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Honda turns in a record quarterly profit

Honda more than doubled its net profit for the January-March quarter from a year ago as soaring vehicle sales in Asia and Europe offset a decline in Japan.
/ Source: The Associated Press

Honda more than doubled its net profit for the January-March quarter from a year ago as soaring vehicle sales in Asia and Europe offset a decline in Japan.

Honda Motor Co., Japan’s No. 3 automaker that makes the Accord compact car and Odyssey minivan, said Wednesday it racked up 219.5 billion yen ($1.9 billion) in profit for the quarter ended March 31 — a record quarterly profit for Honda and dramatically higher than the 94 billion yen profit marked the same period the previous year.

Quarterly sales jumped 20.6 percent to 2.83 trillion yen ($24.7 billion) from 2.35 trillion yen the same period last year. Although Honda vehicle sales slipped in Japan, they surged in the rest of Asia and in Europe. They also rose in North America.

The results come a day after Japanese rival Nissan Motor Co. also reported healthy profits — and mark a contrast with the losses reported by U.S. automakers General Motors Corp. and Ford Motor Co.

For the fiscal year ended March 31, Honda marked a 22.8 percent rise in profit to 597 billion yen ($5.2 billion) from 486 billion yen in fiscal 2004.

Fiscal 2005 sales totaled 9.91 trillion yen ($86.4 billion), up 14.5 percent from 8.65 trillion yen a year earlier. Both sales and profits were record highs for Tokyo-based Honda.

Adding to the gains were cost-cutting efforts, a weaker yen and a reimbursement related to workers’ pension funds in Japan, the company said in a statement.

Honda sold a record 3.39 million vehicles worldwide for the fiscal year just ended, up 4.6 percent from 3.24 million vehicles in fiscal 2004, and the seventh straight year of increased vehicle sales.

Vehicle sales rose 6.8 percent in North America, 9 percent in Europe although they fell 2.2 percent in Japan. They jumped 14.2 percent in other markets.

Koji Endo, auto analyst with Credit Suisse First Boston Securities (Japan) in Tokyo, said Honda faces a challenge in maintaining its momentum for growth in the months ahead, as the rising gas prices hurts sales of trucks and other models in the U.S. that tend to bring in more profits but also use more gasoline. Expectations for a stronger yen is also expected to take a toll on the earnings of Japanese automakers.

“It’s going to be a tough year for Honda especially in North America,” Endo said. “The results aren’t going to be all bad but they aren’t going to be all good either.”

Honda is forecasting a 550 billion yen ($4.8 billion) profit for the fiscal year ended March 31, 2007, down 7.9 percent from last fiscal year, but sales are expected to rise 7 percent to 10.6 trillion yen ($92.5 billion).

On Tuesday, Nissan reported a 9.4 percent rise in profit for the latest quarter at 152.4 billion yen ($1.3 billion). The company also said it would build a vehicle assembly plant in Russia as part of its global expansion, and forecast a slight profit rise on increased revenue for the current fiscal year.

General Motors cut its losses in the January-March quarter but still lost $323 million, its sixth straight quarterly loss. Last week, Ford said it sank into to a $1.2 billion loss for the same period, a reversal from a $1.2 billion profit the same period a year earlier.

Toyota Motor Corp., Japan’s top automaker, reports earnings next month.