Honda profit forecast falls short on yen appreciation

TOKYOHonda Motor Co Ltd, which until last year was the fastest-growing car brand in China, gave a full-year profit forecast that trailed analysts’ estimates on a stronger yen as it halted sales of its popular CR-V crossover in the world’s largest vehicle market.

Operating profit will probably fall to ¥700 billion (RM28 billion) in the year ending March 2019, from ¥833.6 billion last year, the company said in a statement last Friday.

Analysts predicted ¥870.8 billion, according to the average of 19 estimates compiled by Bloomberg.

The local currency’s 7% gain against the dollar since the end of 2016 has made Japanese products less competitive in overseas markets, denting sales.

The temporary stoppage in CR-V sales is also a setback for Honda, leaving it without its top-selling model in what has been the company’s fastest-growing major market in terms of volume for at least three straight years.

The carmaker announced the suspension on March 2 and said it’s working on a solution to address an engine problem.

Honda is the first of the three major Japanese carmakers to give its full-year forecast. Toyota Motor Corp and Nissan Motor Co Ltd are scheduled to announce their numbers this month.

The Tokyo-based automaker announced a plan to buy back 1% of its shares for ¥70 billion. The stock has declined about 2% this year following a 13% rally in 2017.

The current year’s forecasts are based on an exchange rate of ¥105 to the dollar, compared to ¥111 last year.

Beyond the recall hurdle, Honda is boosting production capacity to meet increasing demand in China.

The company said last week it plans to introduce more than 20 electrified models in the country by 2025 as it competes with global rivals for a pole position in new-energy vehicles.

Honda first disclosed its recall plan for the CR-V equipped with a 1.5-liter turbo engine on Feb 12, after consumers in northern China complained about a spike in engine-oil level on short trips in cold weather.

The company intended to fix the glitch with a software update, but the recall plan was deemed insufficient by China’s authorities, triggering a voluntary halt in sales by Honda.

The carmaker will find a satisfactory fix to the CR-V issue and make up for temporary drop in sales in China, COO Seiji Kuraishi told reporters last Friday.

Honda’s sales tumbled 13% in the first three months of 2018 in China, its largest market after the US.

The company sold 187,641 CR-Vs and 176,457 Civics in China last year, the two best-selling models.

Both cars are produced at a joint venture with Dongfeng Motor Group Co Ltd. — Bloomberg