Japanese carmaker reports soaring business abroad but a decline at home
Honda Motor more than doubled its net profit for the first quarter from a year ago as soaring vehicle sales in Asia and Europe offset a decline in Japan.
Honda yesterday said it racked up 219.5 billion yen ($14.84 billion) in profit for the quarter to last month - a record quarterly profit for Japan's No3 carmaker and dramatically higher than the 94 billion yen earnings it posted for the same period last year.
Quarterly sales jumped 20.6 per cent to 2.83 trillion yen from 2.35 trillion yen previously.
Honda vehicle sales slipped in Japan but surged in the rest of Asia, Europe and North America.
The results came a day after Japanese rival Nissan Motor reported healthy profits and marked a contrast to the losses reported by United States carmakers General Motors and Ford Motor.
For the year to last month, Honda marked a 22.8 per cent rise in profit to 597 billion yen from 486 billion yen in the 2004 financial year. Sales totalled 9.91 trillion yen, up 14.5 per cent from a year earlier. Both sales and profits were record highs for Honda.
Adding to the gains were cost-cutting efforts, a weaker yen and a reimbursement related to workers' pension funds in Japan, the company said in a statement.
Honda sold a record 3.39 million vehicles worldwide for the financial year just ended, up 4.6 per cent from 3.24 million in the 2004 financial year and the seventh consecutive year of increased car sales.
Vehicle sales rose 6.8 per cent in North America and 9 per cent in Europe but fell 2.2 per cent in Japan. They surged 14.2 per cent in other markets.
Honda forecast a 550 billion yen profit for this financial year to March next year, down 7.9 per cent year on year, but it expected sales to grow 7 per cent to 10.6 trillion yen.
Koji Endo, an analyst with Credit Suisse First Boston Securities (Japan), said Honda faced a challenge in maintaining its momentum for growth in the months ahead, as rising petrol prices hurt sales of trucks and other models in the US that tended to bring in more profits but used more petrol.
Expectations for a stronger yen are also projected to take a toll on profits of Japanese carmakers.
'It's going to be a tough year for Honda especially in North America,' Mr Endo said. 'The results aren't going to be all bad but they aren't going to be all good either.'
On Tuesday, Nissan reported a 9.4 per cent rise in profit for the latest quarter to 152.4 billion yen.
The company also said it would build a vehicle assembly plant in Russia as part of its global expansion and forecast slight profit growth on increased revenue for this financial year.
General Motors cut its losses in the quarter but still lost US$323 million, its sixth consecutive quarterly loss. Last week, Ford said it sank into a US$1.2 billion loss for the same period, a reversal from a US$1.2 billion profit a year earlier.