Honda Q2 net dips 56%; banks on China, Japan sales for profit

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Tokyo: Honda Motor Co raised its full year profit forecast despite earnings diving by more than half last quarter with “green” car incentives and growth in markets like China expected to further boost vehicle sales.

Net profit for the July-September quarter fell 56.2% from a year earlier to 54 billion yen ($587.0 million), the company said on Tuesday, hit by a strong yen and the weak global auto market.

But Honda, Japan’s No 2 automaker, now expects a net profit for the fiscal year ending March of 155 billion yen ($1.7 billion), nearly four times its initial outlook for a 40 billion yen ($435 million) profit.

The automaker also raised its forecast for sales this fiscal year to 3.4 million vehicles. It expects more sales in emerging Asian markets and also in the previously sluggish Japan where tax breaks and government-backed discounts for green vehicles are helping along a recovery.

Honda in July forecast vehicle sales of 3.29 million but the new projection does not reach the nearly 3.52 million vehicles it sold globally the previous fiscal year. Honda, which makes the Insight gas-electric hybrid, Asimo robot and Accord sedan, said quarterly sales fell 27.2% from a year earlier to 2.057 trillion yen ($22.4 billion).

A strong yen weighed on Honda’s results. Unfavorable currency exchange rates erased 79.7 billion yen ($866 million) from Honda’s quarterly operating profit, it said in a statement. The dollar bought 106 yen the previous year but has fallen to 90-yen levels lately.

Honda said auto sales grew in China and India, as well as in Japan during the quarter. Honda as well as rival Toyota Motor Corp, with their reputation for green cars, are enjoying the benefits of government incentives for fuel efficient and gasoline-electric hybrid cars. Even in the US, where vehicle sales fell during the quarter, a cash for clunkers programme also helped sales, Honda said. Honda, which has focused on smaller fuel-efficient models, has fared relatively better than some rivals in weathering the global auto slump. It stayed in the black in the fiscal year ended March 2009, while Toyota and Nissan Motor Co slipped into losses. Toyota reports earnings November 5, Nissan on November 4.

Honda has also been helped by its strong motorcycle business, which has been enjoying growth in Vietnam and India.Honda now expects to sell 665,000 vehicles in Japan for the full year, up 19.6% from the previous fiscal year.