Honda Motor Co. on Friday reported a larger-than-expected operating profit for its fiscal year that ended March 31 but forecast a 7 percent drop in annual earnings for the current year amid higher raw material costs and the ongoing chip shortage.
The automaker recorded a full-year profit of 871 billion yen ($6.7 billion), topping its own projection of 800 billion yen ($6.2 billion). For the quarter ended March 31 Honda reported an operating profit of 199.5 billion yen ($1.5 billion).
Global automakers have been forced to slash production due a shortage of microchips, and now face an increase in costs as China's COVID-19 curbs have shuttered factories and the war in Ukraine further strains supply chains.
Honda projects its profit for the fiscal year through March 2023 will be 810 billion yen ($6.3 billion). The company said it expects about 300 billion yen ($2.3 billion) in costs to cover rising material, labor, and logistics expenses this year, a roughly 11 percent jump from last year.
It expects to sell 4.2 million vehicles globally this fiscal year, a 3.1 percent increase from last year.
Honda said Thursday it would cut production by about a fifth at two of its plants in Japan for the rest of May, a month after it cut back production by about a half at one of them.
"We are currently hoping to get the business on a recovery track in June," by using parts that are in stock, Senior Managing Executive Officer Yasuhide Mizuno said during an earnings call.
Mizuno said the company was hearing the lockdown situation in Shanghai was getting better and supply chain and logistics in the country were recovering up to about 80 percent.
Earlier this week, Toyota Motor Corp. forecast a 20 percent decline in operating profit for the current fiscal year even after reporting record profits, citing an “unprecedented” rise in costs for logistics and raw materials.
Despite the headwinds, Honda is pushing ahead with an ambitious shift to electric cars, with CEO Officer Toshihiro Mibe in April unveiling a plan to spend $40 billion on its push into electric vehicles over the next decade.
Reuters and Bloomberg contributed to this report