Honda Q1 net beats forecasts on brisk US sales

Tokyo, July 26 | Updated: Jul 27 2006, 05:30am hrs
Honda Motor Co, Japans third-biggest car maker, posted a slightly better than expected 30% rise in quarterly net earnings, fuelled by strong US sales, and maintained its full-year profit forecast.

Hondas fuel-efficient cars are revving up sales in the US as gasoline prices average $3 a gallon in the worlds biggest car market, prompting more buyers to opt for sedans rather than the gas-guzzling sport utility vehicles on offer from General Motors and Ford Motor Co.

Honda is also taking fuel economy to the skies, announcing plans a day earlier to team up with Piper Aircraft to sell a small, fuel-efficient jet in the US market. Higher oil prices and higher gasoline prices have been working very much in favour of Japans auto makers, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. The desire for more fuel-efficient cars has increased worldwide.

April-June net profit at Honda, also the worlds biggest motorcycle maker, rose to 143.4 billion yen ($1.23 billion) from 110.67 billion yen a year earlier. Six brokers surveyed by Reuters Estimates had forecast a profit of 138.9 billion yen. The maker of the popular Accord maintained its full-year net profit forecast at 550 billion yen. That would be down on last year when Honda booked big one-off pension-related gains. But Honda tweaked its revenue forecast to 10.7 trillion yen from 10.6 trillion yen, citing a boost from the weaker yen. It now expects the euro to average 139 yen in the year to March 2007 instead of 132.

Overall, the results were slightly better than what we expected, executive vice-president Satoshi Aoki told a news conference. A softer yen worked in Hondas favour, but the impact of higher raw materials costs notably for aluminium, copper and precious metals exceeded cost cuts, slashing 10.9 billion yen, or about 5%, off quarterly operating profit, he said.

First-quarter operating profit, which excludes earnings from joint ventures in China and some other Asian operations, rose 19.4% to 203.52 billion yen, partly lifted by reduced research and development spending.