Honda Motor Quarterly Profit Falls on Slump in Japan Demandby and
Automaker maintains 525 billion yen full-year profit forecast
Honda sees U.S. sales at 1.6 million units this year
Honda Motor Co. reported quarterly profit that missed analysts’ estimates on quality-related expenses and slumping demand in Japan.
Net income rose 6.9 percent to 127.8 billion yen ($1.06 billion) in the quarter through September from a restated 119.5 billion yen a year earlier, Honda said Wednesday. The result compares with the 129.5 billion yen average of eight analysts’ estimates compiled by Bloomberg. The automaker maintained its full-year profit forecast at 525 billion yen.
Honda, which sells the most vehicles in Japan after Toyota Motor Corp., has posted 12 straight months of declining deliveries at home as demand wanes after a sales-tax increase last year. Weak demand in Japan has offset gains for Honda in China, where sales have been boosted by its crossover models, and in the U.S. auto market, which has registered the best two-month stretch of sales in 15 years.
“Honda has been the most aggressive Japanese carmaker to produce locally in markets overseas, so it’s not benefiting a lot from a weaker yen this year,” Seiji Sugiura, an analyst at Tokai Tokyo Research Center, said before the earnings announcement. “In the meantime it’s suffering from a slump in the domestic market.”
Honda on Wednesday said it’s aware of evidence suggesting Takata Corp. manipulated air bag inflator test data and will no longer use the components in its new models under development. Takata, which has agreed to pay a record U.S. civil penalty of as much as $200 million over faulty air bags, said it omitted information from reports to carmakers.
Honda posted an operating profit of 164.8 billion yen, compared with analyst estimates of 176.6 billion yen.
Shares of Honda rose 1.9 percent to 4,028 yen at close in Tokyo, before the earnings announcement. The benchmark Nikkei 225 Stock Average gained 1.3 percent.
The Japanese automaker expects sales in the U.S. will reach 1.6 million vehicles this year, Tetsuo Iwamura, Honda’s executive vice president, said in Tokyo Wednesday. Industrywide deliveries probably will exceed 17 million vehicles in the 12 months through March 2017, he said.
Honda reaped 37.5 billion yen in operating profit in North America in the quarter, compared with 42.6 billion yen a year earlier. Honda’s sales in the U.S., its largest market, climbed 2.2 percent in the 10 months through October, boosted by demand for its SUV models including the Pilot, according to Autodata Corp.
Auto sales in the U.S. are surging as job growth, available credit and affordable fuel encourage shoppers to replace aging models, especially with SUVs. The monthly selling rate, adjusted for seasonal trends, was 18.2 million vehicles in October, matching the month earlier, according to Autodata. The pace exceeded 18 million in back-to-back months for the first time since February 2000.
In China, Honda sales jumped 33 percent this year through October, as consumers shopped for small SUVs including its Vezel and XR-V. Strong sales of those models have helped make Honda the fastest-rising major auto brand this year in the country.
The Japanese carmaker has said it will be able to achieve full-year target of selling a record 950,000 cars in China, bucking an industrywide slowdown. Operating profit in Japan fell to 26.2 billion yen in the quarter, from 63 billion yen a year earlier.
Honda, like other Japanese carmakers, is struggling to boost sales at home. Deliveries in the first half of its fiscal year fell 14 percent to 330,775 units.
(An earlier version of this story corrected to say profit rose after year earlier numbers were restated.)