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Honda raises forecasts after profit is boosted by U.S., China

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Honda raises forecasts after profit is boosted by U.S., China

July 30, 2010 08:31 CET

TOKYO (Reuters) -- Honda Motor Co. posted its best quarterly operating profit in nearly three years today on brisk sales in the United States, China, and other Asian markets, and raised its forecasts despite a sharp rise in the yen.

Japan's No. 2 automaker joined Nissan Motor Co., Hyundai Motor Co. and Kia Motors Corp. in reporting strong results for April-June, but like the rest of the industry, faces concerns over a slowdown in demand in the United States, China and Europe.

A further strengthening in the yen is also clouding the outlook for Japanese automakers, with the dollar hitting an eight-month low below 86.27 yen on Friday.

For the year to March 31, 2011, Honda now expects an operating profit of 450 billion yen ($5.2 billion), higher than its previous forecast of 400 billion yen but undershooting a consensus of 484 billion yen from a survey of 19 analysts by Thomson Reuters I/B/E/S.

The maker of the Accord and Civic cars lifted its net profit forecast to 455 billion yen from 340 billion yen.

"The new forecasts may look conservative when you look at the first-quarter performance, but there are many concerns and risks to take into account for the rest of the year," Executive Vice President Koichi Kondo told a news conference.

He said these risks include the end of Japanese subsidies on green-car purchases, a potential rise in North American incentives and the impact of higher raw materials prices.

Tomomi Yama$h!a, fund manager at Shinkin Asset Management said that analysts' forecasts might be too optimistic.

"I do think there's a scenario where earnings momentum could go down quarter by quarter, which would explain this quarter and then the full-year forecasts. This does seem to suggest a gradually worsening momentum, but even so the numbers still aren't that bad," he said.

For the April-June quarter, Honda reported an operating profit of 234.4 billion yen, up from 25.2 billion yen a year ago and easily beating the average 138.3 billion estimated by six analysts surveyed by Reuters.

Its operating profit margin improved to 9.9 percent from 4.2 percent in the previous quarter, also thanks to its motorcycle business.

First-quarter net profit, which includes earnings made in China, was 272.5 billion yen, its best quarter ever and up from 7.6 billion yen last year.

China strikes impact

In China, Honda has grabbed headlines in recent months due to production stoppages at its local factories as labor disputes at suppliers -- mostly affiliates -- disrupted the flow of components since late May.

Honda has said it would make up for lost production, which it estimated at less than 20,000 units, and has made no changes to its annual sales plans for China. The impact on production from the strikes would appear in the July-September term since earnings made in China are booked in the following quarter.

On Thursday, Nissan, which looks set to overtake Honda as Japan's second-biggest car maker this year, reported its strongest quarterly operating profit in more than two years as it outsold the industry in most markets.

Nissan's operating margin more than doubled to 8.2 percent from 3.9 percent in the previous quarter, but the positive results failed to lift its share price on Friday in the absence of a forecast revision and the dollar's fall.

Toyota Motor Corp. is also set to report a big improvement in the latest quarter on Aug. 4, although many analysts expect no change in full-year guidance due to uncertainty over global demand, pressure from rising raw materials prices and a stronger yen.

Earlier on Friday, Hyundai affiliate Kia reported a 61 percent jump in second-quarter net profit thanks to brisk sales of the Sorento SUV, while Mazda Motor Corp. swung to a first-quarter operating profit of 6.4 billion yen from a loss of 28 billion yen a year earlier. Mazda kept its annual profit outlook unchanged.

Shares of Honda have fallen 13 percent in the year to date, slightly better than Tokyo's transport sector subindex, which lost 14 percent in the same period. Honda's shares closed down 0.3 percent before the results were announced on Friday, outperforming a 1.0 percent fall in the transport sector.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100730/COPY/307309890/1317#ixzz0vBPQ9Liy

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Honda posts record quarterly profit on sales rise

Detroit News Staff and Wires

Honda Motor Co. stunned analysts Friday with unexpectedly strong first-quarter results: a record net profit of 272.4 billion yen, or $3.2 billion, reflecting strong sales in Asia and a recovery in its North American business.

The Japanese automaker raised its full-year profit forecast, to 450 billion yen, or $4.9 billion, from 400 billion yen, or $4.3 billion, previously.

Its operating profit for the fiscal first quarter begun in April also rose sharply. "First-quarter operating profit came in a 234.4 billion yen ($2.5 billion), far ahead of our 150 billion yen ($1.6 billion) estimate," said analyst Noriyuki Matsushima at Citi Investment Research & Analysis in Tokyo. A year ago, Honda barely broke even at the net level, earning just 7.5 billion, or $81 million, and its operating profit totaled just 25.2 billion yen, or $273 million.

Still, Tokyo-based Honda was one of the few Japanese automakers that remained profitable during last year's downturn, partly because it focuses on smaller models that don't generate big profits but whose sales held up. Honda, maker of the Accord and Civic sedans, also is the world's biggest manufacturer of motorcycles.

Its quarterly revenue jumped 17.9 percent to 2.361 trillion yen, or $27.5 billion, for the fifth straight quarter of year-on-year growth.

Its motorcycle surged 28 percent to 2.89 million units, while Honda's vehicle sales increased 17 percent to 899,000 vehicles, growing in all regions except Europe.

Honda is now projecting higher full-year profits but trimmed its annual revenue forecast because of the yen's strength.

From The Detroit News: http://detnews.com/article/20100730/AUTO01/7300398/1148/auto01/Honda-posts-record-quarterly-profit-on-sales-rise#ixzz0vCqcfMfS

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