Honda’s profit misses predictions

HONDA Motor’s operating profit rose less than expected in the AprilJune period to ¥176bn ($2.25bn), as a strong yen eroded some of the gains from its sales recovery in North America, its biggest and most profitable market.

While the result was below the average estimate of ¥197.4bn by seven analysts polled by Thomson Reuters I/B/E/S, it was nearly eight times the year-ago figure, as the company rebounded after last year’s March 11 earthquake and tsunami.

Japan’s number three vehicle maker kept its operating profit forecast unchanged for the year ending next March, at ¥620bn, confident of its recovery despite the eurozone debt crisis and a slowdown in China, the world’s biggest vehicle market.

Honda was hit much harder than rivals Nissan Motor and Toyota Motor by natural disasters in Japan and Thailand that disrupted supply chains in the past financial year.

It has set an aggressive global sales target of 4.3-million vehicles in the financial year to March, up 38.4% from the previous year, with North America to account for 40%.

Toyota, which announces earnings on Friday, is set to raise its global sales target for this year to 8.8million vehicles from 8.58-million, Japanese media reported yesterday, while car parts maker Denso has boosted its half-year operating profit forecast by 50% to ¥135bn.

Honda’s market share has recov- ered to pre-quake levels in its two biggest markets, the US and Japan, where sales volumes surged in May and June as its restored production caught up with pent-up demand.

Whether Honda can achieve its ambitious sales target will depend in part on how its flagship Accord sedan is received in the US market after a revamp this year with a new generation of engines and transmissions to boost fuel efficiency.

But competition has increased, especially from a resurgent US industry and emerging South Korean rivals.

Japan’s exporters have also had little respite from the steady rise in the yen, which reduces their competitiveness and eats into income earned abroad when it is converted into yen. Reuters