Honda Raises Profit Forecast on Global Sales Recovery
Takanobu Ito, president and chief executive officer of Honda Motor, speaks during a news conference in Wako City. Photographer: Toshiyuki Aizawa/Bloomberg
Honda Motor Co., Japan’s second- largest automaker, raised its full-year profit forecast as greater-than-expected sales gains in Asia outweigh the negative effects of a stronger Japanese currency.
Honda expects net income of 455 billion yen ($5.26 billion) in the year ending in March, compared with an earlier estimate of 340 billion yen, the Tokyo-based company said in a statement today. Revenue may rise 6.1 percent to 9.1 trillion yen, it said.
The maker of Accord sedans expects to sell 3.64 million vehicles this fiscal year, compared with an earlier estimate of 3.615 million, with gains in Asia outside Japan accounting for the increase. A global recovery in demand is also cutting Honda’s fixed costs by raising its factory utilization rate, Executive Vice President Koichi Kondo told reporters in Tokyo.
“Honda’s estimates were conservative,” Hiroaki Osakabe, a fund manager at Tokyo-based Chiba-Gin Asset Management Co., said before the announcement. “They are running ahead of their target.”
Honda, the world’s biggest motorcycle maker, also raised its two-wheeler sales forecast to 10.82 million vehicles from 10.38 million.
Honda fell 0.3 percent to close at 2,709 yen on the Tokyo Stock Exchange before the earnings announcement.
Stronger Yen
The company’s operating profit may be eroded by 80 billion yen as the Japanese currency gains more than previously forecast, Honda said. The automaker based its full-year profit estimate on exchange rates of 87 yen to the U.S. dollar and 112 yen to the euro. In April, Honda expected the currency to average 90 against the dollar and 120 against the euro.
A rising yen against the two currencies reduces the repatriated value of earnings from sales in the U.S. and Europe.
A revamped Odyssey minivan and better inventory management of CR-V, Pilot and Fit models will help sales in the U.S., Kondo said. Still, “real customer demand, aside from the fleet segment, are not on a recovery trend in a true sense,” he said.
Honda’s net income in the three months ended June 30 surged to 272.49 billion yen from 7.56 billion yen a year earlier. Revenue increased 18 percent to 2.36 trillion yen from 2 trillion yen.
North America Sales
Honda’s deliveries in North America, its most profitable market, rose 15 percent in the quarter as the U.S. economy recovered, while Japan sales jumped 13 percent on government subsidies for car buyers. Sales in other Asian countries surged 38 percent.
Higher factory utilization cut fixed costs by 40 billion yen in the three-month period, Kondo said.
The carmaker’s first-quarter output in China rose 4.3 percent to 149,109 units, even as its sales in the country fell 2.4 percent in June after strikes at suppliers forced the carmaker to halt production.
Honda will cut domestic production 3.5 percent in October compared with its September output plan, as government subsidies for fuel-efficient vehicles expire at the end of September, the company said yesterday. Japan sales may drop to 290,000 in the fiscal second half, compared with 360,000 units in the first half, Kondo said.
Chief Executive Officer Takanobu Ito is expanding Honda’s gasoline-electric hybrid line-up after unveiling a new hybrid CR-Z sports car in Japan on Feb. 25. Honda will start selling a hybrid version of the Fit compact, its most popular model in Japan, later this year.
The company will also start selling a battery-powered car and plug-in hybrids in 2012 as governments tighten emissions rules. It plans to introduce a 500,000-rupee ($10,700) car in India next year and to sell a similar model in Thailand, Ito said on July 21.
Honda aims to build a new motorcycle plant in Indonesia next year with capacity to make 500,000 units a year.
Toyota Motor Corp., the world’s largest carmaker, reports first-quarter earnings on Aug. 4.
To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net
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