Tokyo: Honda Motor Co. cut its annual profit forecast as sluggish global vehicle demand and supply issues weigh on the Japanese carmaker, which unveiled a 100 billion yen ($915 million) share buy-back.
Operating profit for the fiscal year ending March will be 690 billion yen instead of 770 billion yen, the company said in a statement Friday. Analysts are predicting a full-year profit of 748 billion yen on average. The revenue forecast was cut to 15.05 trillion yen from 15.65 trillion yen, following a prior revision in August.
The weak outlook by Honda and other smaller Japanese carmakers contrast with Toyota Motor Corp, which is sticking by its profit forecast thanks to healthy sales in the US and Japan. Even amid weaker demand, global automakers are figuring out ways to survive the industrial shift toward electronic vehicles and self-driving technology. Last week, Honda and Hitachi Ltd agreed to merge four of their car parts businesses to create an auto parts supplier with almost $17 billion in sales.
“The downward revision was within expectations, and profit margins of around 3 per cent in the car business is still tough,” said Koji Endo, an analyst at SBI Securities. “They will reduce costs by pulling back on capital investments and restructuring, but they will still be lagging behind Toyota for the better part of a decade. The 100 billion yen buy-back, however, was a positive surprise.”
For the latest quarter ending September, the Japanese automaker reported an operating profit of 220 billion yen compared with analysts’ average estimate for 182 billion yen.
“There’s no doubt that the profitability of our car business is low,” Seiji Kuraishi, Honda’s chief operating officer, said at a news conference in Tokyo. “We can’t compete if we remain the way we are, so we are working to change that.”