Honda profits up 63% on Accord, CR-V sales

Honda jumps on CR-V sales

TOKYO ??“ Honda Motor Co posted a forecast-beating 63 percent jump in quarterly earnings as strong sales of its new CR-V crossover made up for higher raw material costs, and it raised its full-year net profit forecast on a lower tax rate.

Honda's factories are running at full capacity around the world ??“ including in Japan despite weak sales at home ??“ thanks to brisk demand for exports to North America and Europe.

Orders at Japan's second-biggest automaker have been especially strong for the remodelled CR-V from would-be SUV drivers hoping to go further with expensive gasoline.

Honda, also the world's top motorcycle maker, said July-September net profit was 208.5 billion yen ($1.83 billion), ahead of an average estimate of 185.8 billion yen from four brokerages surveyed by Reuters Estimates and above last year's 127.9 billion profit.

Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said the results were firm, but warned U.S. demand warranted close monitoring.

???They rely quite heavily on the U.S. market and housing there right now is very weak. Cars and housing are really linked, so we have to watch this,??? he said, adding that a recent strengthening in the yen was also a potential risk.

Honda Executive Vice President Koichi Kondo said that while the subprime mortgage issue has had little impact on its U.S. car sales, it was dealing a ???significant??? blow to motorcycle sales.

???It seems people are pulling back on leisure products,??? he told a news conference, adding a further 10 billion yen of profit-eroding sales incentives will be offered in North America.

For the year to March 31, 2008, Tokyo-based Honda lowered its dollar-yen exchange rate assumption by 1 yen to 116 yen, pushing its revenue forecast down 50 billion yen to 12.3 trillion yen. The yen is now around 114.3 to the dollar.

But it kept its operating profit forecast at 880 billion yen, saying it would make up for the difference through cost cutting. It raised its net forecast to 640 billion yen from 625 billion yen on lower tax payments.

Consensus forecasts from 16 brokerages ahead of the results were for a net profit of 639 billion yen and operating profit of 884 billion yen.

Robust overseas sales more than made up for a 16 percent plunge in domestic sales, helping Honda expand its global sales by 6 percent in the quarter to 937,000 cars.

But the deeper-than-expected decline at home forced Honda to slightly lower its global sales forecast for the full year to March 2008, by 25,000 cars to 3.935 million.

Second-quarter operating profit, which excludes earnings made in China, grew 48 percent to 286.3 billion yen as sales rose, particularly of higher-margin vehicles,.

Rising commodity and depreciation costs erased the impact of cost-cutting, while higher sales incentives and advertising spending also hurt.

A 2 yen rise in the dollar and 14 yen climb in the euro, meanwhile, added 27 billion yen to operating profit. Revenue for the quarter rose 13 percent to 2.971 trillion yen.

A powerful earthquake in northern Japan at the beginning of the quarter disrupted production at all of the country's automakers, but was not enough to dent profits.

Honda, which has never posted a loss, is hoping to reverse a domestic sales slide with the launch on Friday of the revamped Fit subcompact, its best-selling car in Japan.

Backed by the strong earnings, Honda raised its annual dividend forecast to 86 yen from 80 yen.

Shares of Honda, the world's fourth-most valuable automaker behind Toyota Motor Corp, Daimler AG and Volkswagen AG, fell 21 percent in the year to Thursday, faring worse than Tokyo's transport sub-index ITEQP, which has fallen 18 percent.

Source: [url=http://economictimes.indiatimes.com/News/News_By_Company/Earnings/Honda_profits_up_63_on_Accord_CR-V_sales/articleshow/2491553.cms]Economic Times[/url]