February 3, 2017 / 7:26 AM / 6 months ago

Honda raises full-year profit outlook on lower costs, weaker yen

3 Min Read

People are reflected on a Honda Motor car outside the company's headquarters in Tokyo, Japan February 2, 2017. Picture taken February 2, 2017.Toru Hanai

TOKYO (Reuters) - Honda Motor Co on Friday lifted its annual profit forecast for the second time in as many quarters due to cost-cutting and the impact of a weakening yen, while sales in China remained strong.

Japan's third-largest automaker said it expected net profit for the year through March at 545.0 billion yen ($4.82 billion), up from previous guidance upgraded in November, and 58.2 percent more than a year earlier.

It also raised its operating profit forecast to 785.0 billion yen after posting 207.6 billion yen for October-December - up 27.4 percent from a year prior and exceeding the 157.07 billion yen average of 11 analyst estimates in a Reuters I/B/E/S/ poll.

Analysts expect the automaker to post full-year operating profit of 753.27 billion yen and net profit of 533.44 billion yen.

The automaker also forecasts the local currency to average 107 yen to the U.S. dollar through March, compared with an earlier forecast of 103 yen.

The results come as business is booming in China, where surging sales led by the Civic and the XR-V have prompted the automaker to invest $436 million in its seventh plant in the country.

It raised its full-year sales outlook for Asia including China to 1.945 million vehicles from 1.915 million. The automaker expects to sell 5.005 million vehicles globally in the year through March, up from a previous forecast for 4.98 million.

In the U.S., strong demand for Honda's latest CR-V sport utility vehicle (SUV) and the latest generation of its Civic sedan have also led to record sales in the automaker's biggest market during calendar 2016.

Honda is among global automakers which have come under pressure from U.S. President Donald Trump, who has demanded that more cars sold in the United States be made locally to increase jobs and shrink the U.S. trade deficit.

The new president has focused on protectionist trade policies in his first weeks in office, formally withdrawing the United States from Trans Pacific Partnership trade pact.

Honda and other Japanese automakers have increasingly localised vehicle production over the past three decades, and Honda's U.S.-produced vehicles account for around 26 percent of its global vehicle output.

The company operates seven production plants in the United States which manufactured nearly 80 percent of the record 1.64 million Honda vehicles sold in the country in 2016. It also operates plants in Mexico and Canada which export a chunk of their output to the United States.

As demand for SUVs and trucks continues to rise in the United States, Honda has increasingly turned to exports from Japan, which more than doubled to 82,780 units in the 12 months through December.

($1 = 113.0600 yen)

Reporting by Naomi Tajitsu; Editing by Christopher Cushing

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