Honda Gains After Raising Profit Forecast on Improving Sales in Asia, U.S.

Honda Motor Co., Japan’s second- largest automaker, gained the most in seven weeks in Tokyo trading after raising its full-year profit forecast on improving sales in Asia.

Honda rose 4 percent to close at 2,818 yen, the most since June 14, after earlier climbing as much as 4.9 percent. The carmaker expects net income of 455 billion yen ($5.3 billion) in the year ending March, compared with an earlier estimate of 340 billion yen, the Tokyo-based company said in a statement after trading closed on July 30.

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. Honda’s net income in the three months ended June 30 surged to 272.49 billion yen, more than double analyst estimates, from 7.56 billion yen a year earlier.

Honda “revised up first-half operating profit well beyond Deutsche Bank’s estimate,” Kurt Sanger, an auto analyst at Deutsche Bank AG in Tokyo, wrote in a report today. First- quarter operating profit “far exceeded our expectations,” said Sanger, who rates the stock “buy.”

Honda, the world’s biggest motorcycle maker, also raised its two-wheeler sales forecast to 10.82 million vehicles from 10.38 million.

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., Honda Executive Vice President Koichi Kondo said on July 30.

Honda’s deliveries in North America, its most profitable market, rose 15 percent in the first 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.

To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net

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