Japanese car giant Honda today said it expected net profit to tumble 64% this fiscal year compared with last year, due to the impact of the March 11 earthquake and a strong yen.
Japan's third-biggest car maker forecast net profit would plunge to 195 billion yen ($2.4 billion) from 534 billion. Operating profit was expected to dive 65% to 200 billion yen from last year's 569.7 billion yen. It also forecast a 7.1% fall in global sales to 8.3 trillion yen from 8.937 trillion.
Honda said that as a result of the quake, profits would be hit by a loss in production, decreased sales and restoration costs, effects that were compounded by the rise of the yen against the dollar and euro as well as higher raw material costs.
A strong yen makes it more expensive for Japan's car makers to domestically produce vehicles for sale overseas, while earnings earned abroad are eroded when repatriated into a stronger currency.
Honda said the yen's strength would result in a 91 billion yen hit to operating income. Its earnings projections are based on the dollar at 80 yen and the euro at 110 yen, compared with 86 and 114 respectively in the last fiscal year.
Honda and its Japanese car maker peers delayed giving their full year forecasts to assess the impact of a disaster that shattered supply chains and created a shortage of essential components that hit auto production globally.
The company was forced to temporarily suspend production at its Japan sites as the March disaster crippled crucial component supplies amid a shortage of other parts and power disruptions.
Rival Toyota last week said it expected net profit in this fiscal year to drop 31% on-year to $3.5 billion, also due to the impact of the quake and a strong yen.
Mitsubishi Motors said yesterday it expected net profit to rise 28% in the current fiscal year as it looks to make up for lost output following the March 11 disasters.
The 9.0-magnitude earthquake and the resulting tsunami destroyed entire towns, left 23,000 dead or missing and crippled electricity-generating facilities, including a nuclear plant at the centre of an ongoing emergency.
