Honda Motor Co. on Friday forecast a 10.3 percent drop in net profit to 590 billion yen ($5.4 billion) in the current business year through next March amid uncertainty over semiconductor supplies and surging material costs.

Honda's cautious outlook came after record car sales in China and cost-cutting helped the automaker report a 44.3 percent gain in net profit to 657.43 billion yen, the first rise in three years.

For fiscal 2021, Honda aims to sell 5 million cars globally as demand is expected to recover from the coronavirus pandemic, following a 5.1 percent drop to 4.55 million in fiscal 2020.

Honda expects to sell 18 million motorcycles in the current business year, up from 15.13 million.

In the fiscal year 2020 ended March, Honda reported an operating profit of 660.21 billion yen, up 4.2 percent, helped by a drop in provisions for credit losses in its financial services business. Sales fell 11.8 percent to 13.17 trillion yen.

The shortage of semiconductors, brought on by increased demand during the pandemic, is casting a cloud over the auto industry. Computer chips are used in everything from laptops to game consoles and cars. Rising commodity prices are also a concern.

"We expect the impact (of the shortage) to continue in the first half of the current business year, but we will recover in the second half," Executive Vice President Seiji Kuraishi told a press briefing.

Honda experienced a production cut of 100,000 units in fiscal 2020. Kuraishi did not elaborate on the projected impact for fiscal 2021.

==Kyodo

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