Honda's annual profit slumps 8.9% as recall costs soar

The company said its fiscal fourth-quarter operating profit dropped about one-third, while it took a $425 million recall-related charge in the October-December quarter

Honda said today that its fiscal-year net profit fell 8.9 per cent to USD 4.4 billion as Japan's number three automaker grapples with soaring recall costs, including from an exploding airbag crisis linked to at least five deaths.

The Civic maker downgraded its profit forecasts twice before the results were published today, as it warned the airbag scandal at supplier Takata would take a toll on its bottom line, as well as falling demand in Japan and the world's biggest vehicle market, China.

The company said it earned 522.7 billion yen (USD 4.4 billion) in the year through March - worse than its most recent estimate of a 545 billion yen profit and missing analyst expectations - while operating profit dropped 13 percent to 651.6 billion yen.

Annual sales rose 6.8 per cent to 12.6 trillion yen.

For the current fiscal year, Honda forecast a net profit of 525 billion yen on sales of 14.5 trillion yen, under a new system of accounting standards the carmaker has adopted.

The company said its fiscal fourth-quarter operating profit dropped about one-third, while it took a USD 425 million recall-related charge in the October-December quarter.

In February, Honda said its president, company veteran Takanobu Ito, would step down as the company works through the recall crisis, which it cited as a key reason for its declining profit.

Honda's airbag recalls - and others involving its Fit compact car and Vezel SUV - diluted the positive impact of a sharp decline in the yen, which has inflated profits for major Japanese exporters, including the auto industry.

The results were "due primarily to an increase in selling, general and administrative... Expenses including quality-related expenses and a decline in automobile unit sales in Japan," it said in a statement today.

"This was despite profit-increasing factors such as strong sales in Asia and favourable currency effects associated with depreciation of the Japanese yen."

Honda's Tokyo-listed shares ticked up 0.32 per cent to 4,330.5 yen with its results published after markets closed.

About 20 million vehicles produced by some of the world's biggest automakers are being recalled due to the risk their Takata-made airbags could deploy with excessive explosive power, spraying potentially fatal shrapnel into the vehicle.

Honda recalls account for about 13 million of that total.

The company's biggest domestic rivals Toyota and Nissan, which report their results over the next couple of weeks, are also among the global automakers affected by the airbag crisis.