kei Nihonyanagi.
"We've seen U.S. brands and (South Korea's) Hyundai Motor Co taking market share in May and we'll have to see how long this continues."
Honda's chief financial officer, Fumihiko Ike, stressed that Honda planned to ramp up production in the second half to cover as much of the early losses as possible.
"We're expecting sales of nearly 1 million vehicles in both the third and fourth quarters, out of the total 3.3 million this year," Ike told reporters. Honda will boost production mainly at its Indiana and Alabama factories to achieve a more than 20 percent output rise beyond autumn, he said.
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 U.S. 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.
($1 = 80.225 Japanese yen) (Additional reporting by Antoni Slodkowski; Editing by Matt Driskill)