February 7, 2020 / 7:39 AM / 12 days ago

Honda raises profit forecast, sticks to Wuhan plant schedule

TOKYO (Reuters) - Honda Motor Co (7267.T) raised its forecast for full-year operating profit by 6% on Friday as a weaker yen increased the value of its overseas sales.

A photographer takes a picture while Honda Motor Chief Executive Takahiro Hachigo (not in the picture) speaks at a news conference in Tokyo, Japan, February 19, 2019. REUTERS/Kim Kyung-hoon

Japan’s third-biggest automaker has been struggling to shore up its automobile operations, with profitability down more than half in the past two years due to a series of quality-related issues.

And like other global automakers, Honda has been impacted by the coronavirus outbreak on vehicle production in China.

The automaker plans to restart its factories in Wuhan, the epicentre of the disease, on Feb. 14, Executive Vice President Seiji Kuraishi said at a briefing in Tokyo, after extending the Lunar New Year holiday in line with local government directives.

There are no disruptions in China-made parts supplies that would prevent a restart of the three plants it operates in Wuhan with local joint venture partner Dongfeng Motor Group (0489.HK) or production at other facilities globally, he said.

Fiat Chrysler on Thursday said one of its European plants could close within two to four weeks if Chinese parts suppliers cannot get back to work soon. Hyundai suspended production at its South Korean plants due to a shortage of China-made parts.

The Nikkei newspaper reported last month that Honda parts supplier F-Tech is temporarily moving production of brake pedals from Wuhan to the Philippines.

Among domestic rivals, Toyota said on Friday it would extend Chinese factory suspensions until at least Feb. 16, while Suzuki said it was looking into the possibility of procuring “made in China” car parts from outside Wuhan.

Honda raised its operating income forecast to 730 billion yen ($6.6 billion) for the year to March 31 from a previous estimate of 690 billion yen.

It adjusted its expectation for the yen to average 108 to the dollar for the 12-month period from a prior forecast of 107.

A weaker currency buoys profit because exports become less expensive and the value of overseas earnings increases.

A 730 billion yen operating profit would narrowly top the previous year’s result, whereas the prior forecast of 690 billion yen would have been a four-year low.

Honda raised its estimate slightly for global group auto sales in the current fiscal year by 5,000 units to 4,980,000 vehicles.

Interactive Graphic: Honda operating profit, vehicle sales click on tmsnrt.rs/2p2j3Ao

The company posted operating income of 166.6 billion yen for the October-December period, compared with 170.1 billion yen a year ago and an average forecast of 149.5 billion yen from nine analysts surveyed, according to Refinitiv.

Reporting by Kevin Buckland; Editing by Tom Hogue, Muralikumar Anantharaman and David Evans

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