Honda Raises Full-Year Net Income Profit Forecast on U.S. Sales Outlook

Honda Motor Co., Japan’s third- largest carmaker, increased its profit forecast 6 percent as rising U.S. auto sales and Asian motorcycle demand helped offset the negative impact of a stronger yen.

The maker of Accord sedans and Civic compacts expects net income of 530 billion yen ($6.5 billion) in the year ending March 31, compared with an earlier estimate of 500 billion yen, the Tokyo-based company said today in a statement.

Honda, which gets 42 percent of its unit sales in North America, expects to benefit from a market recovery in the U.S., where deliveries may rise 11 percent to 12.8 million vehicles this year, according to researcher J.D. Power & Associates. Motorcycle sales in emerging markets may also help Honda’s profit surpass that of Toyota Motor Corp. for a third year.

“In North America, Honda is selling more profitable cars, and so the overall results look good,” said Mamoru Kato, a Nagoya, Japan-based analyst at Tokai Tokyo Research Center. “There’s been a gap in results between Honda and Toyota since the second quarter, and that seems to be getting bigger.”

Honda’s net income fell to 81.1 billion yen in the three months ended Dec. 31 from 135 billion yen a year earlier, as vehicle sales in Japan dropped after a government subsidy for car buyers expired. The result fell short of the 102.5 billion yen average of five analyst estimates compiled by Bloomberg. Revenue totaled 2.1 trillion yen.

U.S. Sales

The carmaker fell 1.4 percent in Tokyo trading to close at 3,475 yen before the earnings announcement. The stock has gained 8.1 percent in 2011.

Toyota reports third-quarter earnings on Feb. 8, and Nissan Motor Co. reports the following day.

Honda expects its vehicle sales in the U.S. may rise 10 percent in the fiscal year that begins April 1, Executive Vice President Koichi Kondo said at a press conference today in Tokyo. The company said it expects to benefit from sales of more profitable models as customers buy more light trucks such as the Odyssey minivan, instead of passenger cars.

“Demand is dramatically shifting to sport-utility vehicles since September, even though gas prices are creeping up,” Kondo said.

The automaker plans to introduce an updated Civic compact in the U.S. around April, “which will have a big impact through reduced incentives,” said Kohei Takahashi, an auto analyst at JP Morgan Chase & Co. in Tokyo.

Japan Sales

Honda’s sales in the U.S. gained 25 percent in December and 21 percent in November. The Civic was the second-best-selling small car in the U.S. last year, behind Toyota’s Corolla. The models face increasing competition from Hyundai Motor Co.’s new Elantra compact, which went on sale in December.

Honda’s Japan sales, which account for about a fifth of its global deliveries, have dropped for three straight months, plunging 35 percent in December. The Japanese government ended a subsidy for fuel-efficient cars, cutting demand for Honda’s Fit compact, the country’s third best-selling car.

“With the end of the subsidy program, the overall Japanese market has been declining dramatically,” Takahashi at JPMorgan said. “Still, Honda’s very profitable motorcycle business is contributing to the company’s higher margins relative to other carmakers.”

Operating profit from Honda’s two-wheeler business, the world’s biggest, surged 84 percent to 29.1 billion yen in the fiscal third quarter, helped by growing demand in emerging markets.

To help boost sales in Japan, Chief Executive Officer Takanobu Ito is expanding Honda’s gasoline-electric hybrid line- up and unveiled a hybrid version of the Fit on Oct. 8.

Nissan overtook Honda as the second-largest Japanese carmaker by vehicle sales in 2010 as new models helped the Yokohama, Japan-based company boost deliveries in all regions.

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

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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