Honda in red for 4Q, books profit for fiscal year

[April 28, 2009]  TOKYO (AP) -- Honda Motor Co. said Tuesday it overcame a large quarterly loss to book a fiscal year profit that was well above forecasts, and vowed to stay in the black for the current fiscal year.

Japan's second-largest carmaker said it had a net loss of 186.16 billion yen ($1.94 billion) in the January-March quarter, down from a 25.43 billion yen profit a year earlier.

For the fiscal year through March, though, Honda earned a net profit of 137 billion yen. While that was less than a quarter of its profit a year earlier, it was above the company's forecast of 80 billion yen set in January. A survey of 24 analysts by Thomson Reuters had forecast an average profit of 93.67 billion yen for the year.

For the current fiscal year, Honda projected it would eke out a 10 billion yen profit, barely managing to stay in the black.

"This was a good result for Honda. And 10 billion is a very low number, but this is a strong message by management that they will avoid a loss this year," said Koji Endo, an analyst at Credit Suisse in Tokyo.

Honda Executive Vice President Koichi Kondo told reporters the target was "conservative" and expressed confidence his company would meet it, though much depends on foreign exchange considerations and the recovery of emerging economies such as China.

Like rivals at home and abroad, Honda is feeling squeezed by the global slowdown -- but so far has managed to outperform its peers, maintaining profits even as revenues fall. Toyota Motor Corp. and Nissan Motor Co. are both forecasting net losses for the just-ended fiscal year.

Honda's quarterly sales tumbled 42 percent to 1.78 trillion yen from 3.06 trillion a year earlier. For the year, sales slid 17 percent to 10.01 trillion yen.

Honda has enacted major cost reductions to avoid such losses, including cutting all of its temporary workers and scaling back production worldwide. It has also pulled its Formula One sponsorship.

Honda's car lineup has also been an advantage. Unlike Toyota, it doesn't produce expensive gas-guzzling trucks, and motorcycles are a major product. This has been a good fit as consumers have grown more cost conscious and concerned about fuel economy.

Still, its fortunes have fallen sharply. For the year that ended in March 2008, Honda booked 600 billion yen in profit.

Honda said it sold less vehicles in all regions during the fiscal fourth quarter, but also spent far less on its operations, cutting items such as research and development.

While sales numbers have been especially dire in the massive North American market, Kondo said he thought the worst was over in the region.

"Overall we think demand has bottomed out, but we're not sure how it is going to rebound from here," he said.

Also on Tuesday, Isuzu Motors Ltd. said it would likely book a bigger net loss for the fiscal year than it had previously forecast. The company said it now expects a loss of 26.9 billion yen, versus its previous target of 15 billion yen loss.

Separately, Honda and Pioneer Corp. said Tuesday they had reached an agreement to shore up Pioneer's flagging finances. The electronics maker said it will issue new stock to Honda for 2.5 billion yen later this year, which will make Honda its second-largest shareholder behind Sharp Corp.

Pioneer said car electronics, including audio and navigation products, are a core business, and Honda is a major customer.

Honda's results were released after the stock market closed. In Tuesday trade, its shares fell 2.4 percent to 2,600 yen.

[Associated Press; By JAY ALABASTER]

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