Honda lifts full-year profit forecast on higher Asia sales

By Naomi Tajitsu

TOKYO (Reuters) - Honda Motor Co Ltd (T:7267) raised its full-year operating profit outlook by 4 percent on Friday as it expects higher sales in Asia while it continues to reduce costs, and due to a weaker forecast for the yen's trading level against the U.S. dollar.

Japan's third-biggest automaker now expects a full-year operating profit of 775 billion yen (4.96 billion pounds), based on an assumption of the yen averaging 110 yen versus the U.S. dollar in the year through March, from 109 yen previously.

Profit was 284.5 billion yen in October-December, up 37 percent from a year earlier, and exceeding a mean 281.6 billion yen estimate from 11 analysts polled by Thomson Reuters I/B/E/S.

Honda is benefiting from strong sales growth for its cars and motorcycles, but still forecasts a 7.8 percent slide in full-year operating profit from a year prior as higher costs for quality-related issues including recalls, along with investment for research and development and the impact of a change in pension accounting offset buoyant sales and cost reductions.

Honda expects to sell 5.23 million vehicles globally in the year to March, up 3.9 percent from a year earlier and more than its previous forecast due to expectations of higher sales in Asia. It also sees higher annual global motorcycle sales this year.

Asia, particularly China, has been a source of strong sales growth for autos as demand for cars and trucks ticks up among a growing middle class. Honda expects the region to overtake North America as its biggest source of sales for the first time this year.

Honda has been increasing production in China and other Asian countries including Thailand, along with Europe, while output in Japan has decreased due to a shrinking home market. That prompted the automaker to announce it would end production at one of its domestic plants by 2022.

Global automakers are looking to reduce costs as they invest heavily in new vehicle technologies. Honda plans to launch a compact all-battery electric car in China later this year, and is also developing automated driving functions and new mobility services, both in-house and through partnerships.