By Naomi Tajitsu
TOKYO (Reuters) - Honda Motor Co (T:7267) forecast a 16 percent fall in operating profit for the current financial year as the Japanese automaker sees higher auto sales being offset by a stronger yen, changes to its pension plan and research and development costs.
Japan's No. 3 automaker said it expects an operating profit of 705.0 billion yen (£4.92 billion) in the year to March, lower than an average estimate of 850.8 billion yen according to 23 analysts polled by Thomson Reuters I/B/E/S, and lower than the 840.7 billion yen posted for the year just ended.
It sees a 14 percent slide in net profit to 530.0 billion yen this year.
Honda expects its global vehicle sales to edge up 1 percent to 5.08 million in the current year, boosted by ongoing sales growth in Asia, particularly in China on the back of demand for its CR-V and XR-V crossover SUVs and Civic and Accord sedans.
Overall sales in Asia are seen at 2.06 million units, beating out North America to become Honda's top market. The company expects to sell 1.92 million vehicles in North America, 2.5 percent less than the year just ended.
Honda has been ramping up production of SUVs to keep up with strong demand for larger models in the United States, although overall vehicle sales show signs of slowing following a boom cycle seen following the global financial crisis.
Industry experts are increasingly concerned about rising inventory levels and consumer discounts as automakers push harder to sell their products. A pricing war in the market could undermine automakers' profits.
Honda's projection is based on expectations that the yen will trade at 105 yen to the U.S. dollar in the year to March, strengthening from its 108 yen rate in the year just ended.
Japanese automakers are vulnerable to currency fluctuations as they export many of their vehicles to overseas markets from domestic plants. A stronger currency makes their cars more expensive to export, while eating away at the value of repatriated proceeds.
(For a graphic of a comparison of Japan's top auto makers click http://fingfx.thomsonreuters.com/gfx/rngs/JAPAN-RESULTS/010020SR1YV/index.html)