Honda Posts Record Profits

Strong demand from China and Brazil

Honda Motor Co. said on July 25 its net profit rose 8.1% to hit a record high for the fiscal first-quarter on brisk demand in emerging markets such as China and Brazil. But Japan's second-largest automaker kept its forecast for a slide in annual earnings due to a weaker global economy, a stronger yen and the soaring cost of raw materials including steel.

Honda sold 962,000 vehicles in the first quarter, up 1.7% from a year earlier. Weak demand in Japan, where sales fell 5.9%, was offset by robust demand in emerging markets. Automobile sales in North America slipped 1.1% to about 460,000 vehicles.

The company posted net profit of 179.61 billion yen (US$1.68 billion) for the three months to June. Operating profit edged down 0.2% from a year earlier to 221.35 billion yen as revenue dropped 2.2% to 2.87 trillion yen.

"In the first quarter alone, we saw a significant rise in material prices. We expect more price rises to come," executive vice president Koichi Kondohe said. "If the current weak industry trend continues, we must reform drastically."

Honda cut its forecast for operating profit for the full fiscal year to March to 630 billion yen from 650 billion yen previously, which would mark a 33.9% plunge from the previous year. Net earnings are expected to fall 18.3% to 490 billion yen as revenue edges up 1.1% to 12.13 trillion yen.

Honda has reduced its global production as it shifts resources away from sports utility vehicles and into small cars, Kondo said. "We have been trying to build flexible production systems. Our future competitiveness will depend on how fast we can change and how flexible we can be as market conditions change."

Honda plans to introduce in early 2009 a low-cost hybrid, which are equipped with an electric motor and a standard petrol engine and are more economical and environmentally friendly than conventional autos.

Copyright Agence France-Presse, 2008

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