Bloomberg News

Honda Misses Analyst Estimates on Yen, Expenses

July 31, 2012

Honda Motor Profit Misses Analyst Estimates on Yen, Expenses

Honda, which joins Nissan Motor Co. in reporting profit that trailed analysts’ projections, increased spending on incentives in the U.S. by 31 percent last quarter, the most among major Japanese carmakers, according to Autodata Corp. Photographer: Scott Eells/Bloomberg

Honda Motor Co. (7267), Japan’s third- largest carmaker, reported first-quarter profit that missed analysts’ estimates after the yen strengthened and the company increased marketing spending to sell outgoing models.

Net income was 131.7 billion yen ($1.7 billion) in the three months ended June 30, Honda said in a statement today. That missed the 150.7 billion yen average of seven analyst estimates compiled by Bloomberg. Except for Japan, earnings from all of Honda’s main regions were below expectations.

Honda, which joins Nissan Motor Co. in reporting profit that trailed analysts’ projections, increased spending on incentives in the U.S. by 31 percent last quarter, the most among major Japanese carmakers, according to Autodata Corp. The yen appreciated the most among major global currencies in the same period, cutting the value of overseas sales.

“Honda has been spending a lot on marketing the vehicle, so the costs may not have completely been covered by the sales volume,” said Kunihiko Shiohara, a Tokyo-based auto analyst at Credit Suisse Group AG. “The strong yen continues to weigh down on Honda’s earnings, and what will be important for Honda is to make up for it by gaining volume in sales and cutting costs.”

Honda shares rose 2.1 percent to 2,551 yen at the close of trading in Tokyo before the earnings announcement.

Operating Profit

Operating profit, or sales minus the cost of goods sold and administrative expenses, jumped to 176 billion yen, though it missed the 212.4 billion yen average analyst estimate. Sales gained 42 percent to 2.44 trillion yen, also missing estimates.

Honda kept its full-year financial forecasts unchanged. The automaker is targeting full-year sales of 10.3 trillion yen and record deliveries of 4.3 million vehicles, according to the company. The company is setting its forecasts based on exchange rates of 80 yen to the dollar and 105 yen to the euro.

The yen gained 3.9 percent versus the dollar in the April to June period, and 9.4 percent against the euro, according to data compiled by Bloomberg.

Gains in the Japanese currency reduce the repatriated value of overseas earnings. The Japanese currency traded at 78.23 yen against the dollar today.

Global Output

Honda’s operating profit from North America rose fourfold to 82.2 billion yen from 18.5 billion yen a year earlier. That missed the 105.2 billion yen average estimate of three analysts surveyed by Bloomberg.

In Japan, the company posted a 61 billion yen operating profit after reporting a 45.9 billion yen loss a year earlier. The average analyst estimate was for a 46.1 billion yen profit. Asia, excluding Japan, contributed 31.8 billion yen in operating income, lower than the 35.6 billion yen average analyst estimate.

Europe posted an unexpected loss of 7.63 billion yen, compared with the average analyst projection for a 3.5 billion yen profit. The region had a 6.1 billion yen loss a year earlier.

In the first quarter, Honda’s U.S. sales gained 27 percent to 380,817 units, according to the Tokyo-based carmaker. The carmaker increased its market share 0.9 percentage point to 10 percent in the same period, according to industry researcher Autodata Corp.

In Japan, the Honda N Box, on sale since December, was the most popular minicar model for a third month in June, according to the Japan Mini Vehicles Association. The carmaker this month introduced a variant of the N Box to cater to increasing demand for more fuel-efficient models.

Honda boosted sales in China by 75 percent to 178,887 units in June as Japanese automakers rebounded from the earthquake and tsunami in Japan a year earlier.

To contact the reporters on this story: Anna Mukai in Tokyo at amukai1@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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