Honda's quarterly profit falls on strong yen

[January 31, 2011]  TOKYO (AP) -- Honda reported a nearly 40 percent drop in quarterly profit, hit by a strong yen and fading sales in Japan but raised its full-year earnings forecast, crediting cost cuts.

Honda's October-December profit totaled 81.1 billion yen ($989 million), down from 134.6 billion yen the year before, it said Monday. Quarterly sales slipped nearly 6 percent to 2.11 trillion yen ($25.7 billion).

A strong yen hurt Tokyo-based Honda's overseas earnings and the end of green car incentives crimped vehicle sales in Japan, offsetting the perk from strong motorcycle sales in Asia.

Honda Motor Co. was upbeat about the full fiscal year through March 2011, raising its profit forecast to 530 billion yen ($6.5 billion) from its October forecast of 500 billion yen ($6.1 billion).

The revision was mostly from cost cuts and improved model offerings.

The maker of the Civic sedan, Odyssey minivan and Asimo robot lowered its full-year sales projection to 8.9 trillion yen ($108.5 billion) from 9 trillion yen ($109 billion), mainly because the yen is expected to remain strong.

But the lowered projection still leaves Honda ahead of the previous fiscal year when it posted 268 billion yen ($3.3 billion) profit on 8.58 trillion yen ($105 billion) sales.

Honda said vehicle sales fell in Japan, because of the end of government incentives for green models last year, but improved in North America. Honda's vehicle sales also fell in Europe.

Among Honda's green car offerings are the Insight and CR-Z hybrid models, which are popular but trail the world's top-selling hybrid, the Prius from Japanese rival Toyota Motor Corp.

Honda sold 855,000 vehicles around the world in October through December, down 6.5 percent from 914,000 sold a year earlier. Japan sales slid to 118,000 from 177,000 while North American sales jumped to 364,000 from 344,000.

Honda said there were some signs of a gradual recovery in the key U.S. market but acknowledged lingering worries about tighter credit and high unemployment. It was more optimistic about China and India, where it hopes to expand not only in autos but also in motorcycles.

The surging yen remains a risk for all Japanese exporters, including Honda. It said the dollar traded at about 83 yen during the three months, down from 89 yen a year earlier.

The negatives from currency rates erased 45 billion yen ($549 million) from Honda's quarterly operating profit, it said.

Honda expects the dollar, now at about 82 yen, to trade at 80 yen in the January-March quarter.

For the first nine months of the fiscal year, Honda's profit soared to 489.5 billion yen ($5.97 billion), more than doubling from 196 billion yen the same period the previous fiscal year.

Nine-month sales gained about 7 percent to 6.72 trillion yen ($82 billion).

Toyota, the world's top automaker in annual vehicle sales, reports earnings Feb. 8. Nissan Motor Co., which outsold Honda globally last year to become Japan's No. 2 automaker, reports earnings Feb. 9.

Honda shares lost 1.4 percent to close at 3,475 yen ($42) in Tokyo.

[Associated Press; By YURI KAGEYAMA]

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