Japan’s Honda Chips has seen a profit slide on material costs

Honda’s fourth-quarter profit fell nearly half of the Japanese carmaker’s previous year due to a supply deficit and rising raw material costs.

Tokyo-based Honda Motor Co. The company reported a profit of 124.8 billion yen ($ 967 million) in the January-March quarter, down 41% from 213.3 billion yen a year earlier. Quarterly sales rose 7% to 3.88 trillion yen ($ 30 billion).

Honda said it had reduced costs but acknowledged continued uncertainty over supply and production for a variety of reasons, such as the Chinese lockdown to combat coronavirus outbreaks.

Despite strong demand for the Honda model, a shortage of semiconductors has hurt sales, the company said. Honda was protecting alternative suppliers, it said. Kohei Takeuchi, Honda’s chief financial officer, said from its headquarters:

For the fiscal year ended March, Honda gained 707 billion yen (5.5 billion), up 7.6% from 657 billion yen the previous year. Sales totaled 14.6 trillion yen ($ 113 billion), up 10.5% year on year.

Honda, which manufactures Accord sedans, Odyssey minivans and Civic Compacts, sold about 4 million vehicles in the fiscal year, down from 4.5 million. Car sales declined in Japan, the United States and the rest of Asia.

Motorcycle sales rose 12.5% ​​to 17 million motorcycles in fiscal year, as sales increased, especially in Asia.
Honda is projecting a profit of 710 billion yen ($ 5.5 billion) for the fiscal year ending March 2023, which has changed little since the last fiscal year ended, as the risk of rising raw material costs continues.

Problems affecting Honda have hurt all car manufacturers. But Toyota, Japan’s top automaker, ended a year of record earnings in the January-March quarter, despite lower-than-expected profits. Nissan Motor Company has returned to profit for the first time in three years.

Like other industries, Honda has increased bullishness on electric vehicles. It recently announced an investment of 5 trillion yen ($ 39 billion) over the next decade in such research.

This includes a partnership with General Motors Co. of North America to develop models sold in 2024.

Honda said the recent volatility in foreign exchange rates was unbearable and it hoped for more stability.

The yen is at a two-decade low against the US dollar. A cheaper yen has historically served as a boon for exporters like Honda while converting to yen has increased the value of their overseas earnings. But it also increases the cost for imported materials and materials.

The potential impact of the war in Ukraine on the world economy could also hurt Honda’s sales, Takuchi said.