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Honda reports 38.1 percent jump in profit

/ Source: The Associated Press

Honda, Japan’s second-biggest automaker, reported a 38.1 percent jump in profit for the October-December quarter on Wednesday, thanks to booming sales in the U.S., Europe and Asia outside Japan.

Honda, which sells nearly half of its vehicles in North America, revised upward its annual profit forecast, appearing to shrug off the looming worries about a U.S. recession and as well as worries about a stronger yen, which erodes exporters’ profits.

Like other Japanese automakers with their reputation for smaller fuel-efficient models, Honda Motor Co. — maker of the Civic and Accord sedans and the Odyssey minivan — is getting extra consumer interest because of a recent surge in gas prices.

Honda’s quarterly profit rose to 200 billion yen ($1.87 billion) from 144.8 billion yen the same period the previous year, marking a record for the fiscal third quarter. Cost-cutting also helped boost its bottom line.

Quarterly sales climbed 10 percent to 3.045 trillion yen ($28.52 billion), the Tokyo-based manufacturer said.

Credit Suisse auto analyst Koji Endo said the results were spectacular but expressed worries about the fiscal year that starts in April because of the dollar’s sharp fall.

Although Honda has so far been relatively unscathed by the dollar’s recent nose-dive to levels near 106 yen, compared to around 114 yen late last year, a strong yen could reduce the value of overseas earnings when repatriated to Japan.

Honda said Wednesday it expects the dollar to trade at 105 yen in the January-March period, and Endo said a plunge to such levels will be “tough even for Honda.”

“The results so far have been great, but what lies ahead could take a sharp turn for the worse,” he said.

But Endo said North American vehicle sales are expected to hold up in coming months at moderate growth levels, despite the subprime mortgage crisis.

With global demand growing for its products, Honda said Wednesday that it now expects a 690 billion yen ($6.46 billion) profit for the fiscal year ending March 31, up 16.5 percent from fiscal 2006. In October, it had projected a 640 billion yen ($6 billion) profit.

But it trimmed its fiscal year sales forecast to 12.150 trillion yen ($113.82 billion) from an earlier 12.300 trillion yen . The revised sales number still marks a 9.6 percent rise from the previous year.

Honda’s operating profit rose 35 percent on year to 276.24 billion yen ($2.59 billion), beating analysts’ forecasts.

In the latest quarter, Honda sold 991,000 vehicles globally. About half of those — or 481,000 vehicles — were sold in North America, up 2.1 percent from the previous year. Quarterly sales soared 25 percent in Europe to 90,000 vehicles, and gained 21 percent in Asia to 188,000.

The company expects to sell 3.90 million vehicles in the fiscal year ending March 31.

Honda has fallen somewhat behind Toyota Motor Corp. and other rivals in key technologies for growth, such as the ecological gas-electric hybrids and diesel engines that are popular in Europe. But Honda President Takeo Fukui has vowed to invest heavily in such technologies to keep growth going.

Next year, the automaker plans to introduce a new hybrid with an affordable price tag, targeting sales of 200,000 vehicles a year.

Honda is also seeing sales grow in South America, and it is planning production expansions in Brazil and Argentina.

For the nine months through Dec. 31, Honda reported 574.6 billion yen ($5.38 billion) in profit, up 38.1 percent from the same period in 2006. Sales for the period rose 11.9 percent to 8.947 trillion yen ($83.81 billion).

The company’s stock rose 1.2 percent to 3,300 yen ($30.90) in Tokyo. Earnings were announced shortly after trading closed.

Other big Japanese automakers report earnings in coming days: Nissan on Friday and Toyota next week.