Honda estimates profit lower than expected image

Japan’s third largest carmaker released its full year profit forecast and it looks to be lower than analysts estimated it, as the company increases incentives and the gains from the weaker yen begin to fade away.

Honda Motor said in a statement that its net income is forecasted to grow to 595 billion yen ($5.81 billion) for the 12 months of the fiscal year that will end in March 2015, a slight increase from a year earlier (574.1 billion yen). Although it’s higher than last year, the surge is 14% below analysts median estimates.

“Since the beginning of the year, we began to worry about their sales in the US market,” said Masahiro Akita, an analyst with Credit Suisse Group AG in Tokyo. “The competition is getting tougher and their incentive level is rising.”

The company has been the worst performer this year among Japanese automakers, as its sales continue to decline despite aggressive pricing which dents profit and the gains from the local currency begin to fade away. Also, Honda was the only major foreign automaker to experience a sales slip in China – the world’s largest auto market – last month.

For the first quarter, Honda’s net income surged to 170.5 billion yen and its operating profit went up 22 % to 165.3 billion yen, thanks to the lower yen. For the next 12 months, the company expects operating profit to go up 1.3 % to 760 billion yen and revenue to reach 12.75 trillion yen.

Via Bloomberg