Honda set for record Q1 profits on brisk US sales

TOKYO, July 24 Reuters reported that Honda Motor Co, Japan's second-largest automaker, is set to post record quarterly operating profit in April-June, boosted by brisk U.S. sales of light trucks and a weak yen for the period.

Six analysts polled by Reuters produced an average forecast of 185 billion yen ($1.58 billion) in consolidated operating income for the period, a 23 percent rise over the previous year's record for the quarter.

It would also top Honda's best result for any quarter, which was 169.2 billion yen in the previous January-March period.

Analysts' forecasts ranged from 172 billion yen to 207 billion yen.

The results, due out at 3 p.m. (0600 GMT) on Monday, July 29, are also expected to turn out Honda's best quarterly result for net income.

Net profit was estimated at an average 117 billion yen, up 31 percent from a year earlier.

"We're expecting strong results based on the yen's weakness as well as more Honda light trucks in the U.S. market including the Odyssey minivan, MDX and Pilot sports utilities now that the new Alabama plant is able to build more," said Tsuyoshi Mochimaru at Daiwa Institute of Research.

The first business quarter -- for which analysts estimated Honda's average exchange rate to be between 125 to 130 yen to the dollar against 119 yen a year earlier -- is, however, expected to be the only quarter to see benefits from a weaker yen this year.

A soft Japanese currency inflates the yen value of income earned abroad and makes exports more profitable.

YEN BOON TO BE SHORT AND SWEET

The yen's rapid climb since April to levels as high as 115 yen to the dollar has made life harder for Japan's automakers after windfall currency gains in the last business year.

Most automakers have assumed an average rate of 125 yen to the dollar for the year, but analysts project the average rate to come in at 120 yen if levels of around 115 yen continue for the rest of the year.

Even so, analysts said Honda, as well as rivals Toyota Motor Corp <7230.T> and Nissan Motor Co <7201.T>, was still on track to post record profits for the second consecutive business year.

Robust overseas sales, supported by the introduction of the remodelled Accord sedan -- Honda's flagship model in the United States -- two new models in Europe and strong motorcycle sales should offset the unfavourable exchange rate, they said.

"Stripping out the exchange rate effect, the first quarter is actually the weakest of the year for Honda," said Kurt Sanger, auto analyst at ING.

"It only gets better as there'll be more light trucks sold in the U.S. as the Alabama factory ramps up to full capacity and Honda introduces its new Accord," he said.

The yen's appreciation initially took its toll on auto share prices as investors, expecting bigger currency gains, cut their holdings in the sector. But shares have been bought back partly due to a slight weakening in the currency to 117 yen.

Honda's shares, trading at around 5,270 yen, are now only 3.6 percent off April 1 levels after falling as much as 15 percent at one stage.

A strong mid-term outlook given by the company has supported the shares, with the blue-chip automaker saying it intends to boost global vehicle sales by 26 percent over the next three years to 3.4 million units.