Honda Profit Plunges, Still Forecast Is RaisedBy Michelle Krebs August 1, 2011
Honda Motor Co. reported its quarterly profit plummeted but still the automaker raised its annual outlook in a sign that the company sees a quickening recovery quickly from production disruptions caused by the March 11 earthquake in Japan. Hondas operating profit for the first quarter of its 2012 fiscal year that ended June 30 plunged 90 percent to 31.7 billion yen ($406 million). Quarterly sales dropped 27 percent to 1.7 trillion yen ($22 billion). The fact that Honda, hurt the worst of Japans manufacturers by the earthquake, made a profit at all was a surprise to analysts who predicted a loss. Honda said the quarter was in the black due largely to the strength of its growing motorcycle business, not its car operations. Hondas January to March performance began to feel the impact of the earthquake with profits falling 38 percent.
Still, Honda appears optimistic about its ability to recover from the earthquake and significant loss in production. The automaker raised its annual sales projection to 8.7 trillion yen ($112 billion), down only 3 percent from the previous year, but better than the 8.3 trillion yen ($106 billion) it expected in June. Honda expects to sell 3.435 million vehicles worldwide, about 135,000 more than predicted in its June forecast. Honda sold 3.512 million vehicles the previous fiscal year. As a result, Honda predicts a 230 billion yen ($2.9 billion profit) in its 2012 fiscal year ending March 31, 2012.
In addition to the earthquake aftershocks, Honda, like its Japanese rivals, is dealing with a strong yen that erodes overseas earnings. Honda expects the U.S. dollar to trade at 80 yen for the fiscal year, which is above the 77.5 it is trading at currently. The unfavorable exchange cost Honda $288 million in operating profit in the recent quarter. Through June, Honda was a scant 1.6 percent ahead of its 2010 first-half pace in the U.S., at 607,442 total sales, compared to 593,909 for the first half last year. The first-half drop came after a first quarter in which Honda sales rose 18.5 percent largely on the strength of the Civic. The new 2012 Civic was to be launched in April but its introduction is slowed.