Honda Motor Co. posted a 6.9% fall in quarterly operating profit on Friday as a weaker dollar hurt US-based earnings, but it lifted its full-year forecasts on strong European and Asian sales, Reuters reported.
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The report said the weak quarter for Japan’s third largets auto maker was partly due to increased marketing costs but analysts reportedly said Honda’s product strength and expansion plans should ensure future growth.
According to Reuters, Honda said operating profit dipped to 157.64 billion yen ($1.53 billion) in the third quarter ended December 31 – many analysts had expected a fall – while net profit fell 0.2% to 150.76 billion yen, tempered partly by robust earnings from group companies in Asia, especially China, which are not counted at the operating level. Quarterly sales grew by 7.1% to 2.134 trillion yen.
“Unfavourable currency rates ate into earnings but it bumped up its full-year profit forecasts quite a bit,” Koji Endo, auto analyst at Credit Suisse First Boston Securities, told Reuters, adding: “They’re not brilliant results, but not too bad either.”
Honda reportedly raised its operating profit forecast for the year to end-March by 0.8% to 625 billion yen and bumped up its net profit estimate by 7.4% to a record 480 billion yen while paring its sales forecast slightly to 8.65 trillion yen after raising its assumed yen/dollar rate to 103 yen from 104 yen in the final quarter.
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By GlobalDataOperating profit in the year to March 2004 was just over 600 billion yen and net profit was 464.34 billion yen, Reuters said.
“We’ve got a bit of pressure from currency rates but we’re seeing the benefits of our cost-reduction efforts worldwide. Motorbike sales in Asia are doing well and profits from Asian affiliates have grown,” executive vice president Koichi Amemiya reportedly told a news conference.
Reuters noted that Honda’s domestic rivals Toyota Motor and Nissan Motor are expected soon to post higher third-quarter operating profits on strong US sales growth, offsetting higher prices for raw materials such as steel, aluminium and rubber.
According to the report, Honda also increased its full-year global sales forecast by 10,000 units to 3.25 million vehicles – it sold about 343,000 cars in the United States in the quarter, 15% more than a year earlier, and analysts expect continued growth as the auto maker ramps up output at its Alabama plant.
Reuters noted that the new Ridgeline pickup truck – Honda’s first try at the lucrative US sector – was well received at this month’s Detroit motor show, and industry watchers reportedly predict healthy sales when it hits showrooms in March.
Amemiya said US sales incentives averaged around $600 per vehicle in the third quarter but that should fall in the final quarter to produce an average of around $480 for the second half, the news agency reported.
Reuters said Honda boosted car sales in Europe by 18% last year to a record 255,721 units and has forecast a 9% rise this year to 275,000, helped by the launch of diesel versions of the UK-built CR-V off-roader and the FR-V minivan.
Honda, also the world’s leading motorcycle maker, plans to boost two-wheeler capacity in Asia to meet voracious demand, the report added.
According to Reuters, the dollar slid 7% against the yen in the October-December period, reducing the value of Honda’s dollar-based earnings when converted into yen.
