Chip crunch forces Honda to downgrade profit forecast

Japanese car giant Honda revised its annual profit forecast downwards on Friday, warning it does not an immediate end to the chip shortage and supply-chain issues impacting automakers worldwide.

The announcement follows the firm logging a drop in net profit in the July-September quarter, although first-half net profit was buoyed by stronger results seen in the previous three months.

“The external business environment will remain challenging during this fiscal year due primarily to the resurgence of Covid-19, the supply shortage of certain parts including semiconductors and an increase in raw material costs,” said the firm in a statement.

The company announced the results a day after Toyota upgraded its annual profit forecast despite being forced to cut production by the global shortage of semiconductors, which are essential components in modern cars.

Honda lowered its 2012-22 net profit forecast to 555 billion yen from its previous estimate of 670 billion yen.

Net profit dropped 31% year-on-year in the second quarter.

But first-half earnings were brighter, with net profit up 143% from the same six-month period last year, reaching 389.2 billion yen.

Operating profit in the first half also climbed 161% to 442.1 billion yen.

“This was due primarily to the positive effect of increased unit sales, cost reduction efforts and favourable currency effects,” Honda said, after the first six months of 2020-21 were “heavily impacted by the Covid-19 pandemic”.

But, it lowered its full-year operating forecast to 660 billion yen on sales of 14.6 trillion yen, from 780 billion yen and 15.45 trillion yen respectively.

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