Honda returns to profit but sees chip shortage crimping 2021 earnings

Business

Honda Motor Co on Friday reported a rebound to profit for the fourth quarter, helped by cost cuts, but warned semiconductor shortages and higher raw material costs would curb growth in the current year.

Its forecast for operating profit of 660 billion yen ($6.04 billion) in the year that began on April 1 was short of a 791.7 billion estimate by analysts, SmartEstimate data showed.

Seiji Kuraishi, Honda’s executive vice president, said 100,000 vehicles were affected last year by the chip shortage, and its impact will continue in the first half of the year.

“We currently expect all those loss effects on production will be traded off in the end of the year,” he said at an online earnings briefing.

Honda, like its global peers, has been struggling to ramp up car production due to the chip shortage, exacerbated by a fire at Renesas Electronic Corp’s (6723.T) chip plant in Japan and blackouts in Texas where a number of chipmakers have factories.

Competitor Toyota (7203.T) gave a more upbeat forecast for the full fiscal year, confident it can tackle the chip shortage that has stung its rivals. Nissan (7201.T) predicted it will break even, defying expectations for a return to profitability.

Honda plans to sell 5 million vehicles this business year, up from 4.5 million in the previous 12 months.

The carmaker, which is aiming for 100% of its sales to be of electric vehicles by 2040, said it forecast expenditure of a record 840 billion yen on research and development for the year.

Its electrification strategy is supported by its alliance with General Motors (GM.N), Kuraishi said.

In the three months to March 31, Japan’s No.2 automaker by sales posted an operating profit of 213.2 billion yen ($1.95 billion) following a 5.6 billion yen loss a year earlier.

That beat a consensus estimate of 107.4 billion yen profit compiled by SmartEstimate.