Profits at Japan’s top two car makers likely took a step back in the first quarter mainly due to a weaker dollar, but analysts told Reuters their fundamentals remain solid despite a shrinking global car market.
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For the April-June term, analysts on average expect group operating profits at Toyota and Honda to fall by 19% and 8% respectively, as the dollar lost around eight yen, offsetting a jump in the euro-yen exchange rate, the news agency added.
Reuters said other one-off factors such as a pullback in production to adjust inventory levels also likely put pressure on earnings, but many analysts forecast an improvement in subsequent quarters thanks to strong fundamentals and continued expansion in the fast-growing Asian markets.
A Reuters survey of six analysts put Honda’s quarterly operating profit, on average, at 157 billion yen ($US1.32 billion), down 8% from last year.
Honda’s results, announced under US accounting standards, are due on July 29 while Toyota will report on August 5, the report said.
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By GlobalData“The main factor depressing profits is currencies,” HSBC analyst Christopher Richter told Reuters. He added that things should look up for Honda in the second quarter after a relatively soft performance in the same period last year.
Three analysts put Toyota’s consolidated operating profit at an average 319 billion yen ($2.68 billion) under Japanese accounting standards, down 19%, Reuters said, adding that actual results are expected to veer from the forecast, however, because Toyota will for the first time announce quarterly numbers under US accounting rules.
But, Reuters added, the expected profit decline would still represent a healthier performance in real terms since profits had risen over 30% in the same quarter last year as Toyota produced more cars than usual to replenish its depleted US inventory.
The first quarter of 2002 also saw a large extraordinary gain of 163.7 billion yen for Toyota as it returned the proxy portion of its pension fund to the government, Reuters noted.
