Industryweek 5508 Honda Bike

Honda Profits Surge on Weak Yen, North America Sales

Oct. 30, 2013
Earnings in recent quarters have been squeezed by Honda's heavy spending as it looks to expand production and further tap emerging markets.

TOKYO - Honda (IW 1000/29) said Wednesday its net profit soared 46.4% in the three months to September as Japan's third largest carmaker benefited from a weaker yen and stronger North America sales.

Net profit for July to September rose to 120.37 billion yen (US $1.23 billion), slightly below analyst forecasts, with the company also reporting brisk global demand for its name brand motorbikes, led by fast-growing markets in Asia.

A sharp decline in the yen this year has boosted profitability at major Japanese exporters including Honda rivals Toyota (IW 1000/8) and Nissan (IW 1000/31).

The country's top auto makers have also seen a rebound in demand from China, the world's biggest vehicle market, after a Tokyo-Beijing territorial dispute sparked a consumer boycott of Japanese brands.

For the six months to September, Honda said net profit rose 13.5%to $2.47 billion with revenue up 21.6% at 5.72 trillion yen.

Earnings in recent quarters have been squeezed by Honda's heavy spending as it looks to expand production and further tap emerging markets.

The firm previously set aside 700 billion yen for capital spending for the fiscal year to March 2014.

It hopes to meet a global production target of six million units within several years.

Betting on a Low-Cost Option

Honda last month launched its first low-cost car for Indonesia's booming auto market, part of plans to more than quadruple sales in the country by 2016.

The launch of the Mobilia, a multi-purpose vehicle, comes as Honda builds its second plant in Indonesia to boost both production and sales.

It has also unveiled a plan to build a new assembly plant in Brazil with an annual capacity of 120,000 units.

The $430 million facility, about 200 kilometers (125 miles) northwest of Sao Paulo, will become operational in 2015 and will double Honda's annual output capacity in the country to 240,000 units.

However, demand in Honda's home market may slow further as Japan prepares to usher in a sales tax hike next year.

"Japanese automakers in general showed a good performance thanks to a weak yen and stable demand in North America," said Shigeru Matsumura, auto analyst with SMBC Friend Securities in Tokyo.

But he added: "At home, we expect to see a negative impact from the tax hike, which will dent auto demand in Japan."

Honda's unit sales to the key North American market jumped 10.6% in the quarter to September, and rose 9% in Asia.

The struggling European market was down 9.1% in the period, it said.

A weak yen is generally good for Japanese exporters as it makes their products more competitive abroad while inflating the value of their foreign income.

On Wednesday, Honda left unchanged its 580 billion yen annual profit forecast to March 2014.

Nissan said Wednesday it would now publish its earnings on Friday instead of next week, when rival Toyota also reports its results.

Copyright Agence France-Presse, 2013

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