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Honda sees bumper year as it leaves disasters behind

04/27/2012 | 06:36am US/Eastern

Honda Motor Co (>> Honda Motor) forecast a near-tripling of operating profit in the year ahead on surging Asian sales and a recovery in the United States, marking an emphatic rebound from a 2011 hammered by the yen's record strength and natural disasters.

Honda Motor Co (>> Honda Motor) forecast a near-tripling of operating profit in the year ahead on surging Asian sales and a recovery in the United States, marking an emphatic rebound from a 2011 hammered by the yen's record strength and natural disasters.

Japan's No.3 automaker is expected to ride faster-than-expected growth in demand in the United States, its biggest and most profitable market, where sales of the remodeled CR-V crossover have jumped by more than a quarter so far this year.

For the year to next March, Honda forecast an operating profit of 620 billion yen ($7.7 billion), up from 231.36 billion yen in the financial year just ended. The forecast was slightly behind analysts' consensus for 645 billion yen, but bullish nonetheless for a company noted for its conservative earnings guidance.

"It's a pretty positive forecast, but they were the worst hit automaker by the tsunami and the Thai floods, so they should be returning or have returned to normal production," said Fujio Ando, senior managing director at Chibagin Asset Management.

Executive Vice President Tetsuo Iwamura told a news conference Honda now expects the overall U.S. market to grow to 14.3 million vehicles this year, up from a forecast of 13.5 million made at the end of last year, and Honda aimed to recover a market share of more than 10 percent as soon possible.

"The North American market is slowly recovering, while we're entering new segments in Asia," he said. "We're expecting to grow faster than the overall market."

Honda, which has lagged a recovery from the effects of disasters in Japan and Thailand by rivals Toyota Motor Corp (>> Toyota Motor Corp.) and Nissan Motor Co (>> Nissan Motor), more than doubled its fiscal fourth-quarter operating profit, ending five straight quarters of year-on-year decline.

January-March operating profit jumped to 111.98 billion yen ($1.4 billion), but slightly lagged an average estimate of 123.2 billion yen in a survey of 23 analysts by Thomson Reuters I/B/E/S. Net profit, which includes earnings made in China, rose 60.7 percent to 71.59 billion yen.

Honda set its dollar rate assumption for the business year at 80 yen and the euro at 105 yen, predicting neutral impact on profits from currencies this year.

Honda was the last Japanese car maker to get its supply chain in order after a massive earthquake and tsunami in March 2011, and only re-started work at its Thai car plant at the end of last month following October's floods.

ROBUST SALES FORECASTS

Giving robust sales guidance, Honda forecast its global car sales would jump 38.4 percent to 4.3 million vehicles and its motorcycle sales would increase 10.2 percent to 16.6 million in 2012/13.

It sees sales in North America rising 31.5 percent to 1.74 million vehicles, sales in Japan climbing 20.7 percent to 710,000 and the rest of Asia by 56.5 percent to 1.31 million.

Honda will make minor changes later this year to the year-old Civic after the latest version of the perennially popular model was panned by critics, raising deeper concerns over whether the automaker was slipping in a battlefield made tougher by products from Hyundai Motor Co (>> Hyundai Motor Co) and resurgent U.S. rivals Ford Motor Co (>> Ford Motor Company) and General Motors Co (>> General Motors Company).

"The biggest challenge we see in the year ahead is the intensifying competition in all markets," said Executive Vice President Iwamura. He added that Honda would pour its energy into beefing up its products in the small-car segments to compete better in emerging markets.

Honda CEO Takanobu Ito has conceded that the company he took over in mid-2009 may have let down its guard during the previous decade of rapid expansion, while pulling back on vehicle development too much after the global financial crisis.

Its shares have risen 5.6 percent in the past three months, lagging gains of around 14 percent by both Toyota and Nissan.

Honda is under intense scrutiny to redeem itself with U.S. consumers this fall with the next version of the Accord, which will be the first major model to carry a new generation of engines and transmissions that it hopes will make its future cars the most fuel-efficient in their categories.

Also on Friday, Mazda Motor Corp (>> Mazda Motor Corp.) reported a 38.72 billion yen operating loss for the year ended in March, against a profit of 23.84 billion yen in 2010/11. Japan's fifth-largest automaker is heavily exposed to the strong yen, exporting 77 percent of its domestic output.

Toyota will report on May 9 and Nissan on May 11.

(Additional reporting by Sophie Knight; Editing by Alex Richardson)

By Chang-Ran Kim

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