Honda said on Friday that its full-year net profit soared more than 40 per cent thanks to cost-cutting efforts, shrugging off the negative impact of the pandemic.

But the company now forecasts a drop in net profit for the year ahead and a stagnation in its operating profit, citing a global chip shortage and the rising costs of materials.

The Japanese carmaker posted net profit of 657.4 billion yen (€5bn) for the year to March, up 44.3 per cent, beating its own annual forecast of 465 billion yen. Operating profit grew 4.2 per cent to 660.2 billion yen “due primarily to control of selling, general and administrative expenses and cost reduction efforts,” it said in a statement.

The company added there were “some unfavourable factors such as a decrease in demand due to the impact of the COVID-19 pandemic and the impact of semiconductor supply shortages”.

It forecasts consolidated operating profit for the current fiscal year that started in March of 660 billion yen, with net profit at 590 billion yen.

The results come after the car giant said last month it would aim to have electric and fuel cell vehicles account for 100 per cent of all sales by 2040 to promote climate goals.

The car giant said last month it would aim to have electric and fuel cell vehicles account for 100% of all sales by 2040

Its rival Toyota, the world’s top-selling carmaker, generated 2.25 trillion yen annual net profit.

The pandemic has taken a heavy toll on the global car sector but demand recovered swiftly in the second half of last year, most notably in the United States and China, they said.

Crisis-hit Nissan in the meanwhile narrowed its net loss to 448.7 billion yen, from a loss of 671.2 billion yen a year earlier.

A shortage in semiconductors used in modern vehicles has weighed heavily on the global car industry.