Honda Says Profit Drops on Non-Auto Factors As Sales Surge to Record

TOKYO January 31, 2006; Yuri Kageyama writing for the AP reported that Honda's net profit dropped 12 percent in the most recent quarter on losses unrelated to its auto business as Japan's No. 3 carmaker reported booming sales and raised its earnings forecast for the full fiscal year.

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

Group net profit totaled 133.1 billion yen ($1.1 billion), down from 150.7 billion yen a year earlier due partly to currency hedges against a strong yen. Instead, the yen slid against the U.S. dollar, causing Honda to lose money on those positions.

Honda also suffered losses in stocks it owns in a U.S. 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 yen ($5.2 billion) profit -- a record high for the company that's better than the 490 billion yen ($4.2 billion) projected in October.

Last fiscal year, Honda earned 486.1 billion yen.

Honda now expects sales for the fiscal year to total 9.74 trillion yen ($83 billion), up 13 percent from 8.65 trillion yen in fiscal 2004 and up from the 9.6 trillion yen it had projected in October. That would be the sixth straight 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 United States 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 dollar and the euro last year compared to 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 announce earnings in coming days: Nissan reports Thursday, while Toyota announces results next Tuesday.