Bloomberg News

Honda Raises Profit Forecast on Faster Recovery From Quake

August 01, 2011

(Updates with Honda CFO comment in sixth paragraph.)

Aug. 1 (Bloomberg) -- Honda Motor Co., Japan’s third- largest carmaker, raised its full-year profit forecast by 18 percent on a quicker-than-expected recovery from the March 11 earthquake.

Tokyo-based Honda may post net income of 230 billion yen ($2.96 billion) in the year ending March 31, 2012, compared with an earlier forecast of 195 billion yen, it said in a statement today. The automaker posted a profit of 534 billion yen in the year-earlier period.

Honda and other Japanese automakers are recovering from the magnitude-9 temblor and tsunami in March, which damaged car factories and caused parts and power shortages. The yen also gained 11 percent against the dollar last quarter from a year earlier, cutting the value of profits from exports. The automaker now expects to sell 4 percent more vehicles this fiscal year compared with its outlook in June, citing better parts supply.

Honda raising its forecast “is a sign that production is recovering at a faster-than-expected pace, and that even with the high yen, sales is strong,” said Tatsuya Mizuno, a director at Mizuno Credit Advisory in Tokyo. “It also shows that even with the strong yen, because Honda has production bases in Asia and overseas as well, they’ve managed to decrease the impact of the currency.”

Honda shares rose 1.5 percent to 3,125 yen as of the 3 p.m. close of trading in Tokyo.

Better-Than-Expected Sales

The maker of Civic and Accord sedans also raised the 12- month sales forecast by 4.8 percent to 8.7 trillion yen, up from a previous estimate for 8.3 trillion yen. The automaker now expects to sell 3.435 million vehicles in the year ending March 2012, up from an earlier estimate of 3.3 million.

“We‘ve been able to move up the recovery from the parts shortage,’’ Fumihiko Ike, Honda’s chief financial officer, said in Tokyo today. ‘‘Most of the increase in higher sales will be booked in this quarter.’’

Honda said fiscal first-quarter net income plunged 88 percent after the March 11 earthquake disrupted production and the strong yen cut earnings from exports.

April-June Quarter

The carmaker posted 31.8 billion yen in net income in the three months ended June 30, compared with 272 billion yen a year earlier. Honda was expected to post a net loss of 36.2 billion yen, according to the mean of eight analysts’ estimates compiled by Bloomberg. Sales fell 27 percent to 1.7 trillion yen from 2.4 trillion yen in the period.

A stronger yen cut Honda’s first-quarter operating profit by 22.5 billion yen, while the impact from the earthquake was 225 billion yen. Global car sales fell 39 percent in the three months ended June to 547,000, the company said. The automaker won’t accelerate overseas production plans due to the yen, Ike said. The carmaker is basing its fiscal year forecast on 80 yen to the dollar and 112 yen to the euro.

Honda’s first-quarter profit compares with larger rival Nissan Motor Co.’s first-quarter result of 85 billion yen net income.

Honda was particularly hard-hit by a shortage of semiconductors because it had ordered a new type of chip for its updated Civic compact, which went on sale in the U.S. in late April.

Production Plunge

Honda’s June global output plunged 45 percent to 168,373 units, the company said last week, compared with a 9.2 percent drop at Toyota Motor Corp., Japan’s largest carmaker, and a 19 percent gain at Nissan. Honda expects global production to recover to planned levels by the end of the year, it said in June.

The automaker won’t be able to recover the output lost in the first quarter over the full year, with global sales dropping 2.2 percent, Ike said today. Its China production isn’t keeping up with demand, while the automaker is considering a new plan to supply the North American market, he said.

Carmakers are hiring temporary workers to help fill back orders as suppliers recover. Toyota is employing as many as 4,000 workers, and Honda is engaging 1,000 as they prepare to ramp up production in October.

The dollar fell 3.6 percent against the yen last month. The greenback slid to 76.65 yen today in Tokyo, after gaining last week to the strongest level since March 17.

Gains in the Japanese currency reduce the repatriated value of the company’s overseas earnings. Each 1 yen gain against the dollar reduces profit by 15 billion yen, Ike said in June.

Toyota reports first-quarter earnings tomorrow at 3 p.m. in Japan.

--With assistance from Anna Mukai in Tokyo. Editors: Kae Inoue, Chua Kong Ho

To contact the reporter on this story: Makiko Kitamura in Tokyo at

To contact the editor responsible for this story: Kae Inoue at

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