Honda forecasts 6% rise in annual profit on Europe factory revamp

Vehicles of Honda Motor Co. are on display in front of the Japanese automaker’s headquarters in Tokyo Tuesday, July 31, 2012. Honda’s quarterly profit quadrupled to 131.7 billion yen ($1.7 billion) as the Japanese automaker bounced back from last year’s natural disasters with more vehicles sold across all key regions except for Europe. (AP Photo/Itsuo Inouye)

Itsuo Inouye

Honda Motor forecast on Wednesday a 6% increase in operating profit for the current fiscal year due to cost reduction efforts and a restructuring of its production network in Europe.

Japan’s third-largest automaker signaled that it was looking to reduce global production costs by 10% by 2025 and scale back the number of model variations, underscoring the cost pressures facing traditional automakers as they compete in a market that is being reshaped by tech companies and ride-sharing.

Honda expects profit to rise to 770 billion yen ($7 billion) in the year to March 2020, compared with the 834 billion yen average of 22 analyst estimates compiled by Refinitiv.

Operating profit was 726 billion yen in the year ended March, versus an average estimate of 803 billion yen.

Honda’s profit forecast is based on the assumption that the yen will trade around 110 to the U.S. dollar in the current financial year, compared with 111 yen in the year just ended.

A stronger currency can dent profits repatriated from overseas.

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