* Honda sees 705 bln yen operating profit, -16.1 pct from
* Sees higher global vehicle sales, Asia to become biggest
* Sets average USD/JPY rate of 105 yen
* Compatriot Mazda expects profit jump as SUV sales pick up
(Adds comments from Honda official, Mazda forecasts)
By Naomi Tajitsu
TOKYO, April 28 Honda Motor Co forecast
a 16 percent fall in operating profit for the current financial
year as the Japanese automaker sees higher auto sales being
offset by a stronger yen and research and development costs.
Japan's No. 3 automaker said it expects an operating profit
of 705 billion yen ($6.34 billion) in the year to March, down
from 840.7 billion yen posted in the year just ended, and lower
than an average estimate of 850.8 billion yen according to 23
analysts polled by Thomson Reuters I/B/E/S.
It sees a 14 percent slide in net profit to 530.0 billion
yen this year.
Honda's projections are based on a forecast that the yen
will average 105 yen to the U.S. dollar through March, stronger
than both its 108 yen rate in the year just ended.
Executive Vice President Seiji Kuraishi acknowledged that
Honda's expected currency hit of 95 billion yen was based on a
"conservative" yen forecast, adding that growing costs to create
next-generation cars would also impact earnings.
"Our costs are rising to develop new technologies which will
be needed in the future, like automated driving functions and
electric cars," he told reporters at a results briefing.
Honda's ongoing research and development of self-driving
cars, lower-emissions powertrains and new mobility services
comes as Japanese automakers look for ways to add more value to
their cars beyond the quality and reliability which fuelled
their global growth over the past decades.
SUVS VS SEDANS
Honda expects its global vehicle sales to edge up 1 percent
to 5.08 million this year, bolstered by growth in Asian sales to
2.06 million units, beating out North America to become Honda's
top market as more Chinese drivers flock to its cars.
The company expects to sell 1.92 million vehicles in North
America, 2.5 percent less than the year just ended as it
struggles to sell sedans including the Accord, which have fallen
out of fashion in the past few years.
Honda has been ramping up production of SUVs to keep up with
strong demand for larger models in the United States, although
overall vehicle sales show signs of slowing following a boom
cycle after the global financial crisis.
Mazda Motor Corp is taking a similar strategy,
announcing on Friday it would expand production of SUV crossover
models at home, while equipping overseas plants to enable more
flexible production of models according to market needs.
Japan's No. 5 automaker forecast a 19 percent jump in
operating profit for the current financial year as it expects
higher sales volumes, particularly in North America, to help it
recover from last year's profit slump.
Industry experts are increasingly concerned about rising
inventory levels and consumer discounts as automakers push
harder to sell products. A pricing war in the market could
undermine automakers' profits.
($1 = 111.2000 yen)
(Reporting by Naomi Tajitsu and Maki Shiraki; Editing by