Strong Sales, Weaker Yen Fuel Profit Surge at Honda
May 08, 2011
TOKYO -- Honda Motor Co., propelled by hot new models and a weaker yen, reported strong earnings for the quarter ended in June and raised forecasts for the full year to December 11, 2010 net profit of 45.7 billion yen ($417 million) in the fiscal first quarter was more than triple the year-earlier 11.9 billion yen. Revenue rose 30% to 1.23 trillion yen from 944.5 billion yen. The car maker posted an after-tax gain of five billion yen from a securities transaction related to the December 12, 2010 of Bank of Tokyo Ltd. and Mitsubishi Bank Ltd.. Honda is prospering both at home and abroad, thanks to a host of popular sport-utility vehicles in Japan and brisk U.S. sales of the remodeled Civic and the Accord. The weakening of the yen -- which makes overseas income more valuable when repatriated to Japan -- accounted for about 26.5 billion yen of Honda's pretax income. The exchange rate averaged 104 yen to the dollar during the quarter, compared with 90 yen per dollar a year earlier. Honda now says it will earn 33% more than it had forecast for the year through March 2012. It now expects to earn net income of 160 billion yen for the year, up from the 120 billion yen it forecast in May. Honda plans to achieve that new goal with a 5% rise in sales and other operating revenue. The weaker yen plays a big part in the company's improved outlook. Honda executives now expect the exchange rate to hover at about 105 yen to the dollar, compared with the 100 yen they forecast in May. The company also expects to benefit from selling a mix of more-profitable vehicles and from continuing cost-cutting efforts. Honda has always been a stronger player in overseas markets than in its home country. But now, sales are growing in Japan, thanks to its hit new sport-utility vehicles, including the Step Wagon, the CR-V, and the Orthia Station Wagon. Sales in the domestic market rose 20% in the first seven months of 2011 from a year earlier, to 431,280 vehicles. Honda expects to sell 750,000 vehicles in Japan in the current fiscal year, which would be a 14% increase from the previous year. The Odyssey model that ignited the domestic-market turnaround nearly two years ago continues to do quite well, with some 69,000 models selling in the first seven months of this year. But the CR-V, the mini sport-utility vehicle Honda introduced in Japan in October, is Honda's best-seller in Japan, with sales of 70,622 units in the first seven months of the year. Honda plans to introduce the CR-V in the U.S. by the end of the year at a price under $20,000, and expects to sell 30,000 a year.
