The No. 3 Japanese carmaker by volume reported a more than four-fold profit gain on the year for the three months through June, reflecting a rebound in output after last year’s earthquake and tsunami in Japan.
The first-quarter results account for 28% of Honda’s full-year profit projection, and put it on track to achieve an estimate for a doubling of net profit to 470 billion yen ($6 billion) in the fiscal year through next March.
That plan depends on sales gains in two key markets: Japan, where Honda’s N-Box mini-car has been a hit, and the U.S., where this fall it will debut a remodeled Accord sedan-the company’s best-selling vehicle.
“Our newest Accord is very competitive and will more than hold its own against rivals,” Executive Vice President Tetsuo Iwamura said at a news conference. “We will absolutely deliver a 10% [U.S. market share] and are aiming for 11%,” he told reporters.
Honda’s U.S. market share shrunk to 9% last year, down from 10.6% in 2010 and 11% in 2009.
The carmaker posted a net profit of ¥131.72 billion in the April-June quarter, up from ¥31.80 billion in the same period last year after a four week-long shutdown of all Japanese factories due to the March quake.
Yet Honda’s latest quarterly earnings were less than half the ¥272.48 billion the company earned in the April-June quarter of 2010 when its Japanese plants still were running at full capacity.
A big difference between then and now is the stronger Japanese currency, which Honda said averaged ¥80 to the dollar in the three months to June this year, up from ¥82 last year and ¥92 two years ago.
The yen’s appreciation against other major currencies has hurt Honda and other Japanese automakers by eroding the value of overseas sales and reducing the price competitiveness of exports from Japan.
While the automaker is sticking with its current full-year profit forecast and exchange rate projection of ¥80 to the dollar-and ¥105 to the euro-for now, Honda’s chief financial officer said that could be revisited as soon as the current quarter ending in September if current exchange rates prevail.
“We will monitor the situation in the second quarter and make adjustments if needed accordingly,” said CFO Fumihiko Ike.
Honda was hit hardest and was the slowest to recover among Japan’s top three car makers from the quake and tsunami along with flooding in Thailand later in 2011. With its Thai plant in Ayutthaya back online in April, the company aims to lift net profit 122% in the current fiscal year.
However, economic turmoil in Europe is acting as a drag on Honda’s earnings and Mr. Iwamura says that is unlikely to change in the foreseeable future. In the first quarter, the company lost ¥7.6 billion from its European operations, more than the ¥6.1 billion in red ink it posted in Europe the same period last year.
Even so, Honda’s overall net figure beat the ¥72.28 billion reported last week by Nissan Motor Co. which boasted the largest profit in the last fiscal year among Japan’s Big Three.
Honda’s sales shot up 42.1% to ¥2.436 trillion from ¥1.715 trillion and operating profit jumped nearly eight-fold to ¥176.01 billion from ¥22.58 billion.
For the full fiscal year, the car maker also maintained its operating profit outlook of ¥620 billion and sales forecast of ¥10.300 trillion.
Meanwhile, Mazda Motor Corp. Tuesday reported a net loss of ¥6.46 billion for the just-ended first quarter, narrower than a loss of ¥25.54 billion, as domestic sales recovered from the year-earlier lackluster performance in the wake of the March 11 natural disaster.
Japan’s fifth largest car maker by volume reported sales jumped 24.1% to ¥506.62 billion from ¥408.13 billion, while it swung to an operating profit of ¥1.80 billion from a loss of ¥23.09 billion a year earlier.
The results came as the Hiroshima-based car maker struggled to return to profitability after bleeding losses for four years in a row.
In the last fiscal year ended March, Mazda suffered a net loss of ¥107.7 billion, compared with a net loss of ¥60.04 billion a year earlier, hit by the yen’s strength and production disruptions as a result of the March 11 earthquake.
For the full fiscal year ending March, the Hiroshima-based car maker kept intact its earnings outlook. It continues to project a net profit of Y10 billion with sales of ¥2.200 trillion for the full business year.
Honda reports earnings under U.S. accounting standards, while Mazda compiles earnings using Japanese accounting standards.
***Courtesy of The Wall Street Journal
