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Honda raises profit outlook on strong motorcycle sales

[TOKYO] Honda Motor revved up its annual profit outlook Wednesday on strong motorcycle sales and a lower yen but the more upbeat figures still represented a drop from the previous year.

Japan's third-largest automaker now expects net profit of 585 billion yen (S$6.99 billion) for the year to March 2018 instead of the earlier projected 545 billion yen.

However, the revised-up figure would still be down five percentage points from the previous year's profit.

The company raised its operating-profit forecast from 725 billion yen to 745 billion yen, down 11.4 percent from the previous year.

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The sales forecast was hiked from 14.5 trillion yen to 15.05 trillion yen, up 7.5 percent from last year.

For the six months to September, operating profit fell nearly 15 percent, despite sales growth, hit by a one-time pension charge and costs related to faulty Takata airbags.

Honda made its profit forecast revisions to reflect an "increase in consolidated motorcycle unit sales and favourable foreign currency effects," the firm said in a statement.

Honda now expects the yen to average 109 to the dollar in the current business year, much cheaper than the 107 projected earlier.

A lower yen makes Japanese carmakers more competitive in foreign markets and inflates profits when repatriated.

"Honda is likely to continue to enjoy good contributions from its motorcycle sales," said Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm.

Honda also expects growth in the second half as new models will be released at home and North America, he told AFP.

The Japanese group has agreed to pay US$484 million to settle a US class action filed by Honda car owners who suffered economic damage due to airbag-linked recalls.

Six-month net profit grew 8.4 per cent thanks to increased returns from subsidiaries and affiliates, notably a contribution from robust Chinese vehicle operations, according to the company.

Honda also announced it would buy back up to 24 million of its own shares, which is 1.3 per cent of its outstanding shares.

Investors usually welcome corporate repurchases as it could boost the value of shares remaining in markets.