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Honda's net profit drops 12 percent while sales soar

Honda's net profit dropped 12 percent in the most recent quarter on losses in securities holdings and exchange rates unrelated to auto operations. Japan's No. 3 automaker reported booming sales and raised its earnings forecast for the full fiscal year.

Honda Motor Co yesterday reported its best ever quarterly sales during the October-December period at ¥2.47 trillion (US$21 billion), up 16 percent from ¥2.13 trillion the same period a year ago.

Group net profit totaled ¥133.1 billion, down from ¥150.7 billion a year earlier owing partly to currency hedges against a strong yen. Instead, the yen slid against the US dollar, causing Honda to lose money on those positions.

Honda also suffered losses in stocks it owns in a US satellite company, whose data it uses for navigation systems in luxury Acura brand cars.

In a solid sign of growth despite the lower profit numbers, Tokyo-based Honda revised its forecast for the fiscal year through March to a ¥605 billion profit -- a record high for the company that's better than the ¥490 billion projected in October.

Last fiscal year, Honda earned ¥486.1 billion. It now expects sales for the fiscal year to total ¥9.74 trillion, up 13 percent from ¥8.65 trillion in fiscal 2004 and up from the ¥9.6 trillion it had projected in October. That would be the sixth consecutive year of record sales.

Honda's robust outlook comes at a time when other Japanese automakers, including Toyota Motor Corp and Nissan Motor Co are increasing market share in the US while General Motors Corp and Ford Motor Co are struggling.

For the latest quarter, Honda sold 816,000 vehicles worldwide, nearly unchanged from last year. Growing overseas vehicle sales offset declines Honda suffered in Japan, the company said in a statement.

Honda expects to sell 3.425 million automobiles for the fiscal year through March.

The weaker yen is generally good for Honda because it makes its prices more competitive overseas and inflates overseas income when repatriated to Japan. But because of its hedges, the company lost out on some of those currency gains.

The yen fell by about 2 percent against the US dollar and the euro last year compared with the previous year.

Honda said it also expects extra gains in the fourth quarter for returning part of a pension fund payment to the government.

Japan's other big carmakers will announce earnings in the next few days: Nissan reports tomorrow, while Toyota announces results next Tuesday.

Honda shares, which gained about a fifth in value in the last year, closed up 1 percent at ¥6,600 in Tokyo yesterday.
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