Honda Motor operating profits fell 17% for the past fiscal year and the company forecast a further decline in net profits this year, citing an impact from a stronger yen and weak domestic sales.
According to The Financial Times website, Honda, which was just beaten by Nissan as Japan’s second biggest carmaker, said operating profits fell to Y600 billion ($US5.5 billion) for the year to March 31, compared with Y725 billion a year ago and an earlier forecast of Y623 billion. Higher sales were offset by the negative impact of the yen’s strength on its exports and increased administrative expenses.
The FT said Honda net profits rose 8.8% year-on-year to Y464 billion, as sales edged up 2.4% to Y8,163 billion. Honda reportedly said sales would have increased 6.4% if not for a stronger yen eroding the value of its repatriated earnings in dollars.
For the current fiscal year, the automaker forecast net profits to fall another 16% to Y390 billion and pre-tax profits to decline 22% to Y500 billion, as the “management environment is still under difficult conditions attributable to global political and economic uncertainty and currency movements,” the company said, according to the Financial Times, adding: “Competition in the Japanese market is expected to intensify amid continuing weak consumer spending.”
The FT said Honda’s car sales were mainly affected by a sluggish domestic market, where it sold 716,000 units, down 16% from a year ago, although overseas sales jumped 11% to 2.27 million units.
Honda reportedly said currency and price fluctuations and downturns in its major markets such as the US continued to be the biggest risks to its performance this year.
According to the Financial Times, analysts have warned the company could slow down in the North American market, which accounted for 60% of its operating profits last year, because it does not make pickup trucks, a segment where Toyota and Nissan have been expanding.